BUSINESS MODEL INNOVATION

How management Innovation, process Innovation, product/program Innovation, and marketing Innovation should effect and lead to better business model innovation?

How management Innovation, process Innovation, product/program Innovation, and marketing Innovation should effect and lead to better business model innovation?

Introduction

Our objective is to review the major areas of innovations such as process Innovation, management Innovation, product Innovation and marketing Innovation that relate to the dimensions of 'competitive response' and 'market evolution' and demonstrate that how these Innovations should effect and lead to better business model innovation. We develop a conceptual framework that considers the interactions between these key constructs of 'competitive response' and 'market evolution'. We review the literature that addresses the impact that competitive responses (to a variety of market initiatives) can have on the evolution of a market. We then examine the research that considers how the evolution of a market can constrain and influence the responses of firms within an industry. Our framework also considers the impact that environmental (or exogenous) factors can have on both dimensions of 'competitive response' and 'market evolution.' Such factors may assist to distinguish between the cause and effects of some of the interactions between competitive response and market evolution. More specifically, we can represent the area of investigation using the framework shown in Figure 1. This framework can be useful for organizing and structuring our review of this literature (Athey, 1995).

Discussion and Analysis

Generally, the literature looks at innovations that either improve the quality of existing products or reduce the cost of producing them. Improvements in quality are observed to generate upward shifts in demand or in the prices people are willing to pay for a good or service. In contrast, process innovations provide a reduction in the unit cost of production, but do not affect end-users' willingness to pay for the product. Some innovations provide a combination of performance and production cost benefits, but in most cases an R&D project can be categorized based on whether its primary thrust is to affect the benefits that consumers obtain from the product or to provide benefits to the firm in terms of producing the product (Bloch, 1995).

This distinction is useful, but recent work demonstrates, however, that product innovation is a richer concept than simply an improvement in quality. The use of differentiation as a pre-emptive action by incumbents has received considerable attention. This view of pre-emptive product differentiation has been analyzed in the context of spatial models with focus on an incumbent's 'crowding' the product space by launching additional products. Incumbents are assumed to have cost advantages in launching line extensions. An interesting extension to this idea relates to R&D that focuses on innovations that add benefits to a product beyond the products available in a market place. An example of this would be the child seat recently developed for Polaris personal watercraft (aka Wave Runners). Such innovations broaden the appeal of a product to other end users (families with a small child) without materially affecting the benefit obtained by other users (Eswaran, ...