Wednesday, February 9, 2011

7 Sources of Innovation

Peter Drucker, one of the greatest management thinkers from the last century, defined in his book “Innovation and Entrepreneurship” (1986) 7 classes of “OPPORTUNITIES”. He named these the "SOURCES OF INNOVATION", namely:

  1. THE UNEXPECTED: An example of the unexpected is the development of Nutrasweet. A chemist developed a new chemical. Accidentally he got some of it in his mouth. To his surprise it tasted very sweet. This was the start of a development trajectory, that took many years before Nutrasweet was introduced by Searle into the market.
  2. INCONGRUITIES: Incongruities or conflicts between opposing functions, requirements or values may be the start of an innovation. For example the request for a small car with still enough space on the inside seems to be incongruent. This however was solved in a new design as the Smart.
  3. PROCESS NEEDS: An old proverb says that “necessity is the mother of invention”. In the old days of the US many unskilled immigrants from Europe arrived. They were peasants that lacked in skills for the manufacturing of sophisticated artifacts such as guns. In those days one made every component of these guns by hand. To let them fit to each other and work properly required high skills in manufacturing. By making machines more precise and introducing standardization of the artifacts one could produce thousands of components individually. The machine or gun could be assembled using arbitrarily with ever component from the stores. The individual tasks could easily be learned by the immigrants, without years of training to become an overall master. In this way they could profit maximally from the existing economies of scale and learning curve.
  4. INDUSTRY AND MARKET STRUCTURE: Industry markets and market structure may offer opportunity’s for new types of services. Outsourcing of activities such as maintenance of the IT infrastructure is an example. Other examples are the merging of industry’s such as for example the merging of the computer industry with consumer electronics or IT with business consulting services. The X box of Microsoft is just one example from many.
  5. DEMOGRAPHICS: Demographics have long been a major source of innovation creating opportunities for new types of products and services. Life style drugs such as Viagra are just examples where the growing group of elderly people who feel themselves still very healthy and who would like to enjoy life longer can conquer the effects of biological aging.
  6. CHANGES IN PERCEPTION: An example of changes in perception as source of innovation is the following. In older days health was seen as related to body mass, meaning fatter people were perceived as more healthy. In the last century this perception changed as a result of medical study’s that revealed that overweight was a risk factor. Since that time many light products have come to the market. Many substitutes of sugar have been developed such as Nutrasweet. Also substitutes of fat have been developed although these have not been successfully introduced into the market yet.
  7. NEW KNOWLEDGE: Last but not least new knowledge has produced many opportunities for new products. The emergence of micro-electronics and new programming methods and tools, biotechnology, nano-technology etc have been the main motors of innovation and progress over the last decades . This will probably continue for the coming decades”.

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