Managing Innovation: Diffusion of Innovation Theory and its Application in BrewDog

This document explores the Diffusion of Innovation theory and its application in BrewDog, a bar and brewery chain. It discusses the process of innovation, different adopter categories, and the limitations of the theory. The document also provides insights into BrewDog's business model and future development plans.

Managing Innovation
Assessment
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Innovation Theory.......................................................................................................................3
Definition....................................................................................................................................3
Processes.....................................................................................................................................4
Evaluation of the theory..............................................................................................................5
Application of the Innovation theory..........................................................................................6
Future Development....................................................................................................................9
CONCLUSION................................................................................................................................9
REFERENJCES.............................................................................................................................10
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INTRODUCTION
Innovation in a business involves creating new products or improving the existing
features of an existing product, service and process in order to solve an existing problem,
enhance the efficiency of the business and reach out to new segments of customers which leads
to an increase in sales (Agger and Sørensen, 2018). Implementing innovation is a crucial as well
as important task for any business. It is beneficial for organisations as it helps in increasing their
overall profitability as well as share in the market. Diffusion of Innovation theory was developed
by E.M. Rogers in the year 1962 and is regarded as one of the oldest theories. It explains the
progress of an idea through various stages of adoption by different consumers. There are various
factors that affect the diffusion of an innovation or a new product within a society like education
level, level of disposable income, pressure from peers, level of development of the society etc.
MAIN BODY
Innovation Theory
Consumers in a market do not immediately accept and engage with an innovation
immediately after its launch, rather they take some time to do so (Diffusion of Innovation Theory,
2019). When an organisation decides to launch a new product or an innovation in the market, it
is important for it to understand the characteristics and needs of the customers to avoid the
situation of them taking a long time to adopt the change.
Definition
Diffusion of Innovation is one of the oldest models that helps organisations in
understanding the process through which a buyer adopts as well as engages himself with an
innovation in the market (Ali and et. al., 2016). Therefore, marketers use this theory when they
launch a new product in the market or an existing product in a new market. The adopters or the
consumers are broadly classified into five categories based on the the tine they take to adopt a
product. The different adopter categories are explained below-
 Innovators – Innovators are people who want to be the first ones to try any innovation
the market as they are highly interested and support new ideas. These people are always
open to taking risks and usually have a strong financial back which is why setback of the
innovation or a new product does not affect them much. Marketers don't need to
implement or make use of any special strategies to attract them.
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 Early Adopters – People in this category have a high opinion about a new product or
innovation. Early adopters enjoy various leadership roles and are aware of their need to
adopt change and are thus comfortable with adopting new ideas (Darabont and et. al.,
2017). These people speed up the process of diffusion for the marketers and their
opinions about a certain product is respected by friends and family. Marketers do not
need any kind of strong information in order to attract this category of adopters.
 Early Majority – People in the category of early majority are not opinion leaders but
they still adopt the innovation before other categories of people. But in order to do so,
they first want see a valid proof that the innovation works and is useful. Marketers can
opt for strategies like success stories and an evidence of the effectiveness of the new
product or innovation.
 Late Majority – Adopters in the category of late majority are the ones who are highly
doubtful about the change and only adopt it after many people have tried it. In order to
attract this segment of adopters, marketers of different organisations can present
information about how many people have successfully adopted the innovation.
 Laggards – Laggards are very conservative and resist any kind of change like adopting a
new product or an innovation which makes them the hardest group for the marketers to
convince and attract.
Processes
The processes of diffusion of innovation theory consist of various stages that are
explained below -
 Knowledge – In this stage, the consumers are first exposed to the innovation or the new
product that the company has decided to launch in the market (Diffusion of innovation,
2020). They lack any kind of information regarding the same and may only be familiar
with the name and basic features of the product.
 Persuasion – In this stage, the consumers become interested in the product and thus
searches for information relating to the same in order to increase their knowledge about
how the product works and what are the benefits of buying it from different sources like
friends, family, colleagues etc.
 Decision – The consumers compare the advantages as well as disadvantages of using the
product, whether it will satisfy their needs or not and thus decide if they should buy the
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product or not. In this stage, it is difficult for organisations to completely understand the
mind of the customers.
 Implementation – In this stage, organisations still need to make efforts in order to
encourage the customers try out the product and determine its usefulness (Goffin and
Mitchell, 2016). The main challenge for the organisation in this stage is to provide the
right information to consumers.
 Continuation – If they think that using the product if beneficial and useful to them, they
continue using the product else discontinue the same. This is the shortest stage in the
whole process in which customers confirm that the product is performing well in the
market. They can do this by interacting with friends, family or read reviews that are
posted online by other people.
Evaluation of the theory
Benefits
 Diffusion of Innovation theory is important for businesses as they can use it as a tool to
attract and influence different categories of customers to buy their products and services.
 The theory explains the rate at which consumers will adopt a new product that is
launched in the market which in turn helps organisations in understanding the different
trends as well as the likelihood of their product in either being a success or a failure
among consumers.
 By using this theory, marketers can predict what type of customers will buy their
products and thus they can formulate effective strategies accordingly to attract potential
segments of customers (Grunwald, 2018).
 The theory can be applied across various industries like retail, marketing etc. and also
helps organisations in identifying various factors that can affect the introduction or
launching process of the product in the market.
 If an organisation implements the Diffusion of Innovation theory effectively, it can be
successful in the market and attract a large number of customers to buy its products.
Limitations
The Diffusion of Innovation theory has several limitations that are explained below -
 Number of consumers – In a market, there are few innovators and early adopters
through whom the company can push its products among other categories of customers in
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the market (Lindfors and Hilmola, 2016). Therefore, organisations should pay more focus
on developing strategies that help them in increasing their overall customer base.
 Differences in culture – Culture varies from location to location which is why it is
important for marketers of different organisations to take the same into account. If they
fail to do so, the number of consumers who buy their products will also go down.
 Lack in Communication – If the attempts by organisations to communicate information
about their new products and services in the market are not effective, people will not be
able to gather information about the same and may remain uninformed of the same. Thus,
information about any new launch or innovation should be clearly communicated to the
consumers by using various online and offline channels.
Application of the Innovation theory
Background of the company
BrewDog is a bar and brewery chain that was founded by Martin Dickie and James Watt
in the year 2007. The company is headquartered in Ellon, Scotland and aims to make people
passionate about great craft beer like the founders. The main products of the company are bottled
as well as canned beers that are manufactured in different styles like lager etc. BrewDog began
its business as a small brewery in Scotland, ten years after which it opened its first US brewery
in Ohio (Lütjen and et. al., 2019). The respective company launched a hotel at its brewery in
Columbus, named DogHouse. The founders of the company, starred in their own series on
television, named “BrewDog” and also started running its own airline from the year 2018.
A business model explains the reason behind how does an organisation create and deliver
value to its customers. The different business models that are used by BrewDog are as follows -
 Marketplace Business Model – In this business model, the company lists all its
products and distributes its products to different supermarkets which sell them to the
customers. This helps BrewDog in increasing its overall sales in the market.
 E-commerce Business Model – BrewDog also follows an e-commerce business model
or an internet based model, in which it sells its products online through its website and
not just through offline retail stores and supermarkets.
Business Model Canvas
A business model canvas is a start up template that is used to develop as well as
document existing business models of an organisation (Miglietta and Morrone, 2018). It is
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presented in the form of a visual chart that comprises of elements like infrastructure, finances
and customers of the company. The business canvas model for the respective company is also
explained below-
Key Partnerships
Investors,
Agencies etc.
Key Activities
Mashing,
Lautering,
Conditioning,
Boiling,
Fermenting and
Packaging
Value
Propositions
High quality craft
beers and other
spirits like
Vodka, Whiskey
etc.
Customer
Relationships
Dedicated sales in
retail stores,
online webstore
and supermarkets,
Loyalty Cards for
the customers
Customer
Segments
Retail customers
Key Resources
Physical
machinery and
Information
Technology
Infrastructure
Channels
Offline retailers,
supermarkets and
online webstore
Cost Structure
Distribution, Research and Development
Revenue Streams
Customer Payments, Ad Revenues
Historical Development and Application of the theory
Martin Dickie and James Watt got bored of industrially brewed ales and lager in the year
2007 (Miller, 2016). This is when they decided to fix the situation which gave birth to BrewDog.
Both the founders who were 24 at that time and leased a building and started their operation.
After receiving few bank loans, they spent all their money on stainless steel and started making
craft beers. They brewed small batches of the same that were sold in the market. In the year
2008, the founders approached many banks for loans so that they could buy a proper bottling
machine. The company become Scotland's largest independent brewery in the same year. By
2009, the company had gained popularity and had become UK's fastest growing beer brand. The
company opened its first bar for craft beer in the year 2010 and received a massive response
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from customers. Also, it made the world's most expensive beer and also managed to find space
for more tanks in its brewery.
The year 2011 saw the company opening bars in locations such as Glasgow and
Edinburgh with a flagship store in London. One of the most important event in this year was that
the company launched Equity for Punks II in order to grow its business further. BrewDog shifted
its headquarter brewery from Fraserburgh to Ellon, Scotland. Also, multiple new bars opened all
across the United Kingdom apart from the Dead Pony Club (OUR BEER JOURNEY SO FAR.
2020).
The company raised a total of £4.25M through equity in the year 2013 and continued
making other people passionate about craft beer through 2014. 2015 was a major year as the
company launched the largest scheme of crowdfunding besides opening 17 new bars. BrewDog
set two world records in the year 2016 as well as gave away detailed recipes of each and every
beer that was ever listed in their product portfolio. The year 2017 marked the completion of a
decade of BrewDog when the company decided to change they way it does business. It also
decided to build a new brewery in Brisbane, Australia in the same year. The world's first craft
beer hotel, “The Doghouse” was opened by the company in the year 2018 apart from the
blueprint of the company.
Application
In order to attract innovators, the company produced small batches of craft beers which
the founders packed themselves and sold in the market in order to market themselves. The major
goals was also to increase the overall sales of the craft beer produced by them (Nolan, 2018). No
major efforts were taken by the company to attract early adopters in locations such as Sweden
and Japan and only concrete reasons were provided for why the consumers should purchase its
products. Comparisons and reviews that were posted by other people on different sites pushed
the late majority to try out innovation that the company had brought in the market. All of this
helped BrewDog in attracting customers from different segments and encourage them to
purchase the craft beers and thus become a premium brand in the industry.
Future Development
BrewDog plans to grow its overall bar division business in the coming years as well as
the first crowdfunded craft beer hotel, “The DogHouse” in the coming years. It has also decided
to provide access of the craft beer to a more diverse audience in order to increase its overall
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profitability as well as share in the market (Swink and et. al., 2017). It has also decided to revive
some of its old recipes from the past that are voted as favourites by its customers.
BrewDog can plan on producing low calorie beers for customers who are health
conscious. This will help it in attracting more customers and thus increase its share in the market.
In order to expand business and build a brand image overseas, BrewDog should increase its
presence in different events that happen around the world.
If the company decides to introduce a new batch of low calorie beers in the market, it
should have an understanding of whether consumers are ready to accept the innovation or not.
Important efforts should be made to attract people in the late majority as well as laggards, who
are the toughest groups to be pushed for purchasing the products and services (Weimer and
Marin, 2016). There is no need to put in a lot of efforts to attract innovators as these people are
always ready to try something new and also support the idea of innovation.
CONCLUSION
The above report concludes that organisations should constantly upgrade and innovate
their products and services as this helps in gaining a competitive advantages against competitor.
In order to reach out to increased segments of customers and fulfil the demands of existing ones,
various strategies should be adopted that are developed after carefully reviewing and
understanding their requirements. Diffusion of Innovation theory which is among the most
valuable theories of history, has grouped consumers in the market in to five different categories
depending on the time they take to adopt an innovation or a new product in the market.
Therefore, to be successful, marketers of different organisations should analyse the needs as well
as requirements of the customers effectively and then introduce a new product which will be
beneficial for them.
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REFERENJCES
Books & Journals
Agger, A. and Sørensen, E., 2018. Managing collaborative innovation in public bureaucracies.
Planning Theory. 17(1). pp.53-73.
Ali, N. and et. al., 2016. Risk assessment of wandering behavior in mild dementia. International
journal of geriatric psychiatry. 31(4). pp.367-374.
Darabont, D. C. and et. al., 2017. Managing new and emerging risks in the context of ISO 45001
standard. Calitatea. 18(S1). p.11.
Goffin, K. and Mitchell, R., 2016. Innovation management: effective strategy and
implementation. Macmillan International Higher Education.
Grunwald, A., 2018. Technology assessment in practice and theory. Routledge.
Lindfors, E. and Hilmola, A., 2016. Innovation learning in comprehensive education?.
International Journal of Technology and Design Education. 26(3). pp.373-389.
Lütjen, H. and et. al., 2019. Managing ecosystems for service innovation: A dynamic capability
view. Journal of Business Research. 104. pp.506-519.
Miglietta, P. P. and Morrone, D., 2018. Managing water sustainability: Virtual water flows and
economic water productivity assessment of the wine trade between Italy and the Balkans.
Sustainability. 10(2). p.543.
Miller, B. A., 2016. Assessing organizational performance in higher education. John Wiley &
Sons.
Nolan, G., 2018. Managing risk while translating research outcomes into design and construction
innovation. Architectural Science Review. 61(4). pp.255-265.
Swink, M. and et. al., 2017. Managing operations across the supply chain. New York, NY:
McGraw-Hill Education.
Weimer, M. and Marin, L., 2016. The role of law in managing the tension between risk and
innovation: introduction to the special issue on regulating new and emerging
technologies. European journal of risk regulation. 7(3). pp.469-474.
Online
Diffusion of Innovation Theory. 2019. [Online]. Available through:
<http://sphweb.bumc.bu.edu/otlt/MPH-Modules/SB/BehavioralChangeTheories/
BehavioralChangeTheories4.html>.
Diffusion of innovation. 2020. [Online]. Available through:
<https://www.slideshare.net/raningfire/diffusion-of-innovation-16602553>.
OUR BEER JOURNEY SO FAR. 2020. [Online]. Available through:
<https://www.brewdog.com/uk/community/culture/our-history>.
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