Global Innovation

Economy
What is innovation ?

The process of translating an idea or invention into a good or service that

creates value or for which customers will pay.

To be called an innovation, 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 greater or different
values from resources, and includes all processes by which new ideas are
generated and converted into useful products. In business, innovation often
results when ideas are applied by the company in order to further satisfy the
needs and expectations of the customers.

Read more:http://www.businessdictionary.com/definition/innovation.html#ixzz47q3YXHNT
More on Innovation
Innovation = Differentiation + $

Innovation is the gathering of resources and talent ,

creating a platform , harnessing that platform affecting
change.
Global Innovation
Economy
The traditional foundation of economic and business thinking
has been shaking.

The nature of economic value and wealth creation has changed.

Technological contribution to
Value creation
Creating Innovating
Value capture
Using up the output and benefits of the innovation
Value sustainability
Sustaining the innovation
Global Innovation
Economy
Innovations such as (refer to Value Creation, Value Capture
and Sustainability. Your own output in the course. This
one . Others !! )

Micro processing power

Internet
Hyper storage

De-integration/Loose coupling

Innovations in products, services, processes, business models,

and management approaches
Global Innovation
Economy
Boundaries of firms are decided by the transaction cost

Firms typically Value Create in one department and Value

Capture in another
Typically Produce and Sell
Vertical integration
But as the costs decline de-integrate loosely couple.
Global Innovation
Economy
The innovation value chain is today a
Value web
An extended enterprise
A business ecosystem
Value constellation

Vs the integrated self contained approach of the yester years

Drivers of the
Innovation Economy
Goods centered to service centered

8 eight drivers
New Global Infrastructure for wealth creation
Railroads vs internet

New sources of value

Innovations in processes, services, business models and management
approaches and also in physical products

New ownership
New enterprenurs, stock ownerships. Collaboration Facebooks, Wipro .
Drivers of the
Innovation Economy
New educational models and institutions
Do you see the difference

New Business Models

Engineering to Innovation

Empowered customers
3M , The need, co-creation , not only CRM but CKM !!

Leveraging of global supply and demand chains

As the focus shifts from suppliers to the co-creation of value with the customers the
focus shifts from supply chain to demand chain. push to pull. From consuming to
prosuming.

New governance structures

Naturally . Your inputs on theseexamples. 3M
From Industrial Economy to
Innovation Economy
The new customer
needs
Disruptive Innovation
A disruptive innovation is an innovation that helps
create a new market and value network, and eventually
goes on to disrupt an existing market and value network
(over a few years or decades), displacing an earlier
technology

innovations that improve a product or service in ways that

the market does not expect, typically first by designing for
a different set of consumers in the new market and later by
lowering prices in the existing market

(http://en.wikipedia.org/wiki/Disruptive_innovation )
Disruptive Innovations
New Market Disruptions
The personal computer and Sonys first battery-powered
transistor pocket radio were new-market disruptions,
in that their initial customers were new consumersthey had
not owned or used the prior generation of products and
services.

Canons desktop photocopiers were also a new-market

disruption, in that they enabled people to begin
conveniently making their own photocopies right in their
offices, rather than taking their originals to the corporate
Companies which
started with Disruption
Disruptive vs Sustaining Technologies

Disruptive technologies were first developed within

Established firms ( with ref. to hard drive market /
computer hardware component manufacturing)

Marketing Personnel then sought reactions from their lead

customers

Established firms step up the pace of sustaining

technological development
Disruptive vs Sustaining Technologies

New companies were formed and markets for the

disruptive technologies was found by trial and error

For an established company unattractive margins and market

size vs for a new emerging company there are potential of
volumes and margins in the upscale.
Principles of Success for
Disruptive Innovations
Organizations have capabilities that exist independently
of the capabilities of people who work within them.
Organizations capabilities reside in their processes and
their values and the very processes and values which
constitute their core capabilities within the current
business model also define their disabilities when
confronted with disruptions
A new strategy mindset
for the innovation
economy
Closed Innovation

Innovate through R&D

Keep control of Intellectual Property
Hire the best
Many new products saw the daylight like
DuPont introduced Nylon and Lycra
However ..
Mobility of knowledge workers
Presence of Venture Capitalists
Startups innovating and not able to sustain the same
A new strategy mindset
for the innovation
economy
The company that originally funded a
breakthrough did not profit from the
investment

The firm that reaped benefits did not

reinvest to finance next generation of
discoveries
A new strategy mindset
for the innovation
economy
Open Innovation
Company should not lock up its IP but make it
profitable through licensing agreements, joint
ventures and other arrangements.

Necessary to weed out false positives but at

times retain false negative

false positives are those innovative ideas which

appear extraordinary but are not sustainable
A new strategy mindset
for the innovation
economy
false negatives are those ideas which initially
appear not so great but eventually turn out to be
profitable
Typically a closed innovation is likely to miss it , as it may need
collaboration

Classic example is Xerox and Palo Alto Research Center

Created GUI , was not a great business for Xerox in
effect false negative
Later they were commercialized by Apple and Microsoft
A new strategy mindset
for the innovation
economy
Modes of innovation

Funding innovation
Innovation investors
VCs, corporate VC entities, private equity investors,
Small Business Investment Companies
Benefactors
Like National Science Foundation , independent
agency of US government which provides about 20%
funding to academic institutions to do research.
A new strategy mindset
for the innovation
economy
Entails philanthropy by rich individuals
Selectively fund good ideas

Generating innovation
Innovation explorers (focus is broad )
PARC emerged from Xerox
Telecordia technologies from Bell systems
A new strategy mindset
for the innovation
economy
Innovation Merchants
Narrow focus on a niche area
Qualcomm focuses in telecom research and
commercializes the same to organizations like
Motorola, Nokia etc.

Innovation architects
They provide larger systems solution, communicate it,
persuade people to support it and develop it for future
use.
They do need to capture some part of the value they
create.
A new strategy mindset
for the innovation
economy
Example is Boeing designed Jet engines and
allowed companies like GE to manufacture
constituent parts

Innovation missionaries
No profits
Mission is the motivations
Hobbyists , religious groups , technology as an
aid for collaboration
Like Linux
A new strategy mindset
for the innovation
economy
Commercializing innovation
Innovation marketers
Firms which market some one else's innovation
Innovation one stop centers
Market some body elses innovation
But at the same time develop a close relationship
with the customer to provide all solutions he
desires
IBM is one such example for consulting solutions
and mainframe hardware/software support
Relationship between e-business strategy and other strategies
A generic strategy process model
 Dynamic Network business strategy model
Source: Adapted from description in Kalakota and Robinson (2000)
Elements of strategic situation analysis for the network business
Competitive threats acting on the network business
Porters five forces
Bargaining
powers of
customers

Power of Threat of
The business
suppliers substitutes

Extent of rivalry
Threat of new
between
entrants
competitors
Activity impact of
Internet
For one of the industries below, assess how the Internet has
changed the competitive forces, e.g. has it increased or
decreased power of suppliers and customers
Industries:
Banking
Supermarkets
Oil industry
Rail industry
An evaluation tool relating information to business value. An organizations use of
information on each axis can be assessed from 1 (low use
of information) to 10 (high use of information)
Source: Marchand et al. eds (1999)
 Grid of product suitability against market adoption for transactional
e-commerce (online purchases)
 E-business models based on
Functionality
Merchant Model
Involves selling goods and services using IT to
the customers

Goods can be sold using typical list prices of

auctions

Merchants operating only on the net are called

virtual merchants.

Merchants conducting business for taking orders

online are catalog merchants
E-business models based on
Functionality
Community Model
In this differnet communities share their
data, opinions, photos etc using
websites

www.flickr.com, www.wikipedia.org,
www.facebook.com

Revenue generation is through

advertising or voluntary donations
E-business models based on
Functionality
Types of Community Models
Open Source Models
Group of similar like minded people
share code
Red Hat
Public broadcasting Models
Radio and television programs are
broadcasted in such a way that they
are not intended to earn profits
www.WCPE.org
Knowledge Network
Knowledge sharing networks

E-business models based on
Functionality
Subscription Model
Users are charged for subscribing to
some websites
The charges may be monthly, weekly etc

AOL, You Broadband etc

Some services may be free others are
charged
The ISP model
 E-business models based on
Functionality

Advertising Model
Internet advertising is an extension of
traditional media advertising
Large volumes of traffic required to
generate revenues
Yahoo, Google
Classifieds like Matrimonial sites
Monster.com, Shaadi.com, Naukri.com
Contextual advertising on the basis of
browser behaviour.
E-business models based on
Functionality
Google calls Content targeted advertising

Intromercial
A full page introductory ads appear
before the website is opened.
E-business models based on
Functionality
Brokerage Model
This brings the buyer and seller
organization together on the web

Brokers get a commision on any sales

transactions they enable

Auction brokerage model ebay, Sify

Payment transaction broker model
Paypal
Any intermediary . Search agent,
 E-business models based on
Functionality
Manufacturer Model
Manufacturers or the producers sell
directly to the customers

This allows them to stay away from

the middlemen e.g Dell

Online lease model Use the product

for a while and return on the expiry
of the lease.
E-business models based on
Functionality
Another aspect of Manufacturing model
is the licensing model

Utility Model
Metered use model
pay as you go
Number of pages/songs downloaded.
 E-business models based on
Functionality
Affiliate Model
The affiliate offers an opportunity to
an e-business organization to provide
a purchase point click through

Pay per click

Banner exchange
Revenue sharing
E-business models based on
Functionality
Infomediary model
These are information intermediaries
These provide information about the online
consumption habits which will enable the
strategising of e-business organizations
E-business models based on
Types of Transactions

B2B
Virtual marketplace
E-supply chain
Out sourcing
BPO, KPO
Online bidding, web service
enhancers, inter bank transfers,
net banking etc,
 E-business models based on
Types of Transactions
B2C
Customers can directly go through the catalog
and place orders with the company.

Dell , amazon.com

Major activities involved are

Sharing, ordering products/services, making
payments using methods like credit cards,
paypal, netbanking , fulfilling the order by
delivering and providing after sales service.
 E-business models based on
Types of Transactions

C2C
OLX
E-Bay
Monster
Auctions and people looking for jobs
 E-business models based on
Types of Transactions
B2G
E-filing, UID, dissemination of funds to BPL etc

C2B
The consumers are the sellers to the business
The consumer may be a webmaster, blogger, any on
responding to a survey, referral hiring.
Intermediary has an important role as he has to
connect the consumer to the business
 E-business models based on
Types of Transactions

B2E
Intra organizational information such as
employment policies employee benefits,
service rules.
Mostly intranet bsed

M-commerce
 The New Strategic
Management Approach for the
Innovation Economy

Poised Strategy

Poised strategy to manage multiple business models for

sustaining and disruptive value innovation in collaborative
business networks
 The New Strategic
Management Approach for the
Innovation Economy
Poised Strategy
Distinguish strategy from planning,
balancing, positioning and resource
leveraging

Organizational poise

Dynamic capabilities, diverse

dexterities, positively energize and
change.
 The New Strategic
Management Approach for the
Innovation Economy
Narrow range of dexterities
Paralyzing inertia

Multiple business models

Portfolio of new business models
 The New Strategic
Management Approach for the
Innovation Economy
Sustaining and disruptive value innovation

Organizations need both incremental

(sustaining) and inflective (disruptive)
capabilities for survival

Collaborative business networks

Business ecosystems, traditional industry

clusters, supply and demand chains,
Poised Strategy for Corporate
Rejuvenation
Poised strategy involves the capability of
an enterprise to continually rejuvenate
itself with value innovation and multiple
business models.

In business context the Einsteins formula

has been adapted as :
EnergyBusiness = Management
(Innovation* Speed)
Poised Strategy for Corporate
Rejuvenation
 Key Elements of a Business
Model
Particular Customer Base

Customer Value Proposition

Value Network

Leadership capabilities that ensure the

satisfaction of relevant stakeholders
Key elements of a business model
Context, Content, and Process
Dimension of Poised Strategy

Generic and non linear elements of a

business model
 Need for Portfolio of Business
Models in an Enterprise

The business models may be imitated

, diluted and commoditized

It is important to have
multiple/diverse business models

Comfort zone of business models is

detrimental to the growth of
businesses
 Business Ecosystems and Co
Shaping of Value Innovation to
Form New Business Models
According to the poised strategy
approach company is not a member
of a single industry it is part of a
business ecosystem that crosses a
variety of industries and functions in
a multidimensional plane.
 Business Ecosystems and Co
Shaping of Value Innovation to
Form New Business Models
The critical dimensions of an ecosystem are
It spans
a variety of industries
stakeholders
Organizations
Markets
Customers
in addition to the organizations traditional
industry , customer base and supply chain.
This indicates blurring of boundaries
 Business Ecosystems and Co
Shaping of Value Innovation to
Form New Business Models
 Business Ecosystems and Co
Shaping of Value Innovation to
Form New Business Models
Earlier figure indicates that a new business
model arises not only from reconfiguring an
organizations core business strategy and
dynamic capabilities but also from making
sense of socio cultural dynamics and
opportunity gaps reinventing customer value
proposition and reconfiguring the business
networks and its value chains