What Is Innovation, And How To Classify Its Many Aspects
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The document discusses innovation, defining it as the creation of something new that generates profit efficiently. It outlines various growth strategies using the Ansoff Matrix, including market penetration, product development, market development, and diversification, while emphasizing the associated risks. Additionally, the document explores different terminology related to innovation and suggests aligning these terms with specific growth strategies for effective communication.
What Is Innovation, And How To Classify Its Many Aspects
- 1. What Is Innovation, And How To Classify Its Many Aspects A practical approach for using the right vocabulary when talking about innovation. Public Talk At www.IP-Lawyer-Tools.com on 26 December 2021 by Martin Schweiger www.IP-Lawyer-Tools.com
- 2. The Basic Definition Of Innovation Do Something that is a) New and that b) Generates Profit and all that c) Done in a Short Amount Of Time That definition comes from the definition of „growth“ = increment/time. Anything that does not fulfill the criteria b) and c) is „inventing as a hobby“. www.IP-Lawyer-Tools.com
- 3. Existing Products New Products Existing Market New Markets Increasing Risk Increasing Risk Increase Market Penetration (= find more customers for the existing product in the existing market) Do Market Development (= find customers for the existing product in other market segments) Do Product Development (= alter existing product so that it addresses the needs of more customers in the existing market) Diversification The Ansoff Matrix Determine the risk that comes with different approaches to growth. The Ansoff Matrix can be used (depending on where a company is in its lifecycle and its ‘risk tolerance’) to decide which growth strategies should or should not be applied. www.IP-Lawyer-Tools.com Related Diversification Unrelated Diversification
- 4. The Ansoff matrix is based on Growth Strategies Growth strategy 1: increase market penetration by selling existing more products to existing markets. Do this by: Decreasing prices to attract new customers, increasing promotion and distribution efforts, acquiring a competitor in the same marketplace, and others
- 5. The Ansoff matrix is based on Growth Strategies Growth strategy 1: increase market penetration by selling existing more products to existing markets. Do this by: Decreasing prices to attract new customers, increasing promotion and distribution efforts, acquiring a competitor in the same marketplace, and others Growth strategy 2: Push product development by developing new products that better meet the need of existing markets. Do this by investing in R&D to develop new products, by acquiring a competitor’s product and merging resources to create a new product, by forming strategic partnerships with other firms to gain access to each partner’s distribution channels/brand, etc.
- 6. The Ansoff matrix is based on Growth Strategies Growth strategy 1: increase market penetration by selling existing more products to existing markets. Do this by: Decreasing prices to attract new customers, increasing promotion and distribution efforts, acquiring a competitor in the same marketplace, and others Growth strategy 2: Push product development by developing new products that better meet the need of existing markets. Do this by investing in R&D to develop new products, by acquiring a competitor’s product and merging resources to create a new product, by forming strategic partnerships with other firms to gain access to each partner’s distribution channels/brand, etc. Growth strategy 3: Push market development by finding new markets for existing products. Do this by catering to a different customer segment, by entering into a new domestic market (expanding regionally) or into a foreign market (expanding internationally), etc.
- 7. The Ansoff matrix is based on Growth Strategies Growth strategy 1: increase market penetration by selling existing more products to existing markets. Do this by: Decreasing prices to attract new customers, increasing promotion and distribution efforts, acquiring a competitor in the same marketplace, and others Growth strategy 2: Push product development by developing new products that better meet the need of existing markets. Do this by investing in R&D to develop new products, by acquiring a competitor’s product and merging resources to create a new product, by forming strategic partnerships with other firms to gain access to each partner’s distribution channels/brand, etc. Growth strategy 3: Push market development by finding new markets for existing products. Do this by catering to a different customer segment, by entering into a new domestic market (expanding regionally) or into a foreign market (expanding internationally), etc. Growth strategy 4: Push diversification by developing new products to sell to new markets. This is considered to be the riskiest strategy because it requires both MARKET and PRODUCT DEVELOPMENT. Do this by ‘related diversification’ where many of the company’s capabilities and know-how, and synergies can be leveraged in an adjacent market space, or by ‘unrelated diversification’ into a completely white spot on the market map. side note: there is also ‘geographic diversification’ which is the same as ‘market development by expansion’ (Growth Strategy 3)
- 8. Existing Products New Products Existing Market New Markets Increasing Risk Increasing Risk Increase Market Penetration (= find more customers for the existing product in the existing market) Do Market Development (= find customers for the existing product in other markets) Do Product Development (= alter existing product so that it addresses the needs of more customers in the existing market) „Development“ „Incremental Innovation“ Diversification (= „non-incremental innovation“) „Transfer Innovation“ (ca. 75%) „Breakout Innovation“ (ca. 25%) Example: The Ansoff Matrix applied to my 4x4 Innovation Strategy. Goal: Classify Innovation By Growth Strategy chosen „moving up the S-Curve“ www.IP-Lawyer-Tools.com Related Diversification Unrelated Diversification „Innovative Marketing“ „Standard Marketing“ side note: I am not yet happy with the terms „Standard Marketing“ and „Innovative Marketing“
- 9. That is what happens when you let incremental innovation take place on an almost perfect product, for 25 years. And if you think that this applies only to mechanical inventions then you are wrong. Just ask a programmer who maintains the control software of an electric drive that is 25 years old. He will tell you that every fix that was done to that computer program brought in at least one more bug. www.IP-Lawyer-Tools.com
- 10. My Favorite Example For Unrelated Diversification: Mannesmann Mobilfunk • German steel pipe company Mannesmann decided in 1989 to erect a 2G mobile phone network that competes with the government's planned 2G mobile phone network • This activity was applying a completely new technology to a completely new market: virtually nobody in Germany had a mobile phone in 1989 • The product has later been sold to Vodafone
- 11. Now Apply Your Own Terminology to the Ansoff Matrix! • Breakthrough Innovation • Pioneer Innovation • Ideation • Invention (Patentable vs. Non-Patentable) • Disruptive Innovation • Radical innovation • Architectural Innovation • Schumpeter Innovation and many more … www.IP-Lawyer-Tools.com Related Diversification Unrelated Diversification Commonly used buzzwords in Innovation: • Classical Innovation • Customer Centric Innovation • Open Innovation • Orbit Shifting Innovation • Outcome Driven Innovation • Relentless Innovation • Reverse Innovation • Stage-Gate Innovation • Value Innovation • 4th Generation R&D Innovation
- 12. Outlook: Managing Innovation Stage-Gate and Waterfall Management Methods work well Stage-Gate and Waterfall Management Methods may or may not work for parts of the R&D project Stage-Gate and Waterfall Management Methods will NOT work. Use the Right People and leverage on Agile Management Methods. www.IP-Lawyer-Tools.com „Innovative Marketing“ „Standard Marketing“
- 13. Outlook: Which People For What Innovation 60% of the engineers like that type of work because they are not creative at all. And the creative part of only 40% of the engineers will find that type of work boring on the long run only the creative 40% of the engineers will like that work only 1% (or 0.1% in larger companies or 0.01% in large companies) of the engineers can do that: these are the „Serial Innovators“ Important note: a large part of the creative 40% of the engineers can never create any successful innovation. Most of them are only inventors. If they do not have the right leadership then all what they do is to create new things without the intention to generate profits from them. www.IP-Lawyer-Tools.com „Innovative Marketing“ „Standard Marketing“
- 14. Outlook: Marketing and Marketing Support Goal: Increase Sales Hit the right button at the customer: a) Sell Greed b) Sell Fear or c) Sell a vision www.IP-Lawyer-Tools.com
- 15. Existing Products New Products Existing Market New Markets Increasing Risk Increasing Risk Increase Market Penetration (= find more customers for the existing product in the existing market) Do Market Development (= find customers for the existing product in other market segments) Do Product Development (= alter existing product so that it addresses the needs of more customers in the existing market) Diversification www.IP-Lawyer-Tools.com „Innovative Marketing“ „Standard Marketing“ Related Diversification Unrelated Diversification Outlook: Marketing and Marketing Support Goal: Increase Sales Hit the right button at the customer: a) Sell Greed b) Sell Fear or c) Sell a vision You need creativity if you want to do that successfully for an unknown customer avatar!
- 16. Conclusions How to find a translation sheet for different terminologies when it comes to innovation, both in R&D and in Marketing Match the 4 (+2) different growth strategies of the Ansoff matrix with the two opposed sets of innovation terminology Applied to 4x4 Innovation terminology Market Penetration: “No innovation needed. Standard Marketing suffices.” Product Development: “Incremental Innovation” Market Development: “Innovative Marketing” Diversification: “Non-incremental Innovation” related diversification : “transfer innovation” unrelated diversification: “breakout innovation” www.IP-Lawyer-Tools.com
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