Innovation and Commercialisation: A Business Report on Zara

Desklib provides solved assignments and past papers to help students succeed.

Innovation and Commercialisation
1

Table of Contents
Introduction................................................................................................................. 3
LO1:Explain the context for innovation and determine the difference between
invention and innovation............................................................................................. 4
LO2: Explain the different types of innovation.............................................................7
LO3: Discuss the process required to commercialise innovation..............................10
P6 Build an innovation business case for an organisation, including ways to access
funding...................................................................................................................... 11
LO4: Evaluate the range of methods for protecting ideas and understand their
advantages and disadvantages................................................................................ 15
Conclusion................................................................................................................ 18
Reference List:..........................................................................................................19
2

Introduction
In this 21st century, Innovation has become a key factor for every organisation for
remaining competitive in the market. Innovation can be defined as creative ideas or
imaginations that help an organisation to differentiate it from other competitors of the
same industry. It is essential to meet the increasing demands of the customers and
improvise their existing products and services (Trott, 2012). When an organisation
has successfully incorporated innovation in their business operations, the next step
that follows it is commercialisation.
Commercialisation can be defined as the process of promoting and introducing a
newly launched innovative product into the market. In this context, a business report
will be produced to help an organisation for introducing a new product in the market.
The organisation chosen for this study is ZARA, which is a fast fashion retailer
organisation functioning successfully in UK. In the year 1975, Rosalia Mera and
Amancio Ortega founded the organisation. The Inditex group of companies owns
the company. It has its headquarters in Spain (Zara.com. 2019). In this regard,
various topics will be discussed such as the difference between invention and
innovation, importance of innovation in organisational leadership, various forms of
innovations and approaches chosen for implementing innovation.
3

LO1:Explain the context for innovation and determine the difference between
invention and innovation.
P1 Explain innovation and determine its importance to organisations in
comparison with invention.
In order to understand the difference between invention and innovation, their
definitions should be known clearly. Invention can be defined as the process of
creating new products and services as the outcome of innovative ideas. However,
innovation is possible when the ideas created through invention are adopted by the
organisation for bringing new products and services in the market (Matthews and
Brueggemann, 2015). The main aspect of both invention and innovation is that to
benefit the organisation to incur profitability in the future. It is to be understood that
without invention, innovation is impossible.
Innovation comprises of several activities and methods incorporated by a company
to innovate their existing products or come up with completely new products. In order
to adopt invention as well as innovation in the business operations of an
organisation, employees should be creative and productive about their ideas.
Figure 1: Concept of Innovation
(Source: Valikangas and Gibbert, 2015)
In this technology driven industry and increasing globalisation, the level of
competition has increased tremendously. Along with the increased competition, the
expectations and demands of the customers have also increased. It has become
mandatory for organisations to incorporate invention and innovation in their offered
products and services to remain competitively in an advantageous position in the
industry market. For a brand like ZARA, it is necessary to adapt themselves with the
latest trends and demands prevalent in the society and innovate accordingly.
Innovation should be brought not only into offered products and services but also in
the management system of the organisation. They should focus on bringing in new
4

summer collection made of fine fabric as per the latest demands of the customers.
Invention can also be referred as the formulation of new products, which is done
after analysing and evaluating the needs and demands of the customers. On the
other hand, innovation is the process of recreating the existing products and services
with the implementation of innovative ideas and techniques. Invention is the act of
bringing in a brand new product to the market starting from its designing,
manufacturing, distributing it to the customers. However, the transformation of the
innovative ideas into final products is the concept stated by innovation.
Basis of comparison Invention Innovation
What does it mean? Process of creating new
products
Process of innovating or
transforming existing
products with new ideas
Concept stated by it Indulging creative ideas
into products and business
processes
Real life implementation of
the creative ideas
Required skills Technical and scientific
skills
Strategic, technical and
marketing skills
Activity field Activities related to R&D
department of the
organisation
Activities can be related to
any department of the
organisation
Related to Related to a particular
product or service
Related to several
products and services
Table 1: Comparison table between Invention and Innovation
(Source: Created by Learner)
P2 Explain how organisational vision, leadership, culture and teamwork can
shape innovation and commercialisation.
In this report, the concept of innovation has already been discussed. When an
organisation like ZARA have successfully implemented innovation in their brand new
products, the next step that should be followed by them is commercialisation of their
products. Commercialisation comprises of several set of actions that are taken by
an organisation starting from developing a plan of marketing of the new products,
distribution of them to several stores and market chains in a strategic way for leading
the organisation towards success (Pynnönen et al., 2019). In order to implement
effective innovation and commercialisation of products, the impact of organisational
vision, culture, teamwork, and leadership should be analysed properly.
The vision of an organisation plays a significant role in shaping the innovation and
commercialisation processes. ZARA’s vision is to bring in attractive and high quality
fashion products in the market and subsequently improve their customer services
(Inditex.com. 2019). The objective of the company forces the employees to
implement innovation in their offered products. In order to retain its leading position
in the market, the organisation should carry out survey programs on a regular basis
to understand the demands of their customers. In accordance with the survey
results, the management department of the organisation should formulate creative
ideas and transform them into final products as a part of innovation. After
successfully manufacturing the new products, they should take steps for
commercialisation of them.
5

The leadership prevalent in the organisation also lays an impact on the
commercialisation and innovation. The role of a leader in emphasising innovation is
very significant. Through their innovative leadership, they will be able to influence
and motivate the employees for increasing their productivity. If the leaders and
managers of an organisation duly motivate the employees, they will come up with
creative and innovative ideas. It will help the organisation to incur profitability in
future. It is evident that positive impact of leadership will enhance the rate of
innovation and as a result, it will influence the commercialisation of their products.
Along with leadership, the organisational culture takes an active part in shaping
the innovation and commercialisation procedures. The culture prevailing inside the
working environment of an organisation is responsible to sustain the innovation.
ZARA has a worldwide business operation and as a result, it experiences diversified
culture within the organisation. The culture helps the company to encourage various
innovations and proper commercialisation of their products. Previously, they have
been benefitted by their culture to launch fresh innovative apparel collection in the
market. It increases the acceptability of the product.
It is evident from previous records of the organisation, that teamwork is very
essential for shaping the desired innovation. The leaders should focus on motivating
their employees for enhancing their team performances. Without proper
synchronisation in the team members, the process of bringing in innovation would be
very difficult.
6

LO2: Explain the different types of innovation.
P3 Explain the 4Ps of innovation and explain the use of the innovation funnel
to examine and shape innovative ideas.
Joe Tidd and John Bessant developed the model of 4P’s of Innovation mix. The
model helps in developing the required innovation process for the betterment of the
organisation. The components of the innovation mix are Paradigm, Product, Position,
and Process. The proposed model guides the organisation in the direction where
innovation is required and provides idea for bringing in such change (Zastempowski
and Przybylska, 2016). The 4P’s helps in these ways-
Paradigm: This P helps in identifying the areas where innovation is needed and
guides the employees to think in that particular direction. The organisation should
properly figure the areas of innovation to increase their profitability.
Product: In this stage, the organisation has already identified the region where
innovation is needed and would transform the creative ideas into products. ZARA
knows that they have to bring innovation in the summer collection of their fashion
apparels, as there is a high demand of fresh collection within their customers.
Moreover, other competitors have also come up with their new collection and to
sustain against the rivalry they require innovation.
Figure 2: 4P’s of Innovation Mix
(Source: Bessant and Tidd, 2015)
Process: This stage comprises of the steps taken by the organisation for
manufacturing their desired product. ZARA have to focus on gathering the fine
quality fabric they need to manufacture their summer collection, which will be
capable enough to attain high customer satisfaction. The collection of fabric from the
7

suppliers, training the employees for manufacturing the product and ultimately
launching their final product are included in this stage.
Position: In this stage, the company has to focus more on commercialisation of their
products. They have to emphasise on promotion of their products and gather
customer reviews for successfully positioning their product in the market.
For better management of innovation processes, the company should utilise the
concept of innovation funnel. It guides the R&D department of the organisation to
shape their innovative ideas into final products. The model follows a sequence of
steps namely:
 ZARA needs to analyse the opportunities in the market on which they can work
out. They should gather relevant information and customer views to understand
their requirements.
 Based on the opportunities, they need to figure out their plans
 The leaders of the organisation should convey the ideas to their employees and
train them accordingly
 The concept should be made clear about the proposed idea
 The material, quality and other facts should be tested properly before finally
manufacturing it for the customers
 After the production, they need to launch their products in the market
Figure 3: Innovation Funnel
(Source: Wang, 2017)
ZARA can implement the model of innovation funnel in their desired innovation
project. It will increase the affectivity of the methods incurred in the innovation
process and better transform the creative ideas into real life products.
P4 Explain developments in frugal innovation and provide examples of how it
is used in an organisational context.
The concept of Frugal Innovation states that it concentrates on cutting down the
cost of production within an organisation and enables the customers of all segments
of the society to buy the products at reasonable prices (Weyrauch and Herstatt,
2017). Through frugal innovation, an organisation can reduce the wastage of
products and cut down the production cost with proper maintenance of the quality
factor. Frugal innovation promotes the concept of bringing in innovations in the
8

product range with minimal usage of resources. It initialises the idea of producing
quality products with limited resources (Knorringa et al., 2016).
In organisational context, the implementation of frugal innovation is very significant.
ZARA wants to launch their new summer collection in the market. In this process,
they would require the use of several materials and fabrics for manufacturing their
apparel range. They can implement frugal innovation in the manufacturing process
by emphasising the cutting process through machines. When the manual cost is
reduced, it will automatically cut down the production cost of the apparels. This
would help the organisation to incur additional profits in the future and also enable
them to keep the cost of their products reasonable. It would satisfy the requirements
of the customers that also at an affordable rate.
In order to minimise the production of scrape materials, they can utilise the unused
materials for the production of other fashion garments. This would sort out the
problem of excessive wastage of quality materials. Moreover, ZARA can hire skilled
employees from the locality and avoid hiring them from other countries. It would also
cater to the need of cutting down the production cost. The leaders should properly
convey the ideas and designs of the proposed products and train their employees to
transform the ideas into final products. When the local employees would work
productively, it will automatically minimise the scrape production and hence effective
reduce the production cost of the fashion garments.
9

LO3: Discuss the process required to commercialise innovation.
P5 Explain the importance of the commercial funnel and the application of new
product development (NPD) processing for commercialisation of innovation.
Importance of commercial funnel in commercialising innovation
In metamorphic parlance, commercial funnels suggest the stages potential clients go
through before becoming actual clients. It includes potential clients who become
aware of the products to the smaller sample size of the potential clients who wish to
inquire more and eventually the final group of potential customers who actually make
the purchase. Commercial funnels are utilized by organizations to envision their
product launch processes and estimate the efficacy of the process in every phase of
the funnel. Resembling the structure of an inverted pyramid, the funnel takes into
consideration all necessary steps in the sales process. The commercial funnel is
driven by promotional actions, which create responsiveness and establish demand
for a particular product or service. The commercial funnels aims to move the
targeted customer base carefully through the funnel in an expertly planned set of
actions planned to inform the targeted customer base about the advantages of the
products or services. With due course of time, the targeted customer base is driven
through the funnel, motivating them to express initial desire and concluding with
motivating them enough to make the final purchase. Commercial funnels are integral
to assess the business and recognize areas, which need development.
Figure 4: Commercial Funnel
(Source: Ratcliffe, 2017)
Importance of New Product Development (NPD) processing
New product development or the NDP process initiates with the recognition of an
opportunity and concludes with the production and delivery of the new products
(Homburg et al., 2015). ZARA needs to utilize NPD to diversity their line of products
and keep them competitive enough in the face of changing business atmosphere. It
is integral for ZARA to apply NPD to ensure survival and increase in market share.
10

NDP can be understood as the summation of all activities and actions integral to the
growth and launch of new products in the market (Fuller, 2016). The NDP process is
a summation of five key phases, which have been enumerated underneath:-
1) Ideation
2) Idea Advancement
3) Product Plan
4) Product Testing
5) Product Initiation
With verifiable evidence of more new products failing than succeeding, ZARA needs
to exercise due diligence in implementing the NPD process. It is integral for ZARA to
launch new products in the summer line women’s wear segment that are affordable
and yet offer superior value to their clientele. The NPD process must be a well-
thought out, properly planned, customer-development exercise to ensure the
success of the new products (Ernst et al., 2017). Due diligence is required to
completely comprehend the needs of the clientele, the competitiveness of the
business atmosphere, and the changing dynamics of the market, because a proper
NDP process can be implemented for the launch of the new summer line women’s
wear segment (Golder and Mitra, 2018).
P6 Build an innovation business case for an organisation, including ways to
access funding.
BUSINESS CASE TEMPLATE FOR ZARA
THE PROJECT
The project is to launch a new line of women’s wear summer collection in its UK
market due to increasing demand of the same. The innovation manager who is
convinced that ZARA should definitely launch a new line to ensure growth and
achieve profitability proposes the project. The new line of summer collection will be
developed with a custom-oriented approach, as has been the tradition at ZARA for
years. The launch is aimed to meet the increasing demand in the existing market.
THE HISTORY
ZARA runs 64 stores in UK ever since entering the market since the late 1990’s but
is currently languishing at the 19th place of women’s wear retailers with a 1.5%
market share, way behind the market leader Marks & Spencer with 9% market
share. Further, the increasing demand and increasing efforts on part of the
competitors to innovate in this particular segment, makes it imperative for ZARA to
launch exciting new products in the market to retain and improve its market share.
LIMITATIONS
Every new product launch has some risks associated and there are never full-proof
chances of success for any product or service. ZARA’s competitors are also pushing
new products in the existing market, which means an increasing array of options for
11

the targeted customer preference to choose from, and there is no definite measure
to anticipate where the customers’ preferences will eventually lie. Even though ZARA
has a stellar track record in successfully launching new products, it’s predicament in
the UK market is precarious since it barely makes it to the top 20 women’s wear
retailers in the UK market (Wood, 2017). ZARA just has a 1.5% share of the UK
market, which substantiates the fact that the competitors are better in gauging the
preferences of the customers and delivering upon them. Being potentially outplayed
by the rivals competing in the same segment in the existing market is a serious
limitation of this project and ZARA needs to deliver it’s best to ensure that their new
summer line of women’s wear collection, turns out to be the most preferable and
affordable option for its targeted customer base.
APPROACH
ZARA should follow a customer-oriented approach to ensure the success of its new
line of products. Even the increasing demands promises no full-proof chances of
success as rivals are pushing new products in the same segment and ZARA needs
to deliver it’s best to ensure that their new line is the most preferable option. The
designs can be extensively tested at the headquarters before their launch to get
some semblance of an idea of the preferences of the clientele since word-of-mouth
has always been a huge source of inspiration and referral business for the company.
ZARA can push for an aggressive promotional campaign for its new line of products
by promoting it on different advertising mediums.
BENEFITS
With the success of the line of products, the company can effectively increase its
sales and market share, which will help in maximizing profitability. Increasing market
share will only facilitate greater brand value for ZARA and will be instrumental in
ensuring the success of future collection launches, since BRAND VALUE plays an
integral role in influencing buyers’ preferences in the fashion industry.
Table 2: Business Case Template for ZARA
(Source: Created by Learner)
Ways to Access Funding For New Products
Bank Loans: Bank loans are the most common way for large companies like ZARA
to ensure capital obligations for their business operations. Banks can facilitate loans
to businesses through term loans and lines of credit at the most affordable interest
rates on the market (Allen and Palligorova, 2015). Since ZARA is an extremely well
established business with a globally famous brand and operations in more than 90
countries, this should be the most convenient way for ZARA to access funding. The
company's strong finals and robust credit score is also likely to help it's case in
securing large scale loans necessary for their new line of products.
Using profits: Using retained profits is one of the best ways for ZARA to access
funding for their new product launch. ZARA is a very well established business with
huge profit margins and cash reserves in billions of dollars. Even though it is not the
market leader in the UK market, it can use the central retained profits to launch new
12