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Файл:I.T. Innovations in Business. Teaching handbook
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1.3. Defining Innovation
to obtain high-quality personal medical services
patients to quickly settle financial issues and get help faster
In governance digitalisation
speeds up service requests, ignoring queues at reception points
helps to obtain a wide range of information in a single window
(for example in the Russian e-government system—Gosuslugi)
aids citizens and residents obtain quick answers
In education digitalisation
helps to find a specialist faster, based on the feedback of oth-
er students
helps to get more variability online courses that replace oth-
er types of training
helps students explore a wide range of educational and vo-
cational specialties
helps students communicate more effectively with other stu-
dents and educators
Digitalisation has also been integrated into business processes,
such as in restaurants, tourism, social interaction and provides individuals with a higher quality of life.
1.3. Defining Innovation
Innovation (see Fig. 4) is a consequence of the natural process of
human evolution. Innovations lead to an improvement in the quality of human life and an increase in the quantity and quality of information that a person can manage.
Fig. 4. Dictionary Definition of Innovation
3
Innovation // Merriam-Webster Dictionary : site. URL: https://www.merriam-
webster.com/dictionary/innovation (date of access: 12.07.2023).
3
11
1. The 4th industrial revolution
Innovation is the commercialization of any enabling technology
which provides customers with optimized capability. Other sub-definitions of innovation include the following:
Industrial innovation is defined as the transfer of new ide-
as or the adaptation of new concepts, until the final stage of
a product, process or service activity.
Grassroots innovation is defined as an innovative product or
process created at the bottom of the pyramid, usually due to
necessity, hardship and challenges.
Social innovation is defined as new ideas or solution propos-
als to the needs of humans which have not been fulfilled to
increase their life standards and welfare.
Eco-innovation is defined as any directed/oriented innova-
tion aiming at reducing environmental impacts.
In the modern world, proper innovation management gives companies the opportunity to lead the market in their industries and decide the future of technological development of mankind. Individuals who assimilate innovations will always have a wider outlook, thus
making it easier for them to find opportunities for success both in career and in everyday life.
1.4. Disruptive Innovation
A buzzword from recent times with the boom of the tech industry is the term, disruptive innovation. It refers to a process through
which new products or services enter an already established market
thus eventually displacing the existing market leaders. The concept
was coined by Prof. Clayton Christensen and has been identified as
one of the most influential business ideas of the early 21st century.
The disruptive innovation model is shown in Fig. 5. This diagram
contrasts product performance trajectories (the red lines showing how
products or services improve over time) with customer demand trajectories (the blue lines showing customers’ willingness to pay for performance). As incumbent companies introduce high-quality products or services (upper red line) to satisfy the high end of the market
12
1.4. Disruptive Innovation
(where profitability is highest), they overshoot the needs of low-end
customers and many mainstream customers. This leaves an opening
for entrants to find footholds in the less-profitable segments that incumbents are neglecting. Entrants on a disruptive trajectory (lower
red line) improve the performance of their offerings and move upmarket (where profitability is highest for them, too) and challenge
the dominance of the incumbents.
Fig. 5. Disruptive Innovation
4
Disruptive innovation typically begins with targeting underserved
or overlooked markets with simpler and more affordable options —
over time they gain traction and displace the incumbents. Disruptive innovation itself is characterized by: lower gross margins, smaller target markets, as well as simpler products and services. A number
of well-known examples of disruptive innovation include: personal
computers (PCs) disrupting the mainframe and mini computer ecosystem; cellular phones (now smartphones) disrupting the fixed line
telephone; Netflix (and streaming services) disrupting the video rental
4
Christensen C. M., Raynor M. E., and McDonald R. What Is Disruptive Innovation? // Harvard Business Review : site. URL: https://hbr.org/2015/12/whatis-disruptive-innovation (date of access: 12.07.2023).
13
1. The 4th industrial revolution
market. Other examples include the telephone (which replaced the
telegraph), steamships (which replaced sailing ships), semiconductors (which replaced vacuum devices), digital cameras (which replaced
film), and e-mail (which has somewhat replaced the traditional mail).
Disruptive innovation is capable of having a profound impact on
so many industries, as well as transforming business models, and it
can create new market segments. We have seen this with technologies
such as Large Language Models (LLMs) and the new augmenting of
traditional career roles with AI. It opens up opportunities for newer
firms to obtain market share and challenge incumbents.
It is important to note that disruptive innovation is different from
sustaining innovation, which involves improving existing products or
services for an established customer base. Disruptive innovation, on
the other hand, focuses on creating new value and accessibility for
previously underserved markets.
Overall, disruptive innovation has been a significant concept in
understanding how new products and services can disrupt established
markets and reshape industries.
1.5. Diusion of Innovation
Every technological innovation is disseminated into society
over time and at various rates for various reasons. To furthermore
comprehend innovation and its spread, a theory was popularized by
Everett Rogers in his book “Diffusion of Innovations” (published
in 1962). This theory— Diffusion of Innovation— summarizes how
individuals in society react differently to technological innovation.
It has its origins in communication where it was used to ascertain
how a product or an idea gains momentum over time and spreads
through a group of people or social system. Presently, this theory can be used to predict end users’ reaction to the introduction of
any form of innovation. In the public healthcare sector, the theory
has been used to accelerate critical public health programs adop
tion; particularly the programs that are aimed at behavioral change
of any social system.
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1.5. Di usion of Innovation
According to the theory populations can be divided into fi ve
groups (depending on how they react to changes), see Fig. 6:
1. Innovators: With this group, little is required to convince them
to adopt any technology. These individuals are adventurous
(in search for the latest ideas) and take no long period to accept other innovations. They believe that novel innovations
are an integral part of society.
2. Early adopters: These are opinion leaders and they live with an
awareness of the need for change. They are the one of the fi rst
to apply and test innovations, provide feedback and form an assessment and public opinion about the innovation in question.
3. Early majority: They adopt innovation before the average person though they are not leaders. They expect feedback from the
pioneers (i. e., led by evidence) and leverage it for their benefi t.
4. Later majority: These are the skeptics and usually need to be
forced to accept innovation if the reason is logical. To appeal to
this group, there is the need for success stories to be seen by them.
5. Laggards: This group consists of people who are the most diffi cult to onboard with regards to any new innovative idea due
to their high level of skepticism. They are moved by statistics,
pressure and appeals by other groups of adopters.
Fig. 6. Diff usion of Innovation
5
It is worth pointing out that the theory’s goal is to streamline in-
novation so as to meet the needs of all fi ve (5) groups rather than to
5
Kaminski J. Diff usion of innovation theory // Canadian Journal of Nursing
Informatics. 2011. Vol. 6. No. 2. P. 1–6.
15
1. The 4th industrial revolution
transition individuals from one category into another. This is because
early innovators naturally ‘spread the word’ which enables more peo
ple to become open to the innovation in question which will lead to
critical mass. In summary, diffusion of innovation can be broken down
into a 5-Stage Adoption Process; namely,
1. Knowledge (The Awareness Stage)— where the individual lacks
complete information and is exposed to the innovative product.
2. Persuasion (The Interest Stage)— where the individual gains
interest in the new idea, thus seeks additional justifying information.
3. Decision (The Evaluation Stage) —where the individual from
a mental perspective applies the innovation to their present as
well as anticipated future circumstances, thereby making the
decision as to whether or not it is worth adopting.
4. Implementation (The Trial Stage)—where the individual begins to make use of innovation.
5. Confirmation (The Adoption Stage) —where the individual
commits to fully using the innovation.
Finally, it has been identified that innovation diffuses successfully through factors such as observability (the degree of visibility of results); relative advantage (the degree of superiority to what is existing);
compatibility (with socio-cultural values); trialability (experiential capabilities); and complexity (the degree of simplicity).
In spite of its popularity, the theory has its drawbacks including
the fact that it is an oversimplification of reality when it comes to technology adoption, as such it disregards the complexity in social, economic and cultural makeup of societies across the globe.
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1.6. Ganer Hype Cycle
Another lens for viewing technology is through the popular
Gartner Hype Cycle. This is a graphical paradigm developed and
branded by the American research, advisory and IT firm Gartner
to represent the adoption, maturity, and social application of technologies. It depicts how technology behaves over time.
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1.6. Ga ner Hype Cycle
The Gartner Hype Cycle divides the technology life cycle into
fi ve phases (Fig. 7):
1. Technology Trigger: The initial stage when a new technology is introduced, generating excitement and expectations.
2. Peak of Infl ated Expectations: The stage when the technology receives signifi cant attention and hype, often accompanied by unrealistic expectations.
3. Trough of Disillusionment: The stage when the technology
fails to meet initial expectations, leading to disappointment
and skepticism.
4. Slope of Enlightenment: The stage when the technology starts to
mature, and practical applications and benefi ts become clearer.
5. Plateau of Productivity: At this fi nal stage, the technology
reaches widespread adoption and becomes a standard part
of everyday life.
Fig. 7. The Gartner Hype Cycle
6
The Gartner Hype Cycle has faced some criticisms, such as the
argument that it is not representative of a true cycle thus the outcome
does not solely depend on the nature of the technology itself. Also,
critics argue that the hype cycle is not scientifi c in nature and does not
6
Dedehayir O., Steinert M. The hype cycle model: A review and future direc-
tions // Technological Forecasting and Social Change. 2016. Vol. 108. P. 28–41.
17
1. The 4th industrial revolution
reflect changes over time in the speed of technological development.
Despite the criticisms, the Gartner Hype Cycle is still widely recognized and an influential framework for understanding the adoption
and maturity of technology. Overall, the hype cycle serves as a valuable framework for understanding the lifecycle of technologies and
their potential impact on society, business and industry. It helps organizations make informed decisions about technology investments
and innovation strategies.
1.7. Innovation and ESG
One novel paradigm we observe is the concept of environmental, social, and governance (ESG) practices. Innovation is becoming increasingly important in the context of ESG practices. Innovation is a key driver of ESG progress and enables organizations to
achieve their ESG goals. Without innovation, ESG would not have
reached its current level of prominence within both public and private domains.
ESG is currently an expectation that needs to be attained among
middle market firms, which leads to the question of how companies
and organizations can differentiate themselves further through ESG.
The answer to this lies in innovation, which can aid companies stand
out by developing new and unique solutions to ESG challenges.
ESG-driven innovations usually require significant collaboration
to realize their full potential. This means working with stakeholders,
including customers, suppliers, and regulators, to develop and implement innovative solutions that address ESG challenges.
Innovation programs help identify, assess, and develop solutions
that meet specific ESG needs. They attract and engage the target audience with a focus on sustainability, which is a central topic in the
ESG discussion. Protecting sustainable innovation through patents
enables companies to bring to market environmentally friendly products and processes, while at the same time promoting ESG practices.
ESG practices can guide peer companies to adopt green innovation
behaviors and improve sustainability performance.
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1.7. Innovation and ESG
An article by Dr. Scott A. Snyder & Dr. Sanjay Macwan outlines the steps within a new framework for innovation driven by ESG
(as seen in Fig. 7):
Redefi ne the fi rm’s mission to encompass ESG objectives.
Collaborate with key clients and partners in the ecosystem to
jointly create ESG innovations, and assess innovations generated by external collaborators.
Leverage data and AI technologies to detect ESG innovation
prospects and forecast their forthcoming infl uence on both
business and society.
Establish a systematic innovation approach rooted in ESG
principles, and cultivate leaders in ESG-driven ventures capable of nurturing novel projects that employ emerging technologies to advance positive outcomes for society, profi tability, and the environment.
Fig. 8. ESG-driven Innovation
7
Overall, innovation plays a crucial role in driving ESG progress
and enabling organizations to achieve their ESG goals. It helps companies diff erentiate themselves, collaborate with stakeholders, identify solutions, and protect sustainable innovation through patents.
7
Snyder S. A., Macwan S. The Missing Link Between ESG and Corporate Innovation // Knowledge at Wharton : site. URL: https://clck.ru/3AGZHY (date of access: 28.09.2023).
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1. The 4th industrial revolution
Queions for Chapter 1
1. What is digital transformation, and how does it impact traditional business models?
2. Outline 5 key drivers of the digital economy and their influence on industries and markets.
3. Compare and contrast sustaining innovation and disruptive
innovation. Provide real-world examples of each.
4. How can established firms foster a culture of innovation to
stay competitive in the digital era?
5. Briefly discuss the role of emerging digital technologies (e. g.,
IoT, AI, blockchain) in driving digital transformation across
industries.
6. How do emerging digital technologies impact the customer experience and operational efficiency? Provide use cases.
7. Explain the Gartner Hype Cycle model. How can organizations benefit from understanding technology hype cycles?
8. Provide an example of atechnology that has gone through the
Gartner Hype Cycle stages, and discuss its trajectory.
9. How can organizations identify disruptive innovations early
in their development and respond effectively?
10. Discuss the challenges traditional incumbents face when disruptive innovations enter their markets.
11. Analyze the influence of culture on the diffusion of innovation. How do cultural factors, values, and norms impact the
rate and pattern of innovation adoption in different regions
or countries?
12. Compare and contrast the key innovation adoption models,
such as the Rogers’ Diffusion of Innovations theory and the
Technology Acceptance Model (TAM). How do these models help us understand the process of innovation adoption
and diffusion?
13. Describe the stages of the innovation management process,
from idea generation to implementation.
14. How can organizations effectively manage innovation portfolios to balance risk and reward?
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