Innovation and Entrepreneurship - Assignment Example

Innovation Managing Name Institution Course code Due date CONTENTS Cover Page 1 Contents Page 2 Q1: Innovation as Tool for Entrepreneurs 3 Lessons in Innovation: Corporate Foreign Exchange 5 Q2: Barriers to Imitation 6 Q3: Value Curve Creation 9 References 13 Innovation Management Q 1: Innovation as Tool for Entrepreneurs Innovation is the definite apparatus of entrepreneurs, the means by which they utilize change as a prospect for a special service. In the book, “Innovation and Entrepreneurship,” Drucker defines innovation as a precise means obtainable to entrepreneurs to utilize business opportunities accessible in connecting technology to consumer needs. To better stay alive in the market, entrepreneurs need to apply inventive strategies in developing workable business forms and strategic positioning in today’s competitive market. Market change and technological advancement creates a persuasive case for innovation (Drucker, 2006). The change in the corporate foreign exchange industry has been driven by the deep adoption of emergent computer and communication technologies to perform business transactions. The foreign exchange market has grown with companies pushing to expand their operations across the globe. Globalization and decentralization of financial markets and value addition through innovation has rapidly evolved corporate foreign exchange providers with advanced communication tools for remote trading. Foreign exchange companies have become international leaders of the monetary services industry by taking age-old on-exchange trading practices and shaped then into an advanced technology based industry. The fast pace nature of the industry has led to further brisk innovations in technology with much value addition to the service delivery to consumers. Emergent e-business models must focus on product and service innovation, customer relationship, infrastructure management and financial revenue models for them to be successful (Drucker, 2006). This has been witnessed in the foreign exchange services market during the late 1990’s via the adoption of refined desktop software and server/cloud computing which have gradually replaced the traditional on-exchange trading prevalent in the industry at the time. The introduction of the Forex Virtual Private Server (VPS) hosting technology into the foreign exchange industry has made computer technology the most ideal platform for service delivery. Technology has streamlined foreign exchange trading, a highly specialized area of financial services, by streamlining processes to enable real-time service delivery across different time zones and in different currencies. In the e-business model ontology concept, product innovation and customer relationships are key to the successful adoption of e-business innovations. The successful adoption of information technology in foreign exchange financial services has been enhanced by the speedy decline in the cost and rapid increase in the processing power of digital technologies. The quest for product leadership by foreign exchange service providers has prompted companies to push performance boundaries aimed at offering the very best service delivery to customers. In line with the Blue Ocean strategic approach to business innovation, companies that uphold operational efficiency usually provide key market products at the least price with the least inconvenience. The Corporate foreign exchange industry maintains an efficient quote system that enables the customer to conveniently access real-time price feeds from all major financial exchanges of the world. The service as provided today is more efficiently delivered to the trader than was available during the on-exchange era of foreign exchange. Computer technology has enabled the lowering of costs involved in bringing the service to the consumer. The foreign exchange industry is a dynamic one with small fluctuations in the value of currencies having possibly major gains or losses for traders and companies who form the consumers of this service. Focus on customer intimacy in service provision is implicit in the foreign exchange market. The provision of secure trading user accounts signifies a focus on what the customer wants as opposed to what the market wants. Information technology has enabled marketers for foreign exchange companies to cultivate rich customer relationships in the aim of streamlining service provision and providing optimum customer satisfaction. The available trading account solutions are designed to provide tailor-made trading value for the client. Order execution for market transactions is of key concern with better market execution being a primary concern while developing the various product solutions available in the industry. Lessons in innovation: Corporate Foreign Exchange The success of the foreign exchange providers over banking institutions in the financial services industry has subtle lessons to be learned by budding entrepreneurs. The concept of the buyer utility map which describe how new ideas and technology adoption creates diverse utility suggestions for existing products. New innovations should strive to create environmental-friendly and exiting products which reduce risk to the customer and enhance convenience, simplicity and customer productivity. In reply to customer needs for extra and quicker market information, greater transaction liquidity and trading risk management, foreign exchange financial service providers have applied information technology to an ever more cosmic, complex and refined range of tasks. The early focus on consumer needs have revolutionized the non-bank foreign exchange industry far beyond the earlier dominance by banks of the financial services industry. Innovations providing outstanding value to the customer must also overcome the adoption hurdle for their successful incorporation in product development (Drucker, 2006). Overcoming adoption hurdles for new innovation has put the non-banking foreign exchange providers ahead in the financial services industry owing to the earlier adoption of IT in product improvement. The need for real-time price quotation and transaction execution efficiency by customers has led to the adoption of computer technologies faster than has been for banking institutions. The adoption of the right strategy canvas is of key importance for the success of any business venture. The corporate foreign exchange industry has witnessed a change in the perceived principal factors characterizing the market. The development of value innovation in making available technology to work for the customer has been responsible in putting corporate foreign exchange ahead of the banking sector in the financial services industry. To achieve this, a drastic shift in viewing market factors surrounding corporate foreign exchange has allowed the exploration and embracing of new ways of doing business over the internet. Q2: Barriers to Imitations Intellectual property (IP) includes rights over the commercial use of copyright property, patents, business methods and industrial processes. IP rights stems from technology and innovation as a result of much research and creative development effort. IP rights have important commercial value to entrepreneurs and are the basis on which companies gain competitive market advantage. A company may experience dilution in its market edge in the event of theft and leakage of its intellectual property which may lead to the imitation of the technology by competitors. Protecting IP rights from imitation can be a most daunting task for companies, especially for big multinationals which operate foreign subsidiaries and hold many rights for IP. Coca-Cola being a multinational corporation holds IP registrations all over the world with more than 5,000 IP registrations in its Pacific Group and India subsidiaries alone. In protecting its IP rights, the Coca-Cola Company has had to employ the use various barriers to imitation. The main categories of fences used to protect IP rights include patents, trade marks, designs, copyright, circuit layout rights, plant variety rights, and trade secrets and classified information. These barriers are enabled through the use of international and national laws governing IP rights use and ownership. In registering IP, a set out procedure is followed to ensure that all relevant details and originality of the IP are captured in the registration. Copyright is IP which gives the holder the right to reproduce intellectual work or art. Copyrights are registered for original intellectual work, performances and recordings and give the owner the sole discretion of deciding its distribution, publication and replication, its modification and commercial exploitation. The usage of copyrights is transferable through licensing for use of the IP in specific and limited ways. Trademarks represent names and unique distinguishing marks that are used by persons or businesses for differentiating their products from other similar ones in the market. Trademarks gives the owner the right to prevent others from using these product markers as their own, from imitating the product and passing it as genuine and to seek compensation for any damage arising through their illegal usage. A patent is a limited right granted by a government to an entrepreneur to make, use, license out or sell the invention for 20 years, after which the invention would be open for use by everyone. The patent application requirements and granting procedure and the extent of the rights conferred vary widely depending on the issuing country. For a patent application to succeed, claims defining the invention must meet relevant requirement for patentability. A trade secret is commercial information comprising of a production formula, business practice, organizational process and product design, which derives commercial value from not being widely known. Trade secrets enable businesses to gain an economic advantage over competitors and thus, to maintain its value, the business must guard the trade secret information from leaking outside the organization to its competitors. A company can protect its trade secrets from leakage through non-complete and non-disclosure contracts between it and its employees. Companies attempt to obtain trade secrets of their competitors through lawful reverse engineering and employee poaching and unlawful industrial acumen. Industrial design as a type of IP is the ornamental or aesthetic aspect of a product which may be linked to its shape, surface texture, patterns and color. Designs for jewellery, vehicles, architecture, textiles among other articles can be registered for protection under law. An industrial design must be new and original in the context of existing designs for similar products. IP enclosed in design are typically of an artistic nature and thus do not shield the technical features involved in a product. Circuit layout rights protect the topographical arrangement aspects of electronic design, especially for integrated circuits. Electronic chip designs, being a creation of the human mind, is subject to IP protection under most common legislation against the copying by photographing and preparing masks for imitative reproduction of integrated circuits. Plant diversity or breeders rights are approved to developers of new plant varieties aimed at presenting select controlling rights over the propagation materials and harvested produce for a specified number of years. Coca-Cola owns copyright in the design of its products’ bottles, the logo designs, advertising and brand names. The company employs trademark protection to prevent its competitors from passing off their products as Coca-Cola’s. Trademark protection enables the company to prevent competitors and counterfeiters from cashing in on its large marketing strategy. The formula used for making the Coca-Cola brand of beverage was patented in 1895. When the formula changed, the company chooses not to patent it because the trade secret in the formula would become known to everyone and anyone could use it once the patent expired. To protect the basic idea making the formula unique, the company has to guard the trade secret indefinitely. In doing this, the company runs the risk of having no legal protection at all in the event the trade secret in the formula was to leak to its competitors. To guard the trade secret, Coca-Cola uses confidentiality agreements and other trade contracts between the company and its subsidiaries. In the case study of Coca-Cola’s innovation strategy, it emerges that the company would suffer extensive imitation of its trade secret in the absence of the barriers to imitation. It is therefore imperative that a company protects its IP rights which are harder to protect given their intangible nature. The proper use of these types of protection has enabled Coca-Cola maintain product leadership in the soft drinks industry worldwide. Q3: Value Curve Creation The answer to the question “How can we create a new industry?” is to create a different value curve. A value curve is a graphical illustration of how an organization can configure its customer offering (Drucker, 2006). It can be used to reveal to entrepreneurs where value can be created in an organization’s products and services. It is a powerful tool which can enable a company to create new market spaces by diverging from a traditional approach of the industry’s market environment. A case in example is Compaq which has developed its computer server products along a value innovation aimed at enhanced quality, reliability, maintainability, performance and competitive pricing. There is tendency for product managers to hold a traditional or conventional mental conception of the current market environment. Drucker (2006) put forward the concept of Red and Blue Ocean market strategies which differentiate focus areas for product development. The focus of most product development cycle and market strategy is usually on the competitors offering similar products and services. This leads to what the authors referred to as Red Ocean strategy whereby the market boundaries are presumed to be fixed and all market rules inflexible. This demands managers to focus on beating the competition in a limited market space by making a trade-off on product value to achieve cost advantages. In order to exploit existing consumer demand for their product, these managers align the corporate system to a focus on cost efficiency management models or product differentiation strategy. The Blue Ocean strategy is a product development approach that focuses on creating new market space through meeting emerging needs of existing and new customers. This strategy removes focus from the product having to compete directly with others in the market. Blue Ocean strategy focuses on six principles for creating new markets aimed at addressing consumer value (Drucker, 2006). The first principle is the recreation of market boundaries by searching for commercially viable opportunities through better satisfaction of consumer needs. The strategy seeks to evaluate the big picture of the company’s products in the context of overall market environment as opposed to detail emphasized in management tools. Blue Ocean strategy focuses beyond existing customer demands by looking for emergent and created demand for new innovative products. The strategy focuses management efforts on building a strategy for long term growth. Focus is also on overcoming organizational hurdles to enable offering the product to the consumer in the most convenient way. Lastly, Blue Ocean strategy focuses on the principle of building on the company’s strategic and human resources and using this competitive edge in the execution of its core strategy. In devising a Blue Ocean strategy, managers should seek to answer four questions relating to an industry in guiding the development of a new value curve necessary for opening up new markets (Drucker, 2006). The strategy queries what factors in the organization ought to be reduced to below industry standards. It examines what factors need to be eliminated entirely that the industry assumes to be necessary. It looks into what factor need to be created in the organization that is not offered in the industry. The strategy also establishes what factors need to be raised to well above industry standards. In developing a new value curve for the industry, the current competitive environment is first analysed to bring out information of where competitors are heavily investing in product development. This also brings out how competitors’ marketing efforts position different products to customers. Using this information, the value curve enables a company to create for their product new features that are not on offer in the industry and that create and solve new market needs by creating new demand. The computer server industry has traditionally focused on general application software, operating system compatibility, components and materials, pricing, sales and distribution and field. In a traditional value curve derived for the computer server industry, the vertical axis represents the relative competitiveness values for computer servers, while the horizontal axis represents the factors being invested in and competed on in the industry. In deriving the curve, the relative values for the different product’s offerings corresponding to each of the factors. Compaq has pioneered computer hardware, software and service products subsequently adopted as industry standard, for instance Automatic Server Recovery feature and PCI Hot Plug software technology. In its server development product strategy, the company has developed its products along a value innovation to product design. This has been targeted at providing high availability of features, life cycle cost reduction, performance tracking and optimization, and security alongside the other traditional competition factors driving the industry. A focus on high availability of features is a divergence from the mainstream performance focus. Competition at a higher technological dimension has necessitated computer companies to design more modular products with more clearly defined components and subsystems (Drucker, 2006). Compaq has aimed at the development of systems capable of accomplishing mission-critical functions central to the success of operation. High availability features include non-stop computing designed to work around any failures without interruption, rapid recovery features, and fault prevention features. Life cycle cost reduction focuses on lowering the cost for owning the system through lower maintenance and expansion costs. This includes features for: server maintenance involving tracking, monitoring and maintenance of server subsystems; remote capabilities allowing server control via network, and; investment protection which comprises of products’ update support on legacy versions of server software. Performance tracking and optimization focus for the product include features used to evaluate and report on server performance to allow for system fine-tuning and optimization. Compaq servers offer many features designed to enhance physical and logical security by controlling physical access, remote network access and internal access by installed software. In light of the information brought out by the value curve for the server industry, we can derive a value curve for Compaq in relation to the industry. References Drucker, F. P., 2006. Innovation and Entrepreneurship: Practice and Principles. UK: HarperCollins Business. Read More