Tutorial 2: Innovation

Question 1

Types of Innovation

Answer 1

• Sustaining innovations
  
  • New technologies or business models which suit an existing market better (improvement)
• Disruptive innovations
  
  • New technologies or business models that (at first) lead to worse products measured against common criteria; often cheaper / less complex
  *

Question 2

Disruptive Innovation – Christensen’s Criteria

Answer 2

• Historically most valued attributes
  
  • Innovation leads to products or services that underperform dominant ones along the dimensions historically most valued by customers in the market
• Other quality criteria
  
  • Innovation leads to products or services superior in dimensions not valued as important before
• Cost and margin
  
  • Innovation leads to products or services that are cheaper for customers and provide lower margins for vendors than dominant ones
• Simplicity / convenience
  
  • Innovation leads to products or services simpler or more convenient to use
• Interest of main customers
  
  • The most profitable customers of the current market’s leading firms have initially little interest in products / services based on the innovation
• First customers
  
  • First customers are mainly situated in niche or emerging markets
• First vendors
  
  • Among the companies that commercialize the innovation is a high rate of startups or companies new to the market
• Value chain
  
  • The innovation leads to a different structure of the vendors’ value chain
• Market disruption
  
  • Eventually, products or services based on the innovation will displace the dominant ones in the mainstream market

It is not possible to forecast market disruption ex-ante

Criteria are a good first indicator