Competing On Innovation

COMPETING ON INNOVATION
Professor Ranjan Das
Professor of Strategy, Innovation, Entrepreneurship and

Leadership &
Chairman The Strategy Academy
The Strategy Academy

IIM Calcutta
IIM Ranchi [ Visiting : 2014-15]
IIM Trichy [Visiting : 2014-15]
Indian School of Business, Hyderabad [Visiting : 2008-09]
Hong Kong University of Science and Technology, Hong
Kong [Visiting : 2005-06]
Haigazian College, Beirut, Lebanon [Visiting : 1979-80]
______________________________________________________________________
The Strategy Academy

A Prof
Ranjan Das Creation
Live the NOVELTY Feel the DIFFERENCE Make an IMPACT
www.thestrategyacademy.org
M: +919830052722; EMAIL: ranjandas@thestrategyacademy.org
COMPETING ON
INNOVATION
PROGRAM DESIGN
10 Sessions [2 sessions per day] to be detailed in the next 2 slides

In general, in each session, there will be 3 components:
Concept discussion/ Q&A based on faculty PPT, distributed in
advance
Group exercises [in most classes] one case study in each
session of 90 min
Faculty feedback on each case, after the group exercise on the
concerned case is over
Evaluation:
Group exercise: 40% [ it is expected that 8 group exercises will
be completed over 10 sessions each of 90 mins duration]
Group Project 30% [application of concepts in specific industry
setting to discuss details later]
End term exam 30%
COMPETING ON
INNOVATION
Session-wise Content &
Sessio
Discussion topics and Cases
Cases
n
1
2
3
Concept of Innovation and different types of innovation

Types of Innovation
Getting ideas
Where to look for ideas: Insights
Case: Nypro Product and Process Innovation
Product innovation
Making connection across seemingly unrelated fields and disciplines
Case: TCL Product Innovation
Case: HP Failure to develop innovative product
Competition and innovation
Business Model innovation
From blank page to insight
Case: Harley Davidson meeting global competition through innovation
Disruptive Innovation
Meeting the challenge of disruptive innovation
Innovation Strategy
You need an innovation strategy
Case: Nintendo Disruptive Innovation
Strategic Innovation
A Framework for Strategic Innovation
Case: [1] Taxi for Sure, [2] Google Inc 2014 [abridged]
COMPETING ON
INNOVATION
Growth through new Cases
business development and organizational changes
Read:
Session
7
10
Creating new market space

Case: Alibaba
Innovation against the backdrop of complex operations
Read:
Overcoming hidden barriers to innovation
Case: LEGO Innovation in complex operational context
Innovation supporting social change
Read:
Disruptive innovation for social change
Case: Godrej Social Innovation
Concept Discussion: Making Innovation happen in an organization
structure, system, leadership and culture issues
Case: Managing Disruptive Technological Change The fictional case [but
close to reality] of Electric powered vehicle
COMPETING ON
INNOVATION
Sessio
Cases
n
1
2
3
Context and Concept of Innovation and different types of innovation

Types of Innovation
Getting ideas
Product innovation
Innovation Strategy
SESSION 1
Context and Concept of
Innovation
and
Different types of Innovation
WHY DO GREAT COMPANIES

FAIL?
DECLINE OF THE STAR
PERFORMERS
LATE 70s
2000
AUTOMOBILE
GM
TOYOTA
AIRLINES
PAN AMERICAN
SIA, SWA
TYRES
FIRESTONE,
GOODYEAR
BRIDGESTONE,
MICHELIN
IT
IBM
MICTOSOFT,
GOOGLE
SEMICONDUCTOR TI, MOTOROLA
INTEL
SATISFACTORY
UNDRPERFORMANCE
Performance
Decline
Path of Competitive
Time
ROADMAP TO OBLIVION
PERFORMAMCE
The Moment of Truth
Inferi
or
Value
Todays
Performanc
freefall
e
TIME
Clear Sailing
Performance
TACTICS SHORT TERM
Doomsayer
s
Projections
Tomorrows
Actual
Performance
Denial and defense
Downfall
WHY DO GREAT COMPANIES

FAIL?
Unparalleled
track record
of success
No gap
between
expectation
and
performance
Contentment
with current
performance
Accumulation
of abundant
resources
A view that
resources will
win out
Resources
substitute for
creativity
INABILITY TO ESCAPE THE

PAST
Optimized
business
system
Success
confirms
strategy
Deeply
etched
recipes
Momentu
m is taken
for
leadership
Vulnerabili
ty to new
rules
Failure to
REINVENT
leadershi
p
INABILITY TO INVEST IN THE

FUTURE
FAILURE OF SUCCESS
PHENOMENA
7 STAGES
S1: SUCCESSFUL BUSINESS
STRATEGY
1. Large
companies
take long
time
to
change
2. Effective
companies
make
dramatic
turnaroun
d
and
change
within
a
short time
S2: MANAGERS BEGIN TO BELIEVE

THAT THEY ARE GOOD
S3: BUILD LAYERS OF BUREAUCRACY
WITH GROWING SIZE AND
COMPLEXITY
S4: RISING EXECUTIVE ARROGANCE
AND INTERNAL CONTRADICTIONS
S5: STIFLING OF INITIATIVE
S6: GRADUAL DECLINE TO
SATISFACTORY
UNDERPERFORMANCE
S7: CRISIS
CONTEXT OF INNOVATION
Looking at the decline of many well known brands and
companies, it is clear why great companies stumble .
Some obvious reasons are: incompetence, bureaucracy,
arrogance, poor planning and short term investment
horizons
Even best of managers are not able to come up with
innovations , despite massive investment of management
time and money. In general, innovation remains a
frustrating pursuit in many companies.
One reason for failure to come up with innovative ideas is lack of
conceptual clarity regarding different types of innovations and
conditions under which each such innovation can take place. Lack of
appreciation of the underlying concepts and framework leads to
failure to effect successful innovation needed to sustain competitive
advantages.
Concept of Innovation and different types of Innovation
Innovation is embodiment, combination and/or

synthesis of knowledge in original, relevant , valued
new products, processes or services
Different scholars have introduced different types of
innovation. As can be expected, definition of each of
these innovations often overlaps. These are:
Innovation A common classification [Continuous innovation,
process revolution, product or service innovation]
Innovation 2 way classification: Incremental and radical
Innovation 4 way classification: Incremental, Architectural, Modular and Radical
Business Model Innovation
Sustaining and disruptive innovation
Strategic innovation
Innovation A common classification
DIFFERENT TYPES OF
INNOVATION
CONTINUOUS PROCESS IMPROVEMENTS
Involves countless small investments in incremental process
innovations
GEs Six Sigma initiative is a method to promote continuous
process improvements
PROCESS REVOLUTIONS
Also improves current businesses but in major leaps say 30
% increase in productivity through implementation of major
technologies
Wal-Mart investing in RFID for tracking inventory
PRODUCT OR SERVICE INNOVATIONS
New product or services ideas that will meet new needs of
existing customers but will not alter the business model
altogether
Dual core technology vs. earlier technology
INNOVATION 2 WAY CLASSIFICATION
Incremental INNOVATION
Incremental innovation aims to exploit existing forms
or technologies. It either improves on something
already existing or reconfigures an existing form or
technology to serve some other purpose
Intel P 4 is an incremental innovation over P3, since
both are based on the same fundamental
technologies. P4 incorporated design improvements
and new features that enhanced cheap performance.
An example of a new use of an existing technology is
Global Positioning Satellite GPS which is used in a
variety of applications starting from automobiles
Incremental INNOVATION: Points to remember
Since radical innovations [defined in subsequent slides] involve risks,

expense and long time horizon, most established companies tend to
pursue incremental innovation which is safer, cheaper, and more likely to
produce results in the short run. By one estimate, 85-90% of R&D
portfolios of most companies are made up of innovation projects that are
incremental in nature
While incremental innovations provide business with steady streams of
new, varied and improved products and services, incremental innovators
must observe 2 cautions:
Avoid adding unnecessary features for the sake of it making the life difficult for
customers [because they have to re-learn] and also new version becomes more
costly . As a matter of fact, if this practice is unchecked, new competition will
come up with new innovation and compatible features will be made available at
lower price [Linux is an example]
Since incremental innovations cannot hedge against risks posed by a competitor
coming up with radical innovation, find a balance between incremental and
radical innovation while allocating resources [Kodak and Polaroid focused too
much on instant chemically coated - photography and forgot to invest in digital
imaging]
Radical INNOVATION
Radical innovation brings something NEW to the world and a
distinct departure from existing technology or method. The terms
discontinuous or breakthrough are often used as synonyms for
radical innovation
An example: The transistor technology developed by Bell Labs
represented a radical innovation that undermined the dominant
players of electronics industry who were deeply committed to
vacuum technology. Digital imaging that replaced chemically
coated technology of Kodak and others is another example. Digital
imaging in fact almost killed the sales of photographic films
In general, radical innovation is an innovation that has one or more
of the following characteristics:
An entirely new set of performance features
Improvements in performance features of 5 times or more
A 30% plus reduction in cost
An industry time-line of radical and

incremental improvement
Performance/Cost
Improvement
Radical Innovation
Time
Incremental and Radical Innovations:

Meaning of PROCESS INNOVATIONS
Process innovations are as important as product innovations
Process innovations can lower cost of production, distribution
and services by reducing/ eliminating number of
unnecessary/ disconnected process steps.
Glass making technology originally comprised several
separate steps such as mixing and melting ingredients,
creating glass ingots, annealing finally grinding and polishing
the ingot, making it slow, high labour and energy consuming
and expensive. In 1960s, FLOAT GLASS process was
introduced by Pilkington that combined all the just
mentioned steps into one automated process and flawlessly
smooth finished products emerged at the end of the process.
The costly grinding and polishing steps were eliminated and
Pilkington enjoyed competitive advantage for many years
Incremental and Radical

Innovations:
The Product-Process Connection
It is one thing to create an innovative product or

service; its another thing to create a process capable of
delivering or manufacturing the said product/ service at
a price that the target market will accept.
Thus, innovations in products/ service must wait till
required process innovations, required to get market
traction, are put in place
A good example is P&Gs diapers. While the product
development did not take much time, the process of
manufacturing - required to produce this multi-part,
multi-material product in huge quantities at a price
acceptable to target customers took long time to
streamline.
Incremental and Radical

Innovations: Defining Service
Innovations
Service innovations sometimes produce

breakthrough business models [discussed
later]
Some examples:
Dell skipped the middlemen and sold custom
configured PCs to customer within 24 hours of
receiving orders, though the product PC was same
as that of any other competitor
SW Airlines: Emphasized low fares, frequent
service and fun in its service delivery though the
core product viz. safe and on-time departure
remain same as that offered by any other airline
Incremental, Architectural, Modular and Radical

INNOVATION
Incremental Radical dichotomy alone was not enough
to explain what company would be in a better position
to innovate and under what circumstances.
For instance, why some incumbents would fail to catch
something as straight-forward as some incremental
innovations, just like Xerox failed to develop a small
plain-paper copier even when it was the leader in
xerography technology.
This indicates the need to divide the technological
knowledge required to develop new products, and
consequently to introduce innovations, along two new
dimensions:knowledge
of
the
componentsand
knowledge
of
the
linkage
between
them,
calledarchitectural knowledge.
INNOVATION 4 WAY CLASSIFICATION

INNOVATION

INNOVATION: An Example
Incremental innovationwill build upon existing
component and architectural knowledge. If we
consider the hard disk, an improvement in the
magnetic disk capacity and a faster rotation speed
represent two examples of incremental innovation.
Modular innovations will require new knowledge
for one or more components, but the architectural
knowledge remains unchanged. Around the 1980s
most hard disk manufacturers substituted the
ferrite read/write heads with thin-metal heads; this
is a clear example of modular innovation

INNOVATION
The opposite of modular innovation is theArchitectural
Innovation. This type of innovation will have a great
impact upon the linkage of components, but the
knowledge of single components will remain the same.
The hard disk industry went through several waves of
miniaturization, the first mainframe computers were
packed with 14-inch diameter disks, after some years
the industry came out with 8, 5,25, 3,5 and 1,8 disk
drives. Each and every time the size of the hard disk
diminished the knowledge of the linkages between
components was evolving, while the single components
were using pretty much the same technology, as a result
we classify such changes as architectural innovations

INNOVATION
When a certain innovation revolutionizes both
component and architectural knowledge it will
be aRadical Innovation.
Once again if we consider the hard disk
industry one example of a radical innovation
was the passage from magnetic to optical
technology. The introduction of the laser in the
disk drive industry required not only new
components but it also changed the
configuration of such components inside hard
disks

INNOVATION
Even if some innovations might appear incremental at
a first sight this may not be the case, it is necessary to
analyse how it impacts both component and
architectural knowledge.
Companies, therefore, must be careful in distinguishing
between incremental and architectural or modular
innovations because the competencies and strategies
required to exploit one might not suit perfectly the
other, if at all.
Canon was able to invade Xeroxs turf because it
developed the right architectural knowledge required
to re-design the photocopier machine with smaller
dimensions

INNOVATION: Another Way to describe
BUSINESS MODEL
INNOVATION
[to be discussed later in
There is limit to growth and profitability based solely on product
details]
and process innovation.
Also, many a time product and process
innovations are time consuming and huge upfront investment

in R&D, specialized facilities etc.
Many companies are hesitant to make huge bets involved in
product and process innovation and instead turning towards
business model innovation either as an alternative to product/
process innovation or to complement the same
Business model innovation can consists of adding/ deleting
activities, linking activities in a new way or changing the service
providers to perform an activity in a different way. The focus is
on taking a fresh look at segments of customers to be served,
core value proposition and/ or value delivery processes.
Novelty, lock-in, complementarities and efficiency are major
value drivers in business model innovation
Sustaining and disruptive

Strategic innovation
[to be discussed later]
COMPETING ON
INNOVATION
Sessio
Cases
n
1
2
3

Types of Innovation
Getting ideas
Product innovation
Innovation Strategy
SESSION 2: Getting Ideas & Insights

In 21st century, innovators are demanded everywhere and not
just in R&D Labs, a design group or a start up venture. Today
innovators are in demand in from factory floor to the salesroom,
from IT Help desk to HR Department, from employee cafeteria to
C-Suite.
Innovation thus is not a department. It is a mindset that must
permeate the entire enterprise.
Feedstock for innovation is INSIGHT an imaginative
understanding of an external or internal opportunity that can be
tapped to generate revenue or improve productivity or boost
engagement.
Such an INSIGHT can relate to stakeholders needs, market
dynamics or even how value is created and delivered
INSIGHTS are useful since few people can find great ideas on a
blank canvas. Most of us need our imaginations channeled.

While INSIGHT can be powerful, how does one finds
the same. Obviously, some INSIGHT can emerge by
chance but it is indeed possible for individuals to
approach innovation through INSIGHTS in a
systematic way.
A research shoes that there can be up to 7 INSIGHT
CHANNELS that can be used by an organization or
an would-be-innovator in any function or role.
One can focus imagination, organize thinking, spur
creativity and find valuable ideas for growth by
periodically tuning in to these channel and
methodically running through them

1. ANOMALIES Examine deviations from the norm
Do you see unexpectedly high or low revenue or
share in a market or a segment? Surprise
performance from a business process or a company
unit?
2. CONFLUENCE Find macro trend intersection
What key economic behavioural, technological or
demographic trends do you see? How are they
combining to create opportunities?
3. FRUSTRATIONS Pinpoint deficiencies in the system
Where are customer pain points for your products,
services or solutions? Which organizational processes
or practices annoy you and your colleagues?

4. ORTHODOXIES Question conventional beliefs
Are there assumptions or beliefs in your industry that go

unexamined? Toxic behaviours or procedures at your company that
go unchallenged?
5. EXTREMITIES - Exploit deviance
What can you learn from the behaviours and needs of your leadingedge or laggard customers, employees or suppliers?
6. VOYAGES Learn from immersion elsewhere
How are your stakeholders needs influenced by their socio-cultural

context? You can get insights by visiting stakeholders in their
setting
7.
ANALOGIES
organizations
Borrow
from
other
What successful innovations do you see

disciplines? Can you adopt them for your own?
industries
applied
in
or
other
GROUP[ EXERCISE - NYPRO
COMPETING ON
INNOVATION
Sessio
Cases
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3
4
5
6
7

Types of Innovation
Getting ideas
Product innovation
Innovation Strategy
SESSION 3: CONCEPT DISCUSSION

Product innovation: Making connection across
seemingly unrelated fields and disciplines
As Steve Job said, Creativity is CONNECTING the UNCONNECTED

Innovators often have a taken-for-granted skill called ASSOCIATING that
enables them to make surprising connections across areas of knowledge,
industries and
geographies
and help them pursue diverse
NEW
information and ideas through questioning, observing, networking and
experimenting
A good example is Salesforce.com which was Worlds most innovative
company in 2014 [according to a research done by Forbes].Seeing the
growth of Internet in late 90s, the FOUNDER Benioff, then working at
Oracle, asked some basic questions viz. Why are not all enterprise
software applications built like Amazon and e-bay? Why are we still
loading and upgrading software the way that we have been doing
all the time when we now have the Internet? [ remember, Amazon
and e-bay were totally disconnected to enterprise software business].
Benioff synthesis or association enterprise software meets Amazon
challenged the industry tradition of selling on CD-ROMs and engaging
companies in lengthy and expensive installation process. He started
delivering software as a service over the Internet 24x7. He also saw
opportunities in SMB ignored by Oracle or SAP

Benioff
started asking recently:
Why isn't enterprise SW
[including salesforce.com] is like FB? [another association that
has nothing to do with SW]. This led to creation of CHATTER, a
new social SW application that is referred to as FB for business.
Chatter takes the best of FB and Twitterand apply it to enterprise
collaboration. Chatter helps people see easily what individuals and
teams are focusing on, how projects are progressing and what
deals are closing.
Chatter changed the way companies collaborate on product
development, customer acquisition and content creation by making
it easy for everyone to see what everyone else is doing. Need for
emailing each other ref the same project gets eliminated.
Example like salesforce.com shows that adoption of following 3
steps can help in getting ideas using the principle of ASSOCIATION:
Associating: What is the meaning

Associating: Where it happens and
Associating: How it works
SESSION 3
Associating: What is the meaning
It is an ability to connect and cross- pollinate ideas
own as well as those originating from multiple fields
such
as
people,
industry,
objects,
services,
technologies and disciplines and develop new and
unusual innovations
Disney, Apple, Virgin and Amazon are companies where
such associating skills required to cross-pollinate ideas
are very common. Sonys Walkman came up this way.
Innovators think differently to associate ideas
originating from different fields based on their ability to
associate, a cognitive skill which is at the core of
Innovators DNA.. One can develop such a cognitive
skills as discussed later
SESSION 3
Associating: Where it happens - finding the NEW idea
As mentioned, innovative ideas flourish at the intersection of
diverse experience, whether it be others or are our own. More
diverse is the mix of experience, more will be the possibility of
surprise developments occurring out of synthesis of these ideas
Innovators tend to focus intentionally at the intersection where
diverse experience flourish and foster the discovery of new
ideas. Successful innovators can see and feel a spark that
occurs in a geographic space or market space where a
combination of novel ideas brings to surface quite surprising
outcomes
Identifying the diverse experience sets that are likely to
contribute in getting fresh ideas and then immerse
oneself in the same with an objective to generate ideas at
the intersection is a critical skill of all innovators
SESSION 3
Associating: How it works
To understand how innovators get ideas vs. non-innovators, it is
important to know how our brain works. Research has established
that more diverse knowledge the brain possesses, the more
connections it can make when fresh additional inputs of knowledge
enters the brain and such fresh inputs trigger the association with
diverse knowledge the brain already possesses and creates novel
ideas
Such unexpected associations are powerful and act as supplements
to data when working through a problem or a challenge.
Analogies and associations are critical creative tools
to help
innovators generate strategic insights.
When brain is actively absorbing the new knowledge, it is more likely to

trigger connection between ideas to synthesize novel inputs.
Brains associating muscles get more and more developed through the
active practice of observing, questioning, networking and experimenting
SESSION 3
Associating: How it works [continued]
All innovators are better at associating than non-innovators and a good

predictor of such an excellent skill are observing, questioning, networking
and experimenting. For example:
Benioff [founder salesforce.com]showed this orientation [when he
asked Why isn't enterprise SW [including salesforce.com] is like
FB?
RIM founder got the idea for the Blackberry at a conference as he
listened to someone talk about future trends in wireless data transfer
Starbucks founder got the idea for Starbucks as he was observing
expresso bar in Italy.
Innovators [particularly the ones who come up with disruptive ideas] shine
best at associating when actively crossing all kinds of borders [ geographic,
industry, company, profession, discipline and so on] and engaging with other
innovators DNA skills
Finding the right questions, making compelling observations, talking with
diverse people and experimenting usually deliver productive, associational
insights

HUNTING FOR NEW ASSOCIATIONS [CRITICAL FOR GENERATING INNOVATIVE
IDEAS]:
Creating odd combinations

Innovators often try to put together seemingly mismatched ideas to compose
surprisingly successful combinations.
RIM founder Lazaridis learnt to connect ideas across disciplines early in life for
example, he was a student of both advanced maths and electronics and kept
bridging the gap between the two by applying the concepts learnt in maths in
electronics and vice versa. While in college, he also came to realize that
computers and wireless technology will soon get integrated and BB was born
Similarly Google was launched Larry Page created an odd combination by
connecting two seemingly unrelated ideas academic citation [ he knew how
academic citations are ranked, since he was a PhD student at Stanford] with web
search. Google could set up its web search engine service which ensured that
websites with most links [that were most frequently selected] had more citation.
Similarly e-bay founder got ideas regarding how to ship perishable products
rapidly to consumers, without damage, from post offices whose staff visit every
household almost daily [at least before email and WhatsApp became popular]

HUNTING FOR NEW ASSOCIATIONS [CRITICAL FOR GENERATING INNOVATIVE IDEAS]:
Zooming in and Zooming out
Innovators do two things together [a] they deep dive to understand the subtle
nuances of a particular customer experience and [b] they fly high to see how the
details fit the big picture
Synthesizing these two often results in surprising assumptions
Skype founder Zennstrom maintained that such a lateral think is a must for
innovation. Steve jobs, facing problem with plastics part of the first Mac computer,
visited shops selling products with plastics components. He could solve the plastic
problems of Mac after he discovered a food processor that has many plastic part of
the types Mac needed
Jobs also could combine learning from Pixar [a media company that he owned] and
computer industry and applied the same while developing a framework for internet
based music distribution as well as invention of such products as iTune, iPhone or
iPad.
Lego thinking
A SAFE PLACE FOR NEW THOUGHTS

HUNTING FOR NEW ASSOCIATIONS [CRITICAL FOR GENERATING INNOVATIVE IDEAS]:
Lego thinking
Innovators have one thing common they love to collect ideas [like kids love to
collect legos].
Best way to get ideas is to get a lots of ideas, because getting lots of ideas from
lots of different sources create context for innovation
Innovators who frequently engage in observing, questioning, networking and
experimenting become far more capable at associating because they develop
experience at understanding, storing, and re-categorizing all new knowledge
gathered.
In most cases, innovators rarely invent something totally new; they simply recombine the ideas - they get from various sources in new ways , allowing them to
offer something new to the market. The abilities of observing, questioning,
networking and experimenting help innovators slowly build larger, richer stocks of
building-block ideas, which when combined and recombined create innovative
products, processes and services.

innovators get ideas mostly through the process observing,
questioning, networking and experimenting but such ideas
rarely get generated during a formal problem solving meeting
when discussions normally take place in a focused, convergent
manner.
Actually, ideas are generated when innovators are not trying
to solve any problem [called defocusing phase]. For example,
many innovators got their ideas during shower . In general,
innovators get new ideas when walking, driving, on vacation,
sailing or in the middle of the night
These innovators get ideas in this way because they get more
creative by giving themselves space for generating ideas and
also a longer time frame to think. In this way, the innovators
are able to improve their chances to connect the unconnected.
GROUP EXERCISE: TCL & HP
COMPETING ON
INNOVATION
Sessio
Cases
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1
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3

Types of Innovation
Getting ideas
Product innovation
Innovation Strategy
SESSION 4: COMPETITION &

INNOVATION
BUSINESS MODEL Innovation
A business model [BM] is much more than a description of a particular

product or service.
A BM lays down:
A. The targeted group of buyers ,
B. The value proposition for the chosen targeted group of buyers ,
C. How such a value will be created and delivered and
D. Capability and resources underlying the said value creation and
delivery processes
E. H ow the organization proposes to capture part of the value it will
create for the target group of buyers
F. How the organization will get economic returns [such as EBITDA%
and ROIC]
Thus a BM is much more than a product/ service. It provides
opportunities for innovation across the entire value chain as well as
how does the business interact with value chain partners to finance,
produce, market and distribute the product/service. An example is Dell.
It could make a breakthrough because of its BM

INNOVATION BUSINESS MODEL Innovation
Given the definition of BM as just mentioned, 6 key stages of BM

innovations are:
I. Exploration ref customers/ end users who will be at the receiving end of
value creation; it will require not just past data but also immersion and
active research into peoples lives and experiences
II. Pattern-finding to make connections, find patterns and draw new
conclusions regarding the ways customers/ end users think, feel, make
purchase decisions, consume and reorder; patterns will emerge when live
experiences are related to vast range of research and past data
III. Concept development to conceive a desired experience, form several
hypotheses and then flesh out the until a more concrete construct comes
out. Collaborative teamwork helps create hypothesis and ideas since
multiple voices and multiple inputs are accessed this way.
NOTE: [A] The new concept must clearly articulate the key assumptions being
made ref customers, competition and value delivery method; [B] the new
concept must pass 4 tests value test [will someone buy at the
proposed price point], execution test, scale test and defensibility
test

IV. Prototyping it is an iterative cycle of activities that transforms
concepts into feasible, testable models. The purpose is to
create visual [and sometimes experiential] manifestations of
concepts that can be progressively refined and tested with
users and socialized with a broader organizational audience
V. Piloting live piloting will determine feasibility of the model.
Some key questions will be:
What can I do tomorrow to move the new idea into action and out of
analysis? Describe the first step.
Who might I approach as a potential customer? Collaborator? Value chain
partner?
For each of the key assumptions, what new facts, if known, would cause me
to alter my assumption.
How will I recognize success? What are the specific behavioural metrics I
want to pay attention to?
VI. Scaling required to fully exploit the potential of the business model
covering all components of the model [A to F]

In a highly inter-connected world, in which resources are scarce,
entrepreneurs and managers must look beyond products and services
and see how to innovate their business model. The introspection can
help in discovering new revenue and profit stream.
Following SIX Questions can be asked examining a NEW business
model:
1. What perceived need can be satisfied through the new model?
2. What novel activities are needed to satisfy these perceived needs? [business model
content innovation]
3. How can we link the required activities to each other in novel ways [business model
structure innovation]
4. Who should perform each of the activities that are part of the proposed business
model? Should it be the company? A partner? The customer? What novel governance
arrangements can enable this structure? [business model governance innovation]
5. How is value created through the novel business model for each of the participants?
6. What revenue model fits with companys business model to appropriate part of the
total value created?
Business Model Innovation: An

example from traditional book
publishing industry
Traditional book publishers found that even though the number of ereaders using Kindle and iPad are increasing at a rapid rate and
Google and other competing content and information have stimulated
consumer interest in electronic formats, the time consuming and
expensive traditional book publishing process had not changed in
many decades.
Noting this developments, publishers started searching for solutions to
meet the emerging demand for creating and delivering digital content
on portable devices while preserving and enhancing value
Meeting the demand of digital content will require publishers
performing new activities [business model content innovation]. With
this development, demand for hardcover/ paperback books will be on
the decline and digital content becomes the norm, time taken to add a
new title to a new catalogue and to bookstore shelves will be reduced.
Accordingly, designing, uploading and maintaining the most complete
online catalogue may become a central NEW activity in publishers BM

publishing industry
Moreover, as traditional bookstores are less emphasized in their new

business model, publishers will have to develop a NEW marketing activity
to target retail buyers directly.
Production will need to change as well and creating content with a
digitally enabled streamlined process will be another NEW activity to be
learned and to be incorporated in the new BM.
Linking the various activities to each other, sequencing these linkages
and deciding how different stakeholders will interact with each other in
the new BM requires careful consideration [business model structure
innovation]. For example, working arrangements with multiple digital
distribution partners such as Apple and Amazon [who will distribute digital
content to retail consumers] will affect breadth of the publishers access
to the retail digital book market.
The NEW linkages among content creators [i.e. authors] editors, other
publishing professionals and distributors will constitute the heart of the
new BM. These linkages must consider the alternatives available to
authors such as bypassing the publishers altogether as well as
approaches followed by competitors

publishing industry
Deciding whether all the activities of the new business model will be carried
out by the concerned publisher will require critical consideration of trade-offs
[ new business model governance innovation]. For example, should the
publishers digital content be delivered by publisher branded device or by
proprietary devices like Kindle or iPad, thereby leveraging their existing
position in the market? Or should content be delivered through Internetbased platforms compatible with a broad range of devices, enabling global
distribution? These are crucial business model governance questions.
Book publishers NEW business models will create value through
complementarities and interdependence among activities and through
enormous efficiencies in the publishing process that the new business
models could generate.
A number of alternative revenue models can be considered associated with
these new BMs such as
single subscription pricing independent of the
number of downloaded manuscript, piecemeal pricing and/or value-based
pricing for time sensitive publication [like first release of a highly promoted book
The six questions help identify the ecosystem and networks in which any business
operates

INNOVATION Concept of Creative Confidence
There is a myth that creativity is limited to great authors, scientist,

architects, musicians, sculptors etc. In reality, it is exactly opposite
and one can be creative if one believes that we are all creative.
Given below are 2 strategies that probably can help us increase our
creative confidence:
Think like a Traveller:
During travelling out of our own country, we find things different and hence
notice every detail, from street signs to even how we pay at the
restaurants.. We learn new things not because we are smart but because we
pay attention. On a trip, we become our own versions of Sherlock Homes.
We continuously figure out a world that in foreign and new. in fact, we see
the world with fresh eyes.
Rediscover the familiar with the eyes of a traveller for example, if we
stand in que at check out counter of a Super market and watch what people
do we will get new insight. In general, if we have beginners mind and eye
in everything we do daily, we will get new insights from familiar setting

As we meet more people, we will have idea flow; the more ideas that
cross our minds and field of vision each day, the greater our insights
will be. A key challenge will be to increase the idea flow. A few
sources will be: meet more people, read more journals, listen to new
music, watch a new film, connect with people via social media
To keep our thinking fresh, we must seek our new sources of
information. We need to go beyond traditional sources and get data
sources with experts views, it can be incredibly energizing.
Study of different cultures and organizations can another source of
inspiration and creation of ideas. For example, cross-pollination
between departments, companies and industries can be useful for
individuals working at the same job for a while. It is of course
important to see new sources of understanding that our competitors
are not studying.

If we get some set of new ideas, it is better to discuss the same with others
rather than holding on to the same ourselves. Such a discussion with other
people can provide additional insight and hence making it easier to go from
a blank page to insight.
Empathize with the end user
In most organizations, having many customers/ end users, there is a
tendency to stereotype or depersonalize customers. They become numbers,
transactions, data points on a bell-curve etc. while it helps understand the
profile of market segments, it rarely captures the what individual consumer
is looking for.
To get creative ideas, one approach will be to have empathy with the end
user. Empathy is an ability to see an experience through another persons
eye, to recognize why people do what they do. When we have this ability, we
can go to real life setting and watch people regarding how they interact
with product and services and get ideas where things can be changed for
betterment.

Empathize with the end user
Gaining empathy takes some time and resourcefulness, but there
is nothing like observing the person we are creating something
for, to spark new insights. When we specifically set out to
empathize with our end users [implying that we got our own ego
out of the way], we will find ideas for major innovations. In other
words, empathy is a gateway to better and sometimes surprising
insights that can help us distinguish our ideas or approach vs.
competition.
NOTE:
Coupling the insights based on empathy with trends that can be
seen based on analytics and big data will be the best way forward
. The empathy will give ideas based on underlying human
element while big data will give the trend in no unclear terms
GROUP EXERCISE HARLEY DAVIDSON

Competing On Innovation - Concept Discussion - Pgpex - Dec 15

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Professor Ranjan Das

Professor of Strategy, Innovation, Entrepreneurship and

Chairman The Strategy Academy

The Strategy Academy

The Strategy Academy

Live the NOVELTY Feel the DIFFERENCE Make an IMPACT

M: +919830052722; EMAIL: ranjandas@thestrategyacademy.org

10 Sessions [2 sessions per day] to be detailed in the next 2 slides

Concept of Innovation and different types of innovation

Discussion topics and Cases

Creating new market space

Context and Concept of Innovation and different types of innovation

WHY DO GREAT COMPANIES

SEMICONDUCTOR TI, MOTOROLA

The Moment of Truth

TACTICS SHORT TERM

Denial and defense

WHY DO GREAT COMPANIES

INABILITY TO ESCAPE THE

INABILITY TO INVEST IN THE

S2: MANAGERS BEGIN TO BELIEVE

Concept of Innovation and different types of Innovation

Innovation is embodiment, combination and/or

Innovation A common classification

INNOVATION 2 WAY CLASSIFICATION

Incremental INNOVATION: Points to remember

Since radical innovations [defined in subsequent slides] involve risks,

An industry time-line of radical and

Incremental and Radical Innovations:

Incremental and Radical

It is one thing to create an innovative product or

Incremental and Radical

Service innovations sometimes produce

Incremental, Architectural, Modular and Radical

INNOVATION 4 WAY CLASSIFICATION

Incremental, Architectural, Modular and Radical

Incremental, Architectural, Modular and Radical

Incremental, Architectural, Modular and Radical

Incremental, Architectural, Modular and Radical

Incremental, Architectural, Modular and Radical

Incremental, Architectural, Modular and Radical

innovations are time consuming and huge upfront investment

Sustaining and disruptive

Concept of Innovation and different types of innovation

SESSION 2: Getting Ideas & Insights

SESSION 2: Getting Ideas & Insights

SESSION 2: Getting Ideas & Insights

SESSION 2: Getting Ideas & Insights

Are there assumptions or beliefs in your industry that go

5. EXTREMITIES - Exploit deviance

6. VOYAGES Learn from immersion elsewhere

How are your stakeholders needs influenced by their socio-cultural

What successful innovations do you see

GROUP[ EXERCISE - NYPRO

Concept of Innovation and different types of innovation

SESSION 3: CONCEPT DISCUSSION

As Steve Job said, Creativity is CONNECTING the UNCONNECTED

SESSION 3: CONCEPT DISCUSSION

Associating: What is the meaning

When brain is actively absorbing the new knowledge, it is more likely to

Associating: How it works [continued]

All innovators are better at associating than non-innovators and a good