5.2 Innovation Notes

Innovation

Innovation vs. Invention – What's the Difference?

1. An invention is a completely new idea or product.
2. An innovation is when that invention is improved or used in a way that makes it practical and popular.

Types of Innovation

Sustaining Innovation (Small, Continuous Improvements)

This is when companies keep improving a product to stay competitive.

How companies do this:

1. Adding new features (like facial recognition in phones).
2. Making things cheaper (like Tesla cutting battery costs).
3. Expanding product options (like Apple offering different iPhone sizes).

Disruptive Innovation (Changes the Entire Industry)

1. This is when a product or service is so new and different that it forces existing companies to change—or fail.
2. Companies that don’t adapt to these disruptions often struggle or go out of business (like Blockbuster when Netflix took over).

Process Innovation (Changing How Things Are Made or Sold)

1. This isn’t about new products but about improving how they are built or delivered.
2. Process innovation helps companies save money and improve efficiency.

Innovation Strategies

Architectural vs. Modular Innovation

1. Architectural Innovation – Changing how existing parts work together.
   1. Example:
      1. Early bicycles didn’t have a chain.
      2. Once chains were added, pedaling became much easier.
2. Modular Innovation – Changing just one part of a product while keeping the rest the same.
   1. Example:
      1. Swapping film for digital sensors in cameras made photography easier but kept the camera's basic structure.

How Innovations Spread (Diffusion & Suppression)

1. Diffusion – How Fast People Accept a New Product
   1. Example: ATM cards became the standard for bank transactions but are now being replaced by digital payments like Apple Pay.
2. Suppression – When Companies Block New Innovations
   1. Big companies sometimes slow down or stop new ideas from becoming popular.
   2. Example:
      1. Oil companies have lobbied against electric cars to protect their business.
      2. Some companies buy patents for new technology but don’t develop them to prevent competition.

Challenges to Inventions Becoming Innovations

1. Marketability
   1. There may be low demand for the product.
   2. The target market may not have been identified or reached.
2. Financial Backing
   1. The company may not have enough financial resources to bring the innovation to market.
   2. Internal funding may not be allocated for product development and marketing.
3. Marketing
   1. Poor advertising or promotion may prevent consumers from understanding the product’s benefits.
   2. Distribution and shipping issues may make it hard for customers to buy the product.
4. Need
   1. Consumers may not see a need for the product, meaning there is no demand.
5. Price
   1. The product’s retail price may not match how much consumers think it is worth.
6. Resistance to Change
   1. Consumers may be reluctant to adopt a new product, especially if it is radically different from existing options.
7. Risk
   1. Consumers may feel that the time or cost of trying the new product is too high.
   2. The company must convince customers that the product is valuable and reliable.