LECTURE 1: INTRODUCTION TO INNOVATION
Articles Week 1:
Baregheh, A., J. Rowley and S. Sambrook (2009), Towards a Multidisciplinary Definition of Innovation,
Management Decision, 47(8): 1323-1339.
Ireland, R.D. and J.W. Webb (2007), Strategic Entrepreneurship: Creating Competitive Advantage Through
Streams of Innovation, Business Horizons, 50(1): 49-59.
Christensen, C.M., E. Ojomo and K. Dillon (2019), Cracking Frontier Markets, Harvard Business Review,
97(1): 90-101.
Innovation is “creativity”, “change”, “transformational”, “different”, “new”, and many other words.
EXAMPLE Brad Paisley: welcome to the future, now it’s on my phone, 20 years later and all these
things fit in your pocket.
Innovation is the process by which an idea or invention is translated into a good or service for which
customers are willing to pay, or the result from this process.
Innovation = invention + commercialization
Invention of the telephone:
- Alexander Graham Bell filed a patent on the invention of the telephone in 1876
- Two hours later, Elisha Gray filed an application for the same telephone
- Anotnio Meucci was the inventor of the telephone not the innovator, he filed a patent in 1871
but never developed his idea or defended his patent and this left him poor and bankrupt
Misperceptions about innovation
● “Innovation is about getting good ideas”
○ Successful innovation is not about having good ideas, but about successfully developing
them into new products/ services and launching them in the market
■ “Invention is the root of our success. We’ve done crazy things together and then
made them normal. If you get it right, a few years after a surprising invention,
the new thing has become normal. People yawn, and that yawn is the greatest
compliment an inventor can achieve” Jeff Bezos talking about innovation
■ The story of SPANX: Sara Blakley cut-off the feet of the pantyhose so she could
wear them with open sandals to a party, manufacturers (middle-aged men)
didn’t like this product, clients loved them, Forbes named Bakely the youngest
self-made female billionaire history in 2012
■ “I can’t tell you how many women come up and say something like ‘I’ve been
cutting the feet out of my pantyhose for years. Why didn’t I end up being the
SPANX girl? The reason is that a good idea is just a starting point” It’s about
working on this idea and translating it into a product that works
● “The innovation process cannot be managed”
, ○ Innovation isn’t just creativity, it’s not just about brainstormed ideas, it’s a discipline you
can manage. Measurement, rigor, and IT tools, applied to the innovation process can
fuel business growth
“Business has only two functions: marketing and innovation” → Importance of innovation
● It improves the firm’s competitive position
○ Respond to market opportunities by creating new process or new markets
○ New products to help to differentiate from the competition
○ Contributes to growth
○ Product life cycles get shorter; innovation is needed to remain attractive to customers
○ Without constant innovation you will be overtaken by the competition
● Innovation improves society
○ Innovations improve health, safety, and comfort of customers
○ Cloud computing, AI, internet of things, online shopping
● Changing technologies, customer needs and global economic create many opportunities for
innovation
Innovation is critical for a firm’s future, but creates many challenges, resulting in many failed innovations
RITUALS: “What makes us unique, is our speed of renewal. Every year we launch some three hundred
new products”
McKinsey & Company: interviews with CEOs worldwide
- 85% has innovation at the top of their agenda
- 80% are concerned that their business model is at risk
- 6% is pleased with the ir company’s innovation performance
- While the 94% who are not pleased have no idea what the problem is
BCG Global Innovation survey: one-quarter of companies are not talking the talk on innovation
45% are committed to innovation and they see it as a strategic priority and they invest accordingly
25% are confused and they see commitment and resource investment as indifferent or inconsistent
30% are skeptical and believe that innovation is clearly not a strategic or investment priority
The COVID-19 crisis presents an opportunity that few feel equipped to pursue
- Although most executives agree that innovating the business will be critical, few feel equipped
to face the challenge
- 90% believe that COVID-19 will fundamentally change the way they do business over the
next 5 years
- 85% are concerned that COVID-19 will have a lasting impact on their customers’ needs
and wants over the next 5 years
- 21% have the expertise, resources, and commitment to pursue new growth successfully
- 2/3 believe that this will be the most challenging moment in their executive career
- Only pharma and medical products have increased its focus on innovation during COVID-19
- Companies that invest in innovation through a crisis outperform peers during the recovery
,Top 3 innovation economies by region
North America has the highest total brand value of the top global brands, followed by South East
Asia/East Asia/Oceania and Europe.
Several middle-income economies (China, Malaysia, Bulgaria) have similar high innovation outputs as
high-income economies.
“Innovators are increasingly taking root everywhere. There are currently more than 1.3 million
technology startups globally. Startup ecosystems are popping up all over the world to support them, with
more than 480 hubs worldwide, from Detroit to Bangalore to Puerto Rico to Nairobi to São Paulo.”
Global innovation Index Rankings: Switzerland (1), Sweden (2), US (3), UK (4), Netherlands (5)....
World Top 25 R&D spend: Amazon (1), Alphabet (2), Volkswagen (3), Samsung (4), Microsoft (5)...
R&D spending vs innovation performance (no relationship)
● Studies show that there is no direct relationship between money spent on
R&D and firm innovation performance - you cannot buy your way to
success
○ In every global innovation 1000 study: the top 10 most innovative
companies outform the top 10 R&D spenders on several financial
metrics
● In 2018, Apple spent less on R&D as percentage of sales (5.1%) than eight
of the other nine companies selected as most innovative
○ Intel (20.9%), Facebook (19.1%), Alphabet (14.6%), Amazon (12.7%)
Companies with the most US patents granted to them: IBM, Samsung, Canon, Microsoft, Intel…
Most innovative companies: Snap, Microsoft, Tesla, Hackerone, White Claw…
BCG the 50 most Innovative companies: Apple, Alphabet, Amazon, Microsoft, Samsung
Only 3 companies made it to the Top 50 of four lists: Google, Amazon, Tencent
Each ranking uses different metrics so look at what companies actually stay on the list
Only 20 companies have made the Top 50 list more than ten times
, Characteristics of successful innovators
1. Strategic alignment between innovation strategy and business strategy
2. Corporate culture aligned with innovation strategy
3. Top management involved in R&D program
4. Focus on obtaining deep customer insights
5. Project selection is considered critical to success
The case of Amazon - innovation powerhouse
- Largest number of new products and services in the last decade: Amazon Prime, Video, Music...
- Amazon Go: tested in 2017, launched January 2018
- September 2019: launched Amazon Care for Amazon employees
- December 2020: announces to expand Amazon Care to workers at other companies
Amazon leadership principle #1: Customer obsession
Start with the customer and work backward; work vigorously to earn and keep customer trust; pay
attention to competitions, but keep obsessing over customers.
The future of innovation is digital
Companies expect to invest more in digital technologies and products
Three types of products:
1. Pure information goods: ruled by digital companies like Google and Facebook
2. Once-analog products that are converted into digital products: ruled by digital companies like
Audible.com (books), Spotify (CDs), and Netflix (DVDs)
3. Analog products with digital integrated (Internet of Things): dominated by manufacturers like
Caterpillar, Tesla, and Ford
Who will come to dominate the third category? Unclear - maybe the industry incumbents (Caterpillar or
Ford) or tech giants (Microsoft or Amazon)
Degree of newness - Newness to the market vs newness to the companies
Innovations differ in their degree of newness, from very minor, incremental innovations to
new-to-the-world radical innovations
Incremental innovation
● Minor product changes
● High success rate
● Low returns
Radical innovation
● Large product change
● Low success rate
● High potential returns
