The two concepts of invention and innovation are about each other. An Invention is something that is completely new and is created after much ideation and research process. Innovation is the improvisation or adding something thing unique or significant that is new or efficient on an existing invention. The idea of invention and innovation are of much significance in the industrial sector (Malhotra and Malhotra, 2001). Innovation is used by industries to bring in change and foster sales growth. The invention segment is very few, and Companies mainly survive on innovation. This innovation and changes carry certain inherent risks that must be assessed and managed effectively by the companies to survive. Amazon.com is cited as one of the leading internet retail companies in the scenario of innovation and risk manage. The following paragraphs describe the process and theories of the invention, innovation and the concept of risk management for the company and the process of new product development.
Amazon.com Inc is an American e-commerce internet based retail company founded in the year 1994. It provides services to consumers, sellers, enterprises and content creators. Originally selling books, the company developed to offer a range of other items. The company also provides marketing and promotional services and produces consumer electronics like Kindle e-book readers Fire phones etc. It also provides cloud computing services. The focus of the company is on selection, price and convenience. The Company is ranked number 6 as a renowned Innovative company and it strives to deliver to the most exquisite and excellent service to its customer sets. Hence the following paragraphs will make a study on the new product development process that Amazon.com adopts (Goodfellow et al., 2015).
Invention is creation of something new or finding of new ways of making the same item. An invention is possible when a thorough scientific research and study is constituted. It is the creation of something which was previously nonexistent but would make people’s life easier. The idea of innovation is bringing an improvement or a new concept and feature which will help in turning the invention into a product (Carayannis, 2013).
Innovation is successful in making the business evolve, survive or grow. In many businesses the innovation is needed to solve a problem or capture an opportunity. Innovation could be multi faceted (Evolvehousing.com.au, 2015). Amazon.com has been reinventing its business with its development of the business model of innovation. They found new ways to create value and conduct business and thus they got paid for it. As business model of innovation is the basis of competitive advantage in the 21st century, it has been adopted by many. Amazon.com’s business model was to eliminate unnecessary traditional features. Raise and reinvent the online retailing structure. Created cloud computing services and reduce short term profitability to increase the market share to become the leading web retailer and increase profitability for future.
Amazon’s business model of innovation allows it to provide a diverse customer value proposition as a main competitive advantage. It keeps the company connected to the entrepreneurial roots. The company explains how business model of innovation leads to revenue and growth opportunities (Andries and Debackere, 2013)..
The Linear Innovation model comprises of few basic steps (Ward, Shook and Sobek, 2007). It is the linear movement of the invention to innovation and finally diffusion. It summarises the following steps of Basic research followed by applied research followed by development and production and finally diffusion. It is the basic step of prioritising scientific research as the base of the invention and then to innovation. Next it is the identifying of growth opportunities, generating vale and new ideas, enter the emerging markets and create new systems, rules and metrics (Phillips, 2009).
There are three other models that are the “Technology Push Model”, “Market Pull Model” and the “Phase Gate Model”. The Technology push model, defines the need for basic scientific research into the designing and engineering of the product to manufacturing the product and then apply marketing strategies to gain sales. The Market pull model assesses the market need and develops the product or innovates according to the need. After developing the design, the product is manufactured properly so that it could be released to drive sales. Finally the Phase gate model describes the various steps or phases involved in obtaining feedbacks and time variations to pass each gate. A gatekeeper judges the productivity of the phase and might send it back if judged inefficient. Passing of all the phases will finally yield the desired product (Annacchino, 2007).
Amazon uses the market pull model to assess the market need and thus develops its products and features of service through a customer-centric ideology. The Company has an efficient information technology which is good at understanding the consumer wants and needs. Amazon hence uses the lean principle of automation to evolve as a giant internet retail store (Ijdesign.org, 2015).
Amazon conducts intelligent surveys and identified that the consumers are over burdened with the complexities of the traditional web retailers, there are no clear check out points and hence they used the customer value proposition to identify the customer needs and requirements. They saw that the market need elimination of useless features and new compoact features that will provide clear system of buying and checking out. They developed this features with their Andon cord system to eliminate defects and wastes. Later they found ways to upgrade the site. They continue to ask what the customer needs and wants and thus design and develop accordingly. Amazon found the need to develop original equipment and thus came out with the Kindle e-book reader. Amazon uses marketing techniques to promote the features through advertisements and direct selling. This has finally lead to immense sale and growth as in the first year itself Amazon sold 500,000 kindles. Hence, the Market Pull theory was effective in leading to sales through its innovation model (Amazon Innovates With Its Business Model et al., 2015).
Innovation is required to introduce a new product. For a new product development, the design team goes through many stages of research and studies of consumer behaviour and perception to bring in the innovation. The basic steps of new product development are given below (Anand and Kodali, 2008).
Concept- it is the theme, thought or idea on the basis of which the product is developed. The concept would provide certain benefits to the organisation and achieve some technical goals. For Amazon the concept is meeting the customer requirement. Their latest innovation is offering a valuable customer service by removing defective product line and relaunching it after resolving the defect completely.
Ideation- during this process the teams involved brainstorms on the ways the idea could be implemented and the ways the innovation will benefit the organisation. All the ideas are gathered and evaluated to select the best possible idea that is to be further investigated and applied. The lean principle adopted by Amazon endeavours to eliminate waste, amplify learning, fast delivery and creating value by offering quality.
Design- it is the execution of the best idea and to engineer details to achieve the desired outcome. Amazon used a number of technologies and innovation like Kaizen team and usage of Andon cord to detect a defect and eliminate them (Mital and Desai, 2007).
Test- it is a crucial process where the innovation is first tested in a small or medium market before it is officially released. This process finds out whether there is need of refinement and Amazon found that the andon cord was successful in eliminating tens of thousands of defect each year.
Release- as soon the final test confirms that the product innovation is ready to use and will deliver the desired outcome; it is officially released in the market among the target audience.
A new product development process goes though some clear steps but as this was not developed before the development of a new product means rising of new risks and uncertainties which must be gauged and addressed (Taplin, 2005). Thus as Amazon finds ways to integrate product or rather service development to provide excellent customer service and satisfaction it also has to identify potential risks and has to come out a strategy to mange this risks (Bucherer, Eisert and Gassmann, 2012).
The risk management is an ongoing process and it includes identifying the potential risks and then engaging in risk assessment for risk evaluation and solving of the issues. Some risks are inherent and cannot be solved immediately (GENUS and COLES, 2006).
New Product Development is a very important part of a Company’s competitive strategy. However, it is a task that is related to high risks and uncertainties. The risks are to be identified and assessed and the uncertainties should be addressed properly. Hence, the primary objective is to identify the risks associated with new product development (Charrel and Galarreta, 2007).
Analysing the risk means a three stage process of risk assessment, risk evaluation and risk reduction. The goal of risk assessment is identifying the risk factors and guessing what could go wrong. Once the risks are identified, it is required to understand the impact the risk will have on the organisation as a whole and individual sectors (Theeke, 2013). The final stage of the risk analysis is risk reduction that offers solutions that will lead to minimisation or containment of the risk or solving the issue as a whole. Hence, the risks associated with Amazon.com’s new product development process are identified, evaluated and a resolution idea is recommended (Chew, 2008).
1. Delays or unanticipated costs in integrating the business operations, the personnel and the systems may lead to some uncertainties and difficulties that must be paid attention to. The managers tend to utilize a high volume of resources for the product development process and it leads to delay. Also, the resources are to be maintained and hence using of resources for one project on another project can lead to further delays and risks. Hence, it is important that the capacity buffer system is used to tackle and eliminate the issues (Martinbauer.com, 2015).
It is assumed that using large batches is a cost effective process, but it increases the holding cost of batch maintenance and transaction cost of processing. It is thus better to use medium sized batches to reduce the cost and make the process faster.
2. One of the most impending risks is of sticking to a single development plan. The organisations like to stay in their own comfort zone and thus opportunities are lost and innovation is stagnant. Hence, it is essential that organisations modify their development plan according to the changing consumer needs to create competitive features and unique designs. Amazon.com is doing exactly that and continues to research, create and deliver new services to the changing and rising demand of its huge customer base.
3. Another identified risk is commencing a new product development phase too soon. Often, the companies are quite impatient with their sales growth and hence they rush in developing a new product line and engage in another project. They do not take out time to judge the previous project and sustain it. It utilises a lot of resources and causes delays and yields high cost. Also, the consumers might not be ready for such consecutive and continuous changes. It disrupts the tranquillity of the process and hence a company like Amazon.com must take enough time to assess the success of each new product or service introduction. Also, they should take some quality time for researching the consumer needs and launching of a new project.
4. Products that have too many features could lead to complications. Teams can be confused while deciding on which feature is more relevant and crucial. The teams should understand that feature would be most attractive and useful to customers and thus should omit the irrelevant ones. Having too many features can also lead to failure of few features as each take-up time to be developed and thus concentration on each segment is lowered. Hence, it is important that the company goes through a well-defined phase to list and develop only the relevant features. Amazon.com goes through a single product development concept at a time. It first invested in Kaizen principle of improving product processes; next it developed the Andon cord system to eliminate waste that was the most significant development in Amazon.com. Finally, the 3D printer technology that is sold by Amazon has created a revolution. It is thus seen that Amazon.com employs different strategies each time.
5. The research and development risk is associated with the Complexity of the product design and the similarity with an existing product. Since, the teams already have experience in developing new products; hence there is a chance that there might be similarities in the product design and process. It is required that the research and development team goes through a rigorous process of understanding consumer needs and behaviour of the NPD process. Amazon.com engages in the quality research of consumer insight to deliver the best services.
6. A very crucial risk with many implications is the supply risk that is the disability of the suppliers to provide quality and quantity raw materials to the company and failure to do so within a scheduled time. It disrupt the development phases and delays the process and hence it is essential that proper monitoring of the supply chain and choosing of reliable retailers will make the system efficient. Amazon has a very integrated and complex supply chain that is monitored and maintained to stay updated to the world (Hse.gov.uk, 2015).
The report was a study of the utilisation of invention in innovation in new product development for implementing strategic growth. It identifies the differences between invention and innovation and describes how innovation leads to business growth. Finally, the report takes Amazon.com into account to discuss the role of innovation and the components of product development and the associated risk analysis and the ways of risk management. Thus, a complete process of product development and risk management is provided.
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Anand, G. and Kodali, R. (2008). Development of a Conceptual Framework for Lean New Product Development Process. IJPD, 6(2), p.190.
Andries, P. and Debackere, K. (2013). Business Model Innovation: Propositions on the Appropriateness of Different Learning Approaches. Creativity and Innovation Management, 22(4), pp.337-358.
Annacchino, M. (2007). The pursuit of new product development. Amsterdam: Butterworth-Heinemann.
Bucherer, E., Eisert, U. and Gassmann, O. (2012). Towards Systematic Business Model Innovation: Lessons from Product Innovation Management. Creativity and Innovation Management, 21(2), pp.183-198.
Carayannis, E. (2013). Encyclopedia of creativity, invention, innovation and entrepreneurship. Dordrecht: Springer Dordrecht.
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Phillips, J. (2009). Defining Your Innovation Model: 10 Facets of Innovation. International Journal of Innovation Science, 1(1), pp.1-12.
Taplin, R. (2005). Risk management and innovation in Japan, Britain and the United States. London: Routledge.
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The task provided was a study of the innovations and risk management theories that are applied in the new product development process. Since, new product development is a crucial part of organisational growth and hence it is understood that innovation is one of the major criteria leading business growth. I have studied the fact that innovation is the key to product development and company uses it to introduce new features and developments to gain market growth. I have done a set of secondary research and found that Amazon.com is one of the renowned innovative companies which have come a long way with customer based innovations.
I have been able to differentiate between invention and innovation. I gathered the theories of innovation model that have benefitted me in understanding the model which was applied by Amazon.com. The Market Pull theory was judged as the most suitable model according to Amazon’s vision. Another factor was the study of risk’s that are inherent features of product development activity. Understanding the risks and the ways of risk management is advantageous in learning the processes and identify the risks in future case scenarios.
While completing this reflective log I have gone through journals and academic articles to understand the innovation models and relate in to the industrial case study of Amazon.com. Also, the research was effective in identifying and understanding the risks that are involved with product development process. I gathered the fact, that this kind of research and surveys are essential factors even when working in an Industry. The Research and development team must be going through a similar yet rigorous process to make the new product development happen successfully. During conducting the process, I also faced multiple obstacles of time and other restraints and thus I had an idea about identifying risks. All these facts and figures I gathered through online research and online survey were applied to my industrial case study.
Also, describing the whole process and theories within a few words is a heavy constraint that is faced. In the end, the task was an excellent guiding activity in understanding my personal research skill and how much meaning I can decipher alone form studies. It also provided me an opportunity to study an organisation that will benefit me in future endeavour.
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