Mapping Performance and Expectations in an Innovation Context - Part 1

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From the course by University of Illinois at Urbana-Champaign

Strategic Innovation: Building and Sustaining Innovative Organizations

136 оценки

University of Illinois at Urbana-Champaign

Strategic Innovation: Building and Sustaining Innovative Organizations

136 оценки

Course 1 of 7 in the Specialization Innovation: From Creativity to Entrepreneurship

Innovation strategy is about creating unique value for consumers by delivering a great product that satisfies their needs and capturing value back from consumers. At the core of a successful innovation strategy is a great product concept. Product is an all-encompassing term that includes physical goods, intangible services, and even ideas. There are three pillars to a successful product strategy: a clear understanding of (a) the target customers (WHO), (b) the specific elements of the product offering (WHAT) that satisfies consumer needs and dovetails with company capabilities, and (c) the tactical plans to reach end consumers (HOW). The value proposition has to be embedded in a coherent business model in order to create and capture value. But well-laid innovation plans can go awry without a consideration of the business ecosystem that includes competitors, collaborators, including suppliers, distributors, and retailers, or the contextual environment in which the company operates. In an interdependent world, fostering an integrated ecosystem is critically important for companies interested in maximizing the odds of innovation success. Drawing from many years of research, this course will offer a set of frameworks, tools, and concepts in order to develop innovative strategies in a holistic way so as to achieve leadership positions.

From the lesson

Module 2: There Is More to a Product Than Just Function: Assessing Industry Trends

The second module will focus on a detailed view of innovation and how it relates to the various stakeholders, including consumers, firms, and the overall industry. More importantly, you will learn to assess industry context as you make important innovation decisions. First, you will gain an understanding of concept of the innovation adoption lifecycle and how innovations diffuse in a population of consumers. Then, you will learn about the concepts of the tipping points in an innovation lifecycle, i.e., sales takeoff and firm takeoff for an innovation in a particular new-to-the-world industry. Next, we will study the “failure framework” to examine issues of “overshooting” consumer demand by firms by mapping product performance and consumer expectations trajectories in an innovation context. Finally, you will learn about the different types of innovations and understand the concept of dominant design.

Mapping Performance and Expectations in an Innovation Context - Part 18:53

Mapping Performance and Expectations in an Innovation Context - Part 27:38

Meet the Instructors

Raj Echambadi
Alan J. and Joyce D. Baltz Professor | Sr. Associate Dean for Strategic Innovation
Department of Business Administration, College of Business
E. Geoffrey Love
Associate Professor
Department of Business Administration, Gies College of Business

[SOUND]

[MUSIC]

In this lesson, we are going to learn about the issues, challenges, and

opportunities of managing in a mature phase.

Because when you think about the mature phase of an industry,

while companies know what consumers expect,

sometimes they can go overboard and start shooting consumer needs.

And we are going to learn how to figure these out and how to create

an appropriate product so that the consumer needs are optimally satisfied.

We know products evolve and industries evolve, so it makes imminent sense for

us to develop appropriate strategies for

innovations that are in the nascent stage, vis-a-vis innovations in the mature stage.

So how do we figure out what is appropriate and what should managers do.

Failure framework actually gives the answer.

It was developed by Professor Clayton Christensen, and

I've adapted it from the Innovator's Dilemma book.

And the two axis for

this failure framework are, the x-axis happens to be time.

And the y-axis happens to be the performance

on what we call as the dominant industry attribute.

Some people might call it primary attribute, some people will call it

basis of competition, but the logic is fairly straightforward.

Whenever consumers look at a product or

a category, they zone in on an important criterium.

All are rank ordered setup criteria.

Think about a microprocessor, you look at the speed of the chip.

Think about a hard disk drive, you think about the storage capacity.

That is what we call as the performance on the primary or the dominant attribute.

Once we have done that, what is important for us, is to

plot the customer expectation trajectory and I'm going to plot the customer

expectation trajectory or the market needs trajectory in a dotted line.

As far as the customer expectation trajectory is concerned

it's very akin to the customer expectation we have.

Think of going to a restaurant.

You have a certain expectation in your head about how the restaurant is going to

perform, what the food is going to be, how the service needs to be.

And then you compare the actual performance of the restaurant

against these expectations.

And when you aggregate everybody in the segment and

create a particular trajectory, that is what we call a market need trajectory,

or the customer expectation trajectory.

An associated concept as far as the customer expectation trajectory is

concerned is it makes sense

to have the segment at this point in time drawn as well.

And you will see here, the customer expectation

trajectory actually maps onto the center of the bell curve.

Which basically means that the center of the market is the most lucrative market,

if you are focused on the mass market.

But there are extremes on the high performance side and

the low performance side as well, which creates opportunities for innovation.

Now that we have done the customer expectation trajectory and

the associated bell curve of the segment preferences, now it is time for

us to introduce a concept called technology trajectory.

And when you map the technology project tree,

Professor Christiansen drew it as a linear curve, I'm going to draw it as an S curve

to make it consistent with what we have done so far.

And the technology project tree curve follows this S curve pattern.

In the beginning, in the nascent stages of the industry the technology is much, much,

much lower than what the customer expectations are.

Over time it gets better and better and better.

It meets the needs of the customer at some point in time and beware

when you focus here, that means you're also focused on the center of the market.

You have attacked the center of the market or

the mass market appropriately with your strategy.

That's what this means.

And then, it gets better and better and

better as far as technology is concerned because of learning.

And at some point in time, diminishing sensitivity sets in.

Now, you may say, wait a minute.

What does this really, really mean.

Well, if you think about this what does technology

reading much lower than the customer expectation means.

What that means is that let's go back to 120 years and

let's look at the late 1880s when you had the dominant

transportation option in the United States being the horse and buggy.

And at that point in time we had the first cars that came in, and

the first cars that came in in the late 1800's

were not as reliable as the horse and buggy transportation.

But cars got better and better and better.

They're working their technical constraints and

then they got because of learning, they got better and

at some point in time they cater to the entire segment.

So now that we have done the customer expectation trajectory and the technology

trajectory, there are two important aspects that you need to understand.

One the notion of incremental and radical innovation.

So any time you have a jump on

the dimension that the customers value, that is innovation.

And a small jump is what we call an innovation.

A large jump is what we call as a radical innovation.

But these are sustaining innovations because these are happening

on the dimensions that consumers already know about.

And the second and more important aspect here is that in the nascent phases

of the industry, the technology trajectory is much lower than

the customer expectation and this is what we call as undershooting.

On the other hand, once it intersects the customer expectation trajectory and

it gets better and better and better, at some point in time, it is much,

much higher than what the customers expect and this is what we call as over shooting.

Now, what are the problems with over shooting.

Over shooting can create can create which

effectively means if you are here, you will create a product that is costly and

you'll pass on those cost to the consumers.

And consumers then might look at cheaper options if you will, so

that is one problem.

But an interesting aspect is if you're the only firm

that has overshot, you have no problems.

You can keep overshooting and consumers will be willing to pay for

you because you are the only player in the comparative market.

But a lot of times what happens is multiple players are actually

in the same space as you are.

And if that is the case, a multiple firms have parity in

this dominant performance attribute, then there is potential for

a commoditization if somebody else decides to compete on price.

So how do you avoid commoditization.

You avoid commoditization by changing the basis of competition from

this primary attribute to something else.

Think about Apple.

With the iPhone in 2007, what Apple did was change the basis of competition.

Blackberry and Nokia were competing on functionality.

And iPhone competed on simplicity.

What they did essentially was changed the basis of competition to people who were

focus on functionality and evolve and move over to simplicity.

And this is what you'll need to do.

And this is what we call as sequential evolution in the product life cycle.

As you're looking at the failure framework,

what is very important are the relative

slopes of the customer expectation trajectory and the technology trajectory.

The actual slopes don't matter.

If the slopes are relatively different,

then you're likely to have more shooting problems.

[MUSIC]

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