Definition of Innovation:
'The adoption of ideas that is new to the adopting organization'. Innovation can also be defined as brinning invention successful to market and capitalize on it.
A new product is defined by: The cost is lower, its attributes are improved or new, or it newer existed in that market before.
The process cannot be separated from a firm's strategic and competitive context.
2 types of innovation:
Technical Innovation: Improved products, services or processes or completely new once (may require Administrative innovation).
Administrative Innovation: Changes in organizational structures and administrative processes (may affect Technical innovation).
2 types of new knowledge:
An innovation is when a company use new knowledge to offer a new product or service that customers want.
Technological knowledge: Knowledge of components, linkages between components, methods, processes and techniques that go into a product or service.
Market knowledge: Knowledge of distribution channels, product applications, and customer expectations, preferences, needs and wants.
The innovations impact on the firms capabilities
The organizational view:
Radical Innovation: Technological knowledge required to exploit it is very different from existing knowledge, existing knowledge will be obsolete - competence destroying
Incremental Innovation: The knowledge required to offer a product builds on existing knowledge - competence enhancing. Most innovation is incremental.
The Economic (competitiveness) view:
Classifying Innovation as a function of the extent to which it renders old products noncompetitive
Radical Innovation: Results in a product that is so superior that existing products are rendered noncompetitive
Incremental Innovation: Innovation still allows existing products to stay competitive
Why incumbents possibly outperform new entrants in some radical innovations. A firm's technological capabilities could become obsolete while its market capabilities remain intact.
Focusing on the perspective of the innovating firm, the model classifies innovations according to their impact on the existing technological and market knowledge of the manufacture.
Market knowledge can be just as an important as technological knowledge
Products are normally made by components, building the products must require 2 kinds of knowledge; knowledge of the components, and knowledge of the linkages (Architectural knowledge)
Architectural knowledge: Is often tacit and embedded in the routines and procedures of an organization, making changes in it difficult to discern and respond to. Gives problem when firms believe that the innovation is Incremental but is actually Architectural - components knowledge has not changed but the knowledge of the linkage has.