The use of innovation for sustaining businesses have been in time since the advent of businesses themselves. The ability to exploit technological developments in order to solve real problems bring about value to the people using the businesses’ products or services. The value created by a business is the result of proper innovation taking place in a multi-faceted fashion in the spheres of technology and business administration. Hence, innovation theories are a concept to extensively address and analyse real world problems to get the most valuable benefit whilst the solving the problem. Creativity lies the in heart of innovation and it is a critical ingredient that catalyses the process of value generation via the services and products of the business. Different innovation theories have been coined and discussed globally by businesses to strategically place their products or services in a way that helps their clients or customers the most (Demil et al., 2015). The paper thoroughly discusses few of the innovation theories which help organizations to scale their value addition to the consumers.
Many companies use innovation to creatively search and screen competent human and non-human resources that are suitable for their ventures. The 4P innovation theory proposed by Tidd & Bessant (2007), enables the business to discover how the innovation process can be modified to bring maximum value on to the table and thereby improve the business. The four P’s in the theory stand for Paradigm, Product, Promotion and Public Relations. All these four P’s are necessary to modify existing process of the business in order to cater to the needs of the business. It gives the business a direction where to go and what are the areas where the business needs to innovate (Thomas et al., 2016) .
The concept of Routines proposed by Greve, H.R. and Argote (2015), is an economic evolutionary theory which fulfil the requirements of a unit in an evolutionary framework. The evolutionary framework focusses on three questions – how the variation takes place; how selection takes place; and what has been selected in one period is transmitted to another period. As like in genetics, the routines have stability like inheritance in genes and have the capability to mutate too i.e., cause variation. The use of this theory helps organizations to understand organizational change and thereby take strategic precautions adapting to the change (Greve, H.R. & Argote 2015).
For radical innovations, the ‘bottom of the pyramid’ theory focusses on the 4A’s viz., awareness, access, affordability and availability. To create an environment for innovation, these 4 A’s must be accounted for. This theory mostly focusses on converting fragmented and unorganized markets to organized markets. If people lying in the bottom most part of the economical sphere to be about 4 billion people, there is immense opportunity of an untapped market. Since, this market is unorganized, it is often controlled by local monopolies like middlemen (Meenakshi 2016). Therefore, catering to the 4A’s and making products and services in this market will be a good business opportunity.
Incremental and radical innovation are innovation theories proposed by Tidd, Pavitt & Bessant (2005) to impact markets and bring about disruption in the marketplace. A radical or disruptive innovation has a significant impact on a market and on the economic activities of the firms in the market. Incremental innovation, on the other hand, is concerned with an existing product, service, process or method whose performance has been significantly enhanced or upgraded (Norman & Verganti, 2014). It is assumed that incremental innovation is dominant form of innovation which has the capability to affect a business’s value creation process significantly. On the other hand, radical innovations are said to be a little complex and has more risk factors associated with it (Bouncken, 2018).
Architectural Innovation is another unique concept to evaluate and modify the businesses’ core competencies to bring a product or services into the market. These are the innovations that change the way the components of the product are linked together and leave the core design concepts of the product or service untouched (Barrett et al., 2015). In other words, it destroys the usefulness of a firms architectural knowledge and preserves the knowledge about the product components (Hofman, Halman & Van Looy, 2016). This ensures proper coherence of the product components and eliminates what is not necessary.
Dominant Design based innovation is another innovation theory that helps people to optimize and evaluate the robustness of a product under prescribed environmental conditions. In a competitive marketplace, different companies compete against each other having various designs to outcompete each other. At the same time, the design of the product or service is to be designed in such a way that it is most appealing to the user. Though time, a product design gets optimized and modified to become the dominant design that is an acceptable market standard. It brings out the expected appearance of an innovation and the way its meant to work (Lusch, R.F. & Nambisan 2015).
Dominant design and Bottom of the Pyramid are the Innovation theories which will be talked and discussed in this study. These two theories compliment each other since good and stable design in products are more suited in the markets which expect durability. The best design is the most dominant one; and that is the product which will be used by the masses, including the ones at the bottom of the pyramid. The strengths of each of the theory will be discussed in the following topics and examples of each theory will be shared to have a better understanding of the theory in detail (Lusch, R.F. & Nambisan 2015). Implementation of these theories have a major impact on businesses in modifying their product and services and have helped businesses bring more value to its customers.
As talked about before, this theory is very critical for businesses that cater to unorganized markets. Since people at the bottom most part of the economical pyramid constitutes of around 4 billion people globally; it is evident that the markets catering to service these people are usually unorganized. For such markets, making products and delivering services are complex and competitive. It is evident that since these markets are in an unorganized sector, competitors like local monopolies, money lenders and middle men (Rabino, 2015). Prahalad, 2012 describes his theory for managers to create a good environment for innovation by keeping the market constraints in mind whilst developing an innovation sandbox.
There are 4A’s that will help managers to create an environment for innovation in the bottom of the pyramid market (Lowe, Hasan & Jose, 2018) –
Awareness: The BOP consumers, since they are very large in number, need to be aware about the services and products available for them so that it helps them have an exposure to the new kind of innovations that will be valuable to them. Also, through awareness the consumers will know how to use such products at their advantage. Sometimes, the people in the BOP market are not educated enough to make sense of the product (Lehikoinen, et al., 2018). Active demonstrations and live use cases must be a part of the awareness campaign to educate the people about the products and services available to them.
Access: Enabling access is another key feature that needs to be taken care of while catering to the BOP market. Since there are many people in the BOP market, accessibility is a major risk factor for the producers. They need to ensure that they have enough inventory in a given geographical location to give its users enough number of products without any deficit (Lehikoinen, et al., 2018).
Affordable: This is another key and critical feature that the managers of the company need to understand whilst catering to the BOP market. Since these people lie in the bottom most part of the economical pyramid, it is very necessary for the company to price its product in a way that is affordable by the people its catering to. The BOP market is price driven and consumers will see maximum value in a product or service when it suits their pocket the most (Lowe, Hasan & Jose, 2018).
Availability: As like Accessibility, the products and services given by a company need to be available in all parts of a geographical location. This is needed for building trust among the consumers and have uninterrupted supply of products hereby satisfying the consumers consistently (Lowe, Hasan & Jose, 2018).
Strengths: Understanding the 4A’s is very necessary for managers catering to the BOP market. The BOP market has immense potential influence majority of people in any given area. Their economical conditions and affordability standards help managers to strategically decide and optimize their products in a way that is most valuable to its consumers (Kolk, Rivera-Santos & Rufín, 2014). Furthermore, this theory can also be used for exploiting technological advancements in the heath care industry to make solutions and services readily available and affordable for people at the same time (Angeli & Jaiswal, 2016).
As the name of the theory suggests, the dominant design theory helps companies to iterate their product multiple times to bring about a product that has the most appealing and useful design that helps the user to use it effortlessly and thereby creates a dominance in the market (Brem, Nylund & Schuster 2016). The dominant design-based products are so efficient in the market that any other product with some design inefficiencies will not be able to survive in the market while competing with the dominant one. This is mostly because the consumers are used to use the product or service in an effortless fashion which makes them adapted and gives them a natural feeling for using the product in any particular way. In other contexts, the dominant design is a product class that wins the market place and sets its design features are the market standard for comparing other products. A product, with a dominant design makes it difficult for the competitors to replicate and have a similar market share. This results in having a monopolistic market share compared to the competitors (Hill 2017).
Other literature talks about the narrow window of opportunity that a company must release the dominant design in the market. Timing is a critical factor that is responsible for the success of a dominant design compared to its competitors (Suarez, Grodal & Gotsopoulos 2015). Even though, first mover advantages prevail for companies launching a dominant design into the market, it is also necessary for companies to study the competitor design carefully before launching or even designing their own product design.
Furthermore, a dominant design is already set when a market accepts a technology as one which defines the technological and design specifications for an entire industry. To continue the dominant design as the dominant design in the market, creators of the product must constantly study the minor disadvantages of the existing product and make key changes to eliminate the difficulties. At the same time, they must provide users with additional features so that using the product seems effortless and valuable at the same time (Jindal et al., 2016).
There are 3 phases of dominant design where Wallin, Parida & Isaksson 2015 in their essay “A dynamic Model of Process and Product Innovation” talk about the importance of understanding the three phases in detail. The first phase is the Fluid Phase. The properties of the novelties of a product is changed in this phase. This is done so that the users and thinkers give actual insight to the product and result in the inventions driven by the needs of the users rather the creators themselves driving the needs. The second phase is the Transitional Phase (Wallin, Parida & Isaksson 2015). Here, the innovators are forcing their inventions to meet a higher demand of sales. They investigate the most cost-efficient way of mass-producing products so as to benefit themselves and their consumers at the same time. They bring about product variants in the market along with robust distribution channels to ensure the high demand is complemented well with their supplies.The last phase is called the Specific Phase. Here, the dominant design has established itself with negligible changes in the fundamental working of the product. Here, focus on innovation is low and more focus is laid on the quality of the products made (Tanja 2018).
The two above mentioned theories have had a massive impact on businesses to scale itself in multiple facets and have helped them give more value to its customers. The contribution of the authors for developing these theories are highly commendable as they speak for the success of some of the existing businesses in the market.
Impact of BOP innovation Market: A great example to begin with, Prahalad 2012, in his paper rightly gives a perfect example of an innovation that caters to the lives of the people living in the BOP market. The innovation sandbox developed by the author of the theory describes the key constraints and problem statements observed by the product creator. The solution, therefore, focussed on these key constraints and developed a solution around it. The problem statement investigated was the use of chullas (a traditional stove that uses firewood to make food) in villages and some of the urban parts of the Indian subcontinent. The solution was to build a smokeless modern, and easy to use stove such that a consumer would want to use it without having to deal with a lot of smoke. This is a perfect solution for the BOP market since majority of the people in the market were using the traditional stove to make their food (Prahalad 2012). This advantage of the modern stove over the traditional one was to ensure a smoke-free cooking lifestyle and giving the users less of work for gathering firewood for preparation of meals. This instigated the emotional needs of the poor and gave a product which was safer to use maintaining global safety standards. Furthermore, the business model used was scalable. All parts of the business from inventory, logistics, distribution and fuel supply had to be scaled since the number of users posed a very high demand for the product. Also, the stove was made affordable for the users so as to give them the most value out of all the other features. It was sold for less than INR 1000 ($20) which was decent enough for the people to afford (Prahalad 2012).
Therefore, by making an innovation sandbox, which encompasses the key constraints of the customer requirements help the creators to develop a problem specific solution which is valuable for its users. The above example is perfect as it meets the 4A’s requirement. The entire solution was exposed to lot of people which made them aware about a good alternative for making food. Along with awareness, the parts of stoves were made accessible to the creators to meet the demand of the market. Also, the entire solution is affordable for any person which gives the product an edge over the traditional form of stoves which have a constant operational expenditure of firewood which is a lot compared to the subsidised rates of cooking gas for the poor. Finally, the solution was made available for most of the users to have uninterrupted supply of products establishing trust in the BOP market.
The best example suitable for the Dominant Design is given by Teece (2017), in his paper, the pioneer company in consumer electronics, also known e as APPLE. Apple has revolutionized the way people looked at computers and mobile devices. It is all because of the dominant design strategies employed by the world-renowned Steve Jobs who laid a lot of emphasis on effortless use of products through major and minor design efficiencies. The launch of the first smartphone called the iPhone was a huge disruptive technological move which is still setting standards in the smartphone industry ever since its inception. Before the era of smartphones came into existence, Apple had also revolutionised the concept of personalised computers for normal users like lay men. It is because of this invention he further moved on to the invention of the iPod which helped users to have a million songs in their pocket by exploiting the technology of small data storage circuits coming into play around that time (Teece 2017).
In a similar way Steve Jobs surprised the world in 2007 with a mobile device capable of exploring the internet. Compared to the present time, there are still new smartphone manufacturers coming into existence since Apple has set its benchmark in the smartphone industry. The dominant design features of the device were set by Jobs mentioning features like internet use, text messaging, audio/video playing and recording, good camera options and viewing files for storage. All the other competitors in the market are competing against each other on the same features that Apple had once finalized. Being the first movers in the industry, Apple has risked its options and has been rewarded decently by having a majority market share in the smartphone market (Teece 2017).
The above two theories have been of utmost importance for companies and businesses to creatively have an edge over the market and give its consumers valuable products and services. Companies in the future should adopt innovation theories to understand and specifically have an edge over the market by employing strategic practices. The examples used above are not the only markets and industries where the respective innovation theories can be used. It is up to the discretion of the managers and innovators to use appropriate innovation theories to have the most creative solution to real world problems faced globally.
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