Lecture 1: Fundamentals of Innovation
Strategic importance of innovation:
- Economies: innovation sustains growth and end economic development
- Society: innovation helps to solve sustainability challenges
- Firms: innovation ensures survival and competitiveness
- Innovation as a necessity for business: globalization - increased competition - speed of
knowledge development - shortened product development cycles and product life cycle -
enable technologies (computer-aided design, 3D printing, etc)
Nikolai Kondratieff (1892 - 1938): Theory of long waves (1925)
He was an economist who suggested that
economic propriety/booms were driven by
developments in innovation. (theory has
been controversial and still not accepted
= put the idea of technological innovation
at center stage
Joseph Schumpeter (1883 - 1950): Concept of creative destruction (1942)
➢ Radical innovative entry by entrepreneurs is the primary driver of (long-term) economic
development:
○ Ensuring competition to monopoly power, who are compelled to invest in
innovation
➢ Theory of business cycles (developed Kondratieffs theory further)
➢ Entrepreneurs as key actors: disrupting economic equilibrium
➢ Get monopoly (schumpeterian) rents, i.e. first-mover advantage
Defining Innovation
➢ Innovation is the practical implementation of an idea into a new device or process
(Schilling, 2016:19)
➢ Process of turning idea into reality and capturing value from them (Tidd & Beasant
2009)
➢ Theoretical conception + technical invention + commercial exploitation (Trott, 2012:15)
,Generic Phase Model
Innovation: the process of turning ideas into reality and capturing value from them
The generic phase model
representing the idea that we start
with a broad idea and slowly
funneling it down towards the final
product.
Stage Gate Model
0. Discovery
1. Scoping
2. Build business case
3. Development
4. Testing & validation
5. Launch
Types of Innovation
➢ Product vs. Process innovation:
○ Embodied in the outputs vs orientated towards improving the effectiveness or
efficiency of (process of) production
➢ Architectural vs. Component innovation:
○ Changes the overall design of a system or the way its component interact with
each other vs. only relating to components
➢ Incremental vs. Radical innovation:
○ Incremental: makes a relatively minor change from (or adjustment to) existing
practices and builds on existing knowledge (upgrade)
○ Radical: Innovation that is very new and different from prior solutions, it requires
completely new knowledge and resources (not the same as disruptive - depends
on: reference point, risk levels, time point)
➢ Sustaining vs. Disruptive innovation
○ Sustaining: making better products, for higher prices, to attractive customers in
existing markets
○ Disruptive: simpler or more convenient products, for lower prices to new or
unattractive customers
, Technology S-Curve: Performance
Discontinuous technology: fulfills a similar market need by
building on an entirely new knowledge base
Effort: investment/resources/atten = not necessarily equal
to time (do often correlate)
Performance: the more effort is investested the better the
technologies performance
Technology S-Curve: Adoption
Innovators (2.5%)
Early adopters (13.5%)
Early majority (34%)
Late majority (34%)
Laggards (13.5%)
Strategic importance of innovation:
- Economies: innovation sustains growth and end economic development
- Society: innovation helps to solve sustainability challenges
- Firms: innovation ensures survival and competitiveness
- Innovation as a necessity for business: globalization - increased competition - speed of
knowledge development - shortened product development cycles and product life cycle -
enable technologies (computer-aided design, 3D printing, etc)
Nikolai Kondratieff (1892 - 1938): Theory of long waves (1925)
He was an economist who suggested that
economic propriety/booms were driven by
developments in innovation. (theory has
been controversial and still not accepted
= put the idea of technological innovation
at center stage
Joseph Schumpeter (1883 - 1950): Concept of creative destruction (1942)
➢ Radical innovative entry by entrepreneurs is the primary driver of (long-term) economic
development:
○ Ensuring competition to monopoly power, who are compelled to invest in
innovation
➢ Theory of business cycles (developed Kondratieffs theory further)
➢ Entrepreneurs as key actors: disrupting economic equilibrium
➢ Get monopoly (schumpeterian) rents, i.e. first-mover advantage
Defining Innovation
➢ Innovation is the practical implementation of an idea into a new device or process
(Schilling, 2016:19)
➢ Process of turning idea into reality and capturing value from them (Tidd & Beasant
2009)
➢ Theoretical conception + technical invention + commercial exploitation (Trott, 2012:15)
,Generic Phase Model
Innovation: the process of turning ideas into reality and capturing value from them
The generic phase model
representing the idea that we start
with a broad idea and slowly
funneling it down towards the final
product.
Stage Gate Model
0. Discovery
1. Scoping
2. Build business case
3. Development
4. Testing & validation
5. Launch
Types of Innovation
➢ Product vs. Process innovation:
○ Embodied in the outputs vs orientated towards improving the effectiveness or
efficiency of (process of) production
➢ Architectural vs. Component innovation:
○ Changes the overall design of a system or the way its component interact with
each other vs. only relating to components
➢ Incremental vs. Radical innovation:
○ Incremental: makes a relatively minor change from (or adjustment to) existing
practices and builds on existing knowledge (upgrade)
○ Radical: Innovation that is very new and different from prior solutions, it requires
completely new knowledge and resources (not the same as disruptive - depends
on: reference point, risk levels, time point)
➢ Sustaining vs. Disruptive innovation
○ Sustaining: making better products, for higher prices, to attractive customers in
existing markets
○ Disruptive: simpler or more convenient products, for lower prices to new or
unattractive customers
, Technology S-Curve: Performance
Discontinuous technology: fulfills a similar market need by
building on an entirely new knowledge base
Effort: investment/resources/atten = not necessarily equal
to time (do often correlate)
Performance: the more effort is investested the better the
technologies performance
Technology S-Curve: Adoption
Innovators (2.5%)
Early adopters (13.5%)
Early majority (34%)
Late majority (34%)
Laggards (13.5%)
