1.
Innovative
Entrepreneur’s
Handbook
A
guide
to
Innovators
and
Entrepreneurs
By
SMU
Institute
of
Innovation
&
Entrepreneurship
Professor
Desai
Arcot
Narasimhalu,
Director
Kristabel
Quek
Jingyu,
Idea
Generator
2.
3.
i
Contents
Foreword
by
Professor
Desai
.....................................................................................................................................
vii
Introduction:
What
is
innovation?
..............................................................................................................................
1
Difference
between
invention
and
innovation
.................................................................................................
1
Difference
between
creativity
and
innovation
.................................................................................................
2
Value
of
Innovation
......................................................................................................................................................
3
Three
Axioms
of
Successful
Innovation
...............................................................................................................
5
Chapter
1:
Identifying
Innovation
Opportunities
................................................................................................
6
QaDIM™
-‐
Quick
and
Dirty
Innovation
Method
................................................................................................
7
QaDIM™
for
Product
Innovation
.............................................................................................................................
9
Value
Chain
Analysis
..................................................................................................................................................
11
Innovation
Lines
..........................................................................................................................................................
14
Service
Innovation
......................................................................................................................................................
15
4.
ii
Contents
Product-‐based
Service
Innovation
.......................................................................................................................
18
Innovation
Rules
..........................................................................................................................................................
19
Value
Progression
Innovation
..........................................................................................................................
21
Macro
Trend
Innovation
.....................................................................................................................................
29
Alternative
Innovation
.........................................................................................................................................
37
Modularity
Innovation
.........................................................................................................................................
41
Customization
Innovation
..................................................................................................................................
49
Community
Connecting
Innovation
...............................................................................................................
55
Buyer
Experience
Innovation
...........................................................................................................................
57
Chapter
2:
Qualifying
Innovations
............................................................................................................................
63
The
Three
Key
Questions
.........................................................................................................................................
64
Innovation
Cube
Framework
.................................................................................................................................
65
Understanding
Market
Shift
...................................................................................................................................
66
Macro
Market
Shifts
..............................................................................................................................................
66
6.
iv
Contents
Market
Intelligence
................................................................................................................................................
82
Chapter
4:
Commercializing
Innovation
................................................................................................................
83
Evaluating
Returns
.....................................................................................................................................................
84
Determine
Total
Costs
..........................................................................................................................................
84
Choose
a
Metric
&
Compute
the
Returns
.....................................................................................................
84
Normalize
for
Comparison
.................................................................................................................................
84
Ascertaining
Reuse
.....................................................................................................................................................
85
List
Resources
Needed
.........................................................................................................................................
85
Determine
Current
Resource
Reuse
Efficiencies
......................................................................................
85
Evaluate
Purchased
Resource
Usage
Efficiencies
....................................................................................
85
Determine
Attractiveness
........................................................................................................................................
86
Evaluate
Initial
Cash
Flow
Requirement
......................................................................................................
86
Add
Cash
Flow
for
the
Life
Cycle
of
Innovation
........................................................................................
86
Estimate
Realistic
Revenues
..............................................................................................................................
87
7.
v
Contents
Derive
an
Attractiveness
Metric
and
Normalize
for
Comparison
.....................................................
87
Assess
Time
to
Market
..............................................................................................................................................
88
Establish
lists
of
Suppliers
..................................................................................................................................
88
Determine
the
Lead
Time
...................................................................................................................................
88
Provide
Contingencies
..........................................................................................................................................
88
Determine
the
Probable
Release
Time
..........................................................................................................
89
Normalize
for
Comparison
.................................................................................................................................
89
Mitigate
Risk
..................................................................................................................................................................
90
List
of
Anticipated
Risk
........................................................................................................................................
90
List
of
Mitigation
Plans,
.......................................................................................................................................
90
Confidence
Factors
and
Management
Metric
.............................................................................................
90
Chapter
5:
Planning
the
Development
....................................................................................................................
92
Entering
the
Market
...................................................................................................................................................
92
Modularizing
Development
....................................................................................................................................
93
8.
vi
Contents
Parallelizing
Development
......................................................................................................................................
94
Managing
Innovation
Development
....................................................................................................................
95
Distributing
Development
.......................................................................................................................................
96
Staying
in
Control
of
Integration
..........................................................................................................................
97
Design
Module,
Component,
Subsystem
and
System
Level
Tests
..........................................................
98
Tests
for
All
Necessary
Bugs
..................................................................................................................................
99
Intellectual
Property
Strategy
............................................................................................................................
100
9.
vii
FOREWORD
BY
PROFESSOR
DESAI
I
hope
you
will
learn
something
new
about
how
to
identify,
qualify
and
prioritize
business
innovations.
I
sincerely
hope
that
you
would
apply
the
knowledge
that
you
have
gained
by
reading
this
booklet
and
enrich
this
world
by
creating
innovations
that
benefit
human
and
other
societies.
I
also
hope
in
so
doing,
you
will
end
up
enriching
yourself
not
only
with
material
wealth
but
with
inimitable
knowledge
and
experience
that
can
only
be
gained
by
doing.
A
number
of
people
have
asked
me
to
describe
the
qualities
required
to
be
a
successful
entrepreneur.
My
answer
almost
always
shocks
my
audience.
My
answer
has
been
gathered
by
interaction
with
several
successful
and
not
so
successful
entrepreneurs
and
innovators.
And
the
answer
really
is
that
one
has
to
be
a
passionate
fool
to
be
an
entrepreneur
intending
to
commercialize
innovations.
The
reason
I
come
to
this
conclusion
is
very
simple.
Translating
innovations
into
marketable
products
and
services
is
a
complex
process
and
the
journey
will
come
with
many
twists
and
turns.
It
is
only
those
with
passion
who
will
survive
such
a
demanding
and
unpredictable
journey.
That
explains
the
first
part
of
my
description.
10.
viii
Foreword
by
Professor
Desai
The
process
of
creating
a
start
up
based
on
business
innovations
is
very
complex
indeed.
It
requires
many
different
elements
to
come
together.
Examples
are
business
mentors,
good
employees,
excellent
IP
advisors,
diligent
finance
people,
smart
investors
and
most
of
all
founders
who
know
when
to
lead
and
when
to
cede
control
to
professional
management.
There
is
also
the
danger
that
others
as
smart
as
the
founders
might
also
be
pursuing
a
similar
journey.
And
any
one
of
these
elements
going
wrong
can
disrupt
the
journey.
Only
founders
who
are
foolish
enough
to
think
that
are
capable
of
pursuing
the
journey
which
is
really
laden
with
a
lot
of
obstacles
will
even
begin
the
journey.
Hence,
the
second
part
of
my
description.
Why
do
I
say
this?
It
is
important
to
know
that
if
you
are
faint
hearted
and
not
a
passionate
fool
it
is
best
that
you
work
with
such
individuals
to
bring
your
innovation
to
the
market.
This
requires
you
to
share
the
glory
with
others
who
might
not
have
been
at
the
starting
line
of
the
journey.
And,
you
should
really
be
ready
to
do
so
with
the
objective
of
getting
a
smaller
slice
of
a
larger
pie
than
all
of
a
tiny
pie.
So,
do
yourself
a
favor.
Surround
yourself
with
people
smarter
than
yourself
if
you
really
want
to
bring
an
innovation
to
the
market.
Good
Luck,
Desai
11.
1
IN·NO·VA·TION
Pronunciation:
[in-‐uh-‐vey-‐shuhn]
Function:
noun
1.
Introduction
of
something
new
2.
New
idea,
method,
or
device:
Novelty
INTRODUCTION:
WHAT
IS
INNOVATION?
Innovation
is
the
process
of
creating
value
for
users
and
delivering
it
as
an
intuitively
useful
solution
that
helps
to
address
the
user’s
pain
or
satisfy
a
need.
It
can
be
in
the
form
of
a
new
product
or
process
that
the
users
are
willing
to
pay
for.
DIFFERENCE
BETWEEN
INVENTION
AND
INNOVATION
Invention
is
the
creation
of
something
patentable.
It
must
be
novel,
non-‐obvious
and
utility.
It
could
possibly
have
recognizable
utility
to
the
inventor
and
patent
examiner
but
not
the
market.
An
invention
usually
involves
using
converting
money
into
ideas.
Innovation
is
the
creation
of
value.
It
usually
builds
on
the
past
and
is
not
required
to
be
non-‐obvious.
It
must
have
recognizable
utility
to
its
target
audience.
An
innovation
usually
involves
converting
ideas
into
money.
12.
2
DIFFERENCE
BETWEEN
CREATIVITY
AND
INNOVATION
Innovation
is
defined
as
a
novel
product,
service
or
process
that
meets
the
needs
of
a
community
of
customers
and
is
available
at
a
price
that
customer
base
can
afford.
Several
groups
of
people
were
asked
on
how
many
of
them
would
buy
the
three
objects
shown.
The
object
on
the
left
is
a
creative
door
knob.
Most
people
said
they
like
the
creativity
but
will
not
buy
it.
This
is
an
example
that
not
all
creative
objects
can
be
innovations.
The
object
in
the
middle
reduces
the
pain
of
eating
dark
toasted
bread.
More
than
60
%
of
those
who
viewed
it
said
they
will
buy
it
if
it
is
affordable
given
that
they
can
control
the
extent
of
browning
of
the
bread.
This
was
a
clear
winner
as
an
example
of
a
creation
that
can
be
labeled
as
an
innovation.
The
object
in
the
right
reduces
of
the
pain
of
having
to
hold
a
plate
of
cookies
(biscuits)
in
one
hand
and
a
cup
of
coffee
on
the
other
hand.
Notice
that
the
left-‐handers
will
have
a
hard
time
using
it
since
the
cookies
will
fall
when
they
try
to
sip
or
drink
their
beverage.
This
is
an
innovation
that
is
targeted
at
a
market
segment
made
up
of
right-‐handers.
13.
3
VALUE
OF
INNOVATION
It
is
important
to
understand
the
value
of
innovation
in
order
to
deliver
a
product
or
service
that
the
market
truly
wants.
Here
are
three
observations
made
on
the
value
of
innovation
that
will
help
you
decide
whether
the
innovation
is
worth
pursuing.
OBSERVATION
ONE:
The
value
of
an
innovation
that
is
a
solution
to
a
pain
is
directly
proportional
to
the
product
of
the
acuteness
of
the
pain
and
the
number
of
people
suffering
from
the
pain.
LESSON
ONE:
Look
for
innovation
opportunities
that
address
acute
pains
for
a
large
enough
community
of
customers.
Ignore
innovation
opportunities
addressing
shallow
pain
for
a
small
group
of
potential
customers.
14.
4
OBSERVATION
TWO:
The
solution
for
a
demand
for
enhanced
experience
is
most
likely
fulfilled
by
the
market
leader
unless
it
is
a
first
of
a
kind
product
or
solution.
For
example,
when
there
was
a
demand
for
colour
televisions
with
larger
screens,
it
was
mostly
the
market
leaders
who
were
able
to
respond
to
the
market
need.
LESSON
TWO:
It
is
best
to
leave
alone
innovation
opportunities
that
respond
to
demands
for
enhanced
experience
if
they
are
not
the
first
of
their
kind.
OBSERVATION
THREE:
Markets
will
respond
very
favorably
to
an
innovation
that
addresses
a
NEED
than
to
an
innovation
that
addresses
a
WANT.
LESSON
THREE:
Focus
on
the
needs
since
they
will
need
lesser
marketing
effort.
Give
lower
priority
to
the
wants.
15.
5
THREE
AXIOMS
OF
SUCCESSFUL
INNOVATION
Axiom
One
Successful
innovations
are
the
solution
for
a
pain
or
the
demands
for
a
pleasure
of
a
group
of
customers.
Axiom
Two
Successful
innovations
are
created
when
both
the
markets
and
the
technology
were
ready.
Axiom
Three
Successful
innovations
are
priced
right
and
fulfilled
the
market
demand
before
its
substitutes.
By
understanding
the
key
characteristics
of
successful
innovations,
it
can
be
used
as
a
litmus
test
whenever
we
identify
an
innovation.
We
list
seven
characteristics
1. Successful
innovations
addressed
the
pain
of
a
group
of
(potential)
customers.1
2. Successful
innovations
catered
to
(potential)
customers
demand
for
enhanced
experience
(pleasure).
3. Successful
innovations
were
created
when
the
markets
were
ready.
4. Successful
innovations
were
created
when
the
technology
was
available.
5. Successful
innovations
were
priced
right
for
the
value
they
delivered.
6. Successful
innovations
were
delivered
to
the
market
to
meet
most
if
not
all
of
the
demand.
7. Successful
innovations
did
not
violate
any
ethical,
ethnic,
moral,
religious,
social
and
such
other
norms.
1
A
solution
to
a
pain
is
equated
a
pill
to
cure
a
disease,
while
the
solution
to
a
demand
for
pleasure
is
equated
to
a
vitamin
that
enhances
your
health.
16.
6
CHAPTER
1:
IDENTIFYING
INNOVATION
OPPORTUNITIES
In
this
chapter,
the
following
four
methods
for
identifying
innovation
opportunities
will
be
introduced
in
detailed.
QaDIM™,
also
known
as
the
Quick
and
Dirty
Innovation
Method,
is
used
for
identifying
incremental
product
and
service
innovations.
Value
Chain
Analysis
(VCA)
is
a
generalized
version
of
the
Business
Utility
Matrix
defined
in
the
Blue
Ocean
Strategy2
and
is
useful
in
identifying
innovations
that
are
not
necessarily
triggered
by
novel
technologies.
Service
Innovation
is
gaining
increased
attention
and
hence
it
is
given
a
special
treatment
based
on
Service
Innovation
Opportunity
Identification
method3.
Innovation
Rules
is
derived
from
Innovation
Cube4
that
leverages
both
market
and
technology
changes
to
identify
innovation
opportunities.
2
Blue
Ocean
Strategy
:
How
to
Create
Uncontested
Market
Space
and
Make
the
Competition
Irrelevant,
W.
Chan
Kim
and
Renee
Mauborgne,
Harvard
Business
School
Press,
2005,
ISBN
1-‐59139-‐619-‐0
3
Service
Innovation
Opportunity
Identification,
Annual
Conference
of
the
International
Society
of
Professional
Innovation
Management,
Vienna,
2009
4
Innovation
Cube
–
Triggers,
Drivers
and
Enablers
of
Successful
Innovations,
Annual
Conference
of
the
International
Society
of
Professional
Innovation
Management,
Porto,
2005
17.
7
QADIM™
-‐
QUICK
AND
DIRTY
INNOVATION
METHOD
At
the
heart
of
QaDIM™
is
that
anyone
and
everyone
can
identify
incremental
innovation
opportunities
using
the
following
simple
matrix.
Complementary
functions
Develop
complementary
product
for
the
existing
product
Add
a
feature
Add
a
new
feature
to
the
existing
product
Embed
Embed
the
existing
product
into
another
product
or
vice
versa
Combine
two
products
Combine
existing
product
with
another
to
deliver
higher
value
Existing
Product
Separate
into
two
products
Separate
existing
product
into
two
different
products
Substitute
components
materials
Substitute
the
components
in
the
existing
products
to
for
better
value
Remove
a
feature
Remove
an
unnecessary
or
rarely
used
feature
from
the
product
Reduce
components
or
size
Reduce
the
components
or
size
of
the
product
18.
8
Chapter
1:
Identifying
Innovation
Opportunities
You
can
take
an
existing
product
and
apply
eight
different
QaDIM™
operators
to
identify
incremental
innovation
opportunities.
It
is
important
to
note
that
it
may
not
be
possible
to
apply
all
the
eight
operators
to
every
single
product
you
consider
to
result
in
eight
incremental
innovations.
However,
it
should
always
be
possible
to
identify
at
least
one
incremental
innovation
for
every
product
using
this
methodology.
QaDIM™
can
be
used
as
a
method
for
both
product
innovation
and
service
innovation.
We
will
be
considering
mobile
phone
and
airline
services
to
identify
incremental
innovation
opportunities.
19.
9
Chapter
1:
Identifying
Innovation
Opportunities
QADIM™
FOR
PRODUCT
INNOVATION
Let
us
consider
mobile
phone
as
the
product
that
we
will
use
to
identify
incremental
innovation
opportunities.
Application
of
the
eight
QaDIM™
operators
will
result
in
the
following
incremental
innovation
opportunities
Complementary
functions
Using
mobile
phone
as
an
organizer
=
Phones
with
organizer
functions
Add
a
feature
Add
a
GPS
(map)
capabilities
=
Navigation
applications
Embed
Embed
a
camera
into
the
phone
=
Camera
phones
Combine
two
products
Combine
mobile
phones
and
entertainment
devices
=
Phones
that
play
games,
music,
etc.
Mobile
Phone
Separate
into
two
products
Separate
memory
storage
=
Separate
memory
card
from
phone
Substitute
components
materials
Substitute
metal
casing
for
hard
light
plastic
=
Lighter
phones
Remove
a
feature
Remove
the
clumsy
SIM
card
socket
=
External
SIM
card
socket
Reduce
components
or
size
Reduce
the
length
of
the
phone
=
Calm
shell
design
20.
10
Chapter
1:
Identifying
Innovation
Opportunities
QaDIM™
for
Service
Innovation
Often
time,
one
wonders
whether
QaDIM™
can
be
used
for
identifying
incremental
service
innovations.
We
will
discuss
this
using
airline
service
as
an
example.
Complementary
functions
Booking
of
hotels
at
special
prices
=
Overall
travel
solution
Add
a
feature
Large
screen
for
entertainment
=
Better
entertainment
system
Embed
Embed
air
travel
as
part
of
a
tour
=
Tour
package
Combine
two
products
Combine
purchase
of
air
tickets
with
car
rentals
=
Travel
package
Airline
Service
Separate
into
two
products
Separate
memory
storage
=
Separate
memory
card
from
phone
Substitute
components
materials
Substitute
metal
knives
with
plastic
knives
=
Precaution
against
flight
terrorism
Remove
a
feature
Remove
the
smoking
area
=
No
smoking
flights
Reduce
components
or
size
Reduce
the
cost
of
operation
=
Budget
airlines
21.
11
Chapter
1:
Identifying
Innovation
Opportunities
VALUE
CHAIN
ANALYSIS
We
encounter
many
value
chains
in
our
everyday
life.
Each
value
chain
consists
of
numerous
stages
or
links.
By
identifying
innovation
opportunities
at
different
parts
of
the
value
chain,
we
can
create
better
values.
There
are
three
typical
value
chains
that
can
be
used
to
identify
innovation
opportunities.
1. Buyer’s
Value
Chain
starts
from
the
moment
the
customer
decides
to
buy
a
product
to
the
point
when
customer
disposes
the
product.
2. Seller’s
Value
Chain
begins
when
the
seller
identify
a
demand
to
the
point
where
a
product
is
sold
to
meet
the
demand.
3. Product
/
Service
Developer’s
Value
Chain
beings
with
identifying
an
innovation
opportunity
and
continues
into
prototype,
ending
with
after
sales
services.
Here
is
a
list
of
common
values
that
can
be
considered:
Convenience
Higher
quality
Lighter
Cheaper
Faster
/
Slower
Higher
/
Lower
Smaller
/
Bigger
Colors
Ease
of
use
Robustness
Environmental
friendly
Shapes
Simplicity
Productivity
Emotional
well-‐being
Managing
risk
22.
12
Chapter
1:
Identifying
Innovation
Opportunities
Buyer’s
Value
Chain
:
Seller’s
Value
Chain:
Product
/
Service
Developer’s
Value
Chain:
Search
for
product
Buy
product
Take
product
(or
delivery)
Use
product
Buy
consumables
Repair
product
Dispose
product
Iden?fy
demand
Source
vendor
Nego?ate
terms
Acquire
stocks
Train
sales
people
Sell
product
Iden?fy
innova?on
Design
prototype
Build
prototype
Test
prototype
Test
market
Build
a
bill
of
material
Source
suppliers
Source
contract
manufacturers
Nego?ate
terms
Acquire
material
Manage
inventory
Quality
assurance
Deliver
to
distributors
and
dealers
Register
customers
Provide
aGer
sales
services
23.
13
Chapter
1:
Identifying
Innovation
Opportunities
Value
Chain
Analysis
Sample
Existing
Product
:
The
Washing
Machine
Value
Chains
Links
Identified
:
Values
Considered
for
Improvement
:
Cheaper,
simplicity
and
managing
risk
Buying
Delivery
Use
Cheaper
Cheaper
washing
machines
Cheaper
delivery
services
Green
machines
that
have
lower
energy
consumption
Simplicity
Simpler
purchasing
options,
such
as
on
credit
or
installments
Simpler
or
personalized
delivery
services
that
allows
customer
to
decide
the
time
and
day
of
delivery
Easy
to
use
programs
and
dials
on
the
washing
machines
Managing
Risk
Freedom
to
exchange
if
the
machine
is
faulty
Insurance
for
potential
damage
during
delivery
process
Maintenance
plan
for
repair
service
if
the
machine
breaks
down
*Notice
that
not
all
are
product
innovations.
In
fact,
a
number
of
them
are
service
or
business
model
innovations.
Buying
Delivery
Use
24.
14
Chapter
1:
Identifying
Innovation
Opportunities
INNOVATION
LINES
The
first
introduction
of
innovation
almost
always
focuses
entirely
on
the
function.
For
example,
when
the
car
was
invented
the
attempt
was
to
get
a
vehicle
that
is
self
propelling.
There
was
no
intention
to
focus
on
robustness,
colour,
shape,
lowering
the
cost
or
offering
a
service
using
the
car.
When
Ford
focused
on
producing
Model
T,
General
Motors
took
the
market
leadership
by
producing
different
colours
and
shapes
of
cars.
The
Japanese
focused
on
fuel
efficiency
and
lower
manufacturing
costs.
There
are
situations
when
a
customer
needs
a
car
for
one
of
several
reasons
such
as
when
they
are
in
a
foreign
land,
when
they
need
a
car
only
sometimes
or
when
they
cannot
afford
a
car.
It
is
opportune
to
consider
starting
a
TAXI
service
under
such
circumstance.
Innovation
Lines
matrix
represents
the
different
types
of
innovation
opportunities
that
can
be
created
around
a
current
product
using
four
operators.
25.
15
Chapter
1:
Identifying
Innovation
Opportunities
SERVICE
INNOVATION
Service
Innovation
can
be
of
two
kinds
–
those
visible
to
the
customers
and
those
not
visible.
In
either
case,
the
lifecycle
of
service
innovation
is
often
very
short.
The
visible
service
innovations
are
copied
very
quickly
while
those
invisible
take
a
slightly
longer
time
to
copy.
Let
us
take
the
case
of
a
food
outlet
that
creates
a
new
combo
plate.
Any
competitor
looking
at
this
combo
plate
can
replicate
the
same
combo
within
days.
Take
the
example
of
McDonald’s
hamburgers,
however
much
they
guarded
the
recipe
and
the
process,
Burger
King
and
a
host
of
others
replicated
their
service
model.
It
is
therefore
Variety
based
innova?on
Cost
down
innova?on
Service
innova?on
using
the
product
Higher
quality
product
Current
product
26.
16
Chapter
1:
Identifying
Innovation
Opportunities
important
to
understand
that
service
innovations
have
short
life
cycles.
Service
Innovations
are
often
addressed
at
the
time
a
service
is
offered
to
a
customer.
However
it
would
be
important
to
address
innovations
before
and
after
the
service
is
offered
as
well.
Once
the
pains
and
pleasures
(demands
for
enhanced
experience)
are
identify
you
can
design
solutions
for
them.
You
can
use
a
similar
matrix
to
identify
the
pains
and
pleasures
that
could
be
the
basis
for
innovations
for
a
service.
27.
17
Chapter
1:
Identifying
Innovation
Opportunities
The
following
is
a
table
that
gives
an
example
of
services
offered
to
movie
goers
before,
during
and
after
viewing
a
movie.
Value
addressed
Before
During
After
Pains
Ticket
purchase,
choice
of
seats,
directions
to
the
movie
house,
etc.
Preventing
the
use
of
mobile
phones,
excessive
chatter
from
those
around.
F&B
requirements
Pleasures
Valet
Parking,
Baby
sitting,
etc.
Better
audio
visual
experience
Fine
dining
Visible
service
innovations
are
usually
copied
very
quickly,
it
is
therefore
essential
to
identify
the
intellectual
properties
that
can
be
protected.
Learn
more
about
IP
strategies
on
page
???.
28.
18
Chapter
1:
Identifying
Innovation
Opportunities
PRODUCT-‐BASED
SERVICE
INNOVATION
Introduction
of
an
innovative
product
into
the
market
place
may
offer
opportunities
for
creating
service
innovations.
Some
products
are
either
too
expensive
for
some
customers
to
own
or
they
are
not
needed
all
the
time
by
some
customers.
In
both
cases
there
is
an
opportunity
for
creative
service
innovations.
Two
examples
are
cars
and
planes.
Some
customers
cannot
afford
to
buy
a
car
and
would
use
Taxi
as
a
service
innovation.
Many
of
us
do
not
need
to
own
a
plane
and
would
be
most
willing
to
use
airlines
as
a
service
innovation.
There
is
another
kind
of
service
innovation
that
takes
care
of
the
maintenance
of
a
product
when
the
owner
has
no
capability
to
self-‐maintain
the
product.
The
first
type
of
service
is
rental
or
for-‐hire
service
and
the
second
type
of
service
is
maintenance.
The
following
table
captures
the
parameters
that
can
be
used
to
identify
product-‐basedservice
innovation
opportunities.
Parameter
Value
Is
there
a
service
innovation
opportunity
Comments
Affordability
High
No
Low
Yes
Pay
Per
Use
Model
Usage
Frequency
High
No
Low
Yes
Pay
Per
Use
Model
Maintainability
Easy
No
Difficult
Yes
Pay
per
repair
Model
29.
19
Chapter
1:
Identifying
Innovation
Opportunities
INNOVATION
RULES
Innovation
rules
are
observations
on
how
certain
innovations
evolved
over
time.
This
section
discusses
the
basic
philosophy
behind
innovation
rules.
Each
rule
captures
the
introduction
and
evolution
of
successful
innovations,
representing
the
manner
in
which
a
market
shifts
or
market
trends
over
time.
Some
of
these
innovation
rules
are
based
on
market
demands
and
others
are
based
on
technology
pushes
An
innovation
rule
is
made
up
of
two
or
more
stages
with
each
stage
representing
an
innovation.
An
innovation
normally
starts
from
the
first
stage
and
then
transits
from
one
stage
to
the
next.
However,
there
are
situations
when
an
innovation
skips
some
intermediate
stages,
or
some
of
the
intermediate
stages
can
be
interchanged
without
losing
the
generality
of
the
innovation
rule.
When
an
innovation
rule
is
observed,
we
want
to
identify
what
new
innovations
can
follow
that
innovation.
30.
20
Chapter
1:
Identifying
Innovation
Opportunities
We
will
define
some
approaches
to
identify
innovation
opportunities
using
some
of
the
rules.
Some
of
these
are
based
on
market
demands
and
others
are
based
on
technology
pushes.
For
example,
when
main
frame
computers
were
deployed
for
corporate
accounting
and
other
management
purposes,
this
surely
denied
the
departments
of
an
enterprise
access
to
computing.
When
the
demand
for
department
level
computing
gets
very
real
then
it
is
time
to
create
a
computing
innovation.
This
happened
to
be
called
minicomputers.
If
the
market
demand
is
clearly
identified
and
relevant
technology
is
available,
then
you
can
proceed
to
create
the
computing
innovation
for
departments.
You
will
need
to
invest
in
creating
the
relevant
technology
if
it
is
not
readily
available.
The
beauty
behind
the
concept
of
innovation
rule
is
that
the
set
is
both
extensible
and
customizable.
You
are
encouraged
to
write
your
own
innovation
rules
or
you
may
choose
a
set
or
subset
of
rules
that
are
best
suited
for
you
or
your
company.
31.
21
Chapter
1:
Identifying
Innovation
Opportunities
VALUE
PROGRESSION
INNOVATION
It
has
generally
been
observed
that
the
early
adopters
of
any
innovation
are
happy
with
a
product
or
service
meeting
their
need.
The
first
generation
products
and
services
are
often
not
robust.
This
results
in
a
new
innovation
opportunity
–
to
build
reliable
or
robust
products
and
services.
Customers
become
cost
conscious
once
robustness
has
been
addressed.
This
is
the
next
innovation
opportunity.
Although
lower
cost
is
generally
preferred
by
most
customers,
there
is
often
a
segment
that
is
willing
to
pay
a
premium
for
differentiated
products
–
in
the
case
of
autos
on
color,
shape,
model
etc.
That
is
the
next
innovation
opportunity.
The
desire
for
differentiated
product
is
quickly
followed
by
the
desire
for
good
after-‐sales
service.
It
is
important
to
realize
the
service
is
an
innovation
opportunity
that
almost
always
follows
innovations
for
the
consumer
products.
Func?on
Robustness
Cost
Variety
Service
.........
32.
22
Chapter
1:
Identifying
Innovation
Opportunities
The
history
of
automobiles
began
with
carts
on
wheels,
followed
by
horse
drawn
carriages
before
motor
cars
came
about.
It
used
to
be
a
status
symbol
for
the
wealthy
to
own
a
car
until
Ford
Motor
Company
built
the
Model
T
cars,
making
cars
the
commodity
it
is
today.
Henry
Ford
was
neither
the
inventor
of
the
automobile
nor
assembly
line.
He
changed
the
world
by
using
an
assembly
line
technique
to
produce
affordable,
reliable
and
easy
to
drive
car.
However,
have
you
ever
wondered
why
Ford
Motor
Company
failed
to
sustain
its
leadership?
Henry
Ford’s
famous
quote
“I
will
give
you
any
color
on
your
car
as
long
as
it
is
black”
resulted
from
his
obsession
with
cost
reduction
to
make
cars
affordable.
As
black
paint
dries
faster,
it
resulted
in
high
productivity.
By
1927,
the
company
was
able
to
produce
an
automobile
every
24
seconds.
The
customers
did
not
care
about
the
color
of
the
cars
as
long
as
they
could
at
one
that
they
can
rely
on.
33.
23
Chapter
1:
Identifying
Innovation
Opportunities
Over
the
years,
Ford
further
innovated
by
producing
a
better
car
model
every
year,
but
it
is
all
in
black.
Soon
it
is
no
longer
about
producing
cheaper
or
better
car,
and
the
innovation
value
progressed
to
the
giving
the
customers
choices.
General
Motors
innovated
and
become
the
first
automobile
manufacturer
to
offer
different
colored
cars.
Today,
there
are
many
car
manufacturers
producing
cars
with
different
specifications
to
suit
different
needs
and
wants.
It
ranges
from
economical
cars
from
Toyota
and
Mitsubishi,
to
sports
cars
from
Mazda
and
Rolls-‐Royce.
Cars
now
come
in
many
different
colors
and
interior
components,
with
many
innovative
after-‐sales
services
and
memberships.
34.
24
Chapter
1:
Identifying
Innovation
Opportunities
Value
Enhancement
Innovation
The
amazing
evolution
of
human
transportation
systems
is
a
form
of
value
enhancement
innovation.
The
initial
mode
of
transportation
available
to
mankind
was
walking.
While
hunting,
in
order
to
get
away
from
a
predator,
walking
began
to
evolve
into
running.
Humans
began
to
tame
wild
horses
to
increase
the
speed
of
travel.
This
resulted
in
travel
over
longer
distances.
However,
bare
back
riding
must
have
been
uncomfortable
and
hence
resulted
in
the
saddle
as
an
innovation.
Soon,
mankind
exploited
the
invention
of
wheels
to
assemble
carriages
that
could
take
more
than
one
or
two
riders
on
a
single
horseback.
Single
horse
drawn
carriages
soon
gave
way
to
a
team
of
horses
drawing
a
carriage
over
longer
distances
with
greater
speeds
than
what
a
single
horse
can
do.
This
promoted
travel
over
longer
distances
and
led
to
exploring
newer
geographies.
Ini?al
product
Increased
capacity
Wider
coverage
Longer
range
Increasing
delivery
speed
35.
25
Chapter
1:
Identifying
Innovation
Opportunities
The
same
could
be
said
of
other
modes
of
transportation.
This
innovation
rule
does
not
apply
to
transportation
systems
alone.
It
also
applies
to
other
innovations
such
as
telecommunication
networks,
fax
networks
and
email
systems.
Value
Diffusion
Innovation
Have
you
ever
thought
about
how
we
ended
up
with
the
smart
phones
such
as
the
iPhone?
Computer
is
one
example
of
an
innovation
that
took
roots
for
a
niche
application.
It
all
started
with
the
Department
of
Defense
in
the
US
requesting
for
the
development
of
computers
for
their
use.
These
were
primarily
meant
for
simulating
war
games
of
different
types
in
order
to
train
the
armed
forces.
Over
the
years
IBM
and
the
BUNCH
5
decided
to
reposition
this
innovation
for
corporate
use
in
large
firms.
5
BUNCH
Stood
for
Burroughs,
Univac,
NCR,
CDC
and
Honeywell
Special
Enterprise
Division
Personal
Mobile
Consumer
......
36.
26
Chapter
1:
Identifying
Innovation
Opportunities
When
firms
started
using
computers,
there
was
a
contention
for
the
use
of
their
central
computer.
The
divisions
within
the
firm
wanted
to
use
them
but
the
corporate
applications
always
took
precedence.
The
demand
for
computing
from
the
divisions
resulted
in
the
birth
of
the
Minicomputer.
Digital
Equipment
Corporation,
Sun
Microsystems,
Apollo
Computers,
HP
and
others
addressed
this
new
market.
When
divisions
improved
their
productivity
using
computers,
individual
users
clamored
for
their
own
computers.
This
demand
from
individual
users
resulted
in
companies
such
as
IBM
creating
the
personal
computer.
Individual
employees
were
very
happy
with
the
personal
computer
and
wished
they
can
take
it
along
with
them
where
ever
they
went.
This
led
to
the
demand
for
portable
computers
including
the
lap
tops.
Once
consumers
enjoyed
the
benefits
of
laptops
they
wanted
smaller
sized
products.
This
resulted
in
the
Personal
Digital
Assistants.
We
call
this
evolution
of
products
in
the
same
family
an
Innovation
rule.
You
could
observe
similar
progression
in
several
other
products
such
as
Photocopiers,
Printers
and
Fax
machines.
Now
can
you
write
down
other
products
that
you
think
had
followed
this
progression.
Can
you
identify
innovation
opportunities
using
this
Innovation
Rule?
37.
27
Chapter
1:
Identifying
Innovation
Opportunities
Value
Integration
Innovation
Over
the
years,
technologies
are
integrated
together
to
give
us
product
such
as
4-‐in-‐one
printer
where
the
printer
can
function
as
a
scanner,
photocopier
and
also
a
fax
machine.
Mobile
phones
have
also
been
integrated
with
camera,
music
player,
gaming
and
computing
capabilities
to
become
the
smart
phones
we
have
today.
The
value
of
integrating
several
related
functions
into
one
product
or
service
is
certainly
very
appealing.
It
saves
space
and
also
helps
drive
down
the
cost
of
providing
multiple
functions
by
purchasing
four
different
machines.
However,
it
is
important
to
note
that
randomly
combining
functions
into
an
integrated
product
does
not
often
succeed.
Decades
ago,
there
was
a
product
that
integrated
the
radio,
VCR
and
computer
into
one
device.
The
market’s
inability
to
make
sense
out
of
the
benefits
of
such
integrated
device
could
lead
to
its
failure.
Therefore
it
is
important
to
pay
special
attention
to
usability
when
multiple
functions
are
offered
through
an
integrated
product.
Stand
alone
innova?ons
Integrated
innova?ons
38.
28
Chapter
1:
Identifying
Innovation
Opportunities
Miniaturization
Innovation
Miniaturization
innovations
once
designated
for
larger
applications
that
later
get
redesigned
for
smaller,
but
not
lesser,
applications.
For
example,
the
Magnetic
Resonance
Imaging
(MRI)
machines
were
invented
initially
for
the
scanning
of
the
brain
and
were
later
used
for
scanning
other
parts
of
the
body.
However,
the
early
versions
of
the
MRI
machines
still
required
a
person
to
be
put
on
a
bed
and
scanned
through
the
central
hole
of
a
toroid-‐like
structure
regardless
whether
the
whole
body
was
being
scanned
or
just
an
arm
or
a
leg
was
being
scanned.
Therefore,
innovators
constructed
MRI
scanners
with
a
smaller
toroid
to
scan
just
an
arm
or
a
leg
to
reduce
the
cost
of
the
medical
procedure
and
also
the
complexity
of
the
procedure.
Another
example
of
miniaturization
is
the
transition
from
vacuum
tubes
to
transistors,
and
transistors
to
integrated
circuits.
Even
up
till
today,
integrated
circuits
continue
to
progress
from
small
scale
integration
to
medium
scale,
large
scale
and
ultra
large
scale
integration.
Innova?on
for
larger
applica?ons
Innova?on
for
smaller
applica?ons
39.
29
Chapter
1:
Identifying
Innovation
Opportunities
MACRO
TREND
INNOVATION
Trends
are
observed
from
time
to
time.
A
movement
is
generally
termed
as
trend
when
there
is
a
monotonic
increase
in
the
number
of
people
embracing
the
movement
and
there
is
no
possibility
of
looking
back
on
the
movement.
Some
movements
end
up
as
trends
and
others
remain
as
weak
movements
or
fizzle
out.
Furby
6
was
a
cute
little
toy
to
replace
having
a
real
life
pet.
When
it
was
first
launched,
many
parents
hunted
for
the
toy
across
several
stores
in
their
respective
cities
and
countries.
However,
after
a
few
years
no
one
cared
about
Furby
anymore.
So,
the
frenzy
initiated
by
the
introduction
of
Furby
is
perhaps
better
described
as
a
fad.
For
example,
there
are
currently
two
major
trends
in
play.
A
first
trend
is
that
a
large
majority
of
the
world’s
population
is
graying.
And
a
second
trend
is
that
there
is
an
increasing
awareness
to
keep
our
environment
6
Furby
was
a
toy
introduced
by
Tiger
Electronics.
See
http://en.wikipedia.org/wiki/Furby
for
more
details.
Global
trends
Innova?on
following
the
trends
40.
30
Chapter
1:
Identifying
Innovation
Opportunities
clean.
Many
companies
are
beginning
to
focus
on
elderly
friend
products
and
services
due
to
the
trend
of
aging
population.
Products
such
as
fall-‐detectors
that
can
alert
others
of
a
fall,
and
alarm
that
can
be
set
off
at
the
press
of
a
button
to
put
the
aged
person
in
touch
with
an
operator
can
be
readily
found
in
the
market.
As
our
concern
for
environment
rises,
the
number
of
environmentally
friendly
products
increases
day
by
day.
Toyota
is
an
early
leader
in
identifying
and
responding
to
this
trend
by
designing
and
manufacturing
the
eco-‐friendly
Prius
7
model
of
hybrid
cars
that
run
on
both
petrol
and
electricity.
Here
is
a
list
of
macro
trends
identified
for
2015
and
beyond
which
look
at
the
society
and
tomorrow’s
people
in
order
to
innovate
for
future
products.8
1. Globalization/Globalization
Increasing
global
connectivity
and
integration
between
nation-‐states,
corporations
and
individuals
leads
to
increased
interdependence.
The
increases
in
human
migration,
International
trade,
free
capital
flow,
and
finally
of
the
widespread
diffusion
of
technology
affects
us
all
on
a
global
level.
7
Prius
is
a
hybrid
car
manufactured
by
Toyota.
See
http://en.wikipedia.org/wiki/Toyota_Prius
for
more
details.
8
MACRO
TRENDS
2015+
-‐
Looking
at
society
and
tomorrow’s
people
in
order
to
define
tomorrow’s
products
by
Anne
Lise
Kjaer,
a
London-‐based
futurist.
41.
31
Chapter
1:
Identifying
Innovation
Opportunities
2. Asia
and
New
Economies
Asia
and
other
new
economies
have
become
major
players
that
will
define
future
businesses,
science
and
leadership
agendas.
These
new
Superpowers
are
presenting
both
a
wealth
of
new
challenges
and
opportunities.
3. Convenience
Technology
Convenience
technology
provides
today's
people
with
a
tool
that
empower
them
and
give
them
a
degree
of
ease
in
a
hectic
world.
We
can
now
control
and
juggle
our
life
in
a
ways
unheard
of
just
15
years
ago.
4. Connected
People
are
increasingly
putting
their
faith
in
information
delivered
through
‘social
software’
from
a
virtual
network.
Friendship
networks
grow
and
people
are
forming
tribes
across
cultures,
beliefs
and
borders
as
never
before.
5. Smart
Technology
One
of
the
greatest
benefits
of
digital
technology
has
been
the
empowerment
of
individuals.
Technology
is
faster,
better
smarter,
and,
in
this
accelerated,
borderless,
wireless
world,
we
are
making
instant
choices
about
who
we
are,
what
we
do,
and
what
we
want.
42.
32
Chapter
1:
Identifying
Innovation
Opportunities
6. Transparency
Transparency
implies
openness,
communication,
and
accountability.
Businesses
and
governments
must
have
an
attractive
ethical
dimension
and
practice
a
‘genuine
caring
attitude’.
Tomorrow’s
citizens
want
fair
trade
and
traceability
–
he
wants
more
meaning.
7.
Global
Sustainers
The
influential
and
informed
individual
practices
sustainability
by
applying
it
to
all
levels
from
product
preference
to
lifestyle.
Businesses
must
have
an
attractive
‘green
policy’
as
well
as
an
ethical
and
caring
attitude.
8.
Rethinking
Energy
The
reality
of
Global
warming
has
caused
us
to
rethink
energy.
Both
on
a
personal
scale
in
the
way
we
consume
and
live
and
on
a
much
larger,
society
scale.
There
are
positive
new
avenues
to
be
explored.
Renewable
energy
resources
and
many
other
innovative
projects
and
ideas
will
shape
the
future
of
energy
resources.
9. The
Creative
Class
In
U.S.
alone
it
is
estimated
that
this
group
has
38
million
members,
constitutes
more
than
30%
of
the
workforce,
and
profoundly
influences
work
and
lifestyle
issues.
These
are
high-‐achieving
individuals
-‐
a
responsible,
cohesive
group
interested
in
the
common
good.
43.
33
Chapter
1:
Identifying
Innovation
Opportunities
10. Ageing
Population
The
ticking
retirement
time
bomb
is
a
growing
concern
–
will
it
become
an
unsustainable
burden
for
future
taxpayers?
Will
we
have
raise
retirement
age
and
work
till
we
are
70?
On
the
positive
side
we
slowly
see
attitudes
shift
to
a
more
positive
social,
cultural
and
corporate
mindset
of
age
and
aging.
11. Female
Empowerment
After
an
uncomfortable
alliance
between
the
sexes
-‐
with
women
mimicking
traditional
masculine
power
relations
to
get
ahead
in
a
'man's
world'
-‐
we
are
now
witnessing
the
emergence
of
the
new
woman.
Many
women
are
now
better
educated
than
their
male
counterparts.
Already,
there
are
more
female
than
male
entrepreneurs
and
these
female
icons
inspire
others
around
the
globe
and
have
influence
across
culture
and
class.
12. Health
and
Wellness
Health
concerns
have
changed
the
face
of
the
Western
culture.
Certain
health
issues
have
already
reached
epidemic
levels.
A
healthy
body
and
mind
will
become
a
new
form
of
future
capital
in
the
century
ahead.
We
feel
comfortable
with
the
universal
values
of
the
Eastern
mindset
and
seek
the
calm,
the
healing
and
recovery
it
offers.
44.
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Chapter
1:
Identifying
Innovation
Opportunities
Market
Triggered
Innovation
From
time
to
time
the
markets
evolve
due
to
regulations
or
otherwise.
Watching
for
these
market
shifts
allow
better
evaluation
of
the
innovation
opportunities
available.
The
following
are
examples
of
broad
market
shifts
that
have
resulted
in
innovations.
1. New
regulations
-‐
SOX
compliance9
imposed
by
SEC
in
the
USA
2. Deregulations
–
Freeing
of
broadcast
frequency
spectrums
in
mid
1980s
3. User
maturity
with
respect
to
new
skills
–
Use
of
computers
for
communication
purposes
4. User
familiarity
with
new
technologies
–
Short
Messaging
System
(SMS)
5. New
residential
and
commercial
geographies
–
Evolution
of
towns
into
cities
6. New
user
preferences
–
easy
to
use
and
colourful
hand
phones
9
Sarbane-‐Oxley
Act
is
a
United
States
federal
law
enacted
on
July
30,
2002,
which
set
new
or
enhanced
standards
for
all
U.S.
public
company
boards,
management
and
public
accounting
firms.
45.
35
Chapter
1:
Identifying
Innovation
Opportunities
Technology
Triggered
Innovation
Every
time
a
new
technology
is
introduced,
a
number
of
innovations
follow.
The
introduction
of
iPhone
gave
rise
to
a
number
of
innovations.
There
are
many
bright
minds
waiting
to
create
innovations
around
every
new
technology.
It
is
therefore
important
to
focus
on
identifying
the
innovation
opportunities
around
the
latest
technologies.
Every
technology
innovation
offers
a
new
value.
For
example,
a
number
of
innovative
applications
emerged
when
a
camera
phone
was
introduced.
It
opens
up
the
opportunity
for
the
combination
of
image
capture
and
transmission
within
the
same
device.
Therefore,
whenever
there
is
a
new
technology
introduced,
you
should
try
to
understand
its
value
proposition.
Create
a
list
of
the
pains
and
pleasures
that
can
be
addressed
using
the
value
proposition
of
the
new
technology
and
identify
a
sample
set
of
technology
innovations
and
the
corresponding
value
propositions
and
innovation
opportunities.
46.
36
Chapter
1:
Identifying
Innovation
Opportunities
Technology
Innovation
Value
Proposition
Pain/Pleasure
Innovation
Opportunity
Camera
phone
Image
capture
and
transmission
within
a
single
device
Medical
specialists
are
not
readily
available
in
all
remote
places
Remote
consultations
for
specialized
healthcare
services
iPhone
Ease
of
use
and
high
level
of
applications
customizability
Unwanted
applications
built
into
phones
and
tedious
to
customize
Apps
for
laymen
Multi-‐touch
technology
Concurrent
interactions
on
large
interactive
surfaces
Messy
discussions
Team
orientated
applications
such
as
brainstorming
47.
37
Chapter
1:
Identifying
Innovation
Opportunities
ALTERNATIVE
INNOVATION
Biometrics
is
a
technology
that
is
often
used
to
validate
the
identity
of
a
human
being.
The
early
biometric
systems
used
finger
prints
as
the
means
of
establishing
the
identity
of
a
person.
Finger
printing
worked
very
well
in
certain
circumstances
such
as
for
prison
inmates.
However,
there
were
some
countries
where
finger
printing
was
used
only
for
registering
criminals
and
foreigners.
In
such
countries
use
of
biometrics
for
identifying
other
members
of
their
population
became
a
taboo.
Some
other
societies
considered
using
scanners
to
scan
finger
prints
to
be
unhygienic.
So,
for
several
reasons
there
was
interest
in
finding
alternatives.
Hand
print,
retina,
facial
features
based
identification
systems
have
since
emerged
as
alternatives
to
the
finger
print
based
identity
verification
systems.
We
can
observe
many
such
examples.
Diskettes
replaced
floppy
disks
and
USB
10
disk
storage
devices
or
Thumb
drives
TM
have
replaced
diskettes
in
turn.
Digital
cameras
have
replaced
film
based
cameras.
In
other
words,
the
same
function
is
achieved
by
a
different
technology.
10
USB
stands
for
Universal
Serial
Bus
Innova?on
using
a
technology
Innova?on
using
a
replacement
technology
48.
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Chapter
1:
Identifying
Innovation
Opportunities
Disruptive
Innovation
Disruptive
Innovation
is
a
concept
first
enunciated
by
Professor
Clayton
Christensen
of
the
Harvard
Business
School.
He
was
studying
the
evolution
of
the
disk
drive
industry
when
he
came
across
an
interesting
observation.
He
found
that
the
incumbents
in
an
industry
almost
always
missed
the
opportunity
to
exploit
the
next
stage
of
an
innovation
rule.
New
innovations
in
an
industry
often
came
from
a
different
firm,
typically
a
start
up.
Let
us
take
the
example
of
computers.
The
main
frame
market
was
dominated
by
IBM.
However,
Digital
Equipment
Corporation
was
a
leader
/
pioneer
in
the
minicomputer
market.
IBM
created
the
personal
computer
market.
Toshiba
is
often
credited
with
promoting
the
laptop
market.
The
PDA
market
was
successfully
created
by
the
Palm
computers.
He
also
noticed
that
there
are
incremental
or
sustaining
innovations
that
keep
improving
an
existing
innovation
in
small
steps
to
meet
the
increasing
demands
from
the
market.
He
called
it
the
sustaining
innovations.
He
observed
that
the
disruptive
innovation
can
occur
either
at
the
high
end
of
the
products
as
New
Market
Disruption
or
at
the
lower
end
of
the
product
spectrum
as
Low
End
Disruption.
For
more
information
on
his
observations,
please
look
up
his
book
titled
“Innovator’s
Dilemma.”
Ini?al
innova?on
New
market
disrup?ve
innova?on
Low
end
distrup?ve
innova?on
49.
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Chapter
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Identifying
Innovation
Opportunities
Innovation
from
Obsolete
Technologies
Technology
progresses
over
time.
Computers
initially
used
4
bit
and
8
bit
CPUs
(Central
Processing
Units).
Over
time,
Intel
and
other
chip
makers
started
to
make
16
bit,
32
bit
and
64
bit
CPUs.
When
technology
progresses
forward,
system
developers
tend
to
stay
lock
step
with
new
technology
and
create
new
products.
For
example,
PC
and
Laptop
makers
were
creating
even
more
powerful
computers
every
time
the
chip
makers
provided
them
with
better
CPUs.
When
chip
makers
focus
on
64
bit
CPU
chips,
they
pretty
much
consider
the
earlier
CPUs
obsolete.
History
shows
us
that
clever
entrepreneurs
have
made
use
of
the
small
bit
length.
50.
40
Chapter
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Identifying
Innovation
Opportunities
Translational
Innovation
We
have
witnessed
the
immense
value
of
the
steam
engine
used
in
locomotives
(rail
engines
for
example).
Their
value
to
the
transportation
systems
of
the
world
is
immeasurable.
They
were
the
forerunners
of
the
modern
day
internal
combustion
engines
that
run
on
other
sources
of
power.
Have
you
ever
wondered
whether
steam
engines
were
originally
invented
for
powering
locomotives?
Actually
the
earliest
application
of
steam
engine
was
to
pump
water
from
coal
mine
to
the
surface
or
ground
level.
However,
the
value
derived
from
the
humble
steam
engine
has
been
most
felt
in
railroads
and
other
early
forms
of
vehicles
for
transportation.
There
are
many
other
examples
of
innovations
meant
for
an
initial
application
creating
a
major
impact
in
other
situations.
Take
computers
for
example.
They
were
originally
invented
as
calculating
machines.
We
now
use
them
for
managing
information
and
data,
communication
and
a
variety
of
other
functions.
Similarly,
the
transistor
was
originally
invented
as
a
switching
device.
However,
it
now
forms
the
building
block
of
computers
and
several
other
electronics
devices
for
consumer
and
corporate
markets.
Innova?on
to
meet
a
market
need
New
applica?on
of
the
innova?on
51.
41
Chapter
1:
Identifying
Innovation
Opportunities
MODULARITY
INNOVATION
Have
you
ever
wondered
why
there
are
companies
making
just
bolts
and
nuts?
It
turns
out
when
an
innovation
is
first
commercialized
most
of
the
innovative
firms
try
to
make
all
the
parts
required
for
a
product
themselves11.
This
continues
for
a
period
of
time
until
competitors
emerge
in
the
market.
No
matter
how
sophisticated
the
product,
there
are
bound
to
be
competitors
who
will
introduce
similar
products
in
the
market,
whether
of
same
quality
or
different.
Competition
drives
down
profit
margins.
This
continues
until
such
time
one
of
the
firms
decides
that
it
no
longer
makes
business
sense
for
it
to
make
all
the
parts
or
components.
This
is
the
inflection
point
when
new
entrants
can
enter
the
market
to
produce
components
at
lower
prices.
11
There
are
exceptions.
Sun
Microsystems
chose
to
make
a
workstation
using
components
available
in
the
marketplace.
When
VCs
invested
in
Apple,
they
also
proactively
invested
in
a
company
to
produce
the
floppy
disks
that
were
to
be
used
in
the
Macintosh
computers.
Monolithic
products
Modular
products
52.
42
Chapter
1:
Identifying
Innovation
Opportunities
The
need
to
get
third
parties
to
make
parts
or
components
results
in
the
definition
of
standards.
In
a
number
of
cases,
the
competitors
get
together
at
some
point
in
time
to
define
a
common
set
of
standards
so
that
they
can
enjoy
the
benefits
from
the
economies
of
scale
provided
by
third
party
component
suppliers.
The
third
party
new
entrants
can
produce
larger
volumes
of
components
at
lower
business
costs
given
their
smaller
size.
A
very
important
service
innovation
opportunity
often
presents
itself
at
this
stage.
Given
that
the
parts
manufacturers
may
not
always
be
located
next
to
the
buyers,
there
emerges
a
need
for
delivery
or
supply
chains.
Great
benefits
await
those
who
can
optimize
such
supply
chains.
Dell
and
Olam
are
examples
of
companies
that
greatly
benefitted
from
efficient
supply
chains.
53.
43
Chapter
1:
Identifying
Innovation
Opportunities
Component
Innovation
We
discussed
about
the
evolution
of
computers,
and
how
parts
or
component
manufacturers
come
into
play
when
the
profit
margins
for
a
product
shrink
over
time
due
to
increased
competition.
As
customers
embrace
an
innovation,
they
ask
for
increased
performance.
An
example
can
be
increased
computational
speed
on
a
personal
computer.
When
the
market’s
demand
for
product
performance
rises,
it
has
a
ripple
effect
on
the
parts
or
components
used
in
the
product.
In
the
case
of
a
personal
computer,
faster
computation
will
impose
demands
on
faster
computing
chips
and
perhaps
larger
memories,
both
main
and
cache.
When
a
personal
computer
is
repositioned
or
repurposed
as
a
media
distribution
device,
then
there
is
increased
demand
for
storage
size
and
faster
transfers
between
the
computer
and
its
storage.
These
are
some
examples
of
how
the
continuous
innovations
in
product
performance
have
a
tangible
impact
on
continuous
innovations
on
the
components
or
parts
of
the
products.
The
reverse
is
also
true.
When
Intel
produces
faster
computer
chip,
personal
computer
manufacturers
tend
to
produce
better
products
as
well.
This
innovation
rule
can
also
be
observed
to
be
in
play
in
automobile
and
consumer
electronics.
Product
innova?on
Component
innova?on
54.
44
Chapter
1:
Identifying
Innovation
Opportunities
Enhanced
Customization
Innovation
In
the
early
days
of
personal
computer
era,
we
normally
visited
a
computer
store
and
looked
at
different
preconfigured
models
of
computers
from
different
vendors
before
we
made
a
decision
on
which
model
to
buy.
All
that
changed
when
Dell
computers
offered
enlightened
users
the
option
to
customize
their
computers.
Suddenly
users
did
not
have
to
buy
the
computers
that
the
vendors
offered.
They
could
decide
on
the
screen
type
and
size,
the
amount
of
main
memory,
the
number
of
gigabytes
of
disk
storage
they
wanted
in
their
computer
and
many
other
options.
Letting
the
customers
configure
what
they
want
was
a
clever
means
of
Dell
giving
customers
total
control
over
the
products
they
wanted
to
Standard
products
Customized
products
55.
45
Chapter
1:
Identifying
Innovation
Opportunities
purchase.
The
new
approach
introduced
by
Dell
was
very
successful
and
those
computer
makers
who
depended
on
wholesalers
and
retailers
to
distribute
their
products
were
caught
flat
footed.
Dell
saved
the
money
they
would
have
normally
paid
the
channel
partners
and
instead
passed
on
some
of
the
savings
to
their
customers
by
giving
them
better
products
for
their
money.
Dell
created
several
other
innovations
such
as
having
the
customers
pay
for
their
purchases
first.
This
reduced
pressure
on
their
cash
flows
significantly.
Dell
also
ensured
that
the
inventories
were
supplied
to
the
assembly
lines
just
in
time.
Dell
also
harmonized
their
internal
processes
with
those
of
their
suppliers
for
achieving
optimal
results.
56.
46
Chapter
1:
Identifying
Innovation
Opportunities
Innovation
Simplification
When
an
innovation
is
first
introduced
by
a
company,
competition
soon
follows.
As
the
market
for
the
innovative
product
stabilizes,
the
competitors
tend
to
differentiate
their
products
from
others
by
introducing
additional
features
–
often
features
that
are
not
useful
to
a
majority
of
the
customers.
Sometimes
customers
have
no
choice
but
to
pay
for
the
additional
features
because
those
were
the
only
models
available
in
the
market.
At
other
times,
customers
end
up
buying
products
with
lots
of
additional
features
not
realizing
that
they
would
not
be
using
those
features.
Either
way,
it
is
important
to
realize
over-‐engineered
products
appeal
to
a
limited
customer
base.
An
example
of
simplified
innovations
is
the
Point-‐and-‐Shoot
genres
of
cameras.
Early
cameras
were
meant
for
professionals.
It
is
the
simplified
version
of
the
cameras
that
enlarged
the
market
for
cameras.
So,
if
a
product
innovation
targeted
for
professional
or
high
end
customers
hits
the
market
it
often
offers
an
opportunity
to
create
a
simplified
version
of
the
product
that
is
easy
to
use
by
the
masses.
Innova?on
Simplified
innova?on
