Innovation Management Types of Business Model Innovations

INNOVATION MANAGEMENT
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Innovation Management
Introduction
Innovation involves introducing a new device, material or method that will be applied to practical or commercial objectives (Schilling 2016, p. 1). These devices can be tangible products that can prove useful in running the business. Methods can involve models or new strategies that the company implement to increase competitiveness. Every type of innovation begins with a creative idea. The implementation of these ideas in the company can yield positive outcomes; however, the process of implementation also has to be controlled. Innovation management concerns the actions taken by companies and their staff to manage their innovation activities. Innovation has proven to be an important aspect of the current industrial age. This would mean that innovation management involves the means by which companies manage their acts of introducing new methods, materials or devices. Owing to the current changes experienced in the business environment, it appears that innovation is a must for any organization striving to sustain itself in this modern age. Since the industrial revolution, many industries have acknowledged the central role of innovation and its management (Westland 2008, p. 3). Innovation can be regarded as one of the core competencies of any company in today’s competitive business environment. According to Westland (2008, p. 3), the need for companies to adopt an innovation is no longer optional, since it can determine whether a company will sustain its competitive advantage or even stay ahead of their competitors.
Reviewing Innovation Management
Types and Patterns of Innovation
Innovations can be categorized into various dimensions. These dimensions are useful in clarifying how the various innovations offer various opportunities for regulators, users as well as producers. Owing to the broadened term, innovations were considered to be radical and incremental. The comparison, mainly focused on the extent of newness. This is so because innovation can be new regarding the overall marketplace of ideas, or within a particular new context.
Moreover, it can represent a radical novel notion or an old theme with a new twist. Concerning impact, the results of innovation vary from causing a significant change in the overall services or products and the entire technological process of the company, contributing a minor improvement to the company’s processes or the product, and change the entire marketplace or economy. Radically innovations may fail to affect the company’s operations or the product significantly. The three main types of innovations are a strategy, product, and process (Westland 2008, p. 6). These three types differ from each other regarding impact and newness.
Process Innovation
The recent rise in continuous and quality improvements led to the consideration of process innovation as an important topic. Companies that exist in the developed world tend to reach the limits of incremental process improvements. Companies are meant to achieve maximum effectiveness and efficiency through the radical process of re-engineering the company’s processes. However, since processes fall behind technological advancements, it is difficult for companies to achieve the required transformation through incrementalism. Process innovation is mostly associated with smaller firms since it helps them share in advanced technologies that are developed by larger organizations. Companies that adopt proven process technologies are also more likely to have lower risks and short-term payback. However, the disadvantage of investing in process innovations is that competitors can easily adapt to the strategy, thus leading to the company’s loss in the initial advantage. Compared to product innovation, process technology merely uplifts a company up to standard.
Product Innovation
Product innovation involves introducing a new service or good concerning its intended use and characteristics. The innovations under this category include major improvements in components and materials, user-friendliness, incorporated software, and technical specifications. Product innovation can also comprise both new products and new uses of products. New products comprise of services and goods that have significant differences in their intended use, and characteristics of the products that were previously produced by the company. The new product uses involve developing a new use for a product by making slight adjustments to the technical specifications. Product innovations associated with new products is referred to as incremental product innovation, whereas, new uses for products is associated with radical product innovation. Because of the shorter product life cycles, companies have been forced to depend on new product developments for survival. To do so, organizations have had to constantly keep up with innovation to develop and offer new products to the market faster than their competitors. Regardless of the differences between product and process innovations, the two types are interconnected. For instance, process innovation can be used to support product innovation.
Strategy Innovation
Strategy innovation is the process of a company redesigning or reinventing its corporate strategy, to generate value for the company and drive business growth. This type of innovation is important for companies to adapt to the speed of technological advancements. Organizations that adapt to strategic innovation are not necessarily required to make changes to the services and goods offered to customers. Neither are they required to make technical changes to support the products for them to be successful. A company can incrementally improve its business strategy. However, radical business concept innovation is of greater importance to organizations. The current business environment is friendly to industry revolutionaries and unreceptive to industry incumbents, especially because the business oligarchy has been affected by technology, deregulations, globalization, and social change. Because of this, companies are required to revolutionize their basic company strategy to ensure success continually.
Business Model Innovation
A business model is a holistic description of the relevant contexts of how values are generated by an organization for the firm and their clients. Often, the core processes and capabilities that have been maximized to make the organization successful are targeted for change. However, these changes do not always result in positive outcomes as some might result in conflicts with the brand. Business models are a basic representation of how organizations generate profit. Business model innovation is the framework for capturing and creating value by conducting business differently. Concerning business models, business model innovation is about changing how organizations conduct their business. These changes can be manifested in the five components of the business model, which include customer-value proposition, revenue, market, growth, and capabilities. A variety of innovations can involve a new customer value proposition. For instance, Apple’s iPod business model brought changes to the way in which customers could buy music through its iTunes store (Afua 2014, p. 11).
Types of Business Model Innovations
Regular: Regular business model innovation involves the use of a company’s capabilities to build a new business model. The model is meant to ensure that the existing products are competitive enough. An example would be the built-to-order direct model adopted by Dell in the 1990s (Afua, 2014, p. 13).
Capabilities-Building: In this model, the capabilities necessary to generate and seize value in a new model differ from those of the timeworn business model. Nonetheless, goods which are rooted in the traditional business model are still competitive. The changes made in the company are however related to the firm’s capabilities.
Position-building: In the Position-building model, the services and products rooted in the old business models are rendered by the new business models as non-competitive. Nonetheless, the capabilities that reinforce the new business model are primarily similar to those that reinforce the outdated business model. An example would be Wal-Mart’s approach to move to small towns in the U.S, which can be considered a position-building model (Afua 2014, p. 14).
Business Model Innovation in a Circular Economy
Despite the idea of a circular economy being around for many years, the current economic situation has proven to be more favorable now more than ever for firms to take action. However, the idea of the circular economy has changed among managers mainly because of three aspects. The first involves the increased volatility in the prices of goods and products, the second is information technology, which enables new business models that were unthinkable a few years ago, and the third is the constant change in consumer behavior and preferences. The development of a circular economy requires a pervasive shift in consumer behavior. From a customer’s perspective, the new business models that are aimed towards the more effective use of resources are categorized into ownership-based business models, usage-business models, performance-based business models, and result-based business model. In general, the change to a circular economy entails four main building blocks. These blocks include new building models, enabling conditions, global reverse networks, and product and material designs. According to the proponents of this circular economy, the circular model has better opportunities and advantages as compared to the traditional ownership disposal models. Nonetheless, the initiation and management of circular business models like asset reuse and remanufacturing have been coupled with both challenges and opportunities.
Innovation Models
The need for an innovation model in companies is brought about by the need for growth. Companies are expected to grow at a specific annual percentage to offer significant returns to shareholders. Smaller companies can grow at a much faster rate. However, such growth is dependent on effective innovation. Innovation models offer a conceptual framework for advancing and identifying the change ideas that have a higher chance of generating the value needed to realize sustained growth.
Innovation S-Curve
This innovative co...