The Role of Innovation of a Product in Success of a Company - Assignment Example

Product Innovation “Innovation endows resources with a new capacity to create wealth”, says Peter Drucker. He explains his point saying, “There is no such thing as a ‘resource’ until man finds a use for something in nature and thus endows it with economic value. Until then, every plant is a weed and every mineral just another rock.” (Drucker). Product innovation refers to the introduction of new or improved goods or services. Joseph Schumpeter, one of the great contributors to the scholarly literature on innovation, stated two kinds of change – gradual or incremental change and discrete or disruptive innovation (Lecture 2, Slide 19 and 20). Resources are scarce in the world. To fully utilize these resources, innovative techniques are applied to make the best use of available resources. In this world of extreme competition, innovation is considered lifeblood for every business. Most of the successful businesses have even established separated R&D departments for this purpose in which they consume millions of dollars per year. UPS, one of the largest logistics companies, is maintaining a budget of about $1 billion for its R&D department every year. Microsoft consumes more than $9 billion a year in its R&D. One may be amazed as to why these leaders companies are spending such a huge amount when already earning in billions. The reason is that they want to survive and surpass their competitors by initiating various product innovations. They know that every product has a life cycle and that product innovation is necessary if a product wants to retain a longer maturity period. The force which is helping the Coca-cola and Pepsi to still maintain the highest market share is the force of innovation. Had they been stagnant and dependent on their past success, they would have been no more. The product that I have chosen is Microsoft Windows. I will be discussing the emergence of the MS Windows Graphical User Interface (GUI) based operating system. This example would enable to clearly show my understanding of the subject. An operating system is a program that makes the use of hardware possible. It allows applications to be created and run. It provides a user-friendly interface, enabling us to communicate easily with the hardware. The inception of OS is quite old. The later version of OS includes DOS and Linux based operating systems. When Intel created its first computer-based microprocessor, there happened a revolutionary change in the field of computers. It made possible the creation of advanced and modern operating systems. Many small businesses emerged to create an operating system to make the computer a user-friendly device that might be run by home users. Their efforts resulted in many operating systems, most of them highly complex. However, the world of computers experienced a drastic change when the concept of GUI based OS was made practical. The first GUI interface OS was introduced by VisiCorp’s on Oct 1983. Microsoft launched its first GUI based OS system with the name MS Windows 1.0 on 20 November 1985. It was not a complete OS, it was, in fact, an “operating environment”, with just a few of Microsoft's applications. As a new product, MS Windows faced tough competition from VisiCorp’s GUI based OS, namely “VisiOn”, IBM’s OS, GEM by Digital Research and MacOS by Apple Inc and numerous others UNIX based operating systems, most prominent among them was SunOS. IBM’s journey ended with its one and only OS and never tried manufacturing OS again. While VisiOn and GEM failed as they lacked support from all-important third-party developers. Apple remained Microsoft’s biggest competitor. They are still competition, but now, Microsoft has gone far beyond with 91% of market share. “Microsoft became the top software vendor in 1988 and never looked back” Microsoft Corporation. Bill Gates, the owner of Microsoft, is the person behinds Microsoft’s success. He is an excellent planner. He was the one who spotted the difference in Intel’s new computer chip, the 8008. For others, it was just another improved chip, even Intel thought the same. Gates recall the past saying, “….. Paul and I looked past the limits of that new chip and saw a different kind of computer that would be perfect for us, and everyone – personal, affordable, and adaptable. It was clear to us that because the new chips were so cheap, they soon would be everywhere (and) software would be the key to delivering the full potential of these machines.” (Bill Gates Making His Breakthrough As A Conceptual Innovator, Age 19) He grabbed the opportunity. He foresaw the future. He entered into the PC revolution from the very first stage. Bill Gate’s company became famous for its computer operating systems and killer business deals (Bellis). One of the famous most famous deals, which may be called the turning point of Microsoft, was its deal with IBM. Gates talked to IBM to let Microsoft retain the licensing rights to MS-DOS for IBM’s newly manufactured low-cost personal computer (Bellis). IBM shipped its PC with a choice of three OS – MS-DOS and two other OS. Therefore, only one of the three could succeed and become the standard of the market. To make MS-DOS, the standard OS, Gates provided MS-DOS for a very nominal cost. Among those three OS, the most inexpensive was MS-DOS. This helped MS-DOS to become the most selling OS as compared to the other three, thus making the standard of the market. Talking about the matter, Gates says, “Our strategy worked. … Our goal was not to make money directly from IBM, but to profit from licensing MS-DOS to computer companies that wanted to offer machines more or less compatible with the IBM PC”(Bill Gates Making His Breakthrough As A Conceptual Innovator, Age 19). This example shows that he was a lateral thinker. He preferred the future benefits. This was the starting of Microsoft’s journey toward success. The earlier versions of OS were DOS mode. These were the code-based operating system and very difficult to use with limited functionality. For this reason, we cannot compare DOS with Windows. Though both were operating systems, they have significant differences. The introduction of a GUI operating system was, therefore, a discrete change because it changed the perceptions of controlling a computer. It was a transformation, totally different technology and disconnected from its previous version. However, all the later versions of its Windows, including Windows 1.0, 2.0, 3.0, 95, 98, NT, 2000, XP comes under gradual change. All of these windows were connected with earlier versions, with improvements, keeping in view customers and market demand. The only hindrance Microsoft faced in the creation of its Windows was the lawsuit filed by Apple Inc. against Microsoft. When MS introduced the 2.0 version of its OS in 1998, Apple computer saw a resemblance and filed a lawsuit against Microsoft for breaking the 1985 licensing agreement. Bill Gates, the owner of Microsoft, won the case through his sharp mind and intelligent tactics. MS Windows might never have the position what it is enjoying now if it had lost the lawsuit. The launch of version 2 was a great success and a huge sale was recorded, mainly because it was targeted to home and business users, not for any scientific purpose. The interface was simple and understandable. During 1992, MS introduced a 3.1 version of its Windows. Three million copies were sold just in the first two months. This version was a much-improved version with certain multimedia capabilities and true type scalable fonts. On August 24, 1995, Microsoft improved its earlier version of OS, launching Windows 95, a more powerful and user-friendly with certain additional networking functions. On June 25, 1998, it modified Windows 95 and launched Windows 98. Then in 2000, it introduced windows 2000, which offered automatic software update over internet and with greater security measures. In Oct 2001, MS introduced Microsoft XP. XP was one of the best windows of Microsoft until date. Windows and its Competitors The number of companies dealing in OS business is quite a few, but two main competitors of Microsoft are Apple Inc and Linux. Apple provides Macintosh OS which runs only on its own made computers. Apple provides its free software to its users. Linux based operating systems are the open-source OS, available for free. There are several distributions. They are more powerful than windows and more flexible and secure. The advantage that Windows enjoy over its competitor is its compatibility with most of the software. Every third-party software developer always considers Microsoft Windows when creating software. Microsoft Windows need to consider some of the aspects of its competitor. The main issue is security. Linux is preferred to be installed on server PCs and is preferred by the web hosting services and all of those who are concerned about the security issue. Internet threats are increasing day by day and therefore, Microsoft needs to emphasis this side of the picture. Conclusion The reason behind Microsoft’s success is the continuous innovation of its product. It never relied on its past success. Microsoft invests more than $9 billion US dollar a year in its R&D (Microsoft sees little changes to R&D budget). It cares about its customer's needs and market demand and introduces the product accordingly. Microsoft's operating systems have proved to be very useful for the world of business. Hundreds of thousands of businesses are relying on Microsoft based operating systems. MS windows capture an astonishing 91% of the total share. It has, indeed, totally changed the world of the computer with its continuous innovating operating systems. References Bellis, Mary. About.com. 15 November 2009 . Drucker, Peter F. Innovation and Entrepreneurship. 2nd Revised Edition. Oxford: Butterworth Heinemann, 1999. "From Theory to Practice." 2nd Lecture News Centre. 12 November 2009. 16 November 2009 . The Arts of Innovation. 16 November 2009 . Read More