2. Is it necessary to be Pioneer?
• Pioneer are term generally given to ‘the first movers of the
market’ with completely new product innovation that shift
market structures, represent new technologies, require
consumer learning and induce behavior changes.
• And No, it is not necessary to be a pioneer to have
successful product innovation.
4. Is it necessary to be Pioneer?
Example:
CAT scanner MRI scanner
5. Developing Innovation strategies
• As previously mentioned, product and process
innovations/development are essential for firms’ growth and
survivability.
• There is wide range of alternative strategies which firms can follow
depending on their resources, heritage, capabilities and aspiration.
6. Developing Innovation strategies
• The innovation strategies affects across firms’ functions such
as manufacturing, finance, marketing, R&D, and personnel.
• Therefore careful consideration is important.
• They are 4 broad innovation strategies commonly found in
technology-intensive firms which are:
1. Leader/Offensive
2. Fast follower/Defensive
3. Cost minimisation/Imitative
4. Market segmentation specialist/Traditional
7. Leader/Offensive
• The strategy centres on the advantage gained from
monopoly specifically technology monopoly.
• Aim: to ensure the product is launched into the
market before competition.
8. Leader/Offensive
• Advantages:
1. Enabled price skimming policy
2. Adopt penetration policy based on gaining high market
shares
• Challenges:
1. High R&D activities and costs
2. Substantial marketing resources to promote and may
also require education for consumer for the new product
10. Fast Follower/Defensive
• This strategy involves substantial technology base so that
firms may develop improved version of original, improve
cost, different design and additional features etc.
• The aim: to respond quickly to firms that are first into the
market
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11. Fast Follower/Defensive
• Advantages:
1. Innovate superior products
2. Undercut the leader on prices
3. Out advertise/out distribute the leaders
4. Higher market due to higher acceptance of innovations; less risky
Challenges:
1. Must be agile in manufacturing, design, development, and
marketing
2. Must have significant R&D, to respond faster and innovate quickly
13. Cost minimisation/Imitative
• This strategy is based on being low-cost producer.
• Aim: To achieve economics of scale in manufacturing
by seeking technological, production and/or
distribution efficiency so that they can offer low price
14. Cost minimisation/Imitative
• Advantages:
1. Compete well without high investment in product development and
design
2. Become cost leaders amongst competitors
Challenges:
1. Requires exceptional skills and capabilities in production and
process engineering
2. Require lower labour and supply costs
16. Market segmentation
specialist/Traditional
• This strategy is based on meeting the precise requirement of
a particular market segment or niche with innovation
focused on serving consumers’ requirements/wants
• Aim: to pursue long-time relationship with consumer (brand
loyalty) rather than one off transactions by providing
customised and/or superior products
17. Market segmentation
specialist/Traditional
Advantages:
1. High margins
2. Repeat customers
3. Typically does not require large-scale manufacture with few product
changes
Challenges:
1. Risk of unprofitable customers
2. Maintaining superior qualities
3. High marketing importance
20. Close innovation
• 1960 to the 1980’s: product innovation process are highly internalized within the
firms.
• It is called Close Innovation.
• Close innovation: the use of only internal environment to drive the innovation
process and limit the market of the innovation to internal use only.
• The logic behind this is that successful innovation requires control for the whole
innovation process and the ownership intellectual properties, so it could not be
exploited by others for profit.
21. Close Innovation: Virtuous circle
Fundamental Technology Breakthroughs
Increased investment in
R&D
New Products and Features
Increased Sales & Profits via
Existing Business Model
24. Close innovation: Issues
• However this will also weed out false
negatives. (eg. Xerox and Alto)
• It is also too uncertain, too expensive, and
too slow to keep up with the technological
changes in the market.
25. Open innovations
•However this type innovation process model is
too uncertain, too expensive, and too slow to
keep up with the technological changes in the
market.
•Thus, Chesbrough (2006) argued that process of
innovation had shifted from Close to Open
Innovation
26. Open Innovation
• Open innovation: the use of purposive inflows and outflows of
knowledge to accelerate internal innovation, and expand market for
external use of innovation respectively.
• This assumes that firms can and should use both external and internal
ideas/knowledge/technologies as well as internal and external paths
to market, as they look to advance their technology
29. Technology Transfer
• One of the most important part of Open innovation is technology
transfer.
• Technology transfer: It is the process by which technology developed
for one purpose is employed either in a different application or by a
new user. The activity principally involves the increased utilization of
existing science/technology base in a new areas of application as
oppose to its expansion by means of further research and
development.
30. Technology Transfer
• In context of Innovation, Technology transfer is the process of
promoting technical innovation through the transfer of ideas,
knowledge, devices and artefacts from leading edge companies, R&D
organisations and academic research to more general and effective
application in industry and commerce.
31. Methods of technology transfer
1. Licensing
2. Science park model
3. Intermediary agency model
4. Directory model
5. Knowledge Transfer Partnership model
6. Hiring skilled employee
32. Licensing
• Licensing involves technology owner receiving licensing fee for access
to the technology.
• Typically the technology will be protected by patents.
• Careful evaluation benefits of technology licensed and the
commitment to pay
33. Licensing
• Reasoning:
1. Mutual self-interest
2. To diversify and grow through addition of new products
3. To improve design and quality of existing products
4. To obtain improved production or processing technology
5. To ensure freedom of action in company’s own R&D programme
6. To eliminate uncertainty and risk involved in developing alternative
processes and technology
7. To accommodate customer need and wishes
8. To qualify for government or other desirable contracts.
34. Science Park model
• Science Park model is based on
developing industrial area or district
close to an establish centre of excellence
(e.g. Universities).
• Rationale: to give academic scientist the
opportunity to take laboratory ideas and
develop them to real product and
companies can utilized the centres’
knowledge base.
Eg: silicon valley (A area in San Francisco,
USA)
Companies in Silicon Valley:
Apple, Google, Netflix, adobe etc..
Universities in Silicon Valley:
Stanford University, Washington University,
Berkley etc…
35. Intermediary agency
model
• Their role is to act as
intermediary between
companies seeking and
companies offering technology
Directory model
• Directory model is essentially a
listing directory for technologies
available for licensing
36. Knowledge Transfer partnership
model
• The model works through postgraduate
training, where master students will
study part-time at university and work
part-time for a company on a research
project, where university will provide
support for students and offers expertise
to the company.
37. Hiring Skilled
employees
• Oldest methods of technology transfer.
• By hiring or recruiting people with
necessary skill from other organisations
or from university research centre.
• They will then bring their knowledge,
ways of working and methods they had
used previously to the firm
Consultancy
• A growing industry.
• An adoption of ‘hiring skilled employees’
method.
• The consultants will have previous
experience and knowledge in the area of
consultancy.
• They will lend their expertise, experience
and contacts to start the project.
The first modern automobile was introduced to the market in the late 19th century. However they were scarce, expensive, and unreliable. So, they were still not widely used by the mass public with horse drawn carriages still main transportation. Until the introduction of Ford model T in 1908, that expanded and improved mass production of cars, which made car readily available for the masses (in terms of price, reliability and availability)
CAT scanner: EMI (1971) had no experience in medical equipment industry. Patents were ignored and drove EMI out of business with marketing, distribution, financial and extensive industry experience.
MRI: tiny Fonar (1978) almost similar experience with CAT scanner could not compete with other huge medical equipment supplier
It should be noted that all the strategies are not mutually exclusive or collectively exhaustive (atleast one of the events must occur together)
Price skimming policy: setting high initial price at first before lowering it after a time, to offset the high development/marketing costs and high profit margins, skimming off the top of the market that are willing to pay the high price, perceived high quality, though may cause low sales
Penetration policy: setting a low price to gain wide shares of the market and act as barrier of entry
It is the first mass production of hybrid car that becomes widely available to consumer and made a viable cost effective eco-friendly electric car. The name becomes synonymous with hybrid electric car and seen as the leader of the market for a long time
Innovate superior products: by analyzing the issues and problems faced by previous iteration of products
Was not the first commercially available mp3 player. But previous iterations were bulky, heavy, low memory capacity, poor battery life, slow and difficult music transfer from computer to device due to wiring and different music system used. Ipod answered all this issues, by introducing itunes the year before for a more easier intergrated system, fire wire for faster music transfer, higher memory capacity, lighter and sleeker and became the dominant design for mp3 player device.
Usually by licensing technology from other company
35mm camera: German companies Leica, Contrax, Exacta was the technology and market leader for decades until Japanese companies after the second world war copied the german technology and lower the price, and then improved upon the technology. Pioneer failed to react and ended up as incidental player
Unprofitable customers: the cost of acquiring and maintaining the customer’s are not profitable in the long run
Targeted specifically the luxury market. Produced high quality, performance and reliability. Maintain their superior brand recognition by marketing, synonymizing the watch with sign of success. Innovation: first watchmaker to gain chronometer certification for high accuracy, self winding, first waterproof
From idea, product development, manufacturing, market distribution etc..
This model works in most of 20 th century. For example The general electric laboratory founded by Thomas Edison and others. They’ve developed numerous product including electric fan, tungsten filament lightbulb and first television brought to home
Technology explosion: expansion of technological knowledge in a short period of time 90% of technology knowledge discovered in the last 60 years
Shortening technology cycle: for example market life cycle of car shorten from 10 years in 1960’s to 6 years in 2000’s
Globalisation if technology: where technology and knowledge are transferred, acquired and assimilated into new products easily in form of licensing and alliance.
These external ideas/knowledge/technology can come form external research project, venture investing, technology in-licensing, technology acquisitions.
The open innovation approach also allow the commodisation of the innovations outside the firms’ or product current market (intend of use).
Therefore, Open innovation still weeds out false-positive while keeping in false-negative innovations for firm’s use and growth.
This can also involve, ideas, knowledge, information, equipments, product, process
Licensor: to gain financial gains, lincencee: to use technology in product development without patent infringement
Silicon valley
Morgan motor company a british sports car manufacturer worked with Birmingham university with a knowledge transfer partnership programme where Aeromax was developed, the first superformed aluminium car
While a lot of efforts have been put towards accessibility and mobility of technology transfer. However there is still lack of efforts in understanding the receptibility and the need of an organization acquiring outside technology. They need to be able to be aware, identify and take effective advantage.
