COLLEGE OF
BUSINESS ADMINISTRATION
AND ACCOUNTANCY
Chapter 7: Innovation
What is Innovation?
Innovation is production or adoption, assimilation, and exploitation of a value-
added novelty in economic and social spheres; renewal and enlargement of
products, services, and markets; development of new methods of production; and
the establishment of new management systems. It is both a process and an
outcome.
Innovation is about successfully implementing a new idea and creating value for
your customers and stakeholders.
Importance of Innovation
The importance of innovation in entrepreneurship is shown by coming up with a
new way to produce a product or a solution. A service industry can expand with
another type of service to fulfill the ever changing needs of their clients.
Producers can come up with another product made of raw materials and by
products.
The importance of innovation in entrepreneurship is another key value for the
longevity of a business. They saw the need within the community and among
themselves that they have come up with a solution. They seize the opportunity to
innovate to make the lives more comfortable. And these solutions kept evolving
to make them better, easier and more useful. Entrepreneurs must keep themselves
abreast with the current trends and demands. Manufacturers are constantly
innovating to produce more without sacrificing the quality
Innovation Impact on Market
Innovation serves as a dynamic force, reshaping markets and propelling
businesses into new realms of possibility. Its impact is profound, offering a
spectrum of benefits that redefine competitiveness, customer engagement, and
long-term sustainability. Let’s explore how innovative products and services
transforms the market landscape.
Innovation significantly impacts the market by providing a competitive
advantage, expanding market reach, increasing revenue, enhancing brand
reputation, improving cost efficiency, enabling adaptability to change, boosting
customer satisfaction, attracting top talent, ensuring regulatory compliance, and
fostering long-term growth.
The following benefits collectively contribute to a company’s success and resilience in a
dynamic and
evolving market:
1. Competitive Advantage: Innovation sets businesses apart, creating a competitive
edge that attracts customers and differentiates them from rivals.
2. Market Expansion: Innovative offerings often open new markets, allowing
companies to reach untapped customer segments and expand their business.
3. Increased Revenue: Successful innovations can lead to increased sales and
revenue as customers are drawn to unique and improved products or services.
4. Brand Reputation: Being known as an innovative company enhances brand
reputation, instilling trust and loyalty among customers.
5. Cost Efficiency: Innovations can streamline processes, reduce production costs,
and enhance operational efficiency, contributing to overall cost savings.
6. Customer Satisfaction: Meeting and exceeding customer needs through
innovation enhances satisfaction, fostering loyalty and positive word-of-mouth.
7. Attracting Talent: Innovative companies often attract top talent seeking dynamic
and creative work environments, further fueling the cycle of innovation.
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8. Long-Term Growth: Continuous innovation is key to sustained growth, as
companies staying ahead in the innovation curve are better positioned for long-
term success in dynamic markets.
Innovation Taxonomy
Innovation taxonomy refers to the systematic classification and categorization of
different types of innovations within an organization or a broader context. It
involves creating a structured framework to understand and organize various
innovation initiatives based on their characteristics, objectives, and impact. This
classification helps organizations better manage and strategize their innovation
efforts by providing a clear overview of the diverse ways innovation can take
place. The taxonomy typically includes categories such as product innovation,
process innovation, organizational innovation, and incremental versus radical
innovations. By analyzing and categorizing innovations, businesses can identify
patterns, allocate resources effectively, and tailor their approach to foster specific
types of innovation that align with their goals. It's a valuable tool for navigating
the complex landscape of innovation and fostering a culture of continuous
improvement within an organization.
Categories of Innovation Taxonomy
Product Innovation: Involves creating new or improved products or services.
Example: Introducing a new smartphone model with advanced features or
launching a groundbreaking software application.
Process Innovation: Focuses on improving methods, techniques, or operations within the
organization.
Example: Implementing a more efficient manufacturing process, adopting a new
project management methodology, or streamlining supply chain operations.
Organizational Innovation: Involves changes in the structure, practices, or culture of the
organization.
Example: Implementing a flexible work environment, adopting a new leadership
model, or restructuring teams to enhance collaboration.
Incremental Innovation: Definition: Refers to small, gradual improvements or
enhancements to existing products, processes, or systems.
Example: Releasing regular updates to software with added features or making
incremental adjustments to a product's design.
Radical Innovation: Definition: Involves groundbreaking and transformative changes,
often disrupting existing norms.
Example: Introducing a completely new and revolutionary technology that
reshapes an industry, such as the advent of smartphones or the introduction of
electric vehicles.
Innovation Matrix
An innovation matrix is a strategic tool that can help business leaders identify and
prioritize opportunities for innovation in their organizations. It provides a framework for
analyzing and evaluating potential opportunities, which can help them focus on the most
promising approach for growth. Companies also use it to develop a shared understanding
of the direction and goals of a business and the strategies they plan to employ to achieve
them. This helps executives and managers ensure that their decisions align with the
organization's strategic priorities and goals.
College of Business Administration and Accountancy:
cbaa@unp.edu.ph
COLLEGE OF
BUSINESS ADMINISTRATION
AND ACCOUNTANCY
Common Structure of an Innovation Matrix
In the usual innovation matrix that companies use, the vertical axis describes the problem
an innovation solves, and it may be defined or not well defined. The horizontal axis
establishes the domain in the same way. A defined domain typically means that the
organization knows who or what can address the problem. This may be an existing
technology that they can use, their research and development (R&D) department, or
another company with the capabilities to meet their needs. The four sections are:
1. Breakthrough innovation: While the innovations in this section address a specific
or well-defined problem, the domain isn't well-defined, which usually means a
company is finding it difficult to develop solutions. This may happen when an
organization uses the same approach and strategies and is also often the reason
that breakthroughs come from startups who are still willing to try new and
different methods to achieve their goals.
2. Sustaining innovation: This is similar to a breakthrough innovation because the
problem it addresses is well-defined. Its difference is in the fact that the domain is
also well-defined, which means the organization knows the right approach to
arrive at its desired outcome.
3. Basic research: While many people don't consider this an innovation, it's still key
to pursuing growth in business because it may result in new technological
discoveries that may be useful to a company. Strategies in this quadrant are for
instances wherein the problem and the domain aren't well-defined.
4. Disruptive innovation: Innovations with a well-defined domain and a problem that
isn't well-defined are in this quadrant. These often result in revolutionary products
or services
How to use an innovation matrix
1. Decide on the composition of the matrix. Innovation matrices differ in terms of
the perspective they offer and the elements they use to categorize innovations.
While you can create your own, you can save time and effort by utilizing a
common innovation matrix that many organizations use. If your focus is on
developing solutions for consumers, it may be a good idea to use the matrix with
market and technology as parameters.
2. Brainstorm and categorize innovation strategies. The next step is to facilitate a
group discussion among team members with the aim of developing a list of
strategies the company can use to innovate.You can do this in person or through
an online collaboration tool. After creating a list, the next step is to classify them
into matrix categories.
3. Choose the best strategy. To do this, use the matrix as a reference while
considering the organization's goals and innovation maturity. For example, if the
organization is a startup, it may be a good idea to focus on developing a solution
to address a specific market need that other companies aren't meeting. If the
organization is an established company, it may want to innovate its processes to
improve efficiency.
Different Classification of Innovation
1. Product Innovation vs. Process Innovation:
Product innovation involves the development of new or improved products or
services. This can include the introduction of groundbreaking technology, the
creation of new consumer goods, or the enhancement of existing offerings.
Process innovation focuses on improving the methods and operations used in the
production and delivery of products and services. This can encompass
advancements in manufacturing techniques, the implementation of more efficient
logistical processes, and the adoption of new software systems to streamline
business operations.
College of Business Administration and Accountancy:
cbaa@unp.edu.ph
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2. Incremental Innovation vs. Radical Innovation:
Incremental innovation involves making small improvements to existing products,
services, or processes. It focuses on evolution rather than revolution and can lead
to gradual advancements in technology, design, or functionality.
Radical innovation, on the other hand, involves the development of completely
new and disruptive ideas that can revolutionize an industry or market. This type of
innovation brings about significant changes and often creates entirely new
paradigms.
3. Sustaining Innovation vs. Disruptive Innovation:
Sustaining innovation refers to the improvements that existing companies make to
their products or services in order to maintain their competitive position in the
market. This can involve the regular introduction of new features, the
enhancement of existing functionalities, or the refinement of production
processes.
Disruptive innovation describes innovations that create entirely new markets and
value networks, eventually disrupting existing markets and value networks. This
type of innovation often challenges established norms and can lead to shifts in
consumer behavior and industry structures.
4. Open Innovation vs. Closed Innovation:
Open innovation suggests that firms should use external ideas as well as internal
ideas and internal and external paths to market as they look to advance their
technology. This approach encourages collaboration with external partners,
customers, and even competitors to harness a wider range of ideas and resources.
Closed innovation refers to the traditional model of innovation where all research
and development activities are conducted internally and kept confidential. This
approach relies on in-house expertise and resources to drive innovation and often
leads to proprietary advancements.
5. Discrete Innovation vs. Continuous Innovation:
Discrete innovation involves the development of specific, individual innovations
that have a defined beginning and end. This can include the creation of new
products, the implementation of novel processes, or the introduction of innovative
business models.
Continuous innovation, also known as ongoing innovation, refers to the constant
effort to improve products, services, and processes over time. This can involve the
regular enhancement of existing products, the continuous optimization of
operational procedures, or the ongoing refinement of business strategies.
6. Technological Innovation vs. Business Model Innovation:
Technological innovation focuses on the development of new technologies or the
application of existing technologies in new ways. This can encompass
advancements in hardware, software, engineering, and scientific discoveries.
Business model innovation involves the creation of new business models or the
adaptation of existing ones to better serve customer needs, respond to market
changes, or capitalize on new technological advancements. This type of
innovation can lead to disruptive changes in how companies generate revenue,
deliver value, and interact with customers.
Here are some of the key purposes of innovation along with examples that illustrate the
diverse ways in which innovation manifests:
1. Driving Economic Growth and Competitiveness:
Purpose: One of the primary purposes of innovation is to drive economic growth by
creating new industries, increasing productivity, and enhancing overall competitiveness.
2. Solving Complex Problems and Meeting Needs:
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Purpose: Innovation aims to solve complexADMINISTRATION
challenges and meet the evolving needs of
AND
individuals, organizations, and societies.ACCOUNTANCY
3. Enhancing Efficiency and Effectiveness:
Purpose: Innovation seeks to enhance the efficiency and effectiveness of processes,
operations, and systems across different sectors, leading to improved outcomes and cost
savings.
4. Creating Value for Customers and Stakeholders:
Purpose: Innovation aims to create value for customers by delivering new and improved
products, services, and experiences, as well as generating value for stakeholders through
the development of innovative business models and strategies.
5. Fostering Sustainability and Environmental Responsibility:
Purpose: Innovation plays a crucial role in fostering sustainability and environmental
responsibility by developing eco-friendly technologies, reducing waste, and minimizing
the environmental impact of business activities.
6. Empowering Societal and Technological Advancements:
Purpose: Innovation aims to empower societal advancements by addressing social
challenges, promoting inclusion, and leveraging technological advancements to improve
the quality of life for individuals and communities.
Group 6 BSBA 2B
GUILLERO, SHENNA KYLA
CORTADO, ABIGAIL
AUINGAN, IVANNAH GRACE
BELEN, RUZZELL EARL
College of Business Administration and Accountancy:
cbaa@unp.edu.ph
