Types of Innovation: The ‘4Ps’



Research and Development ‘Research is original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services prior to the commencement of commercial production or use. Research costs cannot be recognized as an intangible asset and must be charged to profit or loss in the year they are incurred. They do not meet the criteria for recognition under IAS 38 (International Accounting Standards). This is because, at the research stage of a project, it cannot be certain that probable future economic benefits will flow to the entity from the project.Development Phase Development activities tend to be much further advanced than the research stage. Where the entity can demonstrate that it is probable that future economic benefits will flow to the entity from the project, the entity may be able to recognize an intangible asset. Development activities include:The design, construction and testing of pre-production prototypes and modelsThe design of tools, jigs, moulds and dies involving new technologyThe design, construction and operation of a pilot plant that is not of a scale economically feasible for commercial productionThe design, construction and testing of a chosen alternative for new/improved materials. Importance ofResearch and Development leads to the development of new products. Firms which are able to develop new products ahead of their rivals will enjoy a competitive advantage in the market.Some Research & Development projects develop new materials. Synthetic materials have helped to reduce the use of natural resources.In some industries research projects are designed to develop new types of machines. New technology is capable of cutting costs and raising productivity. In addition, new machinery is often safer, cleaner and more ergonomically designed.It is often argued that expenditure on R & D helps to enhance a firm’s image. Consumers may be impressed by businesses which are committed to R & D.Motivation: investment in R & D creates opportunities for creativity and invention. Many employment positions in the R & D department will help staff to satisfy their higher order needs such as self-esteem and self-actualisation.Consumer benefits: Consumers enjoy an increasing variety of goods and services as new products come onto the market. They are likely to pay a lower price for products new technology lowers cost. They may also enjoy better quality products resulting from higher grade materials and more effective production methods.’Source: CIMA Enterprise Operations Study Text, BPP Learning Media, 2013. Intellectual property rightsA patent is a license which prevents other firms from copying the product.Copyright prevents the re-use of published works without the author’s consent.Trademarks generally signify a manufacturer’s name. The right to sell another company’s products may have to be registered if they carry a trademark and a fee may be charged.Some benefits of IP to businessesA higher level of salesReduced competitionLegal protection which encourages continued researchHigher profits can be ploughed back into further R & DThe industry benefits from the technical information as a result of the patent. Source: CIMA Enterprise Operations Study Text, BPP Learning Media, 2013. Innovation‘Innovation is:The process of making improvements by introducing something new.Change that creates a new dimension of performance – Peter DruckerWhile innovation typically adds value, innovation may also have a negative or destructive effect as new developments clear away or change old organisational forms and practices.A key challenge in innovation is maintaining the balance between process and product innovations:Process innovation involves the implementation of a new or significantly improved production method.Product innovation involves the introduction of a new good or service that is new or substantially improved. Factors affecting innovation adoption in an organisationAbility of the organisation to embrace change/conflict. Conflict jump-starts the creative process. A certain Law of Cybernetics states that any system must encourage and incorporate variety internally if it is to cope with variety externally. Institutionalised conflict is an integral part of Japanese management philosophy. At Honda any employee can call for a waigaya session. This involves the participants discussing openly the problems with the product/system in sometimes a highly conflictual anisational Structure: one of the Japanese’s chief organisational principles is redundancy – overlapping charters, business activities and managerial assignments, duplicative databases and parallel lines of inquiry. Redundancy spurs tension and encourages frequent dialogue and communication.Shared understandings/objectives. Those in charge of innovation must co-produce technologies and work practices by developing them with partners throughout the organisation – a shared understanding of why these innovations are important. Essentially corporate research must prototype new mental models of the organisation and its business.Responsive to the customer. Innovation will be adopted more vigorously if the organisation’s ultimate innovation partner is the customer. One role of corporate research is to invent methods and tools to help customers identify their latent needs. Future success will be dependent on co-producing these products with customers – customising technology and work practices to meet their current and future needs.Whether the innovation is incremental or radical. Incremental innovation is a step along a technology trajectory with little uncertainty about outcomes and success and generally are minor improvements responding to short-term goals. Radical innovation involves considerable change in basic technologies and methods usually created by those working outside mainstream industry and existing paradigms.Chance of failure. Failure is an inevitable part of the innovation process and most successful organisations factor in an appropriate level of risk. The impact of failure goes beyond simple investment. Failure can also lead to loss of morale among employees, an increase in cynicism and even higher resistance to change.Budgetary constraints. The average investment across all types of organisations is 4%. However, lower levels of turnover can reduce allocation to the areas of innovation in an organisation (marketing, product design, information systems, manufacturing systems and quality assurance)Cultural infrastructure. The following attributes in the cultural infrastructure will cause innovation experiments to fail:Poor leadershipPoor organisationPoor communicationPoor empowermentPoor knowledge managementView of innovation process. Innovation can fail if seen as an organisational process whose success stems from a mechanistic approach i.e. “pull lever obtain result”Market situation. Many ideas wait at the end of the development phase for market conditions to be judged right. There are currently many new products languishing in the laboratories of Philips and Nokia waiting for their moment to begin replacing or even disrupting existing technology.’ Source: Hall, D., Raffo, C., and Jones, R. Business Studies, 3rd Edition, Causeway Press, 2004. Types of Innovation: The ‘4Ps’‘Innovation is often in the eye of the beholder - what may be new and radical for one person, may be old news for another. Despite this subjectivity in identifying and classifying innovation, there has been useful work in thinking about the focus of different innovation processes, guided by the question: what is it that innovation processes seek to change and improve? The ‘4Ps’ model developed by HYPERLINK "" \t "_blank" John Bessant and Joe Tidd provide a powerful tool for such analysis. It builds on the hypothesis that successful innovation is essentially about positive change, and puts forward four broad categories where such change can take place: 'Product innovation’ – changes in the things (products/services) which an organisation offers 'Process innovation’ – changes in the ways in which products and services are created or delivered'Position innovation’ – changes in the context in which the products/services are framed and communicated 'Paradigm innovation’ – changes in the underlying mental models which shape what the organisation does Product innovation Perhaps the most commonly understood form of innovation is that which introduces or improves a product or service – a change in what is offered to end users. The Bic ballpoint pen is an example of a product innovation, which has also benefited from a range of incremental innovations since its original invention. The emblematic humanitarian product is food, which is the dominant form of assistance. Different forms of food aid might be seen as incremental innovations.There may also be innovative products which help to achieve humanitarian goals. For example, the LifeStraw is a portable water filter developed by Vestergaard-Frandsen which enables individuals to drink clean water from almost any source. Another example is PlumpyNut, a therapeutic food which is both durable and can be dispensed outside of traditional medical settings.Process innovationInnovations can also focus on processes through which products are created or delivered. Because so many of the products used in relief settings are initially developed for non-relief contexts, a natural focus for humanitarian innovation is to consider how an existing product might be used in resource-poor or rapidly changing settings. Examples of process innovations that have had a positive effect on the humanitarian sector are the increasing stockpiling of goods in strategic locations, or the use of pre-made packs and kits.Position innovationThe third focus of innovation involves re-positioning the perception of an established product or process in a specific context. Position-based innovations refer to changes in how a specific product or process is perceived symbolically and how they are used. For example, Levi-Strauss jeans are a well-established global product line, originally developed as manual workers’ clothing materials, but then re-branded as a fashion item.In the humanitarian context, position innovations include changes in the signals that are disseminated about a humanitarian organisation and its work. This may relate to the way in which aid is marketed and packaged for potential donors. Alternatively, it may involve a repositioning of humanitarian assistance within a particular operational context or for particular users. An example of the former can be seen in attempts by humanitarian agencies in different complex emergencies to develop principle based cross-agency positions in relation to belligerent parties in complex emergencies which amount to a set of conditions under which humanitarian aid would be delivered, and a clear articulation of the situations where it would not. Agencies such as Disability International or HelpAge International are position innovators in that they call for the delivery of humanitarian products and services to groups that are often excluded.Paradigm innovationThe final ‘P’ relates to innovation that defines or redefines the dominant paradigms of an organisation or entire sector. Paradigm-based innovations relate to the mental models which shape what an organisation or business is about. Henry Ford provides a pithy quote, when talking about the development of the Model T motor car: ‘If I asked people what they wanted, they would have asked for a five-legged horse’.Examples of paradigm innovation in the international humanitarian sector include an increasing emphasis on local ownership and leadership of responses to crises as an alternative to internationally dominated responses. A greater and more central role for aid recipients is another example, and finally, perhaps the most radical innovation is the idea of disaster risk reduction approaches, which if successful can negate the need for any kind of response. The development of community-based feeding therapy is one of the most recent examples of such innovations, with the combination of a product (PlumpyNut), a process (community-based distribution) , a re-positioning (the idea that aid agencies do not need to do the feeding themselves directly) and a paradigm shift (the notion that families and communities can treat malnutrition at home). Similarly, cash-based programming at its most radical involves a new product (cash), new processes (means of distributing cash), new position (a change in how aid is perceived by donors) and new paradigms (a change in how recipients are perceived by aid agencies).’Source: ’ Innovation Adoption Model ‘Diffusion of Innovation (DOI) Theory, developed by E.M. Rogers in 1962, is one of the oldest social science theories. It originated in communication to explain how, over time, an idea or product gains momentum and diffuses (or spreads) through a specific population or social system. The end result of this diffusion is that people, as part of a social system, adopt a new idea, behavior, or product. ? Adoption means that a person does something differently than what they had previously (i.e., purchase or use a new product, acquire and perform a new behavior, etc.). The key to adoption is that the person must perceive the idea, behavior, or product as new or innovative. It is through this that diffusion is possible. ?Adoption of a new idea, behavior, or product (i.e., "innovation") does not happen simultaneously in a social system; rather it is a process whereby some people are more apt to adopt the innovation than others. ? Researchers have found that people who adopt an innovation early have different characteristics than people who adopt an innovation later. When promoting an innovation to a target population, it is important to understand the characteristics of the target population that will help or hinder adoption of the innovation. There are?five established adopter categories, and while the majority of the general population tends to fall in the middle categories, it is still necessary to understand the characteristics of the target population. When promoting an innovation, there are different strategies used to appeal to the different adopter categories’. -11430026289000Source: ‘Five established adopter categories InnovatorInnovators are the first to purchase a product and make up 2.5% of all purchases of the product. Innovators purchase the product at the beginning of the life cycle. They are not afraid of trying new products that suit their lifestyle and will also pay a premium for that benefit. Sales to innovators are not usually an indication of future sales as innovators simply buy because the product is new.Early AdoptersThe next group of purchasers are called Early Adopters and they make up 13.5% of purchases. This group of purchasers adopt early but unlike innovators adoption is after careful thought. Early Adopters are usually opinion leaders in their circle (of friends, family and colleagues) so adoption by this group is crucial for the success of the product. Early adopters help the product's journey in becoming "socially acceptable".Early MajorityThe Early Majority are a cautious group of purchasers, making up 34% of purchases. They will not buy a product until it has become "socially acceptable". Early majority purchases are needed for the product to achieve wide spread acceptance.Late MajorityLate Majority make up another 34% of sales and usually purchase the product during the late stages of the product's life cycle. They are more cautious than the early majority and will only buy after the majority of people have purchased the product.LaggardsThe final group of people to purchase a product are called Laggards. Laggards make up 16% of total sales and purchase the product near the end of its life. Some laggards will never purchase a product, whilst others will buy it because their existing product is broken and it cannot be repaired or replaced with an identical product. Laggards may wait to see if the product will get cheaper and by the time they purchase the product a new version of the product is often (already) on the market.’Source: ................
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