MANAGING INNOVATION REPORT
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Managing Innovation Report
Introduction
Innovation and improvements in technology, which are considered the primary sources of wealth creation, are essential for the survival of a corporation, especially in the modern globalized market. According to Caetano, (2017), innovation is a long term and cumulative process of generating new ideas and implementing them into a product, process, or service that results in the dynamic growth of an entity, while increasing employment and wealth. The process starts with the generation of a new idea or a perception of new customers’ needs, followed by cumulative information gathering as well as the development of the new idea. Finally, the processed idea is commercialized into a marketable product or a new process with attended cost reduction and increased productivity (Benner, 2018). In other words, innovation involves continuously designing and developing new ideas, while improving the innovative system to be repeatable, predictable, consistent, sustainable (embedded in procedures and values), scalable, and tolerable. Several suggested theories can be used to categorize different types of innovation. These theories include Diffusion of innovation, Disruptive innovation, and Blue ocean innovation (Bouwer, 2017). The main focus of the following paper is diffusion innovation theory as applied in the recycling business by TerraCycle Company to become one of the most successful start-ups in the United States.
Diffusion of Innovation Theory
Diffusion of Innovation theory is one of the oldest social science theories developed in 1962 by EM Rogers to explain how ideas or products gain momentum over time and diffuse through a given social system, resulting to the adoption of a new idea, product, or behavior (Mohammadi, Poursaberi, and Salahshoor, 2018). In this case, adoption means doing things differently, such as purchasing or using new products, acquiring and performing new behaviors, etc. Essentially, adoption means perceiving new ideas, products, or behavior as new or an innovative means to an end. The act of adoption is a social system that does not happen simultaneously, but as a process, where some players are more apt to the adoption than others. The Diffusion of innovation theory seeks to explain how a population takes innovation and what makes it spread successfully.
Elements in the Diffusion of Innovations
According to Rogers, Diffusion of innovation is the process by which innovation is communicated through specified channels over time among the members of a given social system. From this definition, there are four main components of the Diffusion of Innovations, which include innovation, communication channel, time, and social system (Sundstrom, 2016).
Innovation
As an element of Diffusion of innovation, innovation refers to an idea, a practice, or a project perceived as new by an individual or other units of adoption. This insertion means that regardless of whether an idea was invented a long time ago or recently if it is perceived as new, then it is an innovation. As such, the newness of adoption is determined by knowledge, persuasion, or decision of the innovator (Dearing, and Cox, 2018). One of the most significant barriers to the adoption of an innovation is uncertainty. The uncertainty here is consequences or changes likely to result from the adoption or rejection of an innovation. This uncertainty can be reduced by knowing the merits and demerits of adopting the new idea. According to Rogers, the consequences of adopting an idea can either be functional or dysfunctional. The consequences may also be direct or indirect and anticipated or unanticipated (Dearing, and Cox, 2018).
Communication Channels
The communication channel is the second element of the diffusion innovation process. It refers to the process of creating and sharing information among people in the bid to reach a mutual understanding. Communication occurs through channels between individuals or institutions that originate from the message. Channels, in this case, refer to how the message is transmitted from the source to the receiver. In essence, Diffusion involves an innovation, unit of adoption, and a communication channel. The communication channel can either be mass media, such as TV, radio, or newspaper and interpersonal channels, which is two-way communication between two or more individuals. Although interpersonal communication channels can either be localite or cosmopolite, almost all mass media communication channels are cosmopolite (Dearing, and Cox, 2018). As a result, mass media is more significant at the knowledge stage, while interpersonal channels are more useful at the persuasion stage of the innovation-decision process.
Time
Inclusion of the aspect of time in the diffusion process, categorization of adopters, and the rate of adoption are some of the most crucial aspects in understanding the Diffusion of innovation. The time dimension helps in determining the diffusion period, of the time required for an innovation to pass through the innovation-decision process (Dearing, and Cox, 2018). In other words, time helps in determining the relative speed at which an innovation is adopted in a social system
Social System
The last element of the diffusion process is the social system, which refers to a set of interrelated units engaged in joint problem-solving in the bid to accomplish a common goal. The social structure of a social system influences the Diffusion of innovation. Social structure, in this case, refers to the arrangement pattern of the unit in a system, which affects the innovativeness of the individual (Dearing, and Cox, 2018). The nature of the social system also plays a role in categorizing adopters.
Process of Diffusion of Innovation Theory
As shown in Figure 1 in the Appendix section, the process of Diffusion of innovation comprises of five significant steps, which flow in a time-ordered manner. These steps include knowledge, persuasion, decision, implementation, and confirmation (Janssen, 2019).
The Knowledge Stage
The first stage of the Diffusion of the innovation process is the knowledge stage. The stage involves learning about the existence of innovation and seeking further information about it. Some of the critical questions asked here include what the innovation is, how it works, and why it is necessary (Dearing, and Cox, 2018). Answering the three questions gives three aspects of knowledge. These include awareness-knowledge, how-to- knowledge, and principles-knowledge. The awareness- knowledge defines the existence of innovation and motivates the adopters to learn more about it before adoption. Also, awareness-knowledge helps in motivating the adopters to learn about the other two types of knowledge, while how to-knowledge helps the adopter in learning how to use an innovation correctly, and therefore increasing chances of adoption. Adoption of innovation also calls for an increased level of how to-knowledge before trying the innovation, and therefore making knowledge one of the most critical aspects in adoption if relatively complex innovation Godin, 2019). The principles-knowledge involves understanding the functioning principles of innovation, or how innovation works. Adoption of innovation with knowledge of how it works may eventually lead to discontinuation. In fact, according to Chatterjee et al. (2017), one of the significant barriers to the adoption of innovation is the lack of vision of why or how to use the innovation.
The Persuasion Stage
The persuasion stage occurs when the adopters have a negative or positive attitude toward innovation. It is, however, essential to note that favorable or unfavorable attitude toward innovation is not directly or indirectly related to adoption or rejection of an innovation. Instead, the attitude of an individual toward innovation is shaped after learning about innovation (Dearing, and Cox, 2018). This is the reason why the persuasion stage comes after the knowledge stage in the Diffusion of the innovation process. Unlike the more cognitive knowledge stage, the persuasion stage is more affective centered, and the individuals are more sensitively involved. The opinion and belief of an adopter toward innovation are affected by its uncertainty of social reinforcement from peers. The subjective evaluation of innovation by close peers helps in reducing uncertainty.
The Decision Stage
The decision stage involves choosing to adopt or reject an innovation. In this case, adoption means full use of an innovation as the best course of action, while rejection means failing to use the innovation. Innovations with a partial trial basis tend to be adopted more quickly because people prefer trying an innovation on their situation before deciding to adopt an innovation.
The Implementation Stage
The implementation stage involves putting innovation into practice. However, the stage is characterized by uncertainty about the outcome of the innovation. As a result, it is up to the change agents to provide the implementer with the required technical support in the bid to reduce the level of uncertainty about the consequence of implementing an innovation (Tariq, Pangil, and Shahzad, 2017).
The Confirmation Stage
The last stage in the Diffusion of the innovation process is the confirmation stage. The stage occurs after implementation of the innovation, and therefore the adopter is looking for support to implement the decision. The adopter can decide to reverse the decision to implement if exposed to conflicting messages about the innovation (Dearing, and Cox, 2018). However, in most cases, adopters tend to veer away from negative messages and only seek supportive messages to confirm their decision. This makes attitude more critical at this stage, as it determines later adoption or discontinuation of the innovation.
Evaluation of Diffusion of Innovation Theory
The positive consequence of an innovation lays the foundation for the benefits of Diffusion of innovation theory. In contrast, the cost related to uncertainty and negative consequences makes up the limitation of the theory. In essence, the Diffusion of innovation theory is based on the notion that consumers respond differently to the trend in innovation. For a business looking forward to introducing an innovation, the Diffusion of innovation theory can help in spelling between the successful or failed launching of a product (Mohammadi, Poursaberi, and Salahshoor, 2018). Some of the limitations associated with the use of Diffusion of innovation theory include the fact that social norms and standards of acceptance of an idea into the social system supersede the idea of taking on innovation. Besides, the theory does not foster a participatory approach in the adoption of ideas and works well with the adoption of behavior rather than cessation.
Application of the Diffusion of Innovation Theory in the Historical Development Context
Background of TerraCycle
TerraCycle, which was founded in 2001 by Tom Szaky as an organic fertilizer producer, is a U.S private recycling company headquartered in Trenton, New Jersey. The company runs a volunteer-based recycling framework, where it partners with corporate donors and municipalities to collect and recycle waste products and turn them into raw materials for making new products (TerraCycle, 2020). In essence, TerraCycle does this by licensing its name to around 200 manufacturers of products made using its raw materials (TerraCycle, 2020). In this sense, TerraCycle is one of the world’s leading companies involved in the collection and repurposing of complex waste streams, including materials that had always been deemed as unrecyclable. Such waste materials include cigarette butts, coffee capsule, ocean plastics, plastic gloves, school pens, oral and beauty products, etc. The collection of these waste materials is done through programs funded by manufacturers and the zero waste boxes purchased by the end-users for recycling from homes, offices, factories, and public space. The waste materials are then converted into different raw materials that are sold to manufacturers for the production of new products. In other words, the TerraCycle business model involved the elimination of the idea of waste by converting non-recyclable waste materials into different products for use by different manufacturing companies. To achieve this, the company partner with collectors, major consumer product companies, retailers, manufacturers, municipalities, as well as small business across different countries. In other words, TerraCycle partners with businesses and institutions which are looking to enhance their environmental performance. Since its inception, TerraCycle has managed to involve over 80 million people in 21 countries in diverting about 5 million pieces of waste materials from landfills and incineration centers, resulting in over 21 million dollars for charities and schools around the world (TerraCycle, 2020).
Historical Development of TerraCycle
TerraCycle started as a novel idea from Tom Szaky’s friends, who together had taken a fall vacation. While in the vacation, Tom’s friends were feeding kitchen scraps to red worms and using the resulting fertilizer to feed some of their indoor plants. This idea marked the beginning of the Diffusion of the innovation process (knowledge stage), where Tom took the idea and used it to help eliminate the idea of waste by making quality fertilizer from food waste (TerraCycle, 2020).
By the end of the vacation, Tom had awareness-knowledge, how-to- knowledge, and principles-knowledge on how the new idea will work. Using the knowledge gained in the vacation from friends, Tom went home and initiated the second stage in the Diffusion of the innovation process (the persuasion stage) by emptying his saving accounts. He also managed to persuade some family members and friends, while maximizing on his credit cards (TerraCycle, 2020). Once he had enough money, Tom entered the decision stage of Diffusion of innovation by creating a massive worm poop conversion unit, where he spent most of his time shoveling tooting food out of the back of Princeton University’s cafeterias.
Broke, exhausted, and on the verge of giving up, Tom entered the confirmation stage when he met Suman Sinha who approved his innovative idea by cutting him a check and becoming the first investor for TerraCycle. This money enabled him to rent his first office space. Later on, Tom left Princeton University to pursue TerraCycle full-time and growing the team involved in the daily running of the operation to half a dozen. Still in the confirmation stage, and two years after the inception of the idea in a vacation somewhere in Montreal, TerraCycle, under the management of Tom, won a grand prize at the Carrot Capital business plan challenge, with a 1 million dollar investment (TerraCycle, 2020).
The Diffusion of innovation culminated when Tom turned away from negative information from the investors to move the company away from making products from waste. Tom stayed true to the company’s mission with his initial idea of eliminating waste. Soon after, TerraCycle plant food was listed in the Home Depot and Walmart in Canada.
Application of the Diffusion of Innovation Theory in the future development of TerraCycle
One of the primary goals of TerraCycle as this decade kicks off is a world without garbage, by changing the waste equation. This g involves making everything recyclable, making everything from waste, and eliminating the concept of waste (TerraCycle, 2020). In light of this goal, TerraCycle has launched a revolutionary change in packaging through the introduction of Loop. Loop is a new shopping system aimed at providing hundreds of name brand products in reusable and refillable packaging. The company is also now recycling products that were initially viewed as inefficient to process, including pens, diapers, razor blades, etc. This approach will build on the foundational business of finding value in what was initially considered unrecyclable on a new level.
Through Loop, TerraCycle aims to wean consumers off single-use disposability. In other words, TerraCycle, which started as a worm poop processing company, is now looking forward to having its impact felt on a global scale. The company will do this by ensuring all stakeholders involved in the churning of waste materials enter into a partnership with TerraCycle to ensure all their waste products are recyclable. For the company involved in the packaging of products, TerraCycle aims at introducing the Loop packaging product, which is reusable and refillable packaging material (TerraCycle, 2020). As an idea, this project seems viable but may prove hard to achieve on such a vast scale. TerraCycle can, however, use a diffusion of innovation principles to ensure the idea reaches all parts of the world before the end of the decade.
The first principle of the Diffusion of innovation theory is innovation. TerraCycle already has the innovation, involves weaning the world off single-use disposability. As far as TerraCycle is concerned, this is a new idea, in which they know about it. The company has already introduced a new shopping system aimed at providing hundreds of name brand products in reusable and refillable packaging. The next thing the company needs to do is to use different communication channels to persuade all the stakeholders worldwide concerning the idea, its benefits, and how it works.
To reduce the uncertainty that is likely to arise, it is up to TerraCycle to demystify the plan by stipulating the expected pitfalls and benefits, with an emphasis on how functional and beneficial the plan will be in creating sustainability. The communication channels to be used here will be determined by the geographical location of the target partners. However, to reduce costs, TerraCycle should consider using mass media and combining it with interpersonal channel s such as phone calls, emails, and video conferencing of the targeted stakeholders.
Once the idea is communicated, the next step is allowing time for the targeted stakeholders to make the decision. Time is of the essence here as it determines the diffusion period, or the time required for an innovation to pass through the innovation-decision process. Once enough time is given, the next step is getting feedback from the social systems that will be willing to implement the idea as well as those who will be rejecting it. Depending on how the idea was communicated, it is likely that most of the social system will get on board, especially given the current needs of companies to attain environmental and economic sustainability. As such, the next step would be the confirmation stage, where TerraCycle will ensure a flow of positivity regarding the project and the projected benefits. In essence, the main idea here is to ensure that as many stakeholders as possible come on board and support the idea of weaning off the world off single-use disposable materials. The viability of the project will be determined by the number of companies that will be willing to use Loop products in their packaging, while the overall success will, by the end of the decade, be on 100% use of reusable materials worldwide.
Conclusion
In conclusion, Diffusion of innovation theory refers to the process by which innovation is communicated through specified channels over some time among the members of a given social system. The process of Diffusion of innovation comprises of five significant steps, which flow in a time-ordered manner. These steps include knowledge, persuasion, decision, implementation, and confirmation. The application of this theory in a real-life situation helps in laying the foundation for the expected benefits while determining the uncertainty or negative consequences of adopting an idea. The theory is based on that consumers respond differently to the trend in innovation. As such, for a business looking forward to introducing an innovation, this theory can help in determining the difference between successful and failed products, even before making the initial investment. Some of the limitations associated with the use of Diffusion of innovation theory include the fact that social norms and standards of acceptance of an idea into the social system supersede the idea of taking on innovation.
References
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Appendix
Figure 1: Process of Diffusion of Innovation Theory