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Innovation Lecture
Jun 5, 2024
Innovation Lecture Notes
Types of Innovation
Product Innovation
Focus: New/better products
Goal: Increase revenue
Process Innovation
Focus: New/better production methods
Goal: Reduce unit costs, increase efficiency
Why Innovate?
Increase revenues or reduce unit costs
Reasons:
Increasing competition
Changing consumer tastes
Changing/rapid technology
Increasing ethical/environmental concerns
Shareholder demands for higher dividends
Advantages of Innovation
Improve product quality => Increased sales, growth, turnover
Enhance brand image => Competitive advantage => Premium pricing
Price inelasticity => Allows price skimming
Disadvantages of Innovation
Initial costs: R&D, market research
Long-term costs: Intellectual property protection (patents, copyrights)
Time-consuming; short-term benefits may not be realized
Innovation Considerations
Are rivals innovative?
Necessary level of innovation
Consumer demand for innovative products
Available finance for innovation
Staff skills and management risk tolerance
Methods to Achieve Innovation (K BIRD)
Benchmarking
Identify high-level performance for comparison
Pros:
Encourages result analysis
Higher aspirations for business/employees
Cons:
Realistic benchmarks?
Less innovation from merely copying competitors
Intrapreneurship
Employees apply entrepreneurial skills: Creative thinking, risk-taking, problem-solving
Likely in a flat structure with delegation
Pros:
Motivating, increased staff retention
Fosters creative culture
Cons:
Loss of management control
Slower decision-making
Inconsistency in output/processes
Research and Development (R&D)
Work towards innovation and improvement of products/processes
Product Innovation
: Better products, meet customer needs, higher turnover
Process Innovation
: Reduce unit costs, increase efficiency, higher profit margins
Pros:
Creates competitive advantage, brand image
Ability to charge higher prices
Cons:
Risk of failure, time-consuming, expensive
Kaizen
Management philosophy for small consistent changes
Empowerment of workers through regular meetings (quality circles)
Pros:
Motivating, reduced waste
Smaller capital expenditure (capex)
Cons:
Time-consuming quality circles, lower productivity
Possible resistance to Kaizen approach
Protecting Intellectual Property (IP)
Patents (for inventions) and copyrights (for creative works)
Pros:
Grow market share, rivals can't copy
Higher prices, wider profit margins
Reinvestment of profits
Cons:
Complex to achieve and maintain
Innovation in Functional Areas
Marketing
Requires market research
Potential overweight of stars/question marks in the Boston Matrix
Human Resources
More innovation with delegation, soft HRM, flat structures, risk-taking culture
Finance
R&D costs are high
Budgeting for benchmarking
Acceptance of failures in intrapreneurship
Operations
Moving from labor-intensive to capital-intensive
Consider supply chain adjustments
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