The document discusses disruptive innovation and challenges common paradigms of innovation based on examples from developing countries. It highlights how innovation at the "Bottom of the Pyramid" provides lessons, including creating new price/performance envelopes, requiring hybrid traditional and new technology solutions, being adaptable and scalable, tackling sustainability issues, coming from deep understanding of local needs/context, and dealing with skills issues through innovative education approaches. Examples discussed include low-cost eye surgery in India, microencapsulated iodized salt, mobile phones, microfinance, and distributed energy systems.

1. Diskontinuierliche Innovation
Kompetenzen und Paradigmen im
Innovationsmanagement
Business Talk des integro-Projektes im Rahmen der Tagung X-Organisationen,
Berlin, 19. Nov. 2009
Frank T. Piller
RWTH Technology & Innovation Management Group, RWTH Aachen, Germany
MIT Smart Customization Group, Cambridge, MA, USA tim.rwth-aachen.de
www.innovationsarbeit.de

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Kontext des Vortrags: Das Projekt Integro
INTEGRO: Integriertes Innovations-, Wissens- und HR-Management in Unternehmen
und Innovationsnetzwerken der High-Tech-Branche am Beispiel Informationstechnik
und Mechatronik
Ziel: Empirische Analyse der Strukturen, Prozesse und Arbeitsbedingungen in Wertschöpfungs-
und Innovationsnetzwerken von KMU der High-Tech-Branche, exemplarisch der IT-Branche und
der Mechatronik.
Im Rahmen des Projektes (Laufzeit: 04/08 bis 04/11) werden Funktionsmechanismen elaborierter
Innovationskonzepte untersucht und Maßnahmen zur breiten Unterstützung der
Innovationstätigkeit sowie zur Kompetenzentwicklung zentraler Beschäftigtengruppen
erarbeitet. Ein besonderer Fokus liegt darauf, wie Innovations-, Wissens- und HR-Management
sowie Kompetenzentwicklung optimal verzahnt bzw. integriert werden können, um die
Innovationsfähigkeit von Unternehmen zu stärken und externes Wissen durch Kundenintegration
und Open Innovation für die Unternehmen nutzbar zu machen.
Das Vorhaben wird aus Mitteln des Bundesministeriums für Bildung und Forschung und aus
dem Europäischem Sozialfonds der Europäischen Union gefördert und vom Projektträger
Arbeitsgestaltung und Dienstleistungen im Deutschen Zentrum für Luft- und Raumfahrt e.V.
betreut.
Projektpartner: Sozialforschungsstelle Dortmund (sfs) an der Technischen Universität
Dortmund (Koordinator); Management Zentrum Witten; networker westfalen e. V.
Dortmund; Ruhr-Universität Bochum - Institut für Arbeitswissenschaft (IAW) und Lehrstuhl
Informations- und Technikmanagement (IMTM); RWTH Aachen - Lehrstuhl für Technologie- und
Innovationsmanagement (TIM).
Mehr Informationen: www.innovationsarbeit.de

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About us
tim.rwth-aachen.de

4. 4
Our team
With about 18 full time
research positions plus
about 25 graduate student
assistants, tutors, and
research affiliates, RWTH-
TIM is one of the largest
groups of its kind in the
German-speaking academic
landscape.

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RWTH-TIM Group: Facts and Figures
Established in 1990 as one of the first dedicated chairs in technology & innovation
management in Europe
Part of RWTH's School of Business & Economics, with strong links to the RWTH
Engineering Schools
Ranked #1 in our school's faculty ranking w/r to research output (publications), and
#2 w/r to external funding. Awarded "RWTH Price for Teaching Excellence 2009".
Interdisciplinary team of about 18 full time positions for researchers plus about 25
support positions and student researchers (strong growth since 2007)
70% of budget funded by research contracts, grants, projects ("Drittmittel")
Dedicated to research, but excellent in participant-centered learning on graduate
student and executive education level.
Strong industry partnerships, yet focus on scholarly research, not consulting.
Network of affiliated companies & consultancies for direct project cooperation.
November 2009: Moving to new building in RWTH Aachen Research Park next to
Research Centers of, e.g., Microsoft, Sony Ericson and Ford (part of "RWTH Campus
Project")

6. When googling "Innovation",
this picture shows up as the
#1 hit.

7. "I' am happy to give you innovative thinking. What are the guidelines?"

8. What Is Innovation?
“(Basic) research is the transfer of money into
knowledge. Innovation is the transfer of knowledge into
money.”
W. Sittenthaler, Wacker Chemie
(German manufacturer of specialized chemical compounds)
"Innovation: How to link creativity in new ideas with
necessary rigor and discipline in execution."
H. Kerminen, Kemira
(Finish manufacturer of fertilizers and industrial chemicals)
(c) Copyright tim.rwth-aachen.de 8

9. Exploring the decision space of innovation mgmt
‘Paradigm’ (= mental model)
Process Innovation Product
‘do better’ ………
‘do different’
Position
Source: Bessant (2008)
(c) Copyright tim.rwth-aachen.de 9

10. How we think about
something ... shapes the way
we manage it.

11. Draw an alien on your
notepad. NOW!

12. Experts' Confidence
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12

13. Innovation follows a paradigm (basic model)
Mildred
McDaniel
(1933)
Olympic
Games,
Melbourne,
1956
World
Record: 2,15
Richard
Fosbury
(1947),
Olympic
Games,
Ray Ewry (1873-1937)
Mexico, 1968
Olympic Games,
London, 1908
World
Record: 2,24
World record: 1,98
(c) Copyright tim.rwth-aachen.de 13

14. (Radical) Innovation is
overcoming the problem
of "local search".

15. The challenge
Popper (1988):
For radically new innovation to occur at all, the
future must be unknowable, since otherwise
innovation would, in principle, be already known
and would occur in the present and not in the
future.
The inherent limits of organizations to forecast,
especially discontinuous and radical new
developments (Hogarth & Makridakis, 1981; Makridakis, 1990)
(c) Copyright tim.rwth-aachen.de 15

16. Exploitation
Exploration
(c) Copyright tim.rwth-aachen.de 16

17. Gary Cooper
(c) Copyright tim.rwth-aachen.de 17

18. How it really happens ...
(c) Copyright tim.rwth-aachen.de 18

19. 19
Exploitation
Exploration
Source: von Stamm / Bessant (2008)

20. Disruptive
Innovation
(c) Copyright tim.rwth-aachen.de 20
20

21. Sustaining vs. disruptive technologies
(c) Copyright tim.rwth-aachen.de
Source: Bower/Christiansen: Disruptive technologies, HBR, 1995/1 21
21

22. Why firms fail to
master discontinuous innovation
Resource dependency:
Listened too much to best customers.
Internal inertia to change:
Existing structures, mental models,
and capabilities

23. Firms face many more sources of discontinuity
than "just" new technologies (Bessant 2005)
(c) Copyright tim.rwth-aachen.de Source: Bessant (2008)
23
23

24. Challenging some of our
common paradigms (mental
models) of innovation

25. Innovation is high-tech

26. Dr G Venkataswamy
(c) Copyright tim.rwth-aachen.de
26

27. But innovation is not just western "high tech":
The fortune at the Bottom of the Pyramid (BoP)
Book and articles by C.K. Prahalad,
University of Michigan
Begins with potential position
innovation – 4 billion people subsist
on less than $2/day
Products and services for this market?
Significant paradigm innovation
potential- challenges our assumptions
about ‘the poor’
Case examples of experiments from
wide range of countries
Early warning signals of fundamental
shifts in innovation landscape?
(c) Copyright tim.rwth-aachen.de
27

28. BoP Example: Aravind eye clinics
Began 1976, Dr G Venkataswamy , retired eye surgeon
9 million in India, 45 million worldwide suffer blindness due to
cataracts
Cataract operation cost in USA - $2500-$3000
Target cost in India - $50, but no compromise on quality
Learning from other sectors – the McDonalds approach
200,000 operations/year @ $50 - $300 including hospital stay
and any complications treatment
60% of patients treated free, so average cost is $25/operation
Rich learning (200k ops) so world-class – NHS is looking at this
as an option for the UK
Extension to other operations – e.g. bypass surgery in India $4k
vs $50k in USA
(c) Copyright tim.rwth-aachen.de
28

29. Further examples of BoP innovation
EID Parry, ITC – e-choupals – internet in the village
Casas Bahia – 10m customers for electronics, appliances, furniture –
45% of spending is at BoP
Jaipur Foot – as Aravind – US cost of foot $8000, target cost of JF is
$30 and free to many. Extreme use innovation. 25million amputees
worldwide.
Voxiva medical alerts and communication – spread of SARS, etc.
Robust comms. platform independent of specific hardware. Applicable
to crime, safety, etc.
Annapurna iodised salt – using extreme conditions as a laboratory to
push the innovation frontier (micro-encapsulation technology)
(c) Copyright tim.rwth-aachen.de
29

30. Learning from the BoP "real life lab"
Create a new price/performance Aravind eye care, Monsoon Hungama
envelope mobile phone, Grameen and other
micro-finance
Innovation requires hybrid Micro-encapsulation of iodine in salt
(traditional and new technology) (Hindustan Lever), Amul Dairies
solutions collection/distribution system
Innovations must be adaptable and How to devolve/reach – mobilise local
scalable entrepreneurs. Cemex, Casias Bahia
Innovations must tackle Energy, water use, waste, etc. E+Co
sustainability issues distributed energy
Innovations must come from deep Jaipur Foot, TVS PoS system
understanding of local needs and
context
Process innovations are as Aravind, Amul
significant as product
(c) Copyright tim.rwth-aachen.de
30

31. Learning from the BoP "real life lab" (II)
Innovations must deal Voxiva medical diagnostics, Cemex
with skill issue
User education is critical and How to work in ‘media-dark’
requires innovation in approaches environments? HLL ‘clean hands’
campaign
Innovations must suit hostile Jaipur Foot, ITC e-choupal, HLL
environments – extreme innovation Annapurna salt
Innovations require robust user Languages, input devices for illiterates,
interfaces etc. Elektra Mexico fingerprint
recognition in stores
Innovations must reach dispersed Extending reach in marketing and
markets delivery. Avon model – networks of
local agents, direct to consumer
Innovations must be Aravind, Voxiva, ITC models diffusing
platform/architecture-based to ‘developed’ world
(c) Copyright tim.rwth-aachen.de
31

32. Consider other "low tech" innovations
breaking with the "high tech" paradigm
The flip video camera
The netbook
The Apple-Nike "+" system
Twitter
Skype
(c) Copyright tim.rwth-aachen.de
32

33. Innovation is the domain of
firms (manufacturers).

34. Users have the advantage of problem-solving in
their own use environments as they “do” a
desired activity – they are learning by doing.
Lead users innovate here
# of users
perceiving
First manufacturer product appears here
need
“Voice of the customer”
methods start here
Time
Time
Source:
Eric von Hippel 2005
34

35. But whatever you do,
inspire your most
important participant
Your Executive Board

36. If you find a
"chief innovation officer",
run away.

37. Innovation cannot be
delegated or assigned to an
"innovation function". It is
the job of everyone in an
organization – including the
executive board.

38. 38
piller@tim.rwth-aachen.de
tim.rwth-aachen.de | open-innovation.com