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Business Fundamentals was developed by the Global Text Project, which is working to create open-content electronictextbooks that are freely available on the website http://globaltext.terry.uga.edu. Distribution is also possible viapaper, CD, DVD, and via this collaboration, through Connexions. The goal is to make textbooks available to the manywho cannot afford them. For more information on getting involved with the Global Text Project or Connexions email us atdrexel@uga.edu and dcwill@cnx.org.
Editors: George M Zinkhan, Anastasia Thyroff, Anja Rempel, and Hongbum Kim (The University of Georgia, USA)
Reviewer: Bettina Cornwell (University of Michigan, USA)
We define “innovation” as an idea or product that is new to the sponsoring organization. A “discontinuous innovation” has the potential to alter existing consumption patterns, or else create new ones. For example, portable audio equipment has evolved from the radio, to the cassette tape player, to the compact disk players and to the digital audio player. At the extreme, a discontinuous innovation results in the creation of a new generic category of products, such as the GPS navigation system.
In contrast, “continuous innovations” involve introducing a new entrant into an existing category. Continuous innovations do not challenge established patterns of consumption behavior. A good example of this type of innovation is the smart phone. For this product, consumers already know what a phone is and how to operate it. From this perspective, the operation of a smart phone can be viewed as a combination of the functions associated with a mobile phone and the functions of a personal digital assistant (PDA). In a more recent offering, a smart phone combines the functions of PCs and Macs through applying the software and operating systems of each. As a result, consumers can access their current knowledge about existing products and then easily grasp the “smart phone” concept.
On the one hand, the process of innovation is the life blood of an organization. New product innovations are responsible for employment, economic growth, technological process, and high standards of living (Souder 1987). In a marketing context, innovation is crucial for the development of successful new products (both goods and services). On the other hand, it is a challenge to develop and evaluate these innovations. In brief, where do innovative ideas come from? We describe five sources of innovation: technical breakthroughs, non-technical idea development, ideas that emerge from environments, serendipity, and purposeful development. These various strategies are outlined in Table 1 and described in more detail in the following section.
Technical breakthroughs refer to product innovations that result from technical developments. New brands that have emerged from this process include MP3 players, GPS navigation devices, and cell phones. In the long run, it is consumers who decide how new technologies will be used. For instance, Guglielmo Marconi created the radio-telegraph so that ships could communicate with each other on the high seas in 1894. However, other applications emerged, and everyday uses eventually multiplied. For instance, in 1921, the RadioShack Corporation was formed in Boston to sell equipment to “ham” operators. The company took its name from the small wooden building for radio equipment on ships. As more families adopted radios, it was a real challenge to develop content. Eventually, the advertising business model was created, and the funds that were provided by advertisers were used to sponsor the development of popular content (e.g. music, dramatic shows, variety shows) (Zinkhan 2005).
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