Chapter 1:

The Innovation Imperative

1.1. Innovation matters
SMEs and large corporations need to be innovative and entrepreneurial if they are to survive,
develop, and grow today and in the future.

Innovation is a word deriving from Latin and means the introduction of something new to the
existing world and the order of things or the improvement of resources productivity.
Innovation is practical implementation of ideas that result in the introduction of new goods and
service or improvement in offering goods and services.
Innovation is the systematic practice of developing and making breakthrough products and
services for adoption by customers.
Innovation is“The industrial innovation involves technical design, manufacturing,
administrative and commercial activities related to the marketing of few (or improved) products or
with the first commercial use of a new (or improved) process or equipment”.

Innovation is the process of creating value by applying novel solutions to meaningful

problems.Innovation has been an important topic of study for a number of different areas, for
example economics, business, engineering, and science. Despite the fact that innovation has been
studied many years, the term is often poorly understood and can be sometimes confused with
related terms such as change, invention, design, and creativity. Among academics there is a
difference of opinion about what the term innovation really means.

Innovation term is hard to unambiguously to determine. The following is a list of defining

innovation by the well-known authors. As you can see on the explanations of innovation can
understand in different ways.
“Industrial innovation includes the technical, design, manufacturing, management and
commercial activities involved in the marketing of a new (or improved) product or the first
commercial use of a new (or improved) process or equipment”
“Innovation is the specific tool of entrepreneurs, the means by which they exploit change as
an opportunity for a different business or service.”
“Innovation is the successful exploitation of new ideas”

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 “Successful innovation is the creation and implementation of new processes, products,
services and methods of delivery which result in significant improvements in outcomes,
efficiency, effectiveness or quality”
”Innovation is the successful development, implementation and use of new or structurally
improved products, processes, services or organisational forms”
Innovation is “something new being realised with (hopefully) added value”
”Companies achieve competitive advantage through acts of innovation. They approach
innovation in its broadest sense, including both new technologies and new ways of doing
things”
”... Innovation does not neccessarily imply the commercialization of only a major advance in
the technological state of the art (a radical innovation) but it includes also the utilization of
even small-scale changes in technologocal know-how (an improvement or incremental
innovation)”
”Innovation = new idea + implementation + creating value”

1.2. Types of Innovation

In the world there are many kind of innovation. Those can be classified according to the object of
innovation, for example innovation of business model, of products, of services, of processes, of
ecosystems, of organizations. Innovation type can be divided into four categories. Those are:-

1. Incremental innovation
Incremental innovation constitutes a gradual, continuous improvement of existing products and
services. Incremental innovation improves certain dimensions of the product design or the
production process for example. This allows products, services, processes etc. to better meet the
needs of specific market segments. Incremental innovation arises under conditions of greater
certainty. Market segments are normally known, as well as customer needs. Company’s technology
required is not usually very different from the company’s recent practices and the production
processes used are well-understood. Incremental projects are quite straightforward and they also are
characterized by low technical and market uncertainty, and incremental product changes are based
on knowledge, experience and capabilities that already exist in the company.
Incremental product innovation for example refers to the small changes in a product that helps
improve its performance, lower its costs, and/or enhance its desirability or simply to announce a new
model release.Good example is new version of mobile phone. Most products are used by continual

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 incremental innovation. That means lowering their costs, and enhancing effectiveness all the
time.This is the main form of innovation and even though it is not as thrilling as a radical innovation.
Althought incremental innovation is not as thrilling as radical innovation, but it is as important as
radical innovation. Incremental innovation is necessary to transform the radical idea into a form that
is acceptable to the early adopters. One of the most common sets of incremental innovation
categories is based on the degree of change required for implementation:

A. Core innovation requires minimal or no change to the current business model

(customers, offerings, revenue model, resources and processes). Also known as
continuous or incremental innovation, this is the unglamorous but deeply
important work of constantly improving what you do and how you do it.
B. Adjacent innovation makes a significant change to at least one element of your
business model. It could be changing who you serve, like expanding from
interventional cardiologists to general cardiologists; what you offer, like expanding
into a new market when launching a new product; or how you offer or deliver it.

2. Radical innovation
This type of innovation completely changes how an organization interacts with the marketplace. This
gives rise to really new products for both the company and the market, involving technological
revolutions that totally change the name of the game. This type of innovation is also called
“breakthrough” but, for obvious reasons. Radical innovation usually involves a high level of
risk and requires a lot of time, money and patience to see to fruition . High risk is involved
because a high degree of complexity in the new product requirements, as yet undefined, as well as a
high degree of uncertainty with regard to technology, customers’ needs and competitors’ actions.
When the company faces radical innovation, the technology, market and company’s infrastructure
may still be at development stage. Basically this innovation is fundamentally change the
business (radical innovations) are a high level of complexity and uncertainty, which increase
company’s need for learning, flexibility and adaptability.
Leaders of the companies are aware of that radical innovations are critical to company’s long-term
growth and renewal. The relationship between business growth and innovation is widely understood
by managers today. Incremental innovation can keep company competitive with current product

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 platforms in current business areas. But only radical innovation can change the game. Radical
innovation can transform the relationship between a customer and a company, restructure
marketplace, displace current products and often create new product categories.

3. Disruptive Innovation
Disruptive innovation is often the most well-known type of innovation. It comes with effective uses
of new technology and high-impact results. While disruptive innovation is extremely flashy and
grabs headlines, it comes with many nuances and challenges. The most common organizations
exhibiting the characteristics of disruptive innovation are startups targeting overlooked segments in
the market to deliver an offering that is more affordable, convenient, or simpler than the established
players can.

4. Sustaining Innovation

Sustaining innovation is the best way to protect an organization’s position in a market. Incremental
innovation focuses on small improvements to existing products and services to increase value or
customer satisfaction. Sustaining innovation focuses on larger changes to gain or maintain a market-
leader position. This category is focused on creating new features or services that differentiate a
product from all of its competitors.

1.3. The Importance of Innovation

Unforeseen challenges are inevitable in business. Innovation can help you stay ahead of the
curve and grow your company in the process. Innovation is crucial benefit for your
consumer, society and business:

Benefits for firms

Localized knowledge base
Exploitation of local knowledge :
For consumers and society:

new and improved goods and services

Reduced cost of existing goods and services

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 Increased private wealth and social welfare

longer, healthier lives

Innovation has a positive impact on GDP: use of technology make the use of labour and

capital more efficient, allowing for higher output levels

For firms: innovation source of competitive advantage:

Separates businesses from their competition

Innovation allows for product differentiation

Better chances of surviving in the market (allows adaptability)

Higher productivity and higher profits over the long term (fosters growth)

Have better credit ratings and higher market values

1.4. Innovation and Entrepreneurship

Innovation and entrepreneurship are two closely related words used in the business world. Some
may think they mean the same, but using them interchangeably would be making a big mistake.
While they revolve around the same idea, it is crucial to understand the difference.

Innovation is applying your creativity to come up with a unique idea or solution, where
Entrepreneurship is applying the innovation to bring the ideas to life. Innovation is the process of
translating an idea or invention into a good or service that creates value. Innovation can allow parts to
do what they could not previously do.

Innovation is an idea must be replicable at an economical cost and must satisfy a specific need.
Innovation involves deliberate application of information, imagination and initiative in deriving
different values from resources. It includes all processes by new ideas are generated and converted into
useful products. In business, innovation often results when ideas are applied by the company to further
satisfy the needs and expectations of the customers.

Entrepreneurship is neither a science nor an art. It is a practice. Entrepreneurship is a means to an

end. Entrepreneurship is the capacity and willingness to develop, organise and manages a business
or innovation venture along with any risk to make profit.

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 1.5. Dimensions of Innovation

There are many dimensions in which innovation can, and possibly should, occur.Innovation can
occur in one or more of 13 different dimensions. Each of the 13 dimensions of innovation can be
placed in one of three buckets, growth opportunities, core capabilities and operations, and the over
arching business model. The segmentation of the dimensions assist in ensuring that the areas
selected for innovation align with the business and innovation strategy set at the beginning of the
initiative. The 13 innovation dimensions as listed in table below:-

Dimensions of Innovation
1 Product and service offering Develop new products and services
2 Platform Develop derivative offerings leveraging common
components or building blocks
3 Solustion Integrated/ customized offering that solve end to end
customer problems Growth
4 Customer needs Identify/satisfy unmet customer needs or underserved Opportunity
customer segments
5 Customer Experience Redesign customer interaction/ experience with the
company
6 Marketing Position, promote or brand of product/services using
creative marketing communication
7 Process Improve efficiency/effectiveness of core operating
processes
8 Revenu Generation Identify/develop new way to get paid for
productes/services
9 Management Identify/Implementation seginificat change in Core cababilities
organizational structure or management methods and Operations
10 Supply Chain Improve efficiency/effectiveness in sourcing and
fulfillment
11 Channal Identify/develop new routes to market
12 Partenership Leverage collaborative relationships with supplyers,
partener, vendors, resellers and etc to create joint
offerings

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13 Business Model Identify changes or develop new way of any of the Business Model
business model canves commponents

Table 1 outlines each of the innovation dimensions.

1.6. A process Model for Innovation and Entrepreneurship

Four Phases of Innovation

Innovation's requirements for novelty and usefulness call for navigating between concrete and
abstract thinking. Introducing structure to innovation can guide this process. There are four-phase
innovation framework: clarify, ideate, develop, and implement.

1. Recognizing the opportunity

 Clarify: The first stage of the process is clarifying a problem. This involves conducting
research to empathize with your target audience. The goal is to identify their key pain
points and frame the problem in a way that allows you to solve it.
2. Finding the resources
 Ideate: The ideation stage involves generating ideas to solve the problem identified
during research. Ideation challenges assumptions and overcomes biases to produce
innovative ideas.
3. Developing the idea
 Develop: The development stage involves exploring solutions generated during ideation.
It emphasizes rapid prototyping to answer questions about a solution's practicality and
effectiveness.
4. Capturing Value
 Implement: The final stage of the process is implementation. This stage involves
communicating your developed idea to stakeholders to encourage its adoption.

Recognizing Finding the Creating the

Entrepreneurial the Developing
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g e and context Resources the Idea Value
opportunity
 Learning

FIGURE 1.1 A model of the entrepreneurial process

1.7. Innovation Isn’t Easy!

Innovation doesn’t happen simply because we hope it will – it’s a complex process that carries
risks and needs careful and systematic management. Innovation isn’t a single event, such as the
light bulb going off above a cartoon character’s head. It’s an extended process of picking up on
ideas for change and turning them through into effective reality. Research repeatedly suggests
that if we want to succeed in managing innovation we need to:

 Understand what we are trying to manage – the better our mental models, the more likely
what we do with them in the way of building and running organizations and processes
will work;
 Understand the how – creating the conditions (and adapting/configuring them) to make it
happen;
 Understand the what, why and when of innovation activity – strategy shaping the
innovation work that we do;
 Understand that it is a moving target – managing innovation is about building a dynamic
capability.

Innovation can take many forms, but they can be reduced to four directions of change:

 ‘product innovation’ – changes in the things (products/services) that an organization offers;

 ‘process innovation’ – changes in the ways in which they are created and delivered;
 ‘position innovation’ – changes in the context in which the products/services are
introduced;
 ‘paradigm innovation’ – changes in the underlying mental models that frame what the
organization does.

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