Modul 3: Insights

Question 1

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Answer 1

• An innovation arena strategy defines and limits the space where we want to “play” and innovate. It fulfills Porter’s first requirement for a good strategy.
• Adjacent arenas of innovation (adjacencies) are generally preferred because they build on existing competencies and therefore reduce the risk.
• White spaces are far removed from the company’s current competencies, and it has not yet had any experience with them. They carry a high risk for the company as the Linde case shows. But they may well be already occupied by other companies.
• There are four steps to define the innovation arena:
  o Determine position and core competencies
  o Analyse the trends and develop relevant future scenarios
  o Derive a list of possible innovation arenas
  o Undertake a focused selection of the innovation arenas

Question 2

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Answer 2

• There are four criteria for the selection of an innovation arena:
  o Consistency with the overall businesssstrategy
  o Synergy with existing core competencies (which is ensureding a three axes model as we start from the current core competencies)
  o Potential (size and growth) of the innovation arena
  o Competitive situation and trends in the innovation arena
• A SWOT analysis and Porter´s Five-Forces Model are great tools to analyze the competitive situation and trends in the innovation arena.

Question 3

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Answer 3

• There are different types of innovations that should be included in the innovation portfolio.
• If we look at innovations and their impact, we first of all distinguish between incremental and radical innovations
• Radical innovations such as Nespresso differ significantly in their management from incremental innovations
• Radical innovations are rare because they involve a significant change in the range of products or services that are available in the market. They have the potential of a major upheaval in the market, above all by generating significant market growth and / or a significant shift in market share
• Incremental innovations are nevertheless important because they increase the return on the previous radical innovation, keep competition at a distance and, because of their lower risk, reduce the overall risk of the innovation portfolio
• Incremental innovations can bring unexpectedly large benefits to the company, as shown by improvements based on digital A/B tests or the Airbus A320 Neo.
• Incremental innovations, on average, make up 85% or more of a company’s innovation portfolio

Question 4

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Answer 4

• Disruptive innovations like Sony’s transistor radio are a special form of radical innovations. A disruptive innovation is “just good enough” on the key dimension previously used to evaluate the product, but has clear advantages in terms of affordability, convenience and / or simplicity
• Disruptive innovations massively attract non-customers who have previously been prevented from consuming because of a lack of financial resources, lack of availability / access, lack of skills or lack of time.