Class 3 and 4 : slides shown in class

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Innovation &

Entrepreneurship

Luc BEAL, 2009-10 MME3

Class #3

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CREATIVE DESTRUCTION

"The whole product" model : why VHS had thrashed Betamax?

Yet another example

Book summary : http://www.parkerhill.com/Summary%20of%20Crossing%20the%20Chasm.pdf

VHS : 1. bigger choice of hardware at lower cost,2. tapes : cheaper and more easily available (distribution) , 3.a lot more movies to rent, .

Betamax : technology superiority (preferred by professional users)

1.Early Adopters are the rare breed of “visionaries "who have the insight to match an emerging technology to a strategic opportunity,… driven by a 'dream'. The core dream is a business goal, not a technology goal, and it involves taking a quantum leap forward in how business is conducted in their industry or by their customers… You can succeed with the visionaries, but that is not ultimately where the dollars are. Instead, those funds are in the hands of more prudent souls who do not want to be pioneers"

The revised technology Adoption lifecycle

2.The Early Majority are pragmatists… "they care about the company they are buying from, the quality of the product they are buying, the infrastructure of supporting products and system interfaces, and the reliability of the service they are going to get… They tend to be 'vertically' oriented, meaning that they communicate more with others like themselves within their own industry than do technology .


Advantages of selling to the pragmatists : “once a startup has earned its spurs with the pragmatist buyers within a given vertical market, they tend to be very loyal to it, and even go out of their way to help it succeed.

When this happens, the cost of sales goes way down, and the leverage on incremental R&D to support any given customer goes way up. That's one of the reasons pragmatists make such a great market…

"They like to see competition… Pragmatists want to buy from proven market leaders because they know third parties will design supporting products around a market-leading products… aftermarket…


The chasm : how to go beyond early adopters to early majority

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VHS / Betamax

HD Disk/ Bluray … SONY won this time because it integrated a

whole product model :

•Large choice of movies on bluray (owns Sony Pictures) ; • large number of players already sold (PS3 playstation)…

Cf powerpoint presentation :

Case studies 1 and 2

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http://www.youtube.com/watch?v=Z2X7eadOcDw&feature=channel

http://www.youtube.com/watch?v=Z2X7eadOcDw&feature=channel

http://www.youtube.com/watch?v=m6gaj6huCp0

http://www.youtube.com/watch?v=m6gaj6huCp0

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Portrait of an entrepreneur :

Elon Musk

Portrait of an entrepreneur :

Elon Musk

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Services : an abundant source of innovation

1. Innovation in services :

new or improved service products (commodities or public services). Often this is contrasted with “technological innovation”, though service products can have technological elements. This sense of service innovation is closely related to SERVICE DESIGN.

* Service Design is the activity of planning and organizing people, infrastructure, communication and material components of a service, in order to improve its quality, the interaction between service provider and customers and the customer's experience.

MACHINES Raw Materials

PRODUCTManpower

A Product

Retailer

CLIENT

PHYSICALMEDIUM

CONTACTSTAFF

CLIENT

SERVICE

A Service

« Service Design » leads to Innovation

« SERVUCTION » (Eglier & Langeard)

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The “Services Diamond” “Excellence in services is by design, and not by mere happenstance”

service interface

The Innovators : 1/ Coordinate back office with service interface (servuction).

2/ Change the level of involvement of the customer in the service interface).

The Innovators : 1/ Coordinate back office with service interface (servuction).

2/ Change the level of involvement of the customer in the service interface).

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4“dimensions” of service innovation, Hertog (2000)

den Hertog, P. (Dec 2000), Knowledge-intensive business services as co-producers of innovation , International Journal of Innovation Management

• 1. The Service Concept: a service concept that is new to its particular market. Examples might include new types of bank account or information service. In some service sectors, such as retail, there is much talk about “formats”, such as the organisation of shops in different ways (more or less specialised, more or less focused on quality or cost-saving, etc.).

• 2. The Client Interface: innovation in the interface between the service provider and its customers. Clients are often highly involved in service production, and changes in the way in which they play their roles and are related to suppliers can be major innovations for many services. Examples : involvement of self-service for clients visiting service organisations. French literature on service innovation that focuses especially on this type of innovation, identifying it as innovation in “servuction”.

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• 3. The Service Delivery System: relates to the linkage between the service provider and its client, since delivery does involve an interaction across this interface. Examples: electronic delivery of services, also transport and packaging innovations (e.g. pizza delivery!). An emerging concept is the idea of taking a "factory" approach to Service Innovation. A "service factory" approach— is a standardized and industrialized environment for more effective service innovation, development and operations for the IP era.

• 4. Technological Options: resemble familiar process innovation in manufacturing sectors. New IT is especially important (greater efficiency and effectiveness in information-processing elements prevalent to a great extent in services sectors). We also often see physical products accompanying services, such as customer loyalty cards and “smart” RFID cards for transactions, and a wide range of devices for communication services.

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4 patterns of innovation, the influence of the client firm or final consumer on the innovation process gradually increases.

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#1 technological innovations are derived from hardware industries. These innovations from external suppliers are disseminated and implemented by service industry users, who in their turn satisfy the needs of their clients (microwave ovens -> cafes and restaurants; cash registers & mobile phones -> many small firms which otherwise use little new technology).

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Complex innovations affecting all actors in a value chain profoundly. But they may also be driven by regulations, resource constraints, and other dramatic changes that require innovation to take place across many elements of the value chain, implying completely new infrastructures, new types of knowledge and adaptation on the part of intermediate and final users.

Class 3 and 4 : slides shown in class

Business