This document discusses technological innovation and provides examples of both successful innovations and product failures throughout history. It defines key terms like innovation, disruptive innovation, and incremental vs. radical innovation. It also outlines strategies for managing different types of innovation, including maintaining an open innovation process, investing in a portfolio of technologies, and being willing to disrupt existing business models for radical innovations. Specific cases like Citibank developing new banking services through patents and metrics are presented.

1. Technological Innovation
Kedareshwaran S

2. Prediction Is Hard
• Who could have predicted that before
• 1940: Hundreds of millions of computers
• 1990: The Web
• 1995: Amazon
• 2005: Social Media
• The pace of evolution in IT is exponential and there is no sign that it is slowing
down.

3. Famous Mis-Predictions
Year Source Quote
1895 Lord Kelvin “Radio has no future. Heavier-than-air flying machines are
impossible. X-rays will prove to be a hoax.”
1943 Thomas Watson, IBM “I think there is a world market for maybe five computers.”
1968 BusinessWeek “With over 50 foreign cars already on sale here, the
Japanese auto industry isn’t likely to carve out a big slice
of the U.S. market.”
1977 Ken Olsen, president,
DEC
“There is no reason anyone would want a computer in their
home.”
2004 Bill Gates, Microsoft “Spam will be a thing of the past in two years’ time.”
2007 Steve Ballmer,
Microsoft
“There’s no chance that the iPhone is going to get any
significant market share.”
2010 Steve Jobs, Apple “This size is useless unless you include sandpaper so
users can sand their fingers down to a quarter of their
size.” (speaking about 7-inch tablets)

4. Bright side about product failures
• However past product failures provide the basis for new
approaches to marketing, new product designs, new technological
alternatives, new information about customers and identification of
weak links in the organization.
• Failure is part of the cost of being an innovative firm; nothing
ventured, nothing gained.
• MOTI involves an appreciation of the role of failure and of how
great innovators can get it wrong.
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5. Case: Nokia’s N-Gage
• In 2003, Nokia introduced a new portal gaming device called the N-
Gage. It combined the gaming console with a mobile phone. N-
Gage Pic
• Although it some over a million units in the first year, it failed to
reach its targets.
• Factors include price, uncomfortable to use as a phone and limited
access to game developers willing to write programs for the
platform and therefore limited number of games available.
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7. Case: Apple Newton
• The Newton MessagePad was introduced to the market in August
1993, under leadership of then Apple CEO John Scully.
• It was the first generation of PDA with a large interactive screen,
address book, to-do lists, notepad and calendar.
• It used a stylus which allowed users to write by hand on the screen
and the handwriting recognition software, Caligrapher would
convert it to text.
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9. Case: Apple Newton..
• However, there were issues with the Caligrapher, size, price and
weight.
• Sales never reached Apple’s expectations and eventually its failure
along with other problems in Apple cost John Scully his job as
CEO.
• However several elements of Newton were reused in the
subsequent Apple products. The iOS was developed by former
Newton programmers and the iPhone has several Newton-like
features.
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10. Difference between innovation and invention
• Innovation is much more than invention – the creation of a new idea and its
reduction to practice – and it includes all the activities required in the
commercialization of new technologies. (Freeman & Soete, 1997).
• Essentially, innovation is the successful commercial exploitation of new
ideas.
• It includes the scientific, technological, organizational, financial, and
business activities leading to the commercial introduction of a new (or
improved) product or service.
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11. Definitions (interpretations) for innovation
• The word originally comes from the Latin innovare meaning ‘to make
something new’, but it helps to think of it in terms not only of ‘invention’—
creating something new—but also of its development and take up in practice.
• The first definition of innovation was coined by Schumpeter in the late 1920s,
who stressed the novelty aspect.
• According to Schumpeter, innovation is reflected in novel outputs: a new good
or a new quality of a good; a new method of production; a new market; a new
source of supply; or a new organizational structure, which can be summarized
as ‘doing things differently’.
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12. Definitions (interpretations) for innovation..
• Perhaps the most succinct definition is offered by the Innovation Unit of the
U.K. Department of Trade and Industry who see it simply as ‘the successful
exploitation of new ideas’.
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13. Scope of “technological innovation”?
• Technology is a replicable artifact with practical application, and the
knowledge that enables it to be developed and used.
• Technology is manifested in new products, processes, and systems, including
the knowledge and capabilities needed to deliver functionality that is
reproducible.
• Technological Innovation encompasses all innovations which come into being
as a result of application of some technology.
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14. Is innovation an outcome or process?
Innovation is at once
an outcome – a new product, process or service,
AND
a process of managerial and organizational combinations
and decisions.
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15. Making innovation happen
• Essentially organizations have to manage four different phases in the process
of turning ideas into successful reality (Tidd, Bessant et al., 2001).
• They have to:
1. Scan and search their environments (internal and external) to pick up and
process signals about potential innovation.
2. Strategically select from this set of potential triggers for innovation those
things which the organization will commit resources to doing.
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16. Phases of managing innovation
3. Having chosen an option, organizations need to resource it—providing
(either by creating through R&D or acquiring through technology transfer)
the resources to exploit it.
4. Finally organizations have to implement the innovation, growing it from an
idea through various stages of development to final launch—as a new
product or service in the external market place or a new process or method
within the organization.
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17. Task of managing innovation
• Research suggests that the task of managing innovation is about creating firm
specific routines—repeated reinforced patterns of behavior— which define its
particular approach to the problem (Cohen, Burkhart et al., 1996; Nelson &
Winter, 1982; Pavitt, 2002; Tidd, Bessant et al., 2001).
• They become part of ‘the way we do things round here’—in other words, part
of the dominant culture of the organization.
• For example, the Toyota Production System (TPS)
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18. 3M & Google Routines
• Keep divisions small so that each division manager knows the names of all
staff. When divisions get too big, split them up.
• Tolerate failure and encourage experimentation and risk-taking. Divisions must
derive 25% of sales from products introduced during the past five years.
• Motivate the champions—when someone comes up with a new product idea,
he/she can recruit an ‘action team’ to develop it. Salaries and promotion are
directly tied to the product’s progress; if successful the champion ends up
running his/her own division.
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19. 3M & Google Routines..
• Stay close to the customer, through regular interaction between research,
marketing and customers.
• Encourage experimentation—staff can spend up to 15% of their time on ideas
of their own to try and prove they are workable.
• For those needing seed money an internal venture fund—Genesis— awards
grants of up to $50,000 for development.
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20. Types and Forms of Innovation
1) Degree of Novelty: The extent to which a technology has
changed is one way to classify/categorize innovation.
• ‘Radical innovation’ includes breakthroughs that change the nature
of products and services and may contribute to the ‘technological
revolutions’.
• ‘Incremental Innovation’ includes the ‘million little things’ that
involve minor changes to existing products, which cumulatively
improve the performance of products and services.
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21. Types and Forms of Innovation..
• Radical innovation usually requires greater investment in basic research
than incremental changes, and more links with research institutes, and
may follow different diffusion patterns.
2. Degree of Disruption: The extent to which an innovation causes
discontinuity to the existing ways of doing things (Tushman & Anderson
1986) and forces organizations to explore new ways of doing things is
one way to classify innovation.
• If the degree of disruption is small, it can be classified as ‘Continuous’
or ‘Sustainable’ innovation & if the degree of disruption is large, it can be
classified as ‘Discontinuous’ or ‘Disruptive’ innovation (Christensen
1997). Video
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22. Types and Forms of Innovation..
3. Degree of openness: The extent to which an innovation is
dependent on internal sources of R&D is one way to classify
innovation.
• If internal R&D contributes entirely towards innovation, it is called
‘Closed’ innovation.
• If innovation is an outcome of interactions between internal and
external innovation activities, in which ideas, people, and
resources flow in, around, and out of organizations, it is called
‘Open’ innovation. (Chesbrough 2006). Video.
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23. Type 1: Managing incremental and radical innovation
• In practice there are no hard and fast distinctions between incremental
and radical innovation and can be treated as different ends of a
continuum.
• Incremental innovation is the most common form and tends to reinforce
the position of established firms, allowing them to exploit what they
know to help them do things better (Utterback 1994).
• It is what firms focus the bulk of their managerial resources upon. Being
a successful incremental innovator requires skill and ingenuity and
those firms that are successful at it are often able to gain significant
economic advantage.
• Examples : Toyota, Amazon, McDonald
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24. Incremental Innovation Management Strategies &
Practices
1. Seeking cost advantages over the competition.
2. Making minor modifications to design.
3. Creating organizational routines, procedures and standards for
more efficient and economic production.
4. Adding features to existing products
5. Branding and developing a reputation for a quality.
6. Learning from users and customers
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25. Managing radical innovations
• In contrast, radical innovations are critical events that reshape
designs, knowledge, and the nature of competition in the product
market (Utterback 1994; Dosi 1982).
• Radical breakthroughs are not common, occurring according to
one estimate at 30-year intervals in most industries (Tushman &
Anderson 1986).
• Such radical innovations may disrupt the position of established
firms and open up opportunities for new firms to enter the market
and overtake incumbents (Christensen 1997).
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26. Radical Innovation Management Strategies & Practices
1. Willingness to be open to new ideas from outside the firm and
sector.
2. Continuous searching and scanning of the technological and
market environment.
3. Investing in a portfolio of technologies.
4. Creating new links and relationships within innovation systems.
5. Reshaping organizational structures to ensure that some parts
engage in exploratory work.
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27. Radical Innovation Management Strategies & Practices..
6. Bringing in new capabilities through acquisition or hiring.
7. Investing in new areas of technology.
8. Building networks and alliances from outside the base industry.
9. Being aware of new patterns of customer behavior.
10. Jettisoning old habits of ‘ways of doing things’ when required.
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28. Disruptive Innovation
• Concept introduced in the book in 1997.
• Clayton Christensen is an American scholar, educator,
author, business consultant who currently serves as the
Professor of Business Administration at the Harvard
Business School.
• https://www.youtube.com/watch?v=qDrMAzCHFUU

29. Disruptive innovation
• The concept of disruptive innovation is about the failure of good
organizations which listen to their customers and yet loose market
dominance.
• Disruptive innovation is different from incremental and radical
innovation. Incremental and radical innovations are ‘Sustaining’
innovations.
• They improve the performance of established products and markets.
This improvement could be marginal (incremental) or sizeable (radical).
• Disruptive innovation result in creation of entirely new markets with a
very different value proposition.
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30. Disruptive Innovation
• Disruptive innovation result in creation of entirely new markets
with a very different value proposition.
• They result in worse product performance and generally under-perform
established products in mainstream markets.
• But they have other features that are attract a few fringe and usually new
customers.
• However, even if these disruptive innovations underperform today, there is a
possibility that they may become mainstream products tomorrow.
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31. Disruptive innovation
• Larger, well established companies have well-developed systems
for killing ideas that ask them to pay attention to disruptive innovations since
their existing customers do not need it.
• These disruptive innovations are low-margin and at the bottom end of the
customer base which make it difficult for large firms to justify investment in
these low margin disruptive innovations.
• When dealing with disruptive innovations, managers are unable to quantify the
size of the market and financial returns.
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32. Disruptive innovation
• Hence most large companies adopt a strategy of waiting until
new markets are “large enough to be interesting”.
• Small companies on the other hand, are most suited to commercialize
disruptive innovations since their (small) size matches the size of the targeted
market.
• Innovator’s Dilemma?
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34. Case: Citibank - development of new services
• Citibank has over 2000 mn. customer accounts on over 100 countries,
with total assets of $1.6 tn, and just below 300, 000 employees. They
handle more than 1 bn transactions annually, processing more than $3
tn. in funds each day. They plan to increase their customer base ten-fold
to 1 bn clients by 2012.
• Citibank has 81 patents in the period from 1991 – 2003, 54 of which in
in the ‘business method’ class or ‘computer-implemented business
method’ class of patents (Class 705 in the USA patent classification).
• Even though Citibank is not listed in the top 10 patenting firms in
business methods, its patents are highly cited, which indicates their
technological importance, high value, and licensing opportunities (Wu
2005).
Management of Technological Innovation (MOTI)Page No 34

35. Case: Citibank - development of new services
• Citibank has succeeded in building a reputation for technological
innovativeness over the years.
• Examples of its innovativeness include ‘talking’ ATMs, banking on
wireless technologies such as mobile phones and PDAs to the first to
introduce biometric credit-card payment solution.
• Citibank Chief Innovation Officer – Amy Radin has developed a set of
metrics to assess their innovativeness. These metrics include new
revenue from innovation, successful transfer of product from one
country or region to another, the number and type of ideas in the
pipeline, and time from idea to profit.
Management of Technological Innovation (MOTI)Page No 35