Ten Different Types of Innovation (cont.) Some Examples
| Types of Innovation/Company | Ford*i | Google*ii | Microsoft*iii | McDonald's*iv |
| Invention/intent | a new industry | a new marketing system | integrated office tools | a convenient food system |
| 1. profit model | develop a high quality, reliable, low-cost vehicle; demanded 50% payment upfront
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started as simple text advertisements that users could buy via a bidding process; implemented 'pay per click' model; advertising accounts for most of Google's revenue
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bundling together popular applications at a cheaper price than buying them separately
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franchisees pay monthly base rent and/or a percentage of monthly sales as rent
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| 2. network
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use vertical integration (control the entire supply chain like investing in rubber plantations, steel factories, etc)
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users global & local partnerships, eg Coca-Cola beverages that delivered daily
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| 3. structure
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paid twice the minimum wage; reduced working days from 9 to 8 hours
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attracts & incentivises staff with activities like allowing 20% of their time to work on new concepts or projects
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in 1961, opened Hamburger University to teach restaurant operations procedures to different stakeholders like franchisees
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| 4. process
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introduced the moving assembly line, which reduced assembly time from around 12 hours to around 100 minutes; by 1923 2 m. cars manufactured annually
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developed 'PageRank' linked analysis algorithm. It ranks webpages according to the number of links connecting them
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collects customer data daily as a basis for improving software
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franchisees are encouraged to develop and launch new product items like Egg McMuffin in 1971
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| 5. product performance
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readily available, easy & cheap repairs and maintenance | simplified the ads by restricting the number of characters as a headline and/or description
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| 6. product system
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modification kits available to convert vehicles into tractors, snowploughs, sawmills, pressing cider, etc
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launched 'AdSense' as another form of advertising by targeting Google ads displayed on their customers' websites
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introduced a group of desktop applications for both Windows & Macintosh operating systems
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| 7. service
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provide integrated advertising services to help major customers communicate effectively with their target audiences
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| 8. channel
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local, independent dealerships in nearly every city; helped with publicity and created local motor clubs, etc | shifted to include location-specific information & mobile devices in its search results to make smarter searches and better devices
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with the rise of the Internet (1990s), Microsoft Office became compatible and able be incorporated automatically with upgrades from third-party add-ins
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| 9. brand
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founded a motion picture department (1914) used to promote the company's own vehicles | uses 'Google Doodles' program to play with its logo
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using distinctive designs of the building themselves, to the Golden Arches, two characters such as Ron McDonald and Hamburglar, etc to focus on family-friendly attributes | |
| 10. customer engagement
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(source: Larry Keeley et al, 2013)
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to market test new products, Microsoft used preferred customers to test their products before selling to the general marketplace
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franchisees develop new products
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Notes
i) There is too much commentary focus on the simplicity of the Ford's car design and the moving assembly line and not enough on Ford's use of multiple types of innovation, like selling cars to dealers rather than directly to the consumers. This created a new business framework and a better pattern of cash flow
"...Dealers help spur demand and engage at a local level - and they used their credit and cash to buy the cars wholesale, lowering Ford's capital requirements and risks..."
Larry Keeley et al, 2013
NB There were around a 100 other car companies that were potential competitors to Ford.
ii) Google was initially another search engine in a crowded market. It established its dominance owing to the accuracy of results over its immense index of webpages. It is essentially a self-sustaining business. Even though it started in 1998, it was not till 2000 when it introduced its integral advertising program for creating online campaigns connected to search terms, ie AdWords, that its revenue exploded.
iii) Microsoft's basis for success was charging for the licences for software solutions, and bundling its popular applications of Word, Excel and PowerPoint under MS office.
iv) McDonald's uses a system where franchisees and suppliers are partners; they buy and build all properties and lease facilities to individuals as franchisees