Managing Innovation: Theories, Benefits, and Limitations

This document explores the theories, benefits, and limitations of managing innovation in organizations. It discusses the diffusion of innovation theory and disruptive innovation theory, highlighting their definitions, processes, and principles. The document also examines the benefits of innovation, such as competitive advantage and fulfilling customer needs, as well as the limitations, including risk and cultural considerations. Additionally, it provides a case study of BrewDog, a multinational brewery and pub chain, to illustrate the application of innovation in a real-world context.

MANAGING INNOVATION

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Definition, process and principles of theory...........................................................................3
Benefits as well as limitations................................................................................................5
Company Background ...........................................................................................................7
Historical Development..........................................................................................................9
Future developments............................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Innovation is basically the procedure of generating new ideas, thoughts as well as
products. Innovation is the method through which organizations are able to bring a well-through
solution to all the requirements and problems of the customers by bringing new and completely
different products, services, ideas, processes etc. The major concept behind innovation is to work
towards the welfare of entire community by providing a solution to all their problems. There are
various theories in innovation which are being used by organizations for establishing a great
position in market. This report mainly focuses upon disruptive theory of innovation. Disruptive
innovation theory is mainly the theory which allows organizations to create new market as well
as value network and eventually disrupts existing market. The major benefit of disruptive
innovation is that it helps the organizations to expand its market share by innovating products as
well as services.
MAIN BODY
Definition, process and principles of theory
Innovation is basically the process through which anew idea, process, product or service
is generated and thus is considered as new and completely different idea or creative thoughts.
Innovation plays a most important role within each and every organization and thus is viewed as
solution to wide range of problems which meets all the requirements. There are generally
numerous theories which has been proposed by various scientists and thus helps to bring a well-
through innovation in each and every aspect (Brem, Tidd and Daim, 2019).
Diffusion of innovation theory
One of the widely known and highly remarkable theory of innovation is diffusion of
innovation theory. Diffusion of innovation is basically the theory which mainly explains that
how and why and at what pace and rate the new ideas and thoughts are spread. This theory was
given by Everett Rogers and is considered as the most effective and significant theory of
innovation. In short, this theory provides the explanation that over the time how an idea as well
as product mainly gains momentum as well as diffuses through particular social system (van de
Wetering, Mikalef and Pateli, 2017).
The major principals of this theory is based on the four elements through which the
spread of the new idea occurs namely innovation, communication channels, social system and

time. These four principles form the major core strength of this innovation theory and thus
encompasses these for spreading the new ideas effectively to others.
The major process of this theory mainly involves fives steps in decision making. First
stage is knowledge where individual is generally initially exposed to the innovation but do not
have information. Second stage is persuasion in which individual shows interest in innovation
and tries to gather information about it. Third stage consist of decision where individual
compares advantages and disadvantages of this innovation and thus takes the decision of using or
rejecting this innovation. Fourth stage consist of implementation where the individual mainly
employs this innovation to some varying degree and thus determines its usefulness. Last and the
fifth stage is all about continuation wherein individual actually finalizes the decision of
continuing this innovation either throughout the life or for some extended period of time until all
the needs are fulfilled (Bahemia, Squire and Cousins, 2017).
Disruptive innovation theory
Disruptive innovation is the another most important as well as significant theory of
innovation which is nowadays completely misunderstood. Disruptive innovation is
predominately the innovation in which a new and completely different market as well as value
network is generally created and thus the existing market and value network are disrupted. This
theory was first given by Clayton M. Christensen. In the nutshell, disruptive innovation theory
mainly refers to technology whose all applications impact the manner in which market as well as
industry functions. One of the most common example of this theory is internet which have
drastically altered the manner in which organizations conduct their business and which impacts
organizations in negative way when they fail to adapt the modern technology (Natalicchio and
et.al.,2017).
There are mainly five principles which basically governs the theory of disruptive
innovation. The first principle states that organizational mainly depends on the customers as well
as investors for their resources as it is led by these two entities. These two mainly direct the
organizations allocation of resources towards the sustainable innovation. The second principle
states that the small markets generally do not solve all growth needs of big companies. The large
organizations need to depend on the emerging markets and cannot rely on small market for its
revenue stream. Third principle addresses that market which do not exist cannot be analyzed.
Planning tools which are used for understanding the technologies do not work when used in

disruptive technologies. The first principle mainly states that the capabilities of organization
define its disabilities. The last and fifth principle describes that technology supply might not be
equal to market demand (Rangone, 2019).
The disruptive innovation mainly occurs through the synchronization of the technology
department, market factors and the business model. These three phases the most important part in
this innovation and thus shape overall path towards the disruption. When the disruptive
innovation mainly emerges out of technology as well as into business model is fist step. In the
second step, disruptive innovation mainly gains the foothold within niche market while the last
step consist of adoption of this disruptive innovation by mainstream customers (Parida and
et.al.,2017).
Benefits as well as limitations
Diffusion of innovation theory is one of the major innovation model as well as theory
which helps the organization to innovate various products as well as services. The various
advantages of diffusion of innovation are
Diffusion of innovation theory
Benefits
Competitive advantage
This is the most important as well as significant theory which helps the organizations to
attain competitive advantage and thus assist in gaining edge over the competitors. The diffusion
of innovation theory mainly stresses upon the five categories for attracting the customers and
thus appeals to various adopter categories. Thus , this theory mainly helps the organizations to
provide a great emphasis on each of the category and innovate products as per the needs of the
categories. This eventually helps the organization to attain competitive advantage. Besides this,
when organization ventures the new ideas as well as thoughts for producing the innovative
products then this helps them to establish a great market position and attain the high market share
(Gerybadze, 2020).
Fulfill needs of different customers
The major rationale behind adopting the diffusion of innovation theory as the business
toll is to fulfill the needs as well as convinces the various level of customers. This becomes its
great advantage. This theory mainly provides a well-through procedure through which businesses
are able to make effective decisions and thus helps the organization to rely on these stages for

attracting the customers towards their products and services. This theory mainly helps the
organization to fulfill the needs and demands of numerous customers by understanding their
perception as well as their motivational factors which goes in their decision for purchasing a
given product (Zumba and et.al.,2017).
Limitation
Uphill climb
Generally customers do not emphasizes on risk taking and thus avoids taking risks so in
this view, this theory might be detrimental for organizations to produce new products as well as
services. Diffusion theory mainly provides the road-map to all organizations for innovation but it
does not guarantee the success of innovation. There remains great risk for organization to bring
the new products as well as idea within market place and this forms the great limitation of this
theory. For example- the new product or idea bought by the organizations might not attain a
great success or help the organization to gain competitive advantage as this theory is not full
proof in guarantying the attainment of goals and objectives. As diffusion of innovation theory
does not take into consideration the aspect that whether new product will be successful in market
or will face a great brunt thus this in one of its major limitation which stops various
organizations to innovate its products and services (Bican, Guderianand Ringbeck, 2017).
Cultural limitation
This is the another most important as well as widely known limitation of diffusion theory
which impacts the overall position of each and every organization. Organizations mainly
unveiling the new innovation do not take into account the culture as well as beliefs of people and
thus this lead to a great downfall of innovative. The diffusion of innovation theory generally does
not consider the cultural values as well as social norms that whether the new idea or product is
acceptable to society or not and whet it will be directed towards the welfare of entire community
or not. Due to this, most of the organizations generally innovate their products as well as services
without focusing much in their beliefs and cultural background and this eventually lead to the
great decline in sale of the new idea (Brem, Tiddand Daim, 2019).
Disruptive innovation theory
This is the another widely known theory of innovation which have its own advantages as
well as limitations
Advantages

Helps in expanding market
This is one of the major benefit as well as advantage of theory of disruptive innovation
which has helped a large number of organizations to enter the new market and thus expand in
wider geographies. Disruptive innovation basically helps the organization to expand the market
by bring new as well as different innovative products, processes, ideas, thoughts etc. When As
disruptive innovation basically relates to developing the new market through the use of advanced
technology and disrupting existing market thus it eventually helps the organizations to expand
their network in different countries and locations and thus attract the customers through its
innovative ideas. Thus, in this way disruptive innovation proves to be highly helpful for even the
small business to take their brand message to wide audience and hence creates the products
which will provide a great value to the stakeholders (Brem, Tidd and Daim, 2019).
Identifying people having optimist approach
As theory of disruptive innovation mainly relates to inculcating technology for
developing the new markets thus it helps the organizations to recognize people who are willing
to accept the changes and thus have optimist view towards the technology. This is one of its
greatest advantage.
Limitations
One of the major limitation of disruptive innovation is that in this organizations are
mainly offering the products which already exists in market which is not a great innovation.
Thus, disrupting the innovation means offering already existing product for providing solution to
customers. Thus, it does not focuses on providing unique solution (van de Wetering, Mikalef and
Pateli, 2017).
Another limitation of disruptive innovation is that it is somewhat risky and does not
guarantees success as it mainly requires the separate process of strategy. This theory mainly
focuses on the unanticipated problems, opportunities as well as successes and thus does not
clearly explain that whether success will occur or not (Bahemia, Squire and Cousins, 2017).
Company Background
Brew Dog’s is based on the multinational brewery and pub chain which provide various
type of products and services in global marketplace. It produces the bottled and canned beers in
various style such as India pale ale, lager and some other type of container available in keg. The
BrewDog was set up by Martin Dickie and James Watt, both are intense young which make their

success all about managing and controlling the brewing industry. Initially, they have limited
experience (Zeng and et. al., 2018). However, they always motivated or inspired towards the
brewing industry and also accept all challenges in order to build conventional relation with
growth models. In this way, it is highlighting the exciting and atypical growth rate while
achieved by entrepreneurs. BrewDog has been used the promotional stunt to drive funding from
other bankers, with heavy media coverage such as Netflix subscription. it carried out investment
prospectus for business expansion (Parhankangas, Mason and Landström, 2019). As a result, it
will increase the demand in global marketplace in order to achieve £$25 million goal and
objectives. In another way, BrewDog uses the internet-based model which help for increasing
productivity and profitability in global marketplace. there are large number of people use internet
through social media platform, website. It helps for attracting large number of people toward
organization. BrewDog has made a plan to build as success enterprise which is leading craft
brewer by running attention stateside. They have been already built a distribution network which
recognize on the back of TV shows and build a strong connectivity in global world. The
management team of BrewDog tries to use business model and tested the product before
launching in marketplace.
BrewDog has been used business canvas model which must be considered as a great tool
for identifying overall structure. Through canvas model, BrewDog will lead to insight about the
potential customer demand and also identify that what are different value proposition offer
through distributed channels (Walia, 2019). The organization should be considered different
points such as customer segments, revenue streams, value proposition, channel, customer
relationships, key activities, price structure, partners, resources etc. these are different
components which must be considered to resolve issues or problem within organization. With the
help of Canvas model, BrewDog will be improving their quality of life while setting social
relationship with potential customer. Employee are trained to inform customer where how they
can involve with enterprise activities. Staff members will be knowledge that able to identify
geographical area or aware of consumer desired. On the other hand, BrewDog should be done
market research and then afterwards they are developing an effective strategy based on internet
that always attracted large number of customers towards products and services (Walia, 2019).
The company always tries to maintain the overall cost of equipment’s, employee salary, software
license and liquid license etc. it is important part of business development to estimate overall

budget. BrewDog can easily calculated budget through canvas model because it always helping
for identifying essential resources for business expansion in global marketplace.
Historical Development
BrewDog’s disruptive innovation strategy
James Watt and Martin Dickie, founded Brewdog in 2006 in Fraserburgh, Scotland. In
2007 Brewdog started with a mission to revolutionise beer drink and make other people
passionate about craft beer. Within few years they had become one of the best-known craft
breweries and fastest growing beverage brands which majorly known for beers, crowdfunding
and bars. With the help of their products they have successfully redefined British beer drinking
culture and has brought revolution in beer industry (Parhankangas, Mason and Landström,
2019). Today they are Scotland’s largest independently owned brewery producers who produces
200,000 bottles per month.
Brewdog is a disruptive thinker. Their strategy, customer offering, marketing and range of
uniquely branded products that capture imagination has helped them to create their own market
space. Disruptive innovation strategy has helped them to develop their products and services
within these 14 years and has also helped them to evolve reach till a position they are new (Zeng
and et al, 2018). Each of their products have their own identity and is promoted as a unique and
memorable product. Some of the most common products of Brewdog and their memorable
identity are:
 Tactical Nuclear Penguin (32% ABV): At the time this beer was introduced it was one of the
strongest beer that gave a tough competition to German brewer Schorschbrau.
 Sink The Bismarck! (41% ABV): When this beer was introduced it was even stronger then
Tactical Nuclear Penguin and gave a tough competition to German brewer Schorschbrau
 The End of History (55% ABV): it is also known as world’s strongest beer. Only 12 bottles
were released and packed inside stuffed squirrels.
 Nanny State (1.1% ABV): it was an extremely weak heavily hopped bitter that brewed as a
result of criticism of their high strength beer.
 #Mashtag (7.5% ABV): It was based on an idea that was generated on twitter.
They started developing their own beer as a result of boring dominant UK market where large
number of fixed type of beers were brewed. Their main vision was to make people craze about
craft beers as they were. Their success started getting on hike when they developed world’s

strongest beer (Zeng and et al, 2018). In 2009 their beer became fastest growing alternative beer
brand. They broke people’s perception about what world’s strongest beer can be by brewing
Tactical Nuclear Penguin at 32 percent. In 2009 they launched ground-breaking crowdfunding
campaign “Equity for punks” and launched their own anti-business model. In 2010 they opened
their own venue and brewed a beer at 55 percent making it world’s strongest beer. In 2014 they
started exporting their beer to more than 52 countries. This disruptive innovation strategy
adopted by them helped them to grow and expand their business in many different ways and
today they are world’s best-known beer brewing organizations who’s all the products are
different and unique and memorable products (Parhankangas, Mason and Landström, 2019).
Their disruptive thinking has helped them to capture UK’s market and promote their products
that are completely different from other beer brewing organizations.
Future developments
The innovative idea which will help organization to gain competitive advantage as well
as help them to establish position in market is Thai Thai beer. The most exciting aspect which
will make this beer highly innovative will be its additive ingredients. This beer will consist of the
various Thai spices like chilli peppers, orange zest, cilantro in order to give beer a great south-
East Asian twist. This disruptive innovation of creating the new market of Thai beers for enticing
the customers from South-East will help company to attain a great market share (Natalicchio and
et.al.,2017). These ingredients will be the inspired move for company and its major innovation
lies in these. The exciting flavour of the spices will provide a great twist to the overall beer and
thus will empower the refreshing orange flavour of the beer. Company can use disruptive
innovation in this by producing these Thai Thai beer and can create a new market of spices in the
brewing industry.

CONCLUSION
It has been summarized that innovation plays an important role within an organization
and thus helps to bring innovative ideas as well as products. There are various theories in
innovation which are being used by organizations but the most remarkable as well as significant
theories are diffusion of innovation theory and theory of disruptive innovation. These two
theories have their own benefits as well as limitations. The major benefit of diffusion of
innovation theory is that it helps organizations to gain competitive advantage while its major
limitation is that it does not consider cultures while innovation. Major benefit of disruptive
theory is that it helps in expansion of market through innovating products as well as services.
The most effective innovation theory which helps organizations to establish position in market.
Brewdog successfully applied this their by innovating Thai Thai beer for the new market of
South-East Asian.

REFERENCES
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