Business Innovation: Zipcar and Diffusion of Innovation Theory

This report provides an in-depth analysis of Zipcar's innovation strategy, focusing on the application of the Diffusion of Innovation Theory. It begins with an introduction to innovation and its significance for businesses, followed by an overview of the Diffusion of Innovation Theory, explaining its five adopter categories: innovators, early adopters, early majority, late majority, and laggards. The report then applies this theory to Zipcar, an American car-sharing company, examining its historical development, services, and how it has adopted innovative practices. It also discusses the factors influencing the adoption rate of innovation, such as relative advantage, compatibility, complexity, trialability, and observability. The report evaluates the strengths and weaknesses of the Diffusion of Innovation Theory and concludes with a case study of Facebook as an example of the theory in action. This analysis provides valuable insights into Zipcar's business model and its strategic approach to innovation within the competitive car-sharing market. This report is contributed by a student to be published on the website Desklib.

INNOVATION

INTRODUCTION
Innovation is a procedure helps create a new product, process, service, technology and
additional economic value to actual goods and processes in order for serving the demands or
needs of customers. This is considered as a significant for an organisation for indulging itself in
innovative recitation on daily basis for the purpose of receiving recognition and assistance from
government, consumers and other professional bodies (Arnold, F. H., 2019). When a business
entity brings innovation in its processes in form of services and products at constant intervals,
organisations strive for building loyalty and trust among the consumers and retaining them for a
prolonged time period. This report will focus upon an organisation named, Zipcar, which is an
American based car sharing business entity that deals with auto mobile reservation to its
customers, which is billable by a minute, day or hour, and its members just have to pay a annual
or monthly membership fee in addition to its car reservations charges. It was founded in the year
2000 by Robin Chase and Antje Danielson. This report covers the historical development of
innovation in this industry and its implication in the same area are covered in this report. For this
purpose a theory is applied upon this organisation named Diffusion of Innovation Theory. This
theory is developed in the year 1962 by E.M Rogers and it explains how and over time, a product
or an idea gained the diffuses and momentum by a specific social system or a population.
Theories of Innovation
Innovation is recognised as a most important and significant concern of every business
enterprise and its part inside its market is irreplaceable. it helps in ascertaining degree within
which enterprise provides itself in creating fresh services and products in addition to its value of
existing processes. Innovation is brought into action in products and services terms and its
development, the way in which work is carried out, ways in which task is managed, etc. This is
considered as an element that helps in providing a strategic edge to a business enterprise within a
marketplace. Innovation helps in driving customers attention to a wide range of latest offerings
of an organisation and it works towards the business growth for a long run (Breuer, Leuz and
Vanhaverbeke, 2019). Beside this, it also helps in providing customer satisfaction by creating
such services and products that meets customer's needs, requirements and demands in a specific
marketplace.
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The requirement for an organisation for bringing innovative techniques and processes can
be determined by R&D department within a business organisation that continues to conduct
study regarding latest techniques and trends which are prevailing within an organisation. The
enterprise after it takes certain steps for executing advanced procedures and technologies across
the premises for gaining market recognition and retaining customers for a long period of time. In
this context, there are various kinds of innovation theories which can be utilised and
implemented by an organisation. For this organisation and in order to identify its innovation
development, diffusion of innovation theory is utilised as follows-
Diffusion of Innovation Theory
This theory is developed and introduced by E.M Rogers in 1962 year and it is among the
most ancient theory of social science. It is basically utilised as a communication procedure that
explores various methods in which an innovative process or idea 9is communicated by utilising
various channels (Conrad, 2019). There are different methods by which data is transmitted,
which is ranged between interpersonal communication to mass media. Diffusion of Innovation
theory helps in assisting determination of those aspects that can be affected at innovation rate in
a way under which innovation can be adopted by a person. It helps in exploring the way under
which innovation gains momentum and them helps in diffusing specified population. This
diffusion's end outcome is an adoption of such innovative ideas an processes. The most
significant aspect of these adoption is that personnel is required to perceive modified and new
idea, good and technology.
According to this theory, adopting new innovative technique, idea, service or product do
not take place on instant basis instead it is a procedure that requires time element. In this, some if
the individuals adopted the innovation at early stage while other individuals adopt it later. It is
basically has been observed that those individuals who adopt innovation at early posses
distinguished behaviour and characteristics than those who takes time to adopt such innovation.
So as to advance an imaginative procedure or practice among the focused on group of spectators,
it is exceptionally basic that the consideration is laid over the conduct qualities of a person inside
such populace so as to recognize opportunities to embrace and develop (Croce and et. al., 2019).
According to this way of thinking of this hypothesis, there are five adopter classes and the people
lion's share has a place with centre classifications but then it is noteworthy to increase an
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understanding into characteristics of focused group of spectators. Different methodologies are
utilized by ventures while speaking to various adopter classes.
According to this theory, adopters has been defined as groups, individuals, business
entities and larger population that is prevailing amidst to social system categorised as per their
own ability for adopting innovation. The five categories of adopter as per this theory of Diffusion
of Innovation are described as follows-
Innovators- As per this theory, these individuals are keen to adopt an innovation and
have an enthusiastic approach for a specific, product, technology, service, etc. These people has
the capability of high risk tolerance and they are willing to adapt an innovation irrespective of its
probable failure chances (Dogan, 2019).
Early adopters- These people are more discreet when their adoption choices comes intio
action as compared to innovators. They represents leader's opinions and embrace the changing
opportunities for adopting potential products that helps to provide a strategic edge to them as
well as the business enterprise existing in marketplace. They are highly aware regarding the need
to adapt itself towards the changes and thus they appreciate innovative and new ideas and
procedures. The strategies that can be appealing to this includes 'how-to' manually as well as
information sheets can contain data which is related to its formulation.
Early majority- This group of individuals are those who adopt innovative processes and
ideas in a significantly long period of time course as compared to early adopters and innovators.
They form majority of marketplace and requires an evidence which is in relation to success of a
specific innovation before adopting any innovative procedure or idea. These strategies helps in
assisting and influence those people who belong to this group and includes evidence regarding
effectiveness of success stories, innovation, etc.
Late majority- The individuals who belong to this category are sceptical and cautious
immensely in order to adopt innovation. These people generally adopt innovative practices and
procedures only after they see the proof regarding positive outcomes and ensure that it must be
adopted by majority of people (Dommen, 2019). Strategies which can be used to target this
group of people can compromise of data provision relating to number of people who before
adopted or tried this innovation feasibly.
Laggards- These people belongs to those category who are the last to adopt new
innovative processes and practices as such these are largely bound by traditional and
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conservative ideology and thinking. These are skeptical immensely and they are hardest people
to convince for adopting a specific innovation. The strategies which can be formulated for
appealing this category is compromising if statistics, fear appeals, pressure, that can be arise
from people who are part of other categories of adopter.
llustration 1: Diffusion of Innovation Theory
(Source: Diffusion of Innovation Theory, 2019)
The stages by which a person carries out its innovation adoption consists of generating
awareness of bringing up an innovative practice or idea, in order to adopt the innovation, initial
utilisation of idea to test feasibility and continuously use innovation. It is generally noted down
that there are five factors basically that has impact upon an individual while they adopt a specific
innovation. Below, each elements is mentioned that has an important role to influence the
categories of adopters (Garcia‐Macia, Hsieh and Klenow, 2019). The factors which has an
impact upon the adoption rate of innovation within the marketplace are explained in brief below-
Relative Advantage: It defines the extent to which an innovation has been observed to be
a better than services, products, techniques and ideas which strives to replace.
Compatibility: It determines the extent towards which an innovation is consistent within
the needs, requirements, desirability and values of potential adopters.
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Complexity: It determines the extent to which an innovation is difficult to perceive or
putted into force by a person. It also states the requirement probability of more competence and
skills for making usage of innovative practice and ideas.
Trialability: It is the extent towards which innovative service, process, product or
technology can be tested and experimented by people before they make any purchase.
Observability: It is the extent of innovative processes and ideas which helps in proving
benefits that are clearly visible to other people.
Evaluation of DOI Theory
This innovation theory helps in explaining rate at which customers adopts a new service
or product. Therefore, it helps the marketers in understanding the way in which trends occurs and
also helps in warning organisations of likelihood of failure or success of introduction of their
products or services. There are certain strengths and weaknesses of this theory which is
elaborated in detail as follows-
Strengths Weaknesses
 This theory has the ability to reach to
existing demand and new customers.
 This theory also helps in enhancing the
knowledge of predetermined
customers.
 It helps the customers in taking
important purchasing decisions as
customers will be aware about
everything which is required to know
by them.
 It can create conflicts of interest and it
is less reliable when it focus upon a
business model which is opposed to
social procedures by which diffusion
can occur,
 In this theory, more focus is developed
upon innovation and cultural and
economic differences are ignored.
Examples of companies using innovation theory
A recent instance of an organisation who used this diffusion of innovation theory is
Facebook. This entity started as a product targeted at professionals and students in educational
institutions. These students spread usage of product up to society that is mainstream and across
the borders.
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As per the figure, it can be determined that diffusion of social networks in last month has
put certain things as per perspective. Facebook are now starting to develop inroads into laggards
and it has around 800 million users who are active. It has been assumed that TAM( Total
addressable market) for the social media which is likely to utilise it in short to medium term and
it has around billions of social media users. It has given social media 80% of Facebook market
share and 20% from Twitter.
Overview of Zipcar
Zipcar is an US based car-sharing organisation and it is subsidiary of Avis Budget Group.
This organisation was founded in 2000 by Robin Chase and Antje Danielson. It provides the
automotive reservations to its members which is billable by hour, day or a minute. For its
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services, its members are required to pay an annual or monthly fee of membership which is
additional to reservation charges of a car.
History of Innovation and Historical development of Zipcar and its Goods and Services
Zipcar is an USA based organisation that deals with providing rental car sharing and club
services. Is is the largest car sharing and club service provider in the world and was founded by
Robin Chase and Antje Danielson in the year 2000. Its headquarter is in Boston and it has
various offices in more than 26 cities of America and it has around 860000 members all over the
countries like Austria, Canada, USA, UK, and Spain. Its company profile has been grown when a
car-rental giant named, Avias bought Zipcar for $491 million in the year 2013 of January. In
fact, both the founders of this organisation has left this company for more than 10 years ago, as
the disputes and power struggles prevent both Danielson and Chase from viewing their shared
vision.
Zipcar had its first vehicle on May, 2000 which is tallied around 600 clients by
September. In December, 2009, Zipcar has reported its support in a series of financing with
Avancar, which is the biggest vehicle which is on request organization situated at Spain
(Manseau, 2019). Under the understanding terms, this organization gains a minority enthusiasm
for Avancar, in which a Zipcar executed had joined leading group of Avancar and in this manner
Zipcar has been given a possibility for a year for expanding proprietorship stake of an
organization. Later in the year 2010, it report its obtaining London-based vehicle sharing club. In
December, it has broadened its alternative for various year through the finish of year 2011, and
give credit to Avancar that is effectively convertible to value if Zipcar practices it.
In 1999 an idea of Zipcar was developed by two women named Robin Chase and Antje
Danielson. In the year 2000, the first debut car of Zipcar was develop on streets of Cambridge
and Boston and around $75,000 was raised. In 2006, Zipcar has opened up an office in London
which is a component of European expansion and it closed an venture of funding around $25
million (Zipcar Timeline, 2019). In 2009, Zipcar launched a new iPhone at Apple Worldwide
developer conference. With this app, users can now locate Zipcars, can check its availability and
than resrve and unlock them. Today, this organisation has around 767,000 members and more
than 11,000 cars all over U.S.
Canvas Model
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It is determined as a lean start-up template and strategic management for development of
documenting and new existing models of business. This model consists of 9 elements which are- Customers segments- It determines the customers of an organisation and the way they
see, feel or do an activity or task. Value prepositions- It determines reason of customer purchasing a product or service. Channels- The way in which these promotions are delivered, promoted or sold and
whether it is working or not. Customers relationship- The way in which interaction can be formed with customers. Revenue streams- The way in which a business earns revenue from prepositions and
value. Key activities- Strategies used by business for delivering proposition. Key resources- The important resources which must be owned by an organisation to
achieve objectives. Key partnerships- What should not be done by a business for focusing upon its activities.
 Cost structure- The major cost drivers of an organisation and its connection with the
revenue.
This model can be applied upon Zipcar as follows-
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Key partners
Zipcar has been
merged with rival
Flexcar which is a
Seattle based for
the purpose of
developing
nationwide rental
company.
Avias budget
group subsidy.
Affiliated program
of Zipcar
Ford as a supplier
Zipcar and Honda
program
Jet blues
Insurance
Companies
Gas Stations
Parking places
Key activities
Marketing
Financials
HR
IT maintenance
management
facilitation
Scheduled management
Technology
development
Value
proposition
s
An easy
manner of
being
independent
without a
need to
purchase a
new car.
Car-sharing
Alternative
way of
hiring cars
Zipcar
offers more
than 50
vehicles
Customer
relationship
System of self
servicing
Automation
access to Zipcar
by using access
card.
Extra value
planning
Occasional
driving planning
Customer
segment
Customers who
do not prefer to
own a car
Those
organisations
who do not use
too many cars
for their
services and
activities
Key resources
More than 500 workers
Cars fleet
Unlocked technology
Scheduled platform
Channels
Online
Mobile
applications
Cars points
towards city site
Facebook and
blogs
Twitter
Access cards

Cost structure
Fleet
Call centres
Facilities
Parking
Staff
Taxes
IT Operations
Technologies
Procurement
Fuel
Cleaning services
Maintenance
Revenue
Annual fees
Rent per hours
one time application charges
Charges for reservation
Innovation and technologies of Zipcar
Zipcar has RFID readers which is located on windshield that helps in forming
communication with the card for locking and unlocking the vehicle doors. Each vehicle helps in
recording its usage hours and its mileage, that is updated to central computer with a wireless data
link. The vehicle's location can not be tracked during the reservation due to privacy reason but it
can trackable and all these cars are featured with “kill” function which helps in allowing an
organisation in preventing car since starting when any kind of theft occurs. Zipcar also offers
embedded information techniques which are installed in its fleet and optimisation service of fleet
with its FastFleet service.
In 2018, Zipcar, which is the leading car-sharing network in the world, had added Jeep
Wranglers to Chicago fleet for the summer travellers, who requires large vehicle for the purpose
of outdoor adventure such as kayaking trip which is located in on Lake Michigan, that is a day
hike at Waterfall Glen Forest Preserve, or any weekend camping (Mitra, 2019.). The Jeeps that
are available for reservation in South Loop, at Lincoln Park by an hour or for a day, that includes
parking spot which is dedicated for picking up and dropping off. The technology which is used
by Zipcar includes a lot of things such as Odometer readings, which is 180 mile per us and
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