Factors Affecting the Success of Innovation
Business Management and Enterprise (Year 12) - Management (U3)
There are 4 main factors that affect innovation:
Time – It takes time to perform research and development. If a business launches a good/service during a recession, it will be difficult for it to succeed. Depending on when a competitor plans to launch their good/service, the business will change accordingly. Global events will also change how well innovative products will perform in the market. For example, in the lead-up to Halloween, confectionery sales will rise. An innovation may also depend on how long it takes to develop a product. If research and development takes too long, it may not be worth it.
Cost – There are two times of costs: direct (materials) and indirect (overheads). They vary depending on the quality and durability of the good/service. If there is a price elastic (sensitive to price) market, the cost influences the price. If the cost is too high, it may not be worthwhile and if the costs can’t be passed on, it may not be a good choice. Government policy and grants can make this expenditure worthwhile for innovative firms and/or universities.
Marketing strategy – refers to how well the business adapts based on the marketing mix (price, product, promotion, placement, processes, people, physical presence). Brand awareness needs to be built to drive sales. It is important to create an image/reputation of quality & success for a business, as people will more likely trust their new innovations. This will lead to higher sales.
Technology – Technology changes that affect the functionality, ergonomics and specifications of products will have an effect on new innovations. Technological advancements in efficiency and productivity will change how well the business will innovate. Improvements in cost, training and quality also affect innovation. Failing to keep up to date with technology can lead to an outdated product being manufactured. Not taking advantage of technology can slow down operations, marketing and business operations. Technology can also be used in marketing to increase the consumer base and sales (e.g., e-commerce, social media).