lOMoARcPSD|15781725
Introduction: innovation management types, types of innovation,
innovation adoption
Lecture 1
Introduction
• Innovation: introducing a new device, method, or material for application not
commercial or practical objectives.
o Input, processes, output.
o Multiple departments involved.
• Types of innovation
o Device, method, material, service, business model.
o Incremental vs. radical.
o Modular (change of process: component) vs. architectural (change of
interaction in system of components).
• Importance: different capabilities needed for each type, organizational
structure must with innovation type, important to make right investment
decisions.
• Implementation of innovation influenced by:
o Market developments and time;
o Personality/subjective perceptions of worth.
MOOC 1: basic concepts
• Product innovation: tangible -> concern’s firm output.
• Service innovation: intangible -> concern’s firm output.
• Process innovation: how a firm conducts its activities -> internal.
• Incremental innovation: slightly different from already existing solutions.
• Radical innovation: new and very different from already existing solutions.
• Modular innovation: changing a component without changing how a system is
configured (easier to conduct).
• Architectural innovation: change in configuration of entire system
and how its components interact (affects firm’s organization).
MOOC 2: adoption lifecycle and individual adoption
Adoption lifecycle
• Adoption: acceptance of an innovation by people in society/specific market.
• Adoption lifecycle: represents number of people that newly adopt a
certain innovation over time. Adoption rate: about acquiring, not owning.
o Innovators: no difficulty with complexity of new technologies/innovations.
o Early adopters: not focused on technology itself, more enthusiastic
about potential application of innovation. They are visionaries and see
potential.
o Early majority: need practical proof of how innovation can be
useful to them. Clarification, confidence, and society’s opinion
needed.
o Late majority: require even more proof. Only adopt if it’s widely
accepted and the standard.
o Laggards: assess an innovation by themselves -> is it interesting?
▪ Often don’t accept and very sceptical.
▪ Unaware and not open to innovation.
o Chasm between early adopters and early majority: gap indicates difference
Early adopters: look with eyes shut Early majority: look with eyes open
Intuitive Analytical
, lOMoARcPSD|15781725
Support revolution Support evolution
Follow own rules Consult others
Take risks Manage risks
Motivated by possible opportunities Motivated by current problems
Explore what’s possible Pursue what is probable
o From early to mass market:
▪ Innovation must be attractive to innovations and early adopters.
▪ First market share: innovation is central -> best product,
most elegant architecture, unique functionality -> opening
up the market.
▪ Mainstream market: market is central -> largest group of
customers, current standard, quality of customer support ->
crossing the chasm.
Innovation adoption at the individual level
How do individuals decide whether to adopt an innovation at a certain
level or not? Will people automatically appreciate innovations?
• Value of alternatives:
o Value is subjective;
o Point of reference;
o Improvements are gains, shortcomings are losses;
o Losses have bigger impact than improvements.
▪ People participative if value potential gains > value potential loss.
▪ Status quo bias (people prefer status quo -> change = loss).
▪ Endowment effect: attach more value to what you own than what you can gain.
• People gain something by adopting innovation, but also a loss.
o What they give up gets bigger weight than gain.
o Innovations must deliver high gains to be adopted.
Chapter 1: innovation management and new business development
1.1 Innovation management and new business development
• Innovations -> uncertainty by creating ideas/projects for new
products/services/business models. Technical and market tests and financial
viability assessment to reduce uncertainty.
• Innovation management (IM): management of the development of
new products, processes, services, and business models.
o Originated in R&D context.
• New business development (NBD): all activities (idea generation ->
implementation & sales) involved in realizing new business opportunities,
including product or service design, business model design, and
marketing.
o New and upcoming field that approaches innovation from a market
perspective and has a stronger focus on the creation of new markets.
o Limited -> excludes process innovation & broader -> includes new market creation.
• IM and NBD are answers to the need for change (due to constantly
changing environment).
o Both established firms and start-ups.
o Performed usually by separate departments/single innovation
manager/within departments. It’s different from R&D, which focuses on
technology development and successive creation of new products -> IM
and NBD are broader (services, markets, business models).
• Innovation manager new business developer: discovery skills (typical
activities for innovators)
, lOMoARcPSD|15781725
o Associating: connecting seemingly unrelated questions, problems, or
ideas from different fields. Innovations are combinations of
ideas/knowledge from different sectors.
o Questioning: asking questions about why things are the way they
are and to challenging the status quo -> result: come up with
alternatives.
o Observing: intensively looking at what people are actually doing with a fresh mind ->
learn about actual usage and get ideas on improvements/alternatives.
o Experimenting: learning by creating imaginary or real image prototypes
or pilots of a new product, service, or business model to learn about its
impact and effectiveness.
o Networking: connecting to other people and institutions, internal and
external to the firm since usually ideas from different people and fields
are combined.
o Entrepreneurial alertness aids in detecting opportunities for
innovation/new business.
These skills are important in the front-end stage; later stages require
execution-oriented skills.
1.2 Paradoxes of innovation
• Uncertainty generation and reduction: high uncertainty at start of
innovation: will the company be able to create the new product, is there a
market for it, suppliers’ delivery, competition, etc. -> different ways of
working needed.
• High uncertainty is characteristic of innovation activities, but they also aim at reducing
uncertainty. Organizations/individuals seek uncertainty to develop
themselves for an uncertain future, and its returns can be high. But they try
to reduce it to prevent losses/risks.
o Every actor tries to reduce uncertainty as early as possible in a new
business development project. Exception = idea generation
process.
• second paradox -> front end: team develops the concept (generate
uncertainty) and implementation phase: detail the concept and bring to
market (reduce uncertainty).
o Phases need different activities and capabilities.
o Front end: creativity (discovery skills) and diverse network ->
implementation phase: project management, deadlines, advertising,
execution-oriented, hands-on management, supportive network.
o Challenge: how to overcome change in needed activities and capabilities?
Assign the tasks in phases to different people or assign to same people
but require different behaviors and network (change in team leadership
and composition or change from within).
• Third paradox -> incremental and radical innovation.
o Incremental: small modifications on existing products, services, or business models.
▪ Low uncertainty.
o Radical innovation: firms enters completely new markets, applies new
competencies, and moves away more radically from its existing
products, services, or business models.
▪ High uncertainty.
o Different activities, skills, processes, time horizons, performance
measures, leadership styles -> manage differences via ambidexterity:
perform well in short term through incremental innovation and prepare
for future through radical innovation and have separate units for both
innovation types.
1.3 Business model innovation
• Definition: business model innovation describes the rationale of how an
organization creates, delivers, and captures value (what it means for your
customers, how you earn money in return, operations of firm) and
, lOMoARcPSD|15781725
innovations in every element of the business.
• Rise of IT/Internet -> more business model options.
Introduction: innovation management types, types of innovation,
innovation adoption
Lecture 1
Introduction
• Innovation: introducing a new device, method, or material for application not
commercial or practical objectives.
o Input, processes, output.
o Multiple departments involved.
• Types of innovation
o Device, method, material, service, business model.
o Incremental vs. radical.
o Modular (change of process: component) vs. architectural (change of
interaction in system of components).
• Importance: different capabilities needed for each type, organizational
structure must with innovation type, important to make right investment
decisions.
• Implementation of innovation influenced by:
o Market developments and time;
o Personality/subjective perceptions of worth.
MOOC 1: basic concepts
• Product innovation: tangible -> concern’s firm output.
• Service innovation: intangible -> concern’s firm output.
• Process innovation: how a firm conducts its activities -> internal.
• Incremental innovation: slightly different from already existing solutions.
• Radical innovation: new and very different from already existing solutions.
• Modular innovation: changing a component without changing how a system is
configured (easier to conduct).
• Architectural innovation: change in configuration of entire system
and how its components interact (affects firm’s organization).
MOOC 2: adoption lifecycle and individual adoption
Adoption lifecycle
• Adoption: acceptance of an innovation by people in society/specific market.
• Adoption lifecycle: represents number of people that newly adopt a
certain innovation over time. Adoption rate: about acquiring, not owning.
o Innovators: no difficulty with complexity of new technologies/innovations.
o Early adopters: not focused on technology itself, more enthusiastic
about potential application of innovation. They are visionaries and see
potential.
o Early majority: need practical proof of how innovation can be
useful to them. Clarification, confidence, and society’s opinion
needed.
o Late majority: require even more proof. Only adopt if it’s widely
accepted and the standard.
o Laggards: assess an innovation by themselves -> is it interesting?
▪ Often don’t accept and very sceptical.
▪ Unaware and not open to innovation.
o Chasm between early adopters and early majority: gap indicates difference
Early adopters: look with eyes shut Early majority: look with eyes open
Intuitive Analytical
, lOMoARcPSD|15781725
Support revolution Support evolution
Follow own rules Consult others
Take risks Manage risks
Motivated by possible opportunities Motivated by current problems
Explore what’s possible Pursue what is probable
o From early to mass market:
▪ Innovation must be attractive to innovations and early adopters.
▪ First market share: innovation is central -> best product,
most elegant architecture, unique functionality -> opening
up the market.
▪ Mainstream market: market is central -> largest group of
customers, current standard, quality of customer support ->
crossing the chasm.
Innovation adoption at the individual level
How do individuals decide whether to adopt an innovation at a certain
level or not? Will people automatically appreciate innovations?
• Value of alternatives:
o Value is subjective;
o Point of reference;
o Improvements are gains, shortcomings are losses;
o Losses have bigger impact than improvements.
▪ People participative if value potential gains > value potential loss.
▪ Status quo bias (people prefer status quo -> change = loss).
▪ Endowment effect: attach more value to what you own than what you can gain.
• People gain something by adopting innovation, but also a loss.
o What they give up gets bigger weight than gain.
o Innovations must deliver high gains to be adopted.
Chapter 1: innovation management and new business development
1.1 Innovation management and new business development
• Innovations -> uncertainty by creating ideas/projects for new
products/services/business models. Technical and market tests and financial
viability assessment to reduce uncertainty.
• Innovation management (IM): management of the development of
new products, processes, services, and business models.
o Originated in R&D context.
• New business development (NBD): all activities (idea generation ->
implementation & sales) involved in realizing new business opportunities,
including product or service design, business model design, and
marketing.
o New and upcoming field that approaches innovation from a market
perspective and has a stronger focus on the creation of new markets.
o Limited -> excludes process innovation & broader -> includes new market creation.
• IM and NBD are answers to the need for change (due to constantly
changing environment).
o Both established firms and start-ups.
o Performed usually by separate departments/single innovation
manager/within departments. It’s different from R&D, which focuses on
technology development and successive creation of new products -> IM
and NBD are broader (services, markets, business models).
• Innovation manager new business developer: discovery skills (typical
activities for innovators)
, lOMoARcPSD|15781725
o Associating: connecting seemingly unrelated questions, problems, or
ideas from different fields. Innovations are combinations of
ideas/knowledge from different sectors.
o Questioning: asking questions about why things are the way they
are and to challenging the status quo -> result: come up with
alternatives.
o Observing: intensively looking at what people are actually doing with a fresh mind ->
learn about actual usage and get ideas on improvements/alternatives.
o Experimenting: learning by creating imaginary or real image prototypes
or pilots of a new product, service, or business model to learn about its
impact and effectiveness.
o Networking: connecting to other people and institutions, internal and
external to the firm since usually ideas from different people and fields
are combined.
o Entrepreneurial alertness aids in detecting opportunities for
innovation/new business.
These skills are important in the front-end stage; later stages require
execution-oriented skills.
1.2 Paradoxes of innovation
• Uncertainty generation and reduction: high uncertainty at start of
innovation: will the company be able to create the new product, is there a
market for it, suppliers’ delivery, competition, etc. -> different ways of
working needed.
• High uncertainty is characteristic of innovation activities, but they also aim at reducing
uncertainty. Organizations/individuals seek uncertainty to develop
themselves for an uncertain future, and its returns can be high. But they try
to reduce it to prevent losses/risks.
o Every actor tries to reduce uncertainty as early as possible in a new
business development project. Exception = idea generation
process.
• second paradox -> front end: team develops the concept (generate
uncertainty) and implementation phase: detail the concept and bring to
market (reduce uncertainty).
o Phases need different activities and capabilities.
o Front end: creativity (discovery skills) and diverse network ->
implementation phase: project management, deadlines, advertising,
execution-oriented, hands-on management, supportive network.
o Challenge: how to overcome change in needed activities and capabilities?
Assign the tasks in phases to different people or assign to same people
but require different behaviors and network (change in team leadership
and composition or change from within).
• Third paradox -> incremental and radical innovation.
o Incremental: small modifications on existing products, services, or business models.
▪ Low uncertainty.
o Radical innovation: firms enters completely new markets, applies new
competencies, and moves away more radically from its existing
products, services, or business models.
▪ High uncertainty.
o Different activities, skills, processes, time horizons, performance
measures, leadership styles -> manage differences via ambidexterity:
perform well in short term through incremental innovation and prepare
for future through radical innovation and have separate units for both
innovation types.
1.3 Business model innovation
• Definition: business model innovation describes the rationale of how an
organization creates, delivers, and captures value (what it means for your
customers, how you earn money in return, operations of firm) and
, lOMoARcPSD|15781725
innovations in every element of the business.
• Rise of IT/Internet -> more business model options.
