Management of Innovation - MoI

Manuel Laranja

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innovation

What is ?

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Questions for debate

• What is innovation for you? Propose an innovation you think

had success (innovation wall of fame/shame !!)

• What do you expect from this course?

Finnegans Fish Bar (15min) https://vimeo.com/160130228

Name / Number : TOPIC:

SUMMARY OF CONVERSATION: KEY INSIGHTS:

You may use rich pictures to document your summary of the conversation

QUESTIONS for further learning :

 Take away
• Concepts and definitions
• Invention and innovation. Definitions, Sources, Performance

• Types of Innovation
• Product, process and business model innovation

• Open and Collaborative Innovation

• User and Lead user Innovation

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Concepts and definitions

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 Defining Innovation
• “Innovation” is an ambiguous word
– Simultaneously refers to a “process” and to “result” of such
process.

– Innovation as a process of obtaining ideas, developing and

introducing in the market.

– In general innovation definitions refer to the process, but types

of innovation refer to the result
What would you choose as the
most important innovations of
the last 10 years?
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 Invention and Innovation
• Invention = discovery
• Ex. Thomas Edison

• Innovation = First commercialization

of an invention
• (OCDE – Frascati, Oslo Manual)
 Invention and Innovation

• Laws of Magnetism -> Radio

• Supercondutivity HTSC -> Maglevs
• Discovery of DNA -> cloning

• New species of wheat <- climate variations

 Hi-tech or Hi-touch ?

Does it have to be technological?

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Finnegans Fish Bar (15min)
https://vimeo.com/160130228

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 Definitions of Innovation
• Process that includes ideas, discovery, conception, development
and management, resulting in market introduction of new (or
improved) products, services, processes or business models.

• The application of knowledge that results in new (or improved)

products, services, processes or business models
So what is innovation?
Inspiration and creativity (ideas) ?
Or hard work ?
 Innovation and Performance
Innovation has an inherent variability, but rate of success can be
improved through better & different management:

• 85% of new ideas never reach a market

• 60% of R&D projects are market failures
• 40% of consumer products & services fail
• 20% of business products & services fail

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Types of innovation
product & service innovation
 Platform innovation - products

• “Apple iPod is a platform

– IC designed by PortalPlayer California
– Maufactured in Taiwan
– Software made-in-India 19
process innovation
 Organisational Innovation
Here Ok

Here

CEOs
10°

Managers
60°
“Implementation of new
organisational methods for
business activities, for work and/or
for external relations
(OECD, 2005: pp 51:177)
Staff
360°
business model innovation

Business Week (www.businessweek.com) Innovations of the year.

O Economist (www.economist.com) Promissing innovations award. 22
Business Model Innovation – A. Osterwalder

INFRASTRUCTURE OFFER Customer CUSTOMER

Partners Relationship
Management Target
Resources Value proposition
market segments
Distribution
Activities
Channels

Costs Funding Revenue stream

a business model describes the value an organization offers to

various customers and portrays the capabilities and partners
required for creating, marketing, and delivering this value and
relationship capital with the goal of generating profitable and
sustainable revenue streams

[Osterwalder (2004) The Business Model Ontology]

Operating Margin Growth in Excess of Competitive Peers
compound annual growth rate over five years

[Source: IBM, CEOs are expanding the innovation horizon: important implications for CIOs]
Open and Collaborative Innovation

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Companies seek knowledge and ideas from a
wider number of sources
Internal External sources – outside-in

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Sources of knowledge and mechanisms for
open and collaborative innovation
internal external

Expert Ideas competitions Lead experts

Focus Groups
Internal R&D
Internal expert groups

Lead Users
Focus Groups
non-Experts Ideas competitions External Communities
Internal Communities Lead user Communities
Crowdsourcing
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 Open Innovation: definitions

“Open Innovation is the use of purposive inflows and

outflows of knowledge to accelerate internal innovation, and
expand the markets for external use of innovation,
respectively.”

Chesbrough, Vanhaverbeke and West, OUP, 2006, p.1

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 Components of Open Innovation

• Search, explore, external knowledge

• Use of internal “venture capital” to support – spin-offs e
start-ups
• Management of Intellectual Property Rights
• Collaborative development (ex. Open Source - SW)

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User and lead user innovation

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 Definition of USER innovation
The source of innovation depends upon the functional
relationship between innovator and innovation:

– An innovation is a USER innovation when the developer expects to benefit by

USING it;

– An innovation is a COMPANY innovation when the developer expects to benefit

by SELLING it.
 Who are the Lead Users

Are direct users (not customers) at the leading edge who

(1) lead the market and – feel a need before others feel

(2) have a strong need – expect strong benefits from

innovation

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Lead Users (see Annex 2 Examples of Lead Users)

Tim Berners Lee • Tim needed hypertext and network computers for his
inventor of the own work (CERN)
World Wide Web • The market as a whole followed
• Major cultural phenomenon
• Emergence of companies and industries based on
this radical innovation

• Gary´s passion was biking off-road. He desperately

Gary Fisher needed a bike that suited his extreme requirements
BTT inventor • … and started to develop the first mountain bike
• Driving off-road became easier and safer for him and his
friends – successful in many competitions
• Gary founded his own firm: www.fisherbikes.com
• Mountain biking is nowadays a mass sport with a
respective industry behind it
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 (Lead) user communities
Mindstorms robot kit

Global community of LEGO enthusiasts

Global community of LEGO enthusiasts

LUGNET™ unites LEGO fans worldwide through
discussion groups, web pages and services.
An independent site by fans, for fans it is neither
owned or operated by LEGO company

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The Internet is enabling individual user innovators to join into
user innovation collaborative networks

Producer
USER USER

USER USER USER USER

Producer

USER
USER USER
USER
USER
USER

The way it was: The way it increasingly is:

Producer-Innovators and/or User innovation
User-Innovators alone Collaborative Networks
 How to involve Users/Lead users
• Focus Groups
• Worshops - trend analysis, co-creation, project initiation,
hackatons, innovation challenges
• Create/develop (lead) user communities (e.g. Stata sw,
LEGO)
• Open innovation online platforms (see innovation models)
• Crowdsourcing

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Name / Number : TOPIC:

SUMMARY OF CONVERSATION: KEY INSIGHTS:

You may use rich pictures to document your summary of the conversation

Do your Journaling 2 minutes

QUESTIONS for further learning :

Deliver your Sheet

 Take away
• Concepts and definitions
• Invention and innovation. Definitions, Sources, Performance

• Types of Innovation
• Product, process and business model innovation

• Open and Collaborative Innovation

• User and Lead user Innovation

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 Support
Tidd, J.Bessant and K. Pavitt, 3rd ed (2005), Managing Innovation: Integrating Technical, Market and Organizational
Change, Wiley, chapter 1, 3-59

Finnegans’s,
https://vimeo.com/160130228

MIT ocw innovation = invention x commercialization

https://www.youtube.com/watch?v=oD7X3KvJAVk

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 Annex

Examples of lead users and lead-user

innovations

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 80% of juvenile products are lead user innovations
(Source: Shah and Tripsas 2008)

In 1980, Phil Baechler decided he wanted to go for a run with his son in tow. He realized that the standard wheels on
his baby stroller would never last. So he decided to replace them with bicycle tires from his garage and the three-
wheeled "Baby Jogger " was born.

Original
Jogging stroller

Car seat for

low birth-weight babies

Motion Bed to
prevent colic
 Lead Users
John Heysham Gibbon – inventor of the heart-lung machine

• “The death of a young patient in 1931 motivated Dr. Gibbon

to develop a heart-lung bypass machine, to enable more
effective heart surgery techniques.
• Gibbon was dissuaded by all with whom he broached the
subject but persevered
• In 1935 he successfully used a prototype heart-lung bypass
machine on animals… In 1953 first used a heart-lung
machine on a human patient…

Why did a USER have to develop the first

heart-lung machine?

Users are leading edge where markets are by

definition small and uncertain!
 Lead Expert Communities

International community of leading spine surgeons

“SpineConnect is the leading collaborative knowledge network
for spine surgeons to collaborate on difficult and unusual cases.”
Every day, over 750 spine surgeons from around the world:
- Develop novel approaches to treatment,
- Address the top challenges in spine healthcare,
Kitesurfing was a new field user innovation - and developed into numerous innovations, products
and services. Each area of products/services was entered by a growing number of companies.

Core Products

Safety Equipment

User Training,
Fashion Innovation
schools

Films, videos Insurance

Traveling
 Since the development of kitesurfing in the late 1970s and early 1980s, more than 200
companies have been founded or started to sell products and/or services related to kitesurfing.
(Hienerth 2007)

3D Kiteboarding, Addiction Kiteboards, Adrenalin, Advance Kites, Aeros, Aggression, AHD, Airea, Airforce Kiteboards, Airtime, Airush, Amundson
Customs, Anton Kiteboards, AP Kiteboards, Arribarri, Ascan, ASD Windsurfing, Atan,Bang, Banshee Kite, Best Kiteboarding, BIC Sport, Boom
Kites, Brunotti, Bull, Bump & Jump, Cabrinha, Camaro, Cape Doctor, Cardboards, Carved, Catapult Kiteboarding, Caution Kites, Challenger,
Chikite, China Kites, Clamcleats Limited, Cobra Kites, Concept Air, Costa Ovest Surfboard, Crave, Crazy Fly, Cyclone, Cyclone Kitelines, Da Kine,
Da Vinci, David Stubbs, Dc Woody, Delta Designs, Depart, Devil, Dlight, DVNT, Dynamit, Early Bird Kiteboarding, Elbecustoms, Elliot, Eric
Hertsens, Euphoria, F.one, Faction Kites, Fanatic, FCS, Flexifoil, Flowbeekite Reel International, Flying Objects, Flysurfer, Freaksoffashion, Force,
Fox Watersports, FST Kitesurfing, Gaastra Kites, Gath, Globerider, Gun, Hammersurf, Hana Crew, Handmade, Hawaiin Pro Line, Hein, HIFLY,
Highwind Criminal, Hooley, HTS, Impact 3D, ION, ITV, Jimmy Lewis, JN, Jogiboards, Jonah Lepak Designs, Jorguse Surfpower, Kailuha-Boards,
KAYBIS Kiteboarding Lifestyle, King, Kite Chicks, Kiteboarding Company, Kiteloose, Kiteski, Kitesurfer, Kronic Kiteboards, Krunk Kiteboarding, La
Ola Kiteboards, Liquid Force, Liquid Sky Kiteboarding Inc., Litewave Designs, Logosz, Long Ocean, Loose Boards, Lorch, Lost Cause, Lunatic,
Manta Sailbords, Maohi Kiteboarding, Martin Technologies, Maui Fin Company, Max-X , Mixpowersports, Monkey Kites, Mormaii, Mystic, Naish,
Neil Pryde, Nice Bindings, Nobile, North Kiteboarding, Northshore, NRG Hawaii, NSI, Obsession, Ocean2air, Ocean Rodeo, Ockert, OES Australia,
Okespor, ON Boards, Open Ocean, Ozone, Pat Love, Peter Lynn, Powerline, Pro, Limit, Protest, Prototyp, Quadrifoil, Radical, Rainbow Fin
Company, Ram-Air, Rip Curl, Rogue Wavebords, RRD Robert Ricci Designs, RSC, Sailboards Tarifa, Schrenk Boards, Schroeder Eric, Sea Jump,
Seasmik, Seatrend Boards, Shroder Boards, Skytiger, Skywalker Kiteboards, Slingshot, Snaketower, Solid Kiteboards, Sonic33, SOS Kiteboards,
Spleene, Starboard, Stonker Boards, Stretch Boards, Surfactory, Surfproducts, Takoon, Tarifa Max Sports, TRB, Tecno Limits, Tekkno Sport,
Temavento, TFC, Threesixty, Timpone Hawaii, Tribal Shapes, Twintail Kiteboards, Two AG, Ul Profil GmbH, Ultra Nectar, Underground, Vade Retro,
Vio Kites, Viper, Vliegerop, Voo-Doo, Wallend AirWanikou Technologie, WARK BOARDS, Waterboards, Wavelords, Wave´s, White Water, Wichard,
Windart, Winddummy, Windtech, Windtools, Windwing, Wings Flugsysteme, WIPIKA, Witchcraft, Woodyfish, Xeleratorkiteboarding, XTC, x-blanks,
X-Shooter, X-Sports, Zenith
Skateboards are user innovations

• From use in swimming pools to

a whole new practice developed
by users and user communities
• Users also developed rules,
contest, awards, standards (a
skateboard culture!)

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 User communities develop much more than new products:
In this example, they develop the sport itself, the techniques, the products, the
infrastructure…

In whitewater kayaking, users developed 100% of the

important technique innovations and 73% of the
important hardware innovations.

Source: Hienerth (2006)

Central-pivot irrigation systems
 Central-pivot irrigation systems

Around 1950 in Nebraska, Frank

Zybach introduces the first
System (patented 1952)
 Central-pivot irrigation systems

The farmer’s invention has

clearly been made from
materials he had on hand.
The piping is
standard irrigation pipe;
tower wheels appear to
have been taken from
worn out agricultural
machinery.
Central-pivot irrigation systems

The company
Valley Irrigation
commercialises the patent

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User innovations don’t look like “products” to manufacturers

First completely automated radioimmunoassay system

First User-Developed Equipment

A Manufacturer’s Product
Is it possible to re-architect problems to fit economic conditions suitable
for collaborative user innovation ?

Consider the $12billion example of GPS

 Skyhook – a geographical positioning system based on millions of
unique wireless points mapped by users - for free

The Wi-Fi Positioning System from

Skyhook Wireless (and other firms) is a
software-only location platform that
provides 20 meter positioning accuracy to
any Wi-Fi enabled mobile device. Unlike
satellite based GPS systems, WPS uses
terrestrial based Wi-Fi access points to
determine location.

Example:
Wi-Fi points mapped in Manhattan
Camelbak is a lead-user innovation
 Open, collaborative innovation in high tech products

3-D filament printers is outstripping producer innovation:

1,000 hackers vs 50 developer employees in Stratasys

Stratasys low-end Rep-rap homemade Rep-rap kit $875

3D printer $25-40K $275 parts cost (Makerbot)
 General sites and communities
• European Open Innovation Forum: 'a new initiative to discover, discuss and share the most effective ways to organise your open
innovation pipeline'.
• 15inno: 'by Stefan Lindegard helps innovation leaders with their challenges and issues through peer-to-peer networking groups and
learning sessions.'
• Crowdsourcing.Org: 'Crowdfounding, mass collaboration, it's all on Crowdsourcing.org, the place go to place for authoritative,
information-rich content and insights on crowdsourcing.'
• Exnovate: 'The European network of excellence on open and collaborative information..a place where OI best practices could be
exchanges and where a genuine market for OI expertise would be prepared and organised for all stakeholders.
• Innovation Tools. Open Innovation Resource Centre. 'This..resource center contains a valuable collection of the best articles,
websitess, books and other resources on this important topic.
• Open Innovation Community: '..an informational resource for thought leaders, consultants, authors, business leaders, academics and
others who have a deep interest in open innovation'.
• Open Innovation Strategy & Policy Group: 'unites industrial groups, academia and private users to support policies for Open
Innovation at the European Commission'.
• Openinnovators.de: German-language open innovation community and news resource.
• The Big Innovation Centre: 'exists to make the UK a global open innovation hub, to build a world-class innovation eco-system, and
re-balance the UK economy.'

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