[INNOVATION MANAGEMENT] B.

COM III YEAR

UNIT – III INNOVATION THEORIES

Major contemporary theories: Disruptive-Networked-Open; Alternative
theories: Evolutionary-Uncontested- Adaptive - Green Initiatives.

INNOVATION THEORIES
Innovation is a process by which a domain, a product, or a service is
renewed and brought up to date by applying new processes, introducing new
techniques, or establishing successful ideas to create new value. The creation of
value is a defining characteristic of innovation.

1. Schumpeterian Theory of Innovation:

 Proposed by economist Joseph Schumpeter.
 Emphasizes the role of entrepreneurs in driving innovation through the
introduction of new products, processes, or technologies.
 Identifies "creative destruction" as a key element, where old technologies
and industries are replaced by new, more innovative ones.
2. Diffusion of Innovations Theory:
 Developed by Everett Rogers.
 Focuses on how innovations spread through society.
 Classifies adopters into categories like innovators, early adopters, early
majority, late majority, and laggards.
 Identifies factors influencing the adoption decision, such as relative
advantage, compatibility, complexity, trialability, and observability.
3. Open Innovation Theory:
 Coined by Henry Chesbrough.
 Suggests that companies should use both internal and external ideas and
paths to market to advance their technology.
 Encourages collaboration with external partners, including customers,
suppliers, and other organizations, to enhance innovation.
4. Resource-Based View (RBV) of Innovation:
 Focuses on the role of a firm's unique resources and capabilities in
achieving competitive advantage through innovation.
 Proposes that firms with valuable, rare, and difficult-to-imitate resources
are more likely to sustain innovation over the long term.
5. Triple Helix Model:
 Developed by Henry Etzkowitz and Loet Leydesdorff.
 Describes the relationship between government, industry, and academia in
fostering innovation.
 Advocates for collaboration and interaction between these three sectors to
drive innovation and economic development.

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6. User Innovation Theory:

 Highlights the role of end-users or consumers in the innovation process.
 Suggests that users can contribute to the development of new products or
services and can be a valuable source of innovation.
7. Lean Startup Theory:
 Developed by Eric Ries.
 Emphasizes a systematic, scientific approach to creating and managing
successful startups.
 Advocates for a build-measure-learn feedback loop to minimize the
time and resources spent on the development of products or services.

3.1 Major contemporary theories:

1. Open Innovation

 Theory: Companies should not limit innovation to internal sources,

but should also tap into external knowledge and resources. This can
be done through collaborations, joint ventures, licensing, and even
acquisitions.
 Benefits: Open innovation can lead to faster development of new
products and services, lower costs, and access to new markets and
technologies.
 Challenges: Managing open innovation can be complex, as it
requires careful attention to intellectual property rights, collaboration
agreements, and cultural differences.
2. Design Thinking

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 Theory: Design thinking is a human-centered approach to problem-

solving that emphasizes empathy, ideation, and prototyping.
 Benefits: Design thinking can help companies to develop innovative
solutions that meet the needs of their customers. It can also foster
creativity and collaboration within organizations.
 Challenges: Design thinking can be challenging to implement in
traditional organizations, as it requires a shift in mindset and culture.
3. Lean Startup

 Theory: The lean startup methodology is a process for developing

new products and services with a minimum viable product (MVP).
The MVP is then tested with customers and iterated upon based on
their feedback.
 Benefits: The lean startup methodology can help companies to
reduce the risk of failure and bring new products to market faster.
 Challenges: The lean startup methodology can be challenging to
implement in large organizations, as it requires a culture of
experimentation and failure.
4. Disruptive Innovation:

 Theory: Disruptive innovations are new products or services that

create new markets and eventually displace existing ones.
 Benefits: Disruptive innovations can lead to significant growth for
companies that are able to embrace them.
 Challenges: Identifying and responding to disruptive innovations
can be difficult, as they often emerge from unexpected sources.

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5. Innovation Ecosystems:

 Theory: Innovation ecosystems are networks of organizations that

collaborate to create and commercialize new products and services.
 Benefits: Innovation ecosystems can provide access to a wider range
of resources and expertise, which can help companies to innovate
more effectively.
 Challenges: Building and managing successful innovation
ecosystems can be complex, as it requires careful attention to trust,
collaboration, and competition.

These are just a few of the many major contemporary theories from
innovation management. Students should be encouraged to explore these
theories in more depth and to consider how they can be applied to their own
work.

3.2. Disruptive Innovation:

Disruptive innovation is a concept introduced by Clayton Christensen in his

seminal work "The Innovator's Dilemma." It describes a type of innovation that
creates a new market and value network, eventually disrupting existing markets
and displacing established market leaders or incumbents.
Disruptive innovations often start in niche markets or serve less-
demanding customers but later expand to challenge traditional products and
services.

Key characteristics of disruptive innovation include:

1. Market Transformation: Disruptive innovations often enter the market by
targeting underserved or overlooked customer segments. They may offer a
simpler, more affordable, or more convenient solution.

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2. Technology Enabler: Disruptive innovations are often enabled by

technological advancements that make it possible to deliver products or services
in a more efficient or cost-effective manner.
3. Lower Price Point: Disruptive products or services typically have a lower
price point than existing solutions, making them more accessible to a broader
audience, initially capturing a foothold in the low-end market.
4. Simplicity and Accessibility: Disruptive innovations often prioritize
simplicity and accessibility, making them attractive to customers who may be
less concerned with advanced features and are looking for a straightforward and
cost-effective solution.
5. Initially Overlooked by Incumbents: Incumbent companies may initially
dismiss disruptive innovations as they focus on serving their existing customer
base with higher-margin products. This is known as the "innovator's dilemma."
6. Gradual Displacement: Over time, disruptive innovations improve and gain
market acceptance. As they mature, they may gradually move upmarket,
challenging and displacing established competitors.
Examples of disruptive innovations include personal computers
disrupting mainframes, digital cameras disrupting film photography, and online
streaming services disrupting traditional television.
Examples: Uber disrupting the taxi industry, Airbnb disrupting the hotel
industry, Netflix disrupting the video rental industry.

3.3. Networked Innovation:

Networked innovation is an approach to innovation that
emphasizes collaboration and interconnected efforts among various
entities, such as companies, research institutions, individuals, and other
organizations.
This collaborative model recognizes that innovation is not confined
within the boundaries of a single organization but is a result of collective
efforts and the ability to tap into diverse sources of creativity and
expertise across networks.
Key features of networked innovation include:

1. Collaboration and Interconnectedness: Networked innovation involves the

collaboration of multiple actors who contribute their unique skills,
knowledge, and resources to create and develop new ideas, products, or
solutions. This collaborative approach often extends beyond traditional
organizational boundaries.

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2. Knowledge Exchange: Networking allows for the exchange of knowledge

and expertise among participants. This can lead to a richer pool of ideas and
insights, fostering a more dynamic and creative innovation process.
3. Openness to External Inputs: Networked innovation often embraces the
idea of open innovation, where organizations actively seek external inputs,
ideas, and technologies to supplement their internal capabilities. This
openness can lead to a more diverse and comprehensive innovation
ecosystem.
4. Ecosystem Perspective: Instead of viewing innovation as a linear process
within a single organization, networked innovation takes an ecosystem
perspective. It considers the broader network of stakeholders, including
suppliers, customers, partners, and even competitors, who contribute to the
innovation process.
5. Accelerated Innovation: By leveraging the collective intelligence and
capabilities of a network, the innovation process can be accelerated. Rapid
access to diverse perspectives and expertise can lead to quicker development
and implementation of innovative ideas.
6. Flexibility and Adaptability: Networked innovation provides a flexible and
adaptable framework for addressing complex challenges. It allows
organizations to tap into external expertise and adjust their innovation
strategies based on changing circumstances.
7. Cross-Sector Collaboration: In some cases, networked innovation involves
collaboration across different sectors, such as industry, academia, and
government. This cross-sector collaboration can bring together
complementary skills and resources to address multifaceted challenges.
Examples: Open-source software development, crowdsourcing platforms,
online communities of practice.
3.4. Open Innovation:
Definition: A paradigm that emphasizes the importance of using external
ideas and collaborations to drive innovation, rather than relying solely on
internal resources.
1. External Inputs: Open innovation encourages organizations to look beyond
their internal R&D departments and tap into external sources of
knowledge, ideas, and technologies. This can include collaborating with
other companies, research institutions, startups, and even customers.
2. Collaboration: Open innovation involves actively collaborating with
external partners to co-create and develop new products, services, or
solutions. This collaboration can take various forms, such as joint ventures,
partnerships, licensing agreements, or collaborative research projects.
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3. Sharing and Licensing: Organizations practicing open innovation are

willing to share their own ideas, technologies, or intellectual property with
external partners. Likewise, they are open to licensing external
technologies or ideas that align with their strategic goals.
4. Crowd sourcing: Open innovation often involves harnessing the collective
intelligence of a broader community. Crowd sourcing allows organizations
to tap into the ideas and expertise of a large group of people, often through
online platforms or innovation challenges.
5. Spin-offs and Spin-ins: Open innovation can lead to the creation of spin-off
companies or the integration of external innovations (spin-ins) into an
organization's operations. This allows for the absorption of external
technologies and capabilities.
6. Start-up Engagement: Engaging with startups is a common practice in
open innovation. Corporations may invest in startups, provide them with
resources, or collaborate with them to bring innovative solutions to market.
7. Flexibility and Agility: Open innovation provides organizations with
greater flexibility and agility in responding to market changes. By
leveraging external expertise, organizations can adapt more quickly to
emerging trends and technological developments.
8. Ecosystem Approach: Open innovation often involves adopting an
ecosystem perspective, where innovation is seen as a collaborative effort
involving a network of partners, suppliers, customers, and other
stakeholders.

3.4 Alternative Innovation Theories: Evolutionary, Uncontested, Adaptive,

and Green Initiatives
1. Evolutionary Innovation:
 Theory: Innovation occurs gradually over time through small incremental
improvements, like natural selection in biology. Companies adapt and
refine existing products and processes to better meet changing market
demands.
 Benefits: Lower risk, less disruptive, suitable for established businesses
in mature markets.
 Challenges: May struggle with radical shifts in technology or customer
needs, can lead to incrementalism and stagnation.

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2. Uncontested Market Theory:

 Theory: Focuses on identifying and entering new markets where there is
little or no competition. This can be through creating new categories or
serving niche markets with unmet needs.
 Benefits: High growth potential, less competitive pressure, ability to
shape market rules.
 Challenges: Requires creativity and foresight to identify uncontested
markets, may be difficult to build brand awareness and customer loyalty
in new categories.
3. Adaptive Innovation:
 Theory: Companies continuously adapt and adjust their strategies and
products to respond to changing external environments, such as
technological advancements, economic fluctuations, or regulatory
changes.
 Benefits: Increased agility and resilience, ability to seize opportunities in
dynamic markets.
 Challenges: Requires a flexible and adaptable organizational culture, can
be difficult to balance long-term goals with short-term pressures.
4. Green Innovation:
 Theory: Focuses on developing new products, services, and processes
that are environmentally sustainable and reduce the impact on the planet.
 Benefits: Addresses growing environmental concerns, attracts eco-
conscious consumers and investors, can lead to cost savings and
efficiency gains.
 Challenges: Requires significant investment in research and
development, may face challenges in scaling up and commercializing
green technologies.

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