CHAPTER 1 The Innovation Imperative

Discussion Questions

10. You are a newly appointed director for a small charity which supports
homeless people. How could innovation improve the ways in which your
charity operates?

Answer:

Innovation will greatly increase the quantum of charity, modes of charity, the
methods of collection, distribution and the overall management and handling of
charity.

1. Innovation will help to open up the ways in which charity has

traditionally been seen. Instead of giving ‘fish to the needy, the best
and most effective form of charity is to give them fishing rods/nets
so that they can catch fish on their own’.
2. Innovation into the management of charity itself will greatly improve
the handling, the distribution and the overall efficiency of managing
charity.
3. Innovation should be used to woo the general public, the business
entities especially corporate companies and related government
agencies to get together so that more meaningful contribution can
be made towards charity.
4. Device creative means and modes of charity as well as provide
initives for businesses and corporations to be involved in charity
events. (eg promotional drives, tax reductions, image building,
political mileage and others)

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11. Innovation can take many forms. Give examples of product/service,
process, position and paradigm (mental model) innovations.

Answer:

i. Product or service innovation – ‘Key-less entry system’ in the

car industry. This idea was first introduced by Mercedes in its S-
Class lineup. But now it is even available in cheaper Japanese
(e.g. Nissan) and Korean (e.g. Hyundai) cars. This system uses
an electronic sensor which sense a certain frequency and will
only allow entry and use of the vehicle as long as the equipment
senses the pre-set electronic frequency. Originally designed for
key-less entry/lockup and engine start/stop facility. It has now
been up-graded as an alarm, immobilizer, anti-theft and
prevents ‘keys’ being locked in the car inadvertently with the
owner on the outside. Other intelligent facility is total shutdown
of other electrical gadgets (radio, headlights etc) when the
engine is stopped.

ii. Process innovation – new software (Distribution Projects

Monitoring System – DPMS in TNB) introduced to provide for
paperless authorization of projects, paperless procurement,
scheduling, monitoring, triggering, reporting and supervisory
control possibilities on the budgetary utilization of TNB projects.

iii. Position innovation – Sonata product launch at Hyundai Motor

Distribution Centres. The product launch was served-up in an
up-market style whereby each visitor is entertained by their
introducers (sales persons) and given a comprehensive
explanation of the model-lineups and test drives. Personal
attention is the event of the day with free flowing refreshments.

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 This product launch is clearly aimed at changing the mind-set of
prospect customers that Hyundai products has improved greatly
and is better of than its Japanese competition.

iv. Paradigm innovation –

a. Low Cost Flight as in Air Asia and Fire Fly - cheap and
economical flight fares with everyone can fly tag-line.
b. Double decker express buses – comfortable for long haul
journeys. New in Malaysia but normal in developed countries.
c. Gantry toll collection system providing for fast and save method
of collection.

12. The low-cost airline approach has massively changed the way people
choose and use air-travel – and has been both a source of growth
for new players and live-threatening challenge for some existing
players. What types or innovation have been involved in this?

Answer:

In this particular case, it involves all the four (4) types of innovation:-
a. Product/Service innovation – this is the way the product is offered to its
potential customers.
b. Process innovation - this involves the process or handling of passengers
from ticket bookings, check – in, embarkation and disembarkation, the air-
ports terminals (LCCT) together with cabin services etc.
c. Position Innovation – the advertising and promotional activities
d. Paradigm innovation – it changes the mindset of travelers that air travel is
reserved for the rich. It is cheap and in some cases cheaper than land or
sea transportation when it allows for daily commute compared to staying
overnight.
CHAPTER 1 The Innovation Imperative

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 Assignment and Case Study Questions
1. Sector Innovation Patterns – Children Toy Manufacturing
Major Changes in the industry Major New Technologies
Big influence of TV and films – Electronics and
increasing tie-ins programmability
Price pressures push actual TV/video and computer games
manufacturing to the far East – as competitors to traditional
toys but also as complements
which can extend their range –
e.g Lego bricks plus
computer=programmable toys
Fashion industry with high risks – Interactive games using TVand
and benefits for the right products monitor consoles
Costs of new technologies mean Mobile downloadable
fewer players can stay in the game games/Music/video.
of new product development – so Games playable on
consolidation of the industry handphones
Interactive and livelike ability Virtual Technology, Hologram
• How has the industry changed
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Main market demands
and how technology
affects them
Strong price pressure –
pushes manufacturing to
low-cost locations-
technology relevant in
keeping costs low while
enabling consistent quality
Major emphasis on design
technologies
Mobile and wearable
design trends
Multiple functionality
Fast changing progress or
improvements
How to become a
market leader
Close market
understanding and
the ability to
communicate this
deep into the
organization and
configure products to
meet these demands
Broad knowledge
base – especially in
newer technologies
like computers and
software but also in
design of parts
Access to distribution
networks
Strong design and
marketing capability
Miniature Design
 The industry has evolved along with the biggest single influencing
media that is electronics. From TV to computer consoles to
walkman and MP3 to handphones with its multiple functions.
The handphones is becoming a mini computer with all the multi-
media capabilities built-in.
• What new technologies have emerged
Multi-media, interactive and miniaturization technology
Interactive technology allows communication with modern toys
thereby making them appear ‘alive’. Multi-media capabilities
together with miniaturization technology provide for unthinkable
possibilities as before.
• What are the main market demands – (price, quality, design,
customizations, speed of response etc)
Price - prices have gone down drastically with each advance in the
technology.
Customization is provided for with the advent of programmable
chips. Greater customization is allowed with micro-computer
technology.
Quality and Design improves exponentially during the last decade.
Speed of response is very competitive with each make establishing
its own service centres and online connectivities.

The most important observation is that all makes are almost at par
in terms of product technology, quality and user-friendliness. The
superior or inferior quality associated with each make or brand is
fast diminishing, whereby every make showed no clear advantage
in terms of quality.
However the deciding factor is the ability to provide product
innovation fast using available technology and understanding the
market trends.

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• If a new entrant came into the industry what would he or she have to offer
to become a market leader

The most important factor to become market leader is product

innovation. The new player has to capitalize on the four dimensions of
innovation:-
Products/Services
- using latest technology a new player must be able to
offer innovative product eg latest state-of-the art
mobile phone with hologram projection, interactive
multi-player game or even programmable remote
controller.
- Excellent service such as pick-up and delivery
coupled with 24-hour guaranteed repair job.

Process innovation
- change in the ways (products/services) are created
and delivered to cut cost and maintain competitive
pricing.

Position innovation
- employing innovative products/services introduction
(e.g product launch) and advertising methods.

Paradigm innovation
– employing latest available technology, technique and
methods in its product development. Brainstorming,
workshops, laboratory work-out sessions used to
hatchout new ideas for product development.

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CHAPTER 1 The Innovation Imperative
Case Study Questions

1. Looking at the case study, try and identify which of the changes are architectural and which are component.
What are the implications for different players in terms of the likely threat to them and the ways in which they
could respond?

Architectural Component Innovation

Likely threat
Player 1 – Copy Illegal distribution and
right holder sharing of artistic materials.
Loss of sales and therefore
cannot pay out royalty
Likely opportunity Why Innovation
Affiliation with computer Encourage legal downloads Internet websites Data compression software –
companies to produce and sharing of music MP3
new low-price web-based pieces
products
eg iTunes

Player 2 – Home production leading to Does not require permanent Music composition, Micro-computer Digital Format recording and
Production direct production employment. recording and editing at chipped musical editing.
House Working from the house home. instrument.
Do not require specialize Ability to replicate (Home Recording)
equipment or recording orchestral music
studio. at home
Player 3 – Looses authority and General consensus. Real time consensus made On-line internet User groups
Reviews and patronage Reduces bureaucracy and available forums websites
Commentary favoritism

Player 3 – Music Uncontrolled ‘Viral Cheap and fast spreading Open Channel for all to Internet exchange Computer
Industry marketing’ and P2P advertising across the internet participate. Software Application
transaction Incur less advertising costs Chain reaction spreading of
information

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2. Competence-destroying and Competence-enhancing Innovation

Answer:

• Both elements of compentency are evident from this case study.

• For the establish music industry players like Sony, the competition being
leveled at them is competence-destroying whereby their expertise is no
longer an advantage to them. They will have to innovate their business
activities altogether to remain competitive or viable in the music industry.
• Internet provides an open channel for everyone who has the talents, the
courage to explore and therefore participate in the music industry. Song
writers, singers, musical players are now provided with an open channel to
contribute and most possibly involved in the distribution of their own
musical product. Therefore the internet application serves as a
competence-enhancing innovation.

In the study case therefore, song writers, singers, musical players, lyricists
appear to be the winners and the production house the losers. But in the
end, with innovation everyone will win. Production house will have to
completely revamp their nature of doing business. We are now living in a
completely different era where “only the paranoid will survive”.

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 An established A newcomer A music publishing Freelance song
record company wanting to offer company writer
entertainment on (responsible for
the web copyrights on sheet
music, etc.)
Is the change No Yes No Yes
competence-
enhancing?

Why? May loose his The web offer an Difficult to curb Have a wider client
business due to open channel for illegal distribution base. Not binded
high capital outlay business round and piracy by legal contracts
but cannot secure the clock and
sales off the shelves across the globe.
Need to affiliate
with subscription-
base service
provider to create
revenue
Is the change Yes No Yes No
competence-
destroying?
Why? May not be viable to The web offers Survival is at risk Opportunity to
exist anymore unlimited expand worldwide
opportunities.
Limited by own
creativity only
What might you do Venture into e- Capitalise on viral Study into e- Develop world
about this to secure business. marketing distribution of music for the world
and improve your Provide for internet musical digital listeners
position? base music formats. Provide
distribution. Joint consultation and
venture with internet solicitation.
service provider

3. Can you map the different kinds of innovation in the case study? Which
were incremental and which radical/discontinuous?

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Answer:
Internet Channels through which you can obtain latest CDs eg Amazon,
CD-Now ~ incremental
MP3 – allow for fast transfer across the internet ~ radical
Direct music industry against Artist and Repertoire (A&R)~incremental
Napster.com enabled P2P transactions~incremental
US Court of Appeal ruling rejecting P2P violated copyright law~radical
iPod and iTunes – generate download sales~incremental
‘Viral Marketing’~radical

4. Strategic advantage in innovation can come through combinations of four

basic types of innovation. How has the pattern of strategic advantage
changed in the music industry?

Answer:

Product innovation - MP3, iPod, iTunes

Process innovation – Internet transfer, download sales
Position innovation – none
Paradigm innovation – Direct music industry,
Viral marketing

The strategic advantage has changed drastically from Product and

process innovation into Paradigm innovation. At the point of paradigm
innovation, the shift is revolutionary whereby new players with the right
approach and technology will dominate and become market leader.
We are looking at established players becoming extinct but new comers
are flourishing.
5. Is the ‘revolution’ in the music industry a result of the development of new
technologies? Or is it happening because of changes on the demand side

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 – shifts in what people want and are prepared to pay for? Or is it a mixture
of both? What lessons might that offer to someone wanting to enter the
industry as a new player? And what might an establish player do to
preserve their position?

Answer:

The revolution in the music industry is a result of mixture of the

development of new technologies as well as changes on the demand
side. New technologies brings about changes in the delivery methods
(process innovation). However, the shift in demand is a direct result of
free distribution and sharing of music pieces.

The introduction of low-priced internet downloads has provide some

incentives for persons involved in the musical industry. This presents
a benefit to the general public whereby the cost of purchasing a
musical piece is greatly reduced. The internet has opened up the
possibility of participating in music business to many and at the same
time lowering the entry barriers into the music industry. Therefore the
revolution in the music industry brings about opportunities and
possibilities to everyone.

Lessons for the new player:

i. must have talent

ii. innovative marketing
iii. go global through internet
iv. use creativity to innovate in terms of product or services,
innovative processes, innovative introduction or lauching of
products and strive for paradigm innovation or creating a new
trend.

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Lessons to to the establish player:
i. must have creativity
ii. innovative marketing
iii. continuous improvement in quality music materials and quality
recordings
iv. search for new talents and business related technology
v. provide for motivational and improvement courses to staffs
vi. establish joint-ventures with IT service provider
vii. engage competent consultants to provide guidance
viii. establish research team or unit within the establishment.

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