Amazon Kindle And Its Innovativeness - Essay Example

Amazon Kindle and Its Innovativeness Introduction The term ‘innovation’ can be simply referred to the creation of better or new ideas, products, technologies, and processes that are duly accepted by governments and society. Innovation is entirely different from the concept ‘invention’. To illustrate, the former converts a new idea into revenues and profits whereas the latter turns a new idea into tangible outcomes such as product or system. Nowadays, organisations set focus on innovation by fostering R&D activities, because empirical evidences point that this process has a direct effect on organisational performance. Innovation is the key element that shapes corporate life and assists business managers to perceive and seize the opportunities which were unimagined previously. According to Lafley and Charan (2008), innovation plays a crucial role in changing market trends, customer tastes, degree of competition, and societal habits in a particular territory where a business operates. Every innovation adds value to the organisational efficiency of a firm by developing effective processes and business strategies, which in turn assists the firm to reduce cost of production and thereby increase the profitability. In total, innovation stimulates growth of the overall economy by procuring huge volume of revenues from a variety of sources. By considering the significance of innovation in the corporate world, this concept has been chosen for the completion of this assignment. This paper will analyse the product innovation process in ‘Amazon Kindle’ in particular. Concepts of Innovation A variety of innovation models have been proposed in different times in order to assist organisational management to initiate innovation procedures. As Mouton and Bailey (2005) point out, the chain-linked innovation model is a well known concept which describes technical activities involved in the innovation process, different external market forces, and complex interaction between different phases of the process. Different branches of economic literature on innovation describe this process differently. Industrial economics identifies innovation as the act of investing money for inducing gains from economic activities. At the same time, institutional economics define innovation as an important economic activity for reducing transaction costs and thereby improving operational efficiency. According to Leger and Swaminathan (n.d), the evolutionary economics defines innovation entirely different from neoclassical theories and assumptions; and it illustrates innovation by reconciling the micro and macro evidences. In the context of international trade, “endowments and factor prices, market structure and competition, and demand pull factors” are the determinants of innovation. Sundbo (2003) reflects that innovation process is generally classified into three types such as product innovation, process innovation, and strategy innovation. Tidd, Bessant, and Pavitt (2005) state that under product innovation, an organisation tries to bring a new product or service to life with intent to meet customers’ changing requirements whereas the process innovation attempts to increase a firm’s bottom line profitability, managerial control over costs, productivity, and employee job satisfaction. In the view of O’Marah (2005), the process innovation also benefits customers by increasing efficiency in supply chain activities such as timely product or service delivery. Finally, strategy innovation is about restructuring the prevailing industry methods of creating customer value for the purpose of adding additional value to the company’s market stature and creating new markets and customer groups for wealth maximisation. Amazon Kindle The following parts of the paper will focus on the product innovation strategies and programmes behind the development of Amazon Kindle. The Amazon Kindle is an e-book reader designed by the multinational electronic commerce company Amazon.com. This device enables users to browse, read, and download digital books, magazines, and newspapers on wireless connectivity (Amazon.co.uk). An E Ink electronic paper display is used in this hardware device and this feature minimises the power usage to a large extent. This innovation has greatly assisted the Amazon.com to stimulate its business activities by offering improved shopping facilities to users. The company’s reports show that different user friendly features of this device have attracted a large number of new customers to Amazon.com Amazon Kindle: A Substantial Innovation Evidently, this product development process comes under substantial innovation. Substantial innovation assists a firm to bring dramatic changes in its business performance by exploring potential business opportunities that are likely to lead the industry with a competitive advantage over rivals. As experts point out, “substantial innovations are mid-level in significance both to customers who benefit from them and to the sponsoring company that believes they will significantly help the firm grow and create new wealth” (Tucker, 2008). Although this type of innovation does not fall under the category of breakthroughs, it enables organisations to meet or exceed its goals for growing business, increasing market share, and lowering cost of operations. Under this type, substantial improvements in a firm’s existing product lines or services greatly aid the firm to achieve customer loyalty. It is expected that there would a considerable increase in the sales revenues of Amazon.com with the introduction of this new e-book reader. In the view of Epps (as cited in Shaer, 2011), the Amazon.com would sell between 3 and 5 million Amazon Kindle Fire (a version of Kindle) units before the end of 2011. Many other marketing experts strongly support this opinion by pointing to the fact that this device possesses a variety of competitive advantages over its competitive substitutes. It is widely expected that the newly designed hardware device would raise challenges to iPad, a tablet computer of Apple Inc, because the Fire is about half the size of the iPad and it is sold at less than half the price of the iPad. The Amazon.com charges a price of $199 for the Kindle Fire whereas the cheapest iPad is sold for $499 (Yahoo Finance, 2011). Origin of Amazon Kindle The aggressive competition from other online shopping companies forced the Amazon.com to develop something extraordinary to retain existing customers and attract new customers. This need led to the innovation of a wireless e-book reader. Actually, the Amazon first Kindle Generation was released on 19th November 2007 with a price of US $399. The company was really struggling with several market issues at the time of its introduction. Although this first generation Kindle greatly captured market, the company did not market it outside Untied States due to some technical barriers. In 2009, the Amazon.com launched the Kindle 2, an upgraded version of Kindle First Generation. Although the company reduced the Kindle 2’s retail price from $359 to $299 by July 2008, the product was widely criticised for its higher original retail price. Subsequently in October 2009, the Amazon.com introduced an international version of Kindle 2 with the addition of a number of innovative features. However, the newly added changes to the Kindle 2 have made it difficult to read smaller font sizes which majority books use. The company could effectively overcome this challenge with the introduction of a higher contrast E-ink technology. During the course of sales of Kindle 2’s international version, the company announced another device called Kindle DX for some simple usages in the US. By the beginning of 2011, the company announced a revised version of the Kindle DX called Kindle DX Graphite. The organisational performance of Amazon.com underwent tremendous changes when the company introduced a new generation of the Kindle (Kindle 3 or Kindle Keyboard) on 28th July 2010. According to the company reports, the Kindle 3 was “the fastest-selling Kindles ever” (Business Wire, 2010). The state interventions have greatly fostered and stimulated the innovations at Amazon.com. The Bloomberg Business week (2011) reports that Amazon.com spends huge amounts on lobbying the federal government on issues including sales tax regulations, transportation safety guidelines, and privacy and intellectual property protection. Hence, the federal government offers maximum assistance to the company in developing innovative products and services. On 28th September 2011, the Amazon.com announced three varieties of Kindle including Kindle (2011), Kindle Touch, and Kindle Fire Tablet. From the analysis on the developmental phases of the Amazon Kindle, it seems that this device was developed gradually over a time period of nearly three years. However, the current market information indicates that these innovations are causing problems to the company including fall in stock values. In the words of Chaffin (2011), the success of Kindle Fire Tablet is raising potential challenges to Amazon.com even before the device has been shipped. The company management announced that profits may be declined during the December quarter probably because of the Fire. According to IHS iSupply (as cited in Chaffin, 2011), the Amazon.com is losing nearly $10 on each Kindle Fire sold as a result of increased cost of materials on the device. In short, the company is struggling with the newly developed e-book readers mainly due to a thoughtless pricing decision. Causes of failure A combination of many factors is likely to contribute to the failure of Amazon Kindle e-book readers. First, product quality issues, specifically screen damage, seem to be the major challenge that Amazon.com needs to confront with. Most of the users of the Amazon’s e-book reader complain about the horizontal or vertical lines that appear on the screen. However, the company management argues that the diagonal damage appearing on the screen does not constitute manufacturing defect and hence the company hesitates to replace the product under warranty terms. In addition, the big size of the Amazon Kindle, compared to rival products, causes inconveniences to its users. The relatively higher prices of Amazon Kindle are found to be unaffordable to users. Today, most of the cell phones provide e-book reader facilities and therefore users do not like to carry cell phones and Kindle e-book readers same time. Yet another problem is that since Kindle does not allow the users to browse images and videos, users are prevented from viewing books that contain videos. Obviously, the company is forced to spend largely on product promotion because Amazon Kindle is facing market competition from iPads and iPhones. Conclusion In total, Amazon Kindle e-book reader is a substantial innovation of the Amazon.com. The Kindle products have been developed into today’s form through a long product development process lasted over past 3 years. Before the innovation of the Kindle, the company had been struggling with several business issues. Although the introduction of Kindle First Generation and Kindle 2 has given the company competitive advantages over the rival products, the subsequent innovations could not maintain the success due to product quality issues as well as pricing problems. The company management expects a future profitability downturn mainly attributed to the Kindle Fire innovation. 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