MGMT8015 Chap.7 Types and Sources of Innovation
Types and Sources of Innovation
What can be new
Innovation can be a new good or service, a new production method, a new market, a new source of supply or a new organisational or industry structure, and it applies to processes and services as well as products.
Four types on two axes
Asking whether the technology and the market are existing or new separates incremental, radical, architectural and disruptive innovation.
Most corporate R&D goes to incremental work, while radical work is rare, slow and costly.
Disruption as a process
Disruption starts when entrants serve customers incumbents ignore, then improve until the mainstream adopts.
A famous ride-hailing app fails that test, which is the chapter’s key trap.
Where innovation comes from
The lecture names social and lifestyle trends, such as urbanisation, and global crises, such as Covid-19, as sources.
Its AI case adds a useful habit: say whether you mean the technology level, the industry level or the whole economy before calling something radical, disruptive or creative destruction.
What this chapter covers
- 01
Five forms of innovation
- 02
The technology-by-market matrix
- 03
Incremental and radical innovation
- 04
The fermentation era and dominant designs
- 05
Architectural innovation
- 06
Disruption in six steps
- 07
Sources of innovation
Worked example · free
Classify four innovations with the technology-by-market matrix
- 1(a) existing technology, existing market: incremental.
- 1(b) known components recombined for a new market: architectural.
- 1(c) new technology serving new markets: radical.
- 1(d) new technology entering an existing market through an ignored low end: disruptive.
Key terms
- Incremental Innovation
- The refinement and enhancement of existing products or processes using existing technology in an existing market.
- Radical Innovation
- Innovation that is new to the world, departs from existing methods and often requires a new business model.
- Fermentation Era
- A period after a new technology appears when no dominant design exists and competition and confusion are high.
- Dominant Design
- The technology or design that emerges as the standard and ends the fermentation era.
- Foothold Market
- The ignored low-end or new segment where a disruptive entrant first wins customers with a cheaper, simpler offer.
Types and Sources of Innovation FAQ
Is Uber a disruptive innovation?
The course says no. Disruption begins with less demanding customers at the low end and turns non-consumers into consumers. Uber built in quality features from the start and mostly served people who already used taxis, while drivers and public-transport users did not change their habits.
Why do most companies favour incremental innovation?
Radical innovation is risky, expensive and slow, often taking at least ten years, and needs patience, determination and budget. Incremental work delivers a steady stream of new, improved and varied products, which is why the lecture reports that 85 to 95% of corporate R&D goes to it.
What is the difference between architectural and disruptive innovation?
Architectural innovation reconfigures known components to create new markets, such as a home fitness bike combining existing bicycles with internet classes. Disruptive innovation uses novel technology to serve existing markets, entering through customers the incumbents overlook and improving until the mainstream adopts it.
What happens during a technological fermentation era?
After a new technology appears, no dominant design exists yet. The lecture lists three marks: high uncertainty about which option will win, intense competition as firms push their own standard, and confusion among producers and users. Autonomous cars, with competing sensing approaches, are its current example.
Is process innovation as important as product innovation?
Yes. The lecture stresses that innovation is not only about physical goods. Process innovations such as the moving assembly line and flat-pack furniture cut unit costs significantly, and service innovations such as direct selling of computers and car sharing changed whole industries.
Exam move
Draw the matrix and add two examples to each quadrant from your own experience. Then take one disruptive example and walk it through the six steps, noting the evidence for each. If any step has no evidence, reconsider the label. Test yourself on the Uber case until you can give both reasons it fails the disruption test without notes. Keep the four quadrant labels and one example each on a single card.
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