The Innovation Cycle: A Continuous Growth Theory
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Heavy content. Phasing theory of product evolution. A unifying view on innovation phenomena, techniques and instruments.
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The Innovation Cycle: A Continuous Growth Theory
- 1. the Innovation Cycle a continuous growth theory Draft August 2011 IDEA
- 2. content Innovation cycle theoretical background organizational chaining constrains characterizations Product Phasing Skill Innovative taxonomy conditions sets background innovation instruments Geoffrey Clayton Chris Malcolm Gary Moore Christensen Argyris Gladwell Hamel Bill Leif Angela ? Steve Gates Edvinsson Merkel Blank
- 3. Organizational constrains theory
- 4. Two organizational forms as a Fn of product complexity Market exchange is more efficient Coase’s firm theory In-house production is better than procuring the product
- 5. Two ownership forms as a Fn of asset building costs Property is more Implementation costs valuable than are higher than the implementation costs value of property that controls an opportunity Demsetz’s property theory
- 6. Organizational forms as a function of relative costs Value > property Costs > costs property value Cheaper goods exchange Markets Commons to build in-house Property Cheaper Firms regimes Coase’s firm theory + Demsetz’s property theory
- 7. Efficient production forms as a Fn of product attributes Value > Costs > property Costs property value Abundance Commodity of market product that exchange Goods players, serves universal significant product need Hygienic Complex, product in an in-house unique Build inapt product in providers’ monopoly market
- 8. ∑ Constrains summary Optimal production form Depends on: • market ubiquity • production costs May require an operation within a social and economic paradigm which isn’t widely tolerable.
- 10. Efficient production forms as a Fn of product life-cycle Value > property Costs > Costs property value exchange Goods in-house Build Spasokukotskiy’s phasing theory
- 11. Any product drifts Cheaper and adjustable replicas of the editor the cycle over time The idea is picked up. Mass product 2 3 A text editor is created as custom built code 1 4 The editor’s functionality is integrated in other products as a component
- 12. maturing all the way increasing market penetration pervasion inception
- 13. upon market saturation the product can make a quality leap pervasion actual maturity limit >> integration cycle quality leap inception components cycle
- 14. …becoming a standard component due to an integration pervasion inception Text editor’s life cycle as a product component Text editor’s life cycle as a stand-alone product
- 15. …over and over again quality leaps
- 16. ∑ Chaining summary Optimal production form Depends on: • market maturity • product ubiquity Is chained: • the forms change each over in a strict sequence • the transformative process is one-way street • repeats in a loop over and over again
- 17. ∑ Chaining corollaries Following theories are necessarily to consider: • skills phasing • business objectives phasing • economic regime phasing • phase timing • organizational forms phasing One solution doesn’t fit all
- 18. Innovation cycle characterization
- 19. Product parameters define dots in the cycle product phasing skill taxonomy + conditions + sets = cycle
- 20. Two scales are common for all products in the cycle buying entities costs/profit
- 21. Break-through products pop share non-consumption entities coverage price New product projects costs/profit
- 22. Mass market products pop share entities coverage price costs/profit
- 23. Saturation products common base standards pop share entities coverage price This phase delivers flavors to any taste. The number of buyers for every variant reduces. The core functionality though becomes a common good and knowledge costs/profit
- 24. Next-level products pop share non-consumption entities coverage price next level infrastructure phase the tipping point “final touch” phase costs/profit
- 25. product-market-costs-time optimization cycle overview Product A buying entities Product B costs/profit
- 26. Product parameters define dots in the cycle product phasing skill taxonomy + conditions + sets = cycle
- 27. Phasing of product type is due to changes in costs and profits price potential price profit costs
- 28. Labor division is the main theme in progress Vendor 3 All new products satisfy the same existing need/want. Typically new products are improving a subset of the whole technological stack that serves to the Value stack Vendor 2 need. Many industry players simultaneously control the value stack. Vendor 1
- 29. If there is a market niche, where potential price is much larger than costs Vendor 3 technology Value profit costs Vendor 1
- 30. enterprises and build-to–order ventures take the chance profit costs project
- 31. If a known and available product has a potential price up to profit standards Vendor 3 technology Value profit costs Vendor 1
- 32. There is no risk to scale the production as along as it goes mass profit production costs
- 33. If the value stack is gainful but a subset’s costs are higher than price Vendor 3 technology Value costs Vendor 1
- 34. The losses are covered by stakeholders from profits through a cooperation cooperation costs
- 35. partners or commons cover excess costs Vendor 3 producing consumers technology Value • the value stack partners costs (value stack is clearly defined, high entry barriers) • commons (3rd party) Vendor 1 (value stack is blurry, covers too many bases, low entry barriers)
- 36. there is no profit in the entire value stack but the product is a must-have costs technology Value costs costs
- 37. Hygienic products are protected by society through regulations costs Government enterprise
- 38. This phase isn’t always evident it could be short, or disguised costs technology Value Governmental preferences, easy tax regime, grant support, etc. all cover costs in a costs distressed value stack. costs
- 39. An innovation reduces costs of the entire value stack, then the cycle begins anew Value > Costs > property Costs property value exchange mass Goods production cooperation in-house government Build project enterprise innovation
- 40. True innovation redesigns industries and value chains across multiple stakeholders beneficiary Value stack inventor beneficiary Other product transformations along the cycle are various forms of continuous improvement process
- 41. But if you stretch the term, there are various types of innovation process innovation | effectiveness application innovation experiential innovation product innovation business model innovations process innovation | efficiency sustaining innovation structural innovation marketing innovation disruptive innovation
- 42. Innovation comparison innovation internal customer side structure capability practice structure capability practice disruptive new, cheaper and better new market low-end sustaining Improves improves product value application existing technology to new markets, serve new purpose product improves established offers process optimizes for established markets experiential cosmetics modifications marketing tweak touching Business change change reframes value proposition model company role focus structural restructure major gains industry
- 43. Product parameters define dots in the cycle product phasing skill taxonomy + conditions + sets = cycle
- 44. Every phase answers different question and uses different governance principles 1. Hierarchy – search for product fit and production method buying entities 2. Process chain – search for common market 2 denominator and scalable production output 3. Network - search for 1 3 true market fit and inexpensive supply 4. Dictatorship – search for supply security and working ideas 4 costs/profit
- 45. Innovation cycle instruments
- 46. Why is a product maturity cycle called a cycle of innovation? huge problem minor problem There are systemic hurdles on the road. Lateral ideas are required to pass through. significant problem
- 47. innovation theories challenges overview Christensen’s dilemma learning Moore’s chasm leap discipline leap Argyris’ single-loop learning & double-loop learning
- 48. Double-loop learning learning leap discipline leap Argyris’ single-loop learning & double-loop learning
- 49. Single-loop mindsets of successful executives Product A •Defensiveness •Hiding and denying uncomfortable information •Avoiding negativity •A need to win at all costs •Worshipping rational behavior, decrying anything that doesn’t conform •“I’m right” attitude by Chris Argyris
- 50. Double-loop mindset of successful executives •Dialogue •Sharing tasks and information •Free choice based on vivid information •Questioning the assumptions by Chris Argyris Product B
- 51. The business development chasm Moore’s chasm
- 52. Startups face a market gap (the chasm) expanding from cheering crowd to mainstream sales time
- 53. Innovator’s dilemma Christensen’s dilemma
- 54. Companies overshoot market demand not willing to give up profitable position Product performance time
- 55. innovation theories solutions Christensen’s modularization, Hamel’s agents provocateurs non-consumption Gate’s success principles paradigm shift product adoption Gladwell’s tipping points Merkel’s subsidy targets idea buy-in Edvinsson’s corporate longitude new idea Blank’s pivot steps Moore’s components-to-platforms Siegel’s IDEA
- 56. Are there other innovation theories? provide your input ?
- 57. Author Konstantyn Spasokukotskiy your gateway to technology and innovation www.spasokukotskiy.info References Yochai Benkler - The Wealth of Networks, 2006 Clayton Christensen – The Innovator’s Dilemma, 2003 Geoffrey Moore – Crossing the Chasm, 1991 Chris Argyris – Organizational Learning, 1978 free to copy and reuse with proper attribution