Module 1 Focus:

1.1 Define innovation.

1.2 List the six aspects of innovation.
1.3 Outline the relationship between innovation and entrepreneurship.
1.4 Outline the difficulties in managing what is an uncertain and risky process.
1.5 List some sources of innovation, both from within companies or industries and in the social
environment.
1.6 Identify and outline different innovation types.
1.7 Identify the key practices of successful innovators and entrepreneurs.
1.8 Identify and explain the four dimensions of innovation: product, process, position and
paradigm.

1.3. Meaning of Innovation

Module LO: 1.1 Define innovation
- Innovation is the process of creating value from ideas. It is the successful implementation
of creative ideas within an organisation.
- What is able to initiate and power the innovation process is the combination of energy,
vision, passion, commitment, judgement and risk-taking within an individual or group.
- On the plus side innovation is also strongly associated with growth. New business is created
by new ideas, by the process of creating competitive advantage in what a firm can offer.

Module LO: 1.2 List the six aspects of innovation

SIX ASPECTS OF INNOVATION
Identifying or creating opportunities
- Innovation is driven by the ability to see connections, to spot opportunities and to take
advantage of them.
- Sometimes this is about completely new possibilities, for example by exploiting radical
breakthroughs in technology.

New ways of serving existing customers

- also offer new ways of serving established and mature ones. Low-cost airlines are still about
transportation, but the innovations firms like Southwest Airlines, easyJet and Ryanair have
introduced have revolutionised air travel and grown the market in the process.

Growing New Markets

- Equally important is the ability to spot where and how new markets can be created and
grown

Rethinking Services
- in most economies the service sector accounts for the vast majority of activity, so there is
likely to be plenty of scope. And the lower capital costs often mean that the opportunities
for new entrants and radical change are greatest in the service sector

Meeting Social Needs

- Innovation offers huge challenges — and opportunities — for the public sector. Pressure to
deliver more and better services without increasing the tax burden is a puzzle likely to keep
many civil servants awake at night.
Improving Operations
- its ability to keep running and productive depends on a workforce able to contribute
innovative ideas on a continuing basis.
-
Identifying or creating opportunities EG. Mobile Phones and tablets have
revolutionised the way we communicate

New ways of serving existing customers EG. Coles, woolworths online shopping

Growing New Markets EG. The auction market on EBAY

Rethinking Services EG. Online banking and no more queues

Meeting Social Needs EG. Facebook and LinkedIn as social platforms

Improving Operations EG. Using robotics in manufacturing, mining

and medicine

Module LO: 1.3 Outline the relationship between innovation and entrepreneurship.
INNOVATION AND ENTREPRENEURSHIP
- Innovation is a tool for entrepreneurs in which they can utilise change by means as an
opportunity for a different business or service.
- Innovation does not come automatically, it is driven by entrepreneurship→ a potent
mixture of vision, passion, energy, enthusiasm, insight, judgement and plain hard work
which enables good ideas to become reality.
- the power behind changing products, processes and services comes from individuals who
enable innovation to happen
- Entrepreneurship plays out on different stages in practice → see table below

Stage in life cycle of an

organisation Start-up Growth Sustain/scale Renew

Creating commercial Individual Growing the Building a Returning to

 value entrepreneur business portfolio of the radical
s exploiting through adding incremental frame-
new new and radical breaking
technology or products/servic innovation to kind of
market es or moving sustain the innovation
opportunity. into new business which began
markets. and/or spread the business
its influence and enables
into new it to move
markets. forward as
something
very
different.

Creating social value Social Developing ideas Spreading the Changing

entrepreneur, and engaging idea widely, the system
passionately others in a diffusing it to —and then
e.g. Mission Australia concerned to network for other acting as
having a cafe that acts as improve or change— communities of agent for the
training grounds for the change perhaps in a social next wave of
unemployed something in region or around entrepreneurs, change.
their a key issue. engaging links
immediate with
environment. mainstream
players like
public sector
agencies.

1.4 Where could Australia Genuinely Innovate?

- Australia’s future prosperity cannot depend on repeating past ventures due to a decline in
mining revenue, elimination of manufacturing jobs and climate dependant uncertainties in
agricultural productivity.
- However there are other opportunities in order for AUS to thrive → we are the largest solar
collector.
 - As well as an abundance of natural resources, AUS have a strong record of innovation in
medicine. EG. Gardasil, ResMed sleep mask and cochlear implants.
- Australia benefits from its diverse population and dynamic marketplace.

Module LO: 1.5 List some sources of innovation, both from within companies or industries and in
the social environment.
SOURCES OF INNOVATION
Within the company
Unexpected occurrences
- Unexpected successes and failures are productive sources of innovation because most
people and businesses dismiss them, disregard them and even resent them
- Many innovations are the result of unexpected successes
Incongruities
- occur whenever a gap exists between expectations and reality.
Process needs
- These exist whenever a demand arises for the entrepreneur to innovate as a way of
answering a particular need
Industry and market changes
- There are continual shifts in the marketplace, which are caused by changes in consumer
attitudes, advances in technology and industry growth. Industries and markets undergo
changes in structure, design and definition.
- When market or industry structures change, traditional industry leaders often ignore the
fastest growing market segments
- New opportunities rarely fit the way the industry has always approached the market,
defined it or organised to serve it
Within a social/intellectual environment: (External Sources)
Demographic changes
- Of the external sources of innovation opportunity, demographics are the most reliable.
- Census data, for instance, provide a precise picture of the actual demographic structure of a
country, and from these data it is relatively easy to extrapolate the future age structure.
Perceptual
- Sometimes the members of a community can change their interpretation of facts and
concepts, and thereby open up new opportunities. What determines whether people see a
glass as half full or half empty is mood rather than fact, and a change in mood often defies
quantification.
- But it is not esoteric. It is concrete and it can be tested and exploited for innovation
opportunities. Perceptual changes can particularly affect dimensions, such as acceptability,
beauty, time and distance.
New knowledge
- Among history-making innovations, those based on new knowledge — whether scientific,
technical or social — rank high. Knowledge-based innovations differ from all others in the
time they take, in their casualty rates, and in their predictability, as well as in the challenges
they pose to entrepreneurs
- They have, for instance, the longest lead time of all innovations. To become effective,
innovation of this sort usually demands many kinds of knowledge
1.6 Different types of Innovation

Innovation is multidimensional, ideas are not enough. Innovation is complex and requires multiple
aspects to enforce and action the innovation.

Module LO: 1.6 Identify and outline different innovation types.

INCREMENTAL AND DISRUPTIVE (RADICAL) INNOVATION

- Improvements of existing products that enhance their services.

- This is usually done through tweaking existing designs and listening to big clients, as to
achieve steady improvements that yield higher margins.
- This particular innovation benefits established companies who continuously improve their
products, however it will cause a problem for them in the future as they will inevitably offer
more quality or features than a customer needs, want or afford.
- As a result of this, disruptive innovations are able to benefit and be able to debut from the
bottom of the market among new customers.

DISRUPTIVE INNOVATION

- Changes the value proposition

- Disruptive innovations, such as personal computers, underperform existing products but
they are also simpler, less expensive, more convenient, adequate and easier to use. They
cause fundamental changes in the marketplace. Such innovations are based on new
technologies, and often present teething problems that ruin the clients’ bottom line.
- inevitably, breakthrough innovations require a foundational rethink. Sometimes they come
from dusting off ideas that failed to make it in the past, but more often they are caused by
 the outright stubbornness of would-be entrepreneurs who refuse to abandon their pet
ideas.
- These innovations are simpler, less expensive, more convenient, adequate and easier to use.
- steady improvements to a company’s product range do not conquer new markets
- Existing corporations, therefore, face the difficulty of choosing between sustaining
technologies, which deliver improved product performance, and disruptive ones, which
may initially result in a worse performance.
- ‘Innovator's dilemma’ in large organisations can enable more flexible, entrepreneurial
companies to capitalise on industry growth. For example, how Uber disrupted the
traditional taxi services

COST INNOVATION

Products or services that in some aspects appear inferior, despite their greater affordability and
ease-of-use, are cost innovation strategies, disruptive to current offerings. Emerging giants initially
relied on cheaper labour to produce low cost products and services, but now others are using cost
innovation to gain a competitive advantage. This capability not only helps those entrepreneurs
establish a stronghold in their home countries, but also allows them to crack the value-for-money
segments in developed markets

● Selling high-end products at mass-market prices. Consider Aravind, the world’s largest eye-
hospital chain, based in Madurai, India. Aravind’s founders used a pricing structure tiered
so that wealthier patients were charged more (for example, for better meals or air-
conditioned rooms), allowing the firm to cross-subsidise care for the poorest. In addition,
the company benefits from economies of scale: its staff screens over 2.7 million patients a
year via clinics in remote areas, and refers over 285 000 of them for surgery at its
hospitals.30 Aravind’s model does not just depend on providing affordable services on a
large scale, but on a clever combination of pricing, scale, technology and process.
 ● Offering choice or customisation to value customers. China’s Goodbaby sells customers 1600
kinds of children’s strollers, car seats, bassinets, baby walkers, high chairs, and tricycles —
four times more than its rivals offer but at comparable prices. The Shanghai-based company
offers a wide range of products that meet practically every need, from strollers that can
handle uneven surfaces to those that fold away with a few simple movements. As a A$500
million company, Goodbaby can do this, in part, because it invests 4 per cent of its annual
revenues in R&D, which is twice the average for the toy industry. 31
● Turning niches into mass markets (see approach 3 in table 1.4). China’s Haier captured 60
per cent of the US wine-refrigerator market in less than a decade by lowering prices so
much that a small, under-guarded niche became a volume business.
1.7 What do successful innovators and entrepreneurs do?
Module LO: 1.7 Identify the key practices of successful innovators and entrepreneurs.

- It is important to understand that successful innovators and entrepreneurs manage

innovation as a process, develop innovation capability, create innovation strategy and build
dynamic capability.

Module LO: 1.8 Identify and explain the four dimensions of innovation: product, process, position
and paradigm.

Dimension Type of change

Product Changes in the things (products/services) an organisation offers.

Process Changes in the ways these offerings are created and delivered.

Position Changes in the context into which the products/services are introduced.

Paradigm Changes in the underlying mental models which frame what the organisation
does.