1. New Types of Innovation
in Global Economy
Balázs Hámori
bhamori@uni-corvinus.hu
New Ideas in a Changing World of Business Management and Marketing
3rd Central European PhD Workshop on Economics and Business Studies
Faculty of Economics and Business Administration,
University of Szeged, 19-20, March, 2015
2. 2
Outline
o Innovation of innovation: Epochal changes in the nature of
innovation process. Persistent innovation
o Known, but peripheral types came to the fore
o New, earlier unknown types of innovation have emerged
o Crowdsourcing – massification and networking in
innovation
o Reverse innovation: innovation flow from the developing
countries uphill to the developed world
o Common features of crowdsourcing and reverse innovation
3. 3
Rank Country Score Value
1 Switzerland 64.8 1.00
2 United Kingdom 62.4 0.99
3 Sweden 62.3 0.99
4 Finland 60.7 0.98
5 Netherlands 60.6 0.97
6
United States of
America
60.1 0.96
7 Singapore 59.2 0.96
8 Denmark 57.5 0.95
9 Luxembourg 56.9 0.94
10 Hong Kong (China) 56.8 0.94
GLOBAL INNOVATION INDEX – RANKING (2014)
Source: https://www.globalinnovationindex.org/
4. 4
Changing nature of innovation in the
21st century
o Innovation: the only crucial factor of long-term
competitiveness (World Bank, OECD, and many other
studies)
o European innovation paradox
o The Lisbon Strategy (2000). The aim to make the
EU “the most competitive and dynamic knowledge-
based economy in the world.”
o It was not really successful. Even the EU-
authorities consider the first decade of the 21th
century a “lost decade” from innovation point of view
5. European paradox
5
o ‘„Europe is in the midst of an innovation crisis, that threatens
the very way of life that Europeans have become accustomed
to.”
(European Young Innovators Forum, Larry Moffett, 2014)
o Victor Hwang’s analogy of the „innovation rainforest”. „A
complex system of supports and alliances have emerged in
Silicone Valley organically over time and the system cannot
easily be mimiced.”
o European Paradox, i.e. „the conjecture that EU countries play a
leading global role in terms of top-level scientific output, but lag
behind in the ability of converting this strength into wealth-
generating innovations” (Giovanni Dosi, Patrick Llerena, Mauro
Sylos Labini, 2005)
6. Characteristics of Innovative,
Entrepreneurial Culture
• Positive attitude toward change
• Decentralized decision making
• Complexity
• Informal structure
• Interconnectedness
• Organizational slack
• System openness 6
7. Barefooted innovations: the spread of
innovative spirit throughout society
7
o Capital intensive (High R&D
costs) versus barefooted
innovation (Low or no R&D).
(Szabó-Kocsis, 2003)
o Many do not consider these forms
of innovation as innovation. Still,
we need to recognize them as
such, since they embody new
combinations of production
factors. (Here, we are not only
considering the traditional factors
of production, but also knowledge
and human capital).
8. 8
Tata Swach
Water for health
Tata Swach silver-based water purifiers were
introduced in the Indian market in 2009, with a
vision of reducing the impact of water-borne
diseases, by providing safe drinking water to
the masses. Using advanced silver nano-technology, Tata Swach
became one of the most affordable, point-of-use water purification
solutions and continued to expand its presence in Indian households.
The non-electric Tata Swach water purifier meets the USEPA
guidelines for bacteria and
virus removal to provide
safe drinking water to
consumers without using
any harmful chemicals.
9. 9
TATA Swach
For its consumer-friendly design and innovative
technology, Tata Swach has received many national
and international accolades, like WSJ Asian Innovation
Awards-Hong Kong, ICIS Best product Innovation
Award-UK, 'Gold' - IDSA Design of the Decade Awards USA, IF Product
Design Award, Germany and Product of the Year-India.
Now, with the Tata Swach portfolio expansion into the electric
purification range, the brand now caters to the entire spectrum of
water-related concerns of consumers, including high TDS, high turbidity
and microbial contamination.With ‘silver action inside’, Tata Swach
purifiers provide safe drinking water adhering to
international guidelines and longer purifier life.
Tata Swach is the complete water purification
solution for every home-maker which helps her
accomplish her mission of providing safe drinking
water to her loved ones.
10. From the jugaad to the „buhera”
Cognate terms
o Frugal innovation
o Grassroots Innovation
o Jugaad innovation
o Bricolage (buhera)
10
11. Grassroots innovation
“Grassroots innovation”: not just
innovation for the bottom of the
pyramid but innovation by the
bottom of the pyramid…
For example, beeping
(or flashing) that allows a message
to be communicated without the call
being completed. Street vendors use
this to receive free “I want to buy
now” messages from known
customers.
11
12. Frugal innovation
12
Frugal innovation is the ability to
generate considerably more
business and social value while
significantly reducing the use of
scarce resources. It’s about
solving—and even transcending
—the paradox of “doing more
with less”.
Frugality can be seen
as a characteristic of the output
—a product or application that is
not just low-cost but also low-
demand in terms of other
resource requirements,
including electricity,
telecommunications
infrastructure, and human skills.
13. Jugaad innovation
o „Jugaad is a colloquial Hindi
word that roughly translates as
‘‘an innovative fix; an improvised
solution born from ingenuity and
cleverness.’’
o Jugaad is, quite simply, a
unique way of thinking and
acting in response to
challenges; it is the gutsy art of
spotting opportunities in the
most adverse circumstances
and resourcefully improvising
solutions using simple means.
o Jugaad is about doing more with
less.” (Radjou, N. Prabhu, J.
Ahuja, S. , 2012 )
13
Some authors use the word jugaad
as synonyms for frugal, some
underline the difference between the
two. Frugal is a simplification of the
multies products, whilst in case of
jugaad the product is produced from
the “Bottom of the Pyramid”, made by
simple people.
14. Bricolage (buhera)
14
Baker and Nelson's (2005) definition of bricolage
(making do, use of resources at hand, and
resource combinations applied to new problems
and opportunities
Te bricolage concept has a theoretical overlap
with improvisation. However, they do not
represent the same construct, because time is a
critical factor in the definition of improvisation - the
degree to which design and execution converge
The bricolage goes back to Claude Lévi-Strauss,
who characterizes "bricolage” as the infinite,
improvisational recombination of the different
items, given at hand in the pri
mitive societies.
15. Buhera: An example
15
A Hungarian entrepreneur has built a successful
business from discarded goods deemed as trash.
A brilliantly simple idea served as the basis of the
success. It turned out that one of the large home-
improvement chain stores cannot do anything
with the defective products returned within 72
hours from purchase. They simply discarded
them, since even transportation of these meant a
cost to them. However, the entrepreneur
recognized a possible business in that. The
products were fixed, when it was possible, and
they began to sell them in a small rented outlet.
They were selling all kinds of goods, from
sunshades to boilers and sanitary products. They
collected the products from the home-
improvement stores and rented a truck, they
opened the packages to see what can be done
with the products. …The news of the Damaged
Goods Store spread quickly. Customers have
confirmed that there is a demand for such
products.
16. 16
Networked innovation as the most
important kind of crowdsourcing
“The act of a company or institution taking a [creative]
function once performed by employees [or contractual
partners] and outsourcing it to an undefined (and
generally large) network of people in the form of an open
call” (Jeff Howe, 2006)
It makes for companies and other organizations possible to
expand their talent pool for the entire globe, and in
parallel with that to get better and more detailed picture
of what customers want.
17. 17
Model of crowdsourcing in innovation
Crowdsourcing
platforms
Help in formulating tasks
Collect answers
Formulate &
submit task
Search for
solution
Provide answers
to the problems
Select, combine
and refine
solutions
Face a problem
Companies
Requesters
Companies/individuals
Individuals/ teams
Test, cheating
detection
Solution providers
19. 19
InnoCentive
o Problem-solving marketplace spun off
from Eli Lilly,
o 250,000 registered “solvers” from 200
countries (!) competing for more than $35
million in prizes
o Currently in its third round of venture
capital funding, InnoCentive has a
“Challenge Driven Innovation” platform
that uses a network of millions of problem
solvers
o Cloud-based technology, to transform the
economics of innovation and R&D.
o Prize competitions to solve major
enterprise problems from the outside.
(Source: Aron, 2012)
20. Further examples
o NineSigma, TexScout,
Yet2.com, Hypios,
One Billion Minds,
Amazon
o Mechanical Turks
(internet marketplace
for computer
programmers;
Wolfgang von
Kempelen)
o Battle of Concepts,
Brainrack (special
sites for students) 20
21. 21
Mutations of crowdsourcing
o Problem solving (Mechanical Turks, NineSigma)
o Information/Knowledge sharing „Citizen science”
(Noisetube, Cornell University birdwatch program,
Wikipedia)
o Voting (objective evaluation, opinion, ranking)
o Crowdsourcing workers select the preferred
variation from a number of choices. The version
that the majority selected is considered to be
correct or can be chosen. The law of great
numbers
o Crowdfunding (Funding startups, Obama first
campaign)
o There are 548 crowdfunding platforms in
development. (crowdsourcing org [2013])
o Other field of application (Science, social field,
politics)
24. 24
Reverse innovation
o „…any innovation that is adopted
first in the developing world.
Surprisingly often, these innovations
defy gravity and flow uphill to the
rich world. ”
(Govidarajan, 2012)
o Innovation is not born out of an
engineering idea, or from the
autonomic development of R&D, but
from the answers provided to the
problems of the potential buyers
o Low-cost, easy to use types of
simple solutions come to the fore
25. 25
Handheld ultrasound scanner (China)
o 1980s, GE had been trying to sell ultrasound scanners in
China, but 90 percent of hospitals couldn’t afford them.
o The company decided to create an independent local
team in China to develop a scanner just for the Chinese
market. The team came up with a handheld scanner - 15
percent of the cost of the company’s previous low-end
ultrasound device.
o Lower performance was outweighed by the portability,
ease of use, and low price for rural hospitals.
o Today GE sells the portable scanners in the U.S. and
other developed countries for use in ambulances and
operating rooms
(Source: McLure, 2012)
26. 26
Reverse Innovation: M-pesa/Kenya
o In 2007, as a result of a student software development project,
telecom giant, Safaricom developed a mobile phone based
payment and money transfer service, the so called M-Pesa
o The service allows users to deposit money into an account
stored on their cell phones, to transfer money by SMS to other
users
o Until now this type of payments were to the online environment
in the developed world. And they require either a credit card,
bank or PayPal account.
o Mid-2012, there were 19.5 million m-money users in Kenya
(83% of the adult population), transferring nearly US$8 billion
per year (24% of the Kenyan GDP)
o TheGuardian: Kenya sets world first with money transfers by
mobile. In the U. K. Pigin system 5 years later
27. Intelligent knife
o The tool matched the vaporized tissue
removed during surgery to entries in
the reference database and, within 3
seconds, could report whether or not
the tissue was cancerous.
o It helps the surgeons to take out as
little healthy tissue as possible, but to
ensure that they remove all of the
cancer.
o July 31, 2014 U.S.-based Waters
Corporation acquired the technology--
called Rapid Evaporative Ionization
Mass--the Hungarian start-up firm
MediMass Ltd.
The iKnife was invented by
Zoltán Takáts, PhD, who
previously worked at the
Semmelweis University in
Budapest. He formed
MediMass Ltd. to fund its
development.
28. 28
Common features of barefooted inovation,
crowdsourcing and reverse innovation
o Determining role of world wide web (in most cases),
geographic place has no real importance
o Drawing in marginal actors, „democratizing the
process”
o Active role of consumers/users
o Channeling of ideas from remote areas,
combining achievements from different
fields
o Decreasing the cost of innovation
o Lower risk of originally „high-risk” innovation process
29. Leg prostheses: Thailand
29
The majority of amputees in Thailand are farmers living in remote rural
areas, and unable to access prosthetic services. They have to create their
own homemade prosthetic limbs using bamboo for a shaft, wood, plastic
pipe, metal pieces, leather and/or any materials available locally.
Dr. Therdchai Jivacate, using his own resources, conducted experiments
using only locally available materials in order to make low cost, durable,
prostheses. For example, he found that recycled yogurt bottles made of
polystyrene, were easily dissolved in a acetone. From this he could make a
strong, cheap and light weight socket, using cotton bandage as a
flamework. The result was a simple prosthetic device with a tenfold cost
reduction.
Dr. Therdchai Jivacate thus @an to provide free leg prostheses to poor
patients, made in both the main workshop at the Faculty of Medicine, and in
a mobile unit which traveled to rural areas around the country. To prove his
point he recalled the case of the cost-effective arti-fi-cial leg sold in Thai-
land, where the chief occu-pa-tion is farming and sub-sis-tence depends on
biking, climbing trees, and walking on wet sur-faces. “That means that you
have to make an arti-fi-cial leg that is supe-rior in quality to the one we have
for $20,000.”
30. 30
New types of innovations compared to the
traditional innovation model of industrial capitalism
The characteristics
of innovation
Traditional
model
Crowdsourcing/reverse
innovation
The main
agents
Vertically integrated
corporations
Innovation networks:
Increasing importance
of marginal agents
The typical
place of birth
of inventions
“Closed” research
labs
Internet (open
innovation)
The geographic
structure
Highly concentrated
in the world’s
economic centers
Decentralized, spreads
to the less developed
countries
The main driving
forces of
innovation
Profit Social goals and human
motivations of innovators
also gain larger weight
(glory, self-realization,etc.)
31. 31
Conclusions
o Crowdsourcing and reverse innovation did not pop up by
chance at about the same time
o The ongoing “Great Transformation” of the economic
system – from industrial capitalism to information economy
stands behind both new forms
o The fundamental features of the Great Transformation
o the dematerialization/virtualization of goods
o transformation of vertically integrated corporations into
global networks
o sweeping changes in the relationship between the
buyers and sellers
all are reflected in the new types of innovation
