Profiting from IDM Innovations: Learning from Amazon.com and iTunes

Background

According to Robert B. Tucker (2002), product innovation is the result of a life that satisfies the needs of the customer problem through new product, which benefits both the customer and the company. Radical innovation has the capacity to destroy the fortunes of firms (Fosters 1986; Tushman & Anderson 1986). Costly innovations that were made for many years by an organization suddenly become useless because of new innovative products taking over the market. Usually the small and medium sized organizations succeed in the competitive market by means of radically innovative products (Chandy & Tellis, 1998).

There is an overall general opinion about radical innovation that they usually provide a disproportionate contribution towards the profitability of an organization. This fact can be best understood with the help of its definition. Firstly, radical innovation provides significant improvements over the existing alternatives in the aspects of need satisfaction and thereby triggers towards higher demand. Secondly, radical innovation is usually based on new and complex technology which is usually difficult to imitate (Terziovski, 2002).