Discontinuous innovation and LED technology disruption response

Discontinuous Innovation in a Business Organization

Scenario

DISCONTINUOUS INNOVATION

SCENARIO

Recently the CEO of a company, an OEM for the light bulb industry, attended a business seminar where everyone agreed that "there is a potential threat of disruption from new Light Emitting Diode (LED) technologies." Moreover, the CEO was told that "Many incumbent firms find it hard to spot or respond adequately to the threat of disruption, which often leads to loss of market share and in some cases total failure." The CEO decided to appoint an innovation consultant to help the firm understand what discontinuous or disruptive innovation is and how it could affect the company. The CEO also wants to know how his company should respond to the potential threat of being disrupted. The writer of this work will take the role of innovation consultant and will: (1) discuss what discontinuous and/or disruptive innovation is and whether or not it is likely to affect the firm you are a consultant for; and (2) Suggest how the firm should respond to the possibility of disruption. This brief will involve desk research and areas such as R&D, marketing activities, technology strategy, and organization - all related to new product development will be considered. Terms to use in this study include those of radical innovation, breakthrough innovation and high technology.

DISCONTINUOUS INNOVATION

INTRODUCTION

Examination of the concept of discontinuous innovation informs the researcher that in order for innovation to be discontinuous it is necessary that innovation be structured into the very core of the organization. This is specifically considered to be a pre-phase consideration in the work of some researchers and is an aspect of the discontinuous innovation concept which has been little researched and due to the importance contained in this area of study is an area that research should be focused upon in disseminating the concept of discontinuous innovation. This however, is not to say that the organization should become locked into an inwardly-focused view and in fact the precise opposite is found to be effective if the organization is to realize 'breakthrough innovation' when needed. Radical innovation and incremental innovation are also phases of innovation that are examined in this work.

ANALYSIS & INTERPRETATION

Innovation is said to be importance as a source of "future competitive advantage" which will acknowledged "probably not recognized explicitly, since the first competitive activities of economic factors took place." (Herzberg, 2005-2006; p. 16) Yet there is stated to be a "high and long-lasting interest in the topic...." It is related that the term innovation "itself is used in very different ways." (Herzberg, 2005-2006; p. 16) Discovering precisely what innovation means is key in understanding the concept of discontinuous innovation. Herzberg states the aim of introducing innovation and states as well that intended is the illustration of the "importance of the pre-project phase." (2005-2006) Innovation is noted by Herzberg to be a process of "problem-solving" and therefore is a process of seeking solutions and in the case of discontinuous innovation the innovation sought is therefore never ending problem solving or solution seeking. One of the greatest challenges during the early phase of innovation according to Herzberg is the fact that this is a decision process which is made as to whether "the concept is going to be realized or not." Herzberg cites the work of Cooper (1992); Goffin et al. (1999) and Khurana/Rosenthal (1997). Therefore, this process is one that will either begin as innovative and continue as such evolving or it will not making the pre-project phase critical in determining whether innovation in an ongoing manner is possible throughout a project. During this phase of innovation the customer may not yet be a known factor according to Herzberg (2005-2006). Technological uncertainties exist as well as do product as there is "naturally a time lag between conception and exploitation." (p. 17) Herzberg notes that the environment related to the innovation is likely to experience a change and this "aggravates the problem of defining a good solution for sustainable future profit. These independencies between the factors make the early phase of innovation processes a complex problem to solve in an ambiguous environment, and so have often been called the fuzzy front-end of innovation." (Herzberg, 2005-2006; p.17 citing: Khurana/Rosenthal, 1997; Sheth/Ram, 1987) it is the organizational strategy which "sets the direction for how organizations generate and sustain profits in the market environment (Mintzberg, et al., 1998; as cited in Herzberg, 2005-2006; p. 17) the essence of the work of Herzberg (2005-2006) is the claim that the "conceptual perspective on pre-project innovation activities is not sufficiently researched." (p. 17) and furthermore that the various approaches chosen by organizations for 'innovation' is: "...almost uncountable, although not every approach may promise a successful realization." (Herzberg, 2005-2006; p.17) This is because the consideration of each individual approach as a singular problem that was solvable would mean "that each of these problem-solving approaches would require specific and individual methods, if methods requirements are individual to a problem." (Ibid; p. 17) Several views have been taken in research into innovation in the attempt to provide a description and analysis of the differential innovation processes and the outcomes of those processes. Examples related in the work of Herzberg include: (1) distinctions between the degree of innovativeness; (2) sectoral patterns; (3) the maturity of products and technologies; and (4) many more contingencies..." (Herzberg, 2005-2006; p. 18) all of which assist the organization in analysis and informing the decision-making and design processes. Because this is little researched from the view of researchers, "this unstructured context for evaluation raises the problem of understanding the pre-project phase in a holistic way. Therefore, research on the fuzzy front-end of innovation is still very vague and abstract, and recommendations can only be made of the level of creating an environment for innovation conception but not on explaining how to actually develop an innovation concept. Existing research focuses either on more organizational or on more strategic questions, the question of how to approach the problem of innovating from a problem-solving perspective is not researched sufficiently yet." (2005-2006; p. 18) Herzberg's line of study follows literature that relates that innovation is not only within the product or within the customer process but is something that is instilled deeply within the very structure of the organization and is something that is basic and fundamental to the organization in the manner of a core ethic that is bound within the processes of the organization. Herzberg therefore identifies not only products and services, but processes as all types or groups of innovations that exist within the innovative organization. Therefore, these groups are comprised by innovators who derive innovations for the promotion of the product or services, or processes. Innovation may also be characterized by pattern types of either 'radical' innovation or 'incremental' innovation. (1000 Ventures, 2008) Radical innovation has a project trajectory with rapid drops and rises within its path patterns while incremental innovation has a project trajectory that steadily builds higher as the project progresses. The following two figures illustrate these two project trajectories. (1000 Ventures, 2008) (1000 Ventures, 2008)

Radical innovation is characterized through the exploration of new technology undertaken and the high rate of uncertainty that exists and has as its focus the products, processes, or services with unprecedented performance features. Finally radical innovation creates a dramatic change that transforms existing markets or industries or creates new ones. Incremental innovation is characterized by the exploitation of existing technology that is familiar with low uncertainty and has as its focus the cost or feature improvements in existing processes, products or services. Finally incremental innovation improves the competitiveness within the market and industries on a current basis. The following figures illustrate the work of Kaizen on Radical Innovation relating to new product development synergies. (1000 Ventures, 2008)

The work of Kaplan and Palmer (2007) entitled: "Strategic Imagination: External Thought Leaders Inspire Breakthrough Innovation" published by Innovation Point relates the fact concerning innovation efforts that they "often deliver disappointingly short-term ideas and fail to identify longer-term growth platforms. An organization's inwardly-focused and historically-biased view of the world limits its capacity for 'strategic imagination'. Bringing in fresh, future-oriented perspectives from outside the organization is an essential catalyst for innovative 'stretch thinking'." (Kaplan and Palmer, 2007) Bringing in what are termed to be 'external thought leaders' derived from various domains will assist the innovation process and assist the team in the development of 'Industry Foresight' and in identification of: "...non-obvious opportunities." (Kaplan and Palmer, 2007) External thought leaders are described as "...inspirational provocateurs and visionaries..." And are said to be the "...essential catalyst for teams that seek breakthrough innovation." (Kaplan and Palmer, 2007) the work of Wagner (2007) entitled: "Organization of Innovation in High-Tech Industries: Acquisitions as a Means for Technology Sourcing" relates that high-technology innovation often is of the nature of radical types of innovations and that these take place "through distinct industry cycles of high and low demand." (Wagner, 2007) Innovation activities in this area are stated to be diverse in nature and "driven by a variety of determinants. In particular firms frequently face make-or-buy decisions, especially as concerns radical innovation." (Wagner, 2007) This creates a level of high challenge in this industry. Oracle in the work entitled: "Profitable Innovation in High Tech" relates that: "As Moore's laws hold fast and the average lifetime of technology products continues to shrink, high tech companies face the constant need to innovate to stay competitive. The race to market has intensified, and technology companies must constantly rebalance the tradeoff between product performance and speed-to-market. A company's ability to consistently produce profitable innovation will separate the winners from the pack in this competitive market environment." (Oracle, 2008) Oracle cite product and project portfolio optimization to be key as well as integration of the extended enterprise as "high tech companies must limit re-work causes by inconsistent bill of materials (BOMs) or frequent engineering change orders (ECOs) and they must be able to react quickly to changes in demand forecasts." (Oracle, 2008)

CONCLUSIONS

It is clear that the pre-phase innovative potential vested within a project or within an organization or team is critical in the determination of whether the project, organization or team will be innovative in nature and in an ongoing and expanding manner. Radical innovation and incremental innovation are quite different from one another and it is likely that both types of innovation are required in projects, organizations or teams that are successful for an ongoing period-of-time. Breakthrough innovation is also a requirement in the successfully discontinuous innovative initiative. Innovation in the High-Tech market certainly combines the requirements of all these groupings and types of innovative components in order to be successful and stay competitive in the rapidly changing, advancing and expanding high-tech marketplace.

RECOMMENDATIONS

Arising from the foregoing study is the recommendation that the pre-phase innovative potential be explored in relation to the impact that pre-phase innovative potential has upon the project, organization, or team to be innovative in a discontinuous and ongoing expanding manner in the high-tech marketplace.