1. Practical Overview of Innovation Flashcards
Give two important qualities of a successful innovation/idea
- They make people’s lives easier.
- They improve the quality of people’s lives.
What are the three key rules of business?
- You can only sell things if people want to buy them.
- People (largely) don’t want things. Instead, they want the benefits of a product.
- You can only stay in business if you are making money (profit) or if you are loaned money that will make a profit in the future.
What are the three requirements for a successful business venture? (3 part model)
- Need (unmet market need)
- Capability (way to produce + distribute a solution to the problem)
- Reward (profit)
Define unmet market need
Needs (of customers) that are not adequately met by current technology, providing a gap in the market.
What is the solution to an unmet market need?
Producing a product that provides benefit to a customer by making their life easier/better.
How can market need be determined?
By completing market research.
What does a customer base depend on?
- Demographic (affluence)
- Location setting
- Age
- Nationality
A ______ product is one used for pleasure.
Luxury
A ________ product is a necessity to customers for daily life.
Commodity
Give the reason why market dynamics change over time
External factors change customer needs so cause markets to grow/decline.
Define capability
A proven technical concept that matches the market need of the customer. It includes a way to produce and distribute a solution to a problem.
What are the 8 factors that determine whether a solution has the capability to solve an unmet market need?
- Can it be developed as a concept?
- Can it be manufactured and distributed?
- Are there funds to produce and promote it?
- Does it pass health and safety regulations?
- Is it environmentally friendly?
- Does it pass product-specific regulations?
- Is there freedom to operate (ie. does it infringe on any patents/legislation)?
- Does it have a sustainable competitive advantage?
Define reward
The profit a product makes for a company.
How can the potential return of a product be calculated?
Estimate how many products will be sold over a given time frame and the cost of the product then subtract production costs (revenue and capital costs) to determine the potential return.
(price - revenue cost) x number of customers p.a. = reward p.a.
(reward p.a. x years in business) - capital cost = profit
How can we determine if an innovation is financially viable?
Calculate how much a product is worth and how many products will be sold at that price and compare it to production costs to see if a profit will be made.
