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1. Marketing Management by Arun Kumar and N Meenakshi
CHAPTER 9
MANAGEMENT OF
INNOVATIONS

2. Marketing Management by Arun Kumar and N Meenakshi
LEARNING OBJECTIVES
• Various approaches to defining an innovation
• Essential prerequisites of creating an innovative
culture in the organization
• Explaining various strategies for managing
innovation in an organization
• Role of marketers and the senior management in
fostering innovation in an organization

3. Marketing Management by Arun Kumar and N Meenakshi
• Managing the innovation process in an
organization, and the new product development
process
• Product replacement strategies of a company
• Understanding the commercialization of
technology
• Appreciating various forms of innovations: Next
generation products, Modular design, Disruptive
innovations, and Open market innovations
• Criticality of experimentation in innovations
Learning Objectives (Contd.)

4. Marketing Management by Arun Kumar and N Meenakshi
DEFINING INNOVATIONS
• Customers’ perspective
Discontinuous innovations
Continuous innovations
Dynamically continuous
• Company’s perspective
Product replacements
Addition to existing lines
New product lines
New to the world products

5. Marketing Management by Arun Kumar and N Meenakshi
CREATING AN
INNOVATIVE CULTURE
• Create corporate culture that promotes and
rewards innovation
• Encourage their employees to take risks
• Tolerant attitude towards failure
• Management should visibly support new
product development

6. Marketing Management by Arun Kumar and N Meenakshi
• Management should resist the temptation of
automatic nay-say
• Traditional performance appraisal measures
such as the fulfillment of an expected
revenue target revised for new product
development teams
• Defend NPD teams in front of detractors
Creating An Innovative Culture (Contd.)

7. Marketing Management by Arun Kumar and N Meenakshi
ORGANIZATIONAL
STRUCTURES FOR
INNOVATION MANAGEMENT
• Project teams
• Product and brand managers
• New product committee
• Importance of teamwork

8. Marketing Management by Arun Kumar and N Meenakshi
ROLE OF MARKETERS
• Work with R&D to establish clear, mutually
agreed project priorities
• Improve the provision of marketing information
to R&D
• Encourage R&D personnel to be more customer
savvy
• Important personality and value differences
between R&D and marketing
• Marketers should get over their technology
phobia

9. Marketing Management by Arun Kumar and N Meenakshi
ROLE OF SENIOR MANAGEMENT
• Locate marketing and R&D near to each other
to encourage communication and development
of informal relationships
• Show personal interest in new product
development
• Provide strategic direction
• Top management conviction about product
development
• Encourage teamwork between R&D and
marketing

10. Marketing Management by Arun Kumar and N Meenakshi
MANAGING THE
INNOVATION PROCESS
• New product strategy
Senior management should provide vision and
priorities for new product development
Outline objectives, like market share, profitability,
or technological leadership for new products
Concentrate resources on few projects

11. Marketing Management by Arun Kumar and N Meenakshi
• Idea generation
Look outside current markets
Modify product form
Question conventional price and performance
relationships
Imagine unarticulated customer needs rather
than simply following them
Examine competitors’ products at frequent intervals
Retailers as a source of ideas for NPD
Customers as a source of ideas for NPD
Utilize MR effectively
Managing The Innovation Process (Contd.)

12. Marketing Management by Arun Kumar and N Meenakshi
• Idea screening
Evaluate commercial worth of ideas
Use criteria to evaluate attractiveness of
market for the proposed market
Basis such as return on assets, sales growth etc.
Idea for NPD should be in alignment with the
company’s objectives and competencies
Should have reasonable chances of success
Managing The Innovation Process (Contd.)

13. Marketing Management by Arun Kumar and N Meenakshi
• Concept testing
Each basic product idea can be expanded into
several product concepts
Each product concept can be compared by
testing with target customers
Product concept is a particular combination of
features, benefits, and price
Allows views of customers to enter the NPD
process at an early stage
Use research to gather customer opinions
Managing The Innovation Process (Contd.)

14. Marketing Management by Arun Kumar and N Meenakshi
• Business analysis
Estimates of sales, cost and profits
Identifies the product target market, its size,
and projected product acceptance over a number
of years
Study various prices and their implications on
sales revenues
Conduct sensitivity analysis
Estimate revenues and profits to justify the
expenses of development and marketing
Managing The Innovation Process (Contd.)

15. Marketing Management by Arun Kumar and N Meenakshi
• Product development
New product concept is developed into a
physical product
Multi-disciplinary project teams
established
Product testing focuses on the functional
aspects of the product and consumer
acceptance
R&D focuses on functional aspects of product
and marketing keeps the project team aware of
psychological factors
Managing The Innovation Process (Contd.)

16. Marketing Management by Arun Kumar and N Meenakshi
Products set up to fail at this stage:
Developers become their own during this stage
Developers are wary of showing their
incomplete designs to other people in the
organization
Both customer needs and technologies are likely
to change during the development process itself
A description of the product can never match
the physical product in eliciting real reactions of
customers
A company should be willing to do ‘anything’
to increase the probability of success of a new
product
Managing The Innovation Process (Contd.)

17. Marketing Management by Arun Kumar and N Meenakshi
• Market testing
Simulated market test
Launch the new product in a limited way
Key success indicators such as penetration and
repeat purchase can be ascertained
Launch of new product in one or few
geographical areas chosen to be representative of
its intended market
Facing competition in retail outlets
Information provided by test marketing facilitates
the go / no go national launch decision
Managing The Innovation Process (Contd.)

18. Marketing Management by Arun Kumar and N Meenakshi
• Commercialization and diffusion of
innovation
Diffusion is how a new product spreads
throughout a market over time
Buyer at different stages of buying readiness
In initial phase of launch target customers who
are more likely to buy the new product than
others
Adoption slower if company targets complete
market initially
Managing The Innovation Process (Contd.)

19. Marketing Management by Arun Kumar and N Meenakshi
Innovators: Most likely to buy the new
product
Early adopters: Set of customers who buy the
product next
Early and late majorities form the bulk of the
customers
Laggards are tradition bound
Diffusion of innovation categories play crucial
role in the choice of target markets
Key is to understand the characteristics of the
innovator and early adopter categories and target
them at launch
Managing The Innovation Process (Contd.)

20. Marketing Management by Arun Kumar and N Meenakshi
Adopter categories can provide basis of
segmenting the target market
Diffusion curve linked to the product life
cycle
Characteristics of the product being
launched also affects diffusion rate
Choice of marketing strategy to establish a
differential advantage to be made
Product’s communicability affects adoption of
new product
Managing The Innovation Process (Contd.)

21. Marketing Management by Arun Kumar and N Meenakshi
PRODUCT REPLACEMENT
STRATEGIES
• Facelift
• Inconspicuous technological substitution
• Remerchandising
• Relaunch
• Conspicuous technological substitution
• Intangible repositioning
• Tangible repositioning
• Innovation

22. Marketing Management by Arun Kumar and N Meenakshi
COMMERCIALIZATION OF
TECHNOLOGY
• New technologies important to best competition
• Develop capability to bring new technologies to
market faster than competitors
• MR has a limited role in launching
technologically superior products
• Major market innovations technologically
driven
• Technical pursuits must be linked to market
requirements

23. Marketing Management by Arun Kumar and N Meenakshi
NEXT-GENERATION
PRODUCTS
• Priority for technology based companies as well
as traditional businesses
• Technology-based companies should focus on
meeting customer’s evolving needs
• Create list of products that companies should
develop in near, intermediate and distant future
• Create separate units and teams with the
involvement of chief executive

24. Marketing Management by Arun Kumar and N Meenakshi
• Different resources required at different stages of
the product development process
• New-generation products will be distinctly different
from existing products
• Monitor on a continuous basis the progress of the
development process in terms of investments being
made and targets achieved
• Develop early prototypes of subsystems and the
final product to assess workability
• Should not shy away from using relevant
competencies of their suppliers and should make
them a part of the development process
Next-generation Products (Contd.)

25. Marketing Management by Arun Kumar and N Meenakshi
MODULAR DESIGNS
• Modularity: Building a complex product from smaller
subsystems that can be designed independently and
can function together as a whole
• Modular designs can increase the rate of innovation
• Innovations in modules must fit in the design of the
complete product
• Products can be designed to allow modularity in use
• Companies can either act as an architect to create the
design rules, or can compete as a designer of modules
that conform to the architecture, interfaces, and test
protocols of others

26. Marketing Management by Arun Kumar and N Meenakshi
DISRUPTIVE
INNOVATIONS• Makes a stealthy entry into an industry and
changes industry structure and dynamics
• Over time, innovations overshoot the need of the
average customers in an industry: Potential for
upstart companies to introduce disruptive
innovation
• Capability of the disruptive innovation remains
low during the introduction phase
• But rapid improvement in the capability of the
disruptive innovations ensure widespread
adoptions

27. Marketing Management by Arun Kumar and N Meenakshi
OPEN-MARKET
INNOVATIONS
• Importing new ideas is a good way to enhance the
innovative capability of the company
• Exporting ideas is a good way to earn revenues and
keep creative people motivated
• Exporting ideas gives companies a way to measure
the innovation’s real value
• Exporting and importing ideas help companies
clarify what they do best
• Real dangers in sharing innovations
• Suitable when the economies of innovation are low

28. Marketing Management by Arun Kumar and N Meenakshi
EXPERIMENTATION IN
INNOVATION
• Rapid experimentation can provide the rapid
feedback necessary to shape those ideas by
reinforcing, modifying, or complementing
existing new knowledge
• Experimenting with many diverse ideas is
crucial to innovation

29. Marketing Management by Arun Kumar and N Meenakshi
• When projects fail late in the development
cycle, the damages are enormous.
Companies can reap enormous benefits if
they were to avoid late-stage problems
• By combining new and established
technologies, a company can get the desired
performance faster and at lesser expense