Innovation in the New Economy

1. Innovation in the New Economy Minder Chen Professor of MIS California State University Channel Islands Minder.chen@csuci.edu

2. Importance of Innovation • “In a world of ever-accelerating change, innovation is the only insurance against irrelevance. • In an environment of steadily decreasing frictionand crumbling entry barriers, innovation is the only antidote to margin-crushing competition. • And in a global economy where knowledge advantages dissipate ever more rapidly, innovation is the only brake on commoditization.“ • Gary Hamel, “Introduction” to the Innovation to the Core

3. Definition of Innovation http://www.youtube.com/watch?v=2NK0WR2GtFs&feature=watch-vrec http://www.designcouncil.org.uk/Documents/Documents/OurWork/Insight/DesignForInnovation/DesignForInnovation_Dec2011.pdf • An innovation is the creation and application of a new or significantly improved technology, product/service, process, or business model that is accepted by markets and society. • Adapted from OECD 2005 and Wikipedia. • Innovation applies ideas and new knowledge to the production of goods and services to improve product/service quality and process performance. • UK Design Council

4. Formula for True Innovation • America’s advantage, if it continues to have one, will be that it can produce people who are also more creative and imaginative, those who know how to stand at the intersection of the humanities and the sciences. • That is the formula for true innovation, … • Walter Isaacson is the author of “Steve Jobs.” • http://www.nytimes.com/2011/10/30/opinion/sunday/steve-jobss-genius.html?pagewanted=all&_r=0

5. Innovation: Creative Destruction • A commercialization process based on the application of new materials and their components, new technical methods, new markets and new forms of organization. • Joseph Schumpeter • The innovation involves both technical world and business world. A change in technology only is just an "invention“.

6. Creativity • Creativity is the quality or ability to create or invent something original. • “Genius is 1% inspiration and 99% perspiration.” • Thomas Edison • Creativity is about coming up with the big idea. Innovation is about executing the idea — converting the idea into a successful business. • Vijay Govindarajan • http://blogs.hbr.org/govindarajan/2010/08/innovation-is-not-creativity.html • Innovation is applied creativity.

7. Discovery, Invention, and Innovation “If an idea begat a discovery, and if a discovery begat an invention, then an innovation defined the lengthy and wholesale transformation of an idea into a technological product (or process) meant for widespread practical use. Almost by definition, a single person, or even a single group, could not alone create an innovation. The task was too variegated and involved.” • The Idea Factory, by Jon Gertner

8. Discovery vs. Invention Applied creativity — taking clever ideas and smart designs and applying them to useful devices. – Walter Isaacson lightning was a form of electricity.

9. Invention vs. Innovation Source: http://www.pbs.org/idealab/2012/03/the-difference-between-invention-and-innovation086.html iPod wasn't the first portable music device (Sony popularized the "music anywhere, anytime" concept 22 years earlier with the Walkman; MP3) What made Apple innovative was that it combined all of these elements -- design, ergonomics and ease of use -- in a single device, and then tied it directly into a platform that effortlessly kept that device updated with music. Apple invented nothing. Its innovation was creating an easy-to-use ecosystem (with iTune Store, iTune, ans iPod) that unified music discovery, delivery and device. And, in the process, they revolutionized the music industry.  Creative Collision

10. Evolution of Dominant Market Demand and Firm’s Focus Innovation Flexibility & Agile Quality Cost Efficiency Firm’s Focus Choice, Time of Delivery Uniqueness Market Demand Quality Price Time Adapted from Felix Janszen, The Age of Innovation, 2000, p. 19.

11. Technology Innovation http://www.slideshare.net/Busarovs/innovations-3833340

12. Does Customer Know What They Want? • Seeing what customers have not yet imagined but will instantly desire. • “If I had asked my customers what they wanted, they’d have said a faster horse.” - Henry Ford

13. Drivers for Innovation • Necessity is the mother of invention. • Where there is a friction (frustration), there is an opportunity. • Zappos’ founder Nick Swinmurn • Dropbox file sharing: Drew Houston reportedly conceived the idea for Dropbox after repeatedly forgetting his USB drive  • Chinapages.com by Jack Ma

14. Product & service Innovation Polaroid Camera (Instant Camera)

15. Process Innovation Model-T: a true innovation available to a wide audience. pleasure car  passenger car Moving assembly line Steal from : Meat Packing Plant High wage;

16. Business model Innovation Southwest Zara: Fast Fashion Dell: Direct sales IKEA: Self-assembled furniture Apple: iPod & iTune  ecosystem innovation

17. Innovation Arena: TAMO New processes New services Technology World A problem looks for a solution. New materials and components Invention Business World Innovation A solution looks for a problem. Adapted from Felix Janszen, The Age of Innovation, 2000, p. 9.

18. The Rate of Innovation: Product vs. Process

19. Key Factors at Three Phases

20. Service innovation is inherently multidisciplinary Knowledge sources driving “service” innovations… Business Administration and Management Technology Innovation Business Innovation Science & Engineering TQM Reengineering Laser, seminconductor Social-Organizational Innovation Demand Innovation Global Economy & Markets Social Sciences Grameen Bank (Bank of the poor, Micro lending) Groupon SSME = Service Sciences, Management, and Engineering

21. Three Types of Restaurants Hotpot 火 鍋 Teppanyaki-type Restaurant (i.e., Benihana) Source: Service Is Front Stage

22. Cross-disciplinary communication Service system design, management, and modeling Value co-creation analysis Service lifecycle analysis (for quality assurance) Service supply and demand management New service development Business project management Business case development and analysis Organizational change management Marketing and sales Creative and critical thinking Communication skills Leadership and collaboration skills T-Shaped Talents: skills, abilities, and knowledge T-shaped professionals are in high demand because they have both depth and breadth They combine expert thinking (depth in one or more areas) and complex communications (breadth across many areas) complex communication expert thinking Wendy Murphy & Bill Hefley, “What’s new in service science, management, and engineering?” Presented at Frontiers in Service Conference, October 2008

23. Architecture of Innovation Intersection & Integration Science/Technology Humanity/Art Business Model Innovation Consumer Process Innovation End product/ service & Component Experience Innovation Service Innovation Product Innovation Technology Innovation Creativity & Imagination Business

24. Innovation Diffusion The Process of Innovation Diffusion Invent Persuade Decide The cumulative distribution of innovation adopters who are characterized by the timing of their decision to accept and implement the innovation. Reject Abandon Accept S-Curve or the logit function for rate of diffusion adoptation. Adopt Implement Innovation Diffusion Function to Saturate a Market Everett M. Rogers (1931-2004), Diffusion of Innovations, 4th edition (1995)

25. 5 Factors of Innovation Adoption Decision (Roger)

26. Technology Forecasting • “I think there is a world market for maybe five computers.” • Thomas Watson, Chairman, IBM (mainframe giant), 1943 • “This telephone has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.” • Western Union (telegraph) internal memo, 1876 • “There is no reason why anyone would want a computer in their home.” • Ken Olsen, Founder, Digital Equipment Corp. (minicomputer giant) 1977

27. For Innovation Opportunities Demographics New Perception New knowledge Rule breaking

28. Innovation New opinions are always suspected and usually opposed, without any other reason but because they are not already common. - John Locke

29. Not Seeing the Opportunities • Cannot see at its nascent stage • Don’t take it seriously once seen • Don’t understand when it has become successful • Wait until it is too late 視而不見見而不屑察而不懂行已不及 先見之明人棄我取摸透產業先人一著

30. An Innovation Process

31. Innovation Arithmetic Build up the pipeline Quantity matters

32. From Ideas to Product/Service/Business Between the conception And the creation Between the emotion And the response Falls the Shadow - T.S. Elliot Idea Is it possible? Is it attractive? Uncertainty Is it do-able? Is it what our customers want? How do we implement it? Product/Service/ Business Resource allocated Source: Felix Janszen, The Age of Innovation, 2000, p. 99. And http://www.artofeurope.com/eliot/eli2.htm

33. Manage the Product/Innovation Pipeline http://www.keytechinc.com/blog/index.php/2009/reduce-risk-product-development/ Additional source: https://paul4innovating.com/2011/08/19/there-are-two-distinct-parts-to-any-innovation-funnel/

34. Innovation Pipeline Source: http://www.cimaglobal.com/Documents/ImportedDocuments/cid_tg_innovation_management_jul07.pdf.pdf

36. Reverse Innovation Reverse innovation or trickle-up innovation is a term referring to an innovation seen or used first, in the developing world before spreading to the industrialized world. Examples: • Red Bull • Gatorade: The drink’s origins can be traced to Bangladesh, where for centuries practitioners of ayurvedic medicine have used liquid concoctions of carbohydrates, sugar, and salt to quickly hydrate patients.http://www.gatorade.com/company/heritage & http://www.strategy-business.com/article/120301b • GE is now selling an ultra-portable electrocardiograph machine in the U.S. at an 80% markdown for similar products. The machine was originally built by GE Healthcare for doctors in India and China. https://en.wikipedia.org/wiki/Reverse_innovation

37. Seven Innovation Myths Source: Innovation to the core • Innovation is risky. • Innovation is (only) about products. • Innovation is about "big" ideas. • Innovation can't be taught. • Innovation is a diversion. • Innovation is expensive. • Innovation is an exception.

38. Key Challenges to Innovation Five Innovation Myths You've Probably Fallen For, Published: 3 September 2014 Analyst(s): Mary Mesaglio, Ed Gabrys from Gartner. ■ ROI is not effective in exploration mode; different innovation metrics are required. ■ People are unreliable when it comes to knowing what they want. ■ Many of your best innovators are invisible to you. ■ New ideas do not sell themselves, and the best ideas often start off looking stupid. ■ Small changes can have extraordinary effects if you know where to look.

39. Five Innovation Myths Five Innovation Myths You've Probably Fallen For, Published: 3 September 2014 Analyst(s): Mary Mesaglio, Ed Gabrys from Gartner. • Myth No. 1: ROI Is the Most Important Innovation Metric • Reality: ROI doesn't work in exploration mode, because there are too many unknowns to make an accurate prediction. • Solution: Adopt "goal post" (range) and "time to truth" metrics and measures to manage uncertainty. • Myth No. 2: People Know What They Want; Just Ask Them • Reality: People are unreliable at knowing what they want. • Solution: Determine preferences via observation, rather than direct questioning.

40. Time to Truth Measures

41. Five Innovation Myths • Myth No. 3: You Know Who Your Best Innovators Are • Reality: Many of your best innovators are invisible to you. • Solution: Look for innovators in unlikely places. • Myth No. 4: The Value of a New Idea Is Self-Evident • Reality: New ideas do not sell themselves, and the best ideas often start off looking stupid. • Solution: To sell the value of a new idea, show, don't tell. • Myth No. 5: Big Problems Require Big Solutions • Reality: Small changes can have extraordinary effects if you know where to look. • Solution: Focus on "little elephants."

42. The Art of Innovation https://www.youtube.com/watch?v=Mtjatz9r-Vc http://surfthedream.com.au/writing/the-art-of-innovation-guy-kawasaki-at-gartner-barcelona/ http://www.slideshare.net/GuyKawasaki/the-art-of-innovation The Art of Innovation – Guy Kawasaki