Showing posts with label Definition. Show all posts
Showing posts with label Definition. Show all posts

Friday, July 1, 2022

Innovation || Imitation


By far the greatest flow of newness is not innovation at all. Rather, it is imitation. 
— Theodore Levitt

 
When a company — for the first time in its history — presents a product that offers a new capability that a competitor had already introduced to the market a year earlier, should that be considered an innovation or an imitation?

In his 1966 HBR article "Innovative Imitation" Theodore Levitt makes the following distinction:

Innovation may be viewed from at least two vantage points: 
  1. newness in the sense that something has never been done before, and 
  2. newness in that it has not been done before by the industry or by the company now doing it.

Strictly defined, innovation occurs only when something is entirely new, having never been done before. 

A modest relaxation of this definition may be allowed by suggesting that innovation also exists when something which may have been done elsewhere is for the first time done in a given industry. 

On the other hand, when other competitors in the same industry subsequently copy the innovator, even though it is something new for them, then it is not innovation; it is imitation.

The newness of which consumers become aware is generally imitative and tardy newness, not innovative and timely newness.

Imitation is not only more abundant than innovation, but actually a much more prevalent road to business growth and profits.


Hence the categorization of a new offer as innovation or imitation depends on the definition* of the term "innovation" you adopt - according to the 2007 research paper "Innovation and Imitation as Sources of Sustainable Competitive Advantage".

That paper addresses the following research questions: 

  • What are the differences between innovating and imitating? 
  • What factors explain these differences?
  • Can imitation be a source of sustainable competitive advantage?
Companies with what the authors call an entrepreneurial orientation tend to generate their own ideas (innovation) rather than to adopt ideas generated by others (imitation).


The authors define innovation as a form of technological development that expands not only a firm’s existing knowledge set but also the existing world knowledge set, whereas imitation is defined as the form of technological development that expands the firm’s existing knowledge set but not the existing world knowledge set.

Innovation expands the knowledge existing in the world, 

Imitation expands only the knowledge existing in the company that adopts something new.

 

Three factors: Generation of ideas, timing, and space

The generation of the idea is the starting point for distinguishing between innovation and imitation. Only those companies that generate new ideas can be analyzed as possibly innovative, whereas those that take a previously existing idea should be considered imitators.

The generation of the idea is the necessary condition for obtaining an innovation, but this is not a sufficient condition in itself because, for innovation rather than merely invention, this idea must be put into practice (Damanpour; Schumpeter; Utterback).

The factor of timing must be considered for the differentiation of the two concepts, because generating a new idea means being the first to implement it and launch it on the market.

Innovation must be new for the organization and for its environment of reference. This consideration introduces the variable space (in effect, the global marketplace). This allows to separate the company that generates the idea, produces it, and applies it for the first time anywhere (the innovator) from another (an imitator) that later applies and markets that same idea.

One should distinguish between a company that follows the innovator in the same market (an imitator) and another that adopts an innovation so as to launch it in a different or new market segment or territory.


These three factors, the generation of ideas, timing, and space, help establish a typology of innovators and imitators that corresponds better to the real world.


Organizational attitudes: 
Entrepreneurial, Market-oriented

The literature distinguishes between entrepreneurial and market-oriented organizational attitudes as factors influencing innovation.

Companies with an entrepreneurial orientation are “exploiters” of the knowledge generated by the “explorations” of their scientists or R&D personnel, which leads them to propose new ideas that are brought into material form as new products, services, or processes.

They have a greater propensity to generate their own ideas (innovation) rather than to adopt ideas generated by others (imitation).

Entrepreneurial orientation is defined as the approach characterized by

  • Innovativeness
    (defined as the tendency of an organization to support experimentation and creative processes intended to give rise to innovations),
  • High-risk projects, and 
  • Proactivity.

A proactive attitude or stance is identified with technological leadership and with the desire to be first or a pioneer.

The degree of risk incurred by launching an innovation is much greater than that accepted by the company that adopts an imitation because the innovator confronts a change in the knowledge existing at the global level, and incorporates the commercial risk and the technological risk inherent in true innovation.

An essential prerequisite for the development of successful innovations is a good knowledge of the industry and markets in which the organization operates.

Market orientation is the concern with or study of the business environment in general, including customers, competitors, suppliers, and other external forces that affect the behavior of the organization. Market-oriented companies continually modify their offer —their products, services, and processes—to satisfy the needs of their market.

Market-oriented companies with a corresponding focus on their clients ("proactive") have a greater propensity to generate ideas to satisfy their customers’ needs and innovate. Conversely, those companies with a focus on competitors ("reactive") have a greater propensity to adopt ideas generated externally and imitate.

Radical innovations emanate from scientific research supported by an entrepreneurial orientation. On the other hand, the strategy aimed at continually satisfying customer needs, characteristic of a market-oriented company, will lead to specialization in the development of incremental innovations.

Incremental innovation can be classified as a “pull”-type innovation, whereas a “push”-type innovation is radical innovation.


Topology of innovative and imitative companies













“Incremental innovator”
  • Strong market orientation 
  • Moderate entrepreneurial orientation (proactive attitude) 
  • Moderate levels of technological and commercial risk
"Radical innovator”
  • Moderate market orientation
  • Strong entrepreneurial orientation
  • High levels of technological and commercial risk
“Mixed innovator”
  • Strong market orientation
  • Strong entrepreneurial orientation
  • Moderate levels of technological and commercial risk
“Strict imitator”
  • Weak market orientation
  • Lack of entrepreneurial orientation (reactive attitude)
  • Low technological and commercial risk.
“Explorer”
  • Strong market orientation
  • Limited entrepreneurial (proactive attitude)
  • Low levels of technological risk and moderate levels of commercial risk

The authors define global innovation as an innovation that is new for the economy as a whole and local innovation as an innovation that is new in a limited environment.

They distinguish between companies that imitate and operate in the same markets as the innovators, and those that do so in different markets.
In the same markets, taking into account the factor of timing, they argue that only the first to generate an idea and apply it as a new product should be considered an innovator, and that all the rest are imitators.
A company that adopts an innovation that is new for the company but has already been successfully applied or marketed in its reference market will be considered an imitator in the strict sense, whereas a firm is categorized as an explorer company if it introduces innovations in a market different from that supplied by the strict innovator company.

A previous article in this blog provides alternative views on how to construct a Typology of Innovation that imposes lesser requirements on the originality of an idea behind a specific type of innovation.


Competitiveness

Please consult the original article for an analysis of how both
innovation and imitation can be a source of sustainable competitive advantage, provided the company is capable of designing a strategy that differentiates it from the innovator.

The establishment of barriers to imitation promotes the maintenance of the competitive advantage achieved by the successful innovator, provided this innovation is impossible to substitute.

The innovator will obtain a sustainable competitive advantage based on an innovation if it maintains a strategy of differentiation against the imitator,
whereas the imitator will obtain a sustainable competitive advantage based on an imitation if it maintains a strategy of price leadership against the innovator.

The explorer will obtain a sustainable competitive advantage based on a local imitation if it maintains a strategy of price leadership vis-à-vis the innovator, and a strategy of differentiation against future imitators.



*Note that the definitions introduced earlier in this blog (such as "innovation = successfully exploited ideas") mostly follow Schumpeter in requiring a positive market impact —  a positive benefit, especially in the form of an economic improvement — but there are many alternative definitions including those following Thompson that do not (see research paper for bibliography and details). The only common element among all the definitions of innovation is that it implies novelty.











This table classifies the principal authors in terms of whether they consider the subsequent market or commercial success of an innovation as a necessary factor for innovation.

Schumpeter (1961) dealt with innovation within the theory of economic development as a process of putting into practice new combinations of materials and forces.

Thompson (1967) defined innovation as the generation, acceptance, and implementation of new ideas, processes, products, and services (without mentioning the need for the idea to have a positive impact in the market).

Friday, June 24, 2022

Creativity

In a recent interview Dr. Deepak Chopra made the following statement:

"Creativity is a spiritual experience, not a mental experience."

which made me investigate the topic a little further.


I came across the 2014 book Modeling Creativity (arxiv.org) by Tom De Smedt who summarizes key insights in chapter 4 as follows:

Creativity refers to the ability to think new ideas. 

Creative ideas are grounded in fast, unconscious processing such as intuition or imagination which is highly  error-prone but allows us to “think things without thinking about them”.

Some of these near-thoughts can emerge without warning as an interesting solution: a moment of insight. This usually happens while tackling everyday problems. This is called little-c creativity.

Big-C creativity, eminent ideas that fill history books, develop gradually. They require interaction with slow, conscious processing. This requires effort and motivation, because consciousness is lazy and tends to wander off.

Flexibility to switch between styles of thought – from unconscious to conscious, from goal-oriented to open-ended, from combinatory to explorative and transformative – is key to creativity: an agile mind.


Another Chopra quote summarizes the above:

"To harness true creativity, you must silence the conditioned mind."

Tuesday, September 27, 2016

Typology of Innovation

There seems to be a common view that only "disruptive" innovation counts, i.e. technological innovation that radically disrupts business practice, when in essence this is only one - extreme - type of innovation which is certainly not the most frequent but, of course, potentially the most impactful if successful.
Every now and again a radical innovation is introduced that transforms business practice and rewrites the rules of engagement. In other words, business practice across an entire industrial sector changes radically.
[In "Innovator's Dilemma"] Christensen (1997) defines these types of innovations as disruptive innovations. Disruptive innovation often occurs because new sciences and technology are introduced or applied to a new market that offers the potential to exceed the existing limits of technology.
Note that Gary P. Pisano (see "You Need an Innovation Strategybelow) only emphasizes the business model change but not a radical shift in technology:
Disruptive innovation [...] requires a new business model but not necessarily a technological breakthrough. For that reason, it also challenges, or disrupts, the business models of other companies.
The maybe confusing usage of the term "disruptive" has been acknowledged by Clayton Christensen himself in this recent noteworthy Google Talk (@1:05:47):
BTW, Christensen does not consider Uber a disruptive innovation despite it's profound impact on the established taxi market as explained in the 2015 "What is Disruptive Innovation?" HBR article nor does Tesla qualify but Airbnb does per explanation given in a 2015 Forbes interview.

Most ideas, however, will rather lead to incremental sustaining or routine innovation; that is often incremental, evolutionary improvements of existing products.

The concepts of "novelty", "impact", and "fields" of innovation listed below are taken from "Towards innovation measurement in the software industry".
Novelty or Reach of Innovations
Note that only a very small fraction of innovations are new to the world, some are new to a market, or new to an industry, and most are (only) new to a particular organization or company.
Impact of Innovation
  • Incremental innovation -
    These are relatively minor changes in technology based on existing platforms that deliver relatively low incremental customer benefits.
  • Market breakthrough -
    These are based on core technology that is similar to existing products but provides substantially higher customer benefits per dollar.
  • Technological breakthrough -
    These innovations adopt a substantially different technology than existing products but do not provide superior customer benefits per dollar.
  • Radical innovation -
    They are referred to as disruptive innovations which introduce first time features or exceptional performance. They use a substantially different technology at a cost that transforms existing or creates new markets and deliver a novel utility experience to customer.

Fields of Innovation
  • Product innovation
  • Process innovation
  • Market innovation
  • Organisation innovation
Dimensions of Innovation
  • Extent of change (radical—incremental)
  • Modality of change (product—process)
  • Complexity of change (component—architecture)
  • Materiality of change (physical—intangible)
  • Capabilities and change (enhances or destroys market/technological capabilties)
  • Relatedness of change (replaces a firm’s existing product or extends it)
  • Appropriability/Imitability (difficult or hard to hang on to)
  • Cycle of innovation (time between discontinuities)

Types and Extent of Innovation (as cited by Andrew Davies in "Innovation contexts" except for the entries after 2003)

In his June 2015 Harvard Business Review (HBR) article "You Need an Innovation Strategy" Gary P. Pisano provides the following Innovation Landscape Map that list examples for four dimensions (routine, radical, disruptive, architectural):
Routine innovation builds on a company’s existing technological competences and fits with its existing business model—and hence its customer base.
Disruptive innovation requires a new business model but not necessarily a technological breakthrough. For that reason, it also challenges, or disrupts, the business models of other companies.
Radical innovation is the polar opposite of disruptive innovation. The challenge here is purely technological.
Architectural innovation combines technological and business model disruptions.  As one might imagine, architectural innovations are the most challenging for incumbents to pursue.

A company’s innovation strategy should specify how the different types of innovation fit into the business strategy and the resources that should be allocated to each. In much of the writing on innovation today, radical, disruptive, and architectural innovations are viewed as the keys to growth, and routine innovation is denigrated as myopic at best and suicidal at worst.
That line of thinking is simplistic.
In fact, the vast majority of profits are created through routine innovation. 

Definition: Innovation

There is no single dogmatic definition of the term "innovation" in the context of economics and science.
The book Small Business Management and Entrepreneurship by David Stokes, Nicholas Wilson, Nick Wilson, wraps it up nicely:
In its broadest sense, the term innovation comes from the Latin innovare, meaning ‘to make something new’. Modern day understanding is that innovation is a process of turning ideas into new opportunities for value creation and of putting these into widely used practice. The terms innovation and creativity are often used interchangeably. […] it is helpful to distinguish between them:
■  Creativity is the generation of new ideas.
■  Innovation is the successful exploitation of new ideas.
The process of entrepreneurship relies on the creativity of those individuals involved, in terms of coming up with the original ideas for new products and services in the first place. This is only one side of the story, however. Entrepreneurship involves the successful exploitation of these ideas. In a market context, this involves the successful exchange of the new product or service, or what we refer to as innovation. Arguably, therefore, we can only really refer to an innovation after the event (post hoc), since whether or not a new product or service is successfully introduced into the market can only be born out by the evidence, rather than through prior speculation.It is widely acknowledged that innovation plays a central role in the competitiveness of firms and countries. Innovation is understood to be a key driver of productivity. Innovation helps businesses to improve the way that products and services are made and delivered, or to introduce entirely new ones. [...] Evidence suggests that innovating companies sustain a higher performance and grow faster than non-innovators. Innovation has been defined broadly as the successful exploitation of ideas - or turning ideas into profitable products, processes, services or business practices. In other words, an innovation has been commercialized, whereas an invention has not.

Here's another short definition that I can relate to:
Innovation is the process of translating an idea or invention into a good or service that creates value or for which customers will pay.
Source: http://www.businessdictionary.com/definition/innovation.html

The UK Department for Innovation, Universities and Skills has expressed this even more sustinct:
Innovation is the successful exploitation of new ideas.
Source: Innovation Nation, UK Dept. for Innovation, Universities & Skills, 2008; see also "Innovate to Accumulate", 1994.

Others have turned this into a short formula:
Innovation = Invention + Exploitation
Source: Managing Invention & Innovation, E.B. Roberts, 1998


Innovation = Creativity + Exploitation
Source: Applying Innovation, D. O'Sullivan, L. Dooley, 2008


The OECD defines "innovation" in a more comprehensive fashion:
An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.  
Source: 
OECD Oslo Manual, Guidelines for collecting and interpreting innovation data, 3rd Edition, 2005 


Wikipedia has adopted a definition that even goes beyond the OECD definition:
Innovation is: production or adoption, assimilation, and exploitation of a value-added novelty in economic and social spheres; renewal and enlargement of products, services, and markets; development of new methods of production; and establishment of new management systems. It is both a process and an outcome.   

Source: 
A Multi-Dimensional Framework of Organizational Innovation: A Systematic Review of the Literature, Crossan & Apaydin, 2010
Cited in Towards innovation measurement in the software industry. Journal of Systems and Software 86(5), 1390-1407, 
Edison, Ali, Torkar, 2013


MIT's Innovation Initiative (MITii) simply defines
        Innovation is the process of taking ideas from inception to impact.


Of course, there are many other definitions, some of which have been assembled on the following web pages:

I took note of the alternative definitions referenced in the LinkedIn article above:

          An innovation is a feasible relevant offering
         such as a product, service, process or experience
        with a viable business model that is perceived as new and is adopted by customers.
         - Gijs Van Wulfen

         Innovation = Invention * Commercialization
        - Bill Aulet


Scott Berkun, author of the book "The Myths of Innovation", claims the "best definition of innovation" to be his:
Innovation is significant positive change.

I find Scott's book a little too much focussed on the ideation and invention phases of the overall innovation process and I don't fully concur with the broadness of his definition (but even creators of Idea Management Software seem to like and endorse it). I'd  rather refer to one of the short definitions listed above or Geoff Mulgan's formula that I came across just recently:

        Innovation = Ideas that work.


To put this into the context of research, invention and creativity, i.e. the creation of ideas, let me quote Dr. Geoff Nicholson, the "Father" of the "Post-it" Notes @ 3M:

      Research is the transformation of money into knowledge.
      Innovation is the transformation of knowledge into money.

      Creativity is thinking but innovation is doing.


Others have morphed this into

      Invention is turning money into ideas. Innovation is turning ideas into money.

which brings me to the final quote by Jim Balsillie, co-founder of RIM/Blackberry:

      Innovation is getting money for ideas.


[20210615 - Added MIT definition and two more taken from referenced LinkedIn article.]