Limitations of Innovation

• High costs - Investment in innovation and research and development is highly expensive and requires sufficient labour and financial resources.
• High failure rate - Most new ideas fail to materialise, often due to internal and external constraints. Even for the few that might work, most will not be commercialised. Failure not only leads to a loss of investment funds, it can also demoralise the workforce.
• Budgetary constraints - Innovation is often held back by funding problems. Even if an innovation idea is realistically achievable, budget constraints can prevent the project from being undertaken.

Huang, P.597

Relative Advantage

The relative advantage offered by the new technology, product or service to the customer in comparison with those already being supplied by existing systems. Any new product or process must be able to demonstrate that it offers a significant advantage in relation to existing systems, or it is unlikely to be viewed as worth the cost and effort of switching. The benefits offered by the new technology, product or service need to be important to the customer and may not always be related to the technologies associated with innovation. Technical sophistication that is not able to offer measurable benefits to the customer is unlikely to be adopted. This suggests that the innovation's technical complexity may sometimes be a liability to the rate of market adoption.  

Complexity

The second attribute that can determine how quickly an innovation is diffused into a market is its technical complexity. Products of processes that are overly complex can be too difficult for the customer to understand and use. The early market penetration of the computer and the internet were largely confined to academic, technical and business communities who had the necessary skills to operate the equipment. User-friendly software has been able to increase the market adoption rates for personal computers and the internet, which has assisted in the lowering of costs.

Compatibility

For many customers, the ability to have a new technology integrate with their existing systems is a major attraction. The third attribute that determines the adoption rate of a new product or process is how compatible it is with established systems. Where an innovation can integrate with existing technologies operated by the customer, there is likely to be less cost and disruption. This means that the new products or processes that are not compatible are likely to be viewed by the customer as inherently more risky. Customers have typically invested a good deal of money, time and even  reputation in their exiting technologies. Asking them to make sudden and costly changes is likely to be met with resistance.

Trial-ability

The fourth attribute associated with the adoption of innovation is whether the customer can trial the new product or process prior to purchase or full adoption. As noted above, the adoption of any new technology carried with it some degree of risk. Customers like to test drive cars and try on shoes and clothing prior to purchase both to determine if they are going to be happy with the purchase and to experience first hand the benefits offered. Apple Computers achieved this in the 1980s with the launch of their Macintosh system. They knew that the graphic user interface would be well-received by the customers, but to get this point across they offered a free 'test drive' program allowing the computers to be taken home and used for a few days with a no obligation return policy if the purchaser did not want ot proceed with the deal. The majority of customers bought the computer (McColl-Kennedy, Yau & Keil 1990).

Observability

The fifth and final attribute is the ability for the customer to observe the innovation's benefits and to be able to measure them. Where the product of process can clearly demonstrate its value to the customer with measures of lowered costs, enhanced performance or ease-of-use, the chanced of technology being accepted will increase. For some process innovations and many services, the ability to observe benefits is not always possible.

The Unexpected

The business world is full of surprises – not only the unexpected failures but also the unexpected success that comes to the organization can be a great source of inspiration for innovation. Both, unexpected success and unexpected failures, shouldn’t stay unnoticed and shouldn’t be overlooked as opportunities for a change.  Unexpected situations can be extremely powerful in the business world as they inspire the leaders and innovators to get another perspective on the situation (no matter if it is positive or negative) and to take advantage of the opportunities that emerge.

Incongruities

Many companies fall into the trap of developing their product without to actually do the appropriate research to determine what the target customers really want. The dissonance between what is and what it is supposed to be or what is and what everybody else assumes it to be can lead the company to a downfall but can be also a great source of inspiration for innovation. The customer reviews, feedback, and complaints are often the best way to determine incongruity.

Process Need

This source of innovation is said by Drucker to be more task-focused rather than situation-focused. Here the source of opportunity for innovation comes after looking closely at the processes of the company and identifying clearly the weak spots and the ways they can be improved. Knowing what the weak links are after a detailed evaluation of the company’s capabilities, the teams will be able to create more effective and innovative solutions.

Changes in Perception

With the years, there are significant changes in the way people perceive the world. Perception changes over time, and, nowadays, due to the involvement of technology and the power of social networks, these changes happen faster than ever. People can change their perception about certain product, brand or industry overnight. The changes of perception open a road for businesses to innovate, to develop new products and services that align with the new perspective of the customers.

Industry and Market Structure Change

Industry and market structures can be stable for years, yet with the technology development, many industries are disrupted almost overnight. The leaders need to keep an eye on these changes and to treat these changes not as threats but more like opportunities.

New Knowledge

New knowledge is often used as a byword for innovation. Technological and scientific breakthroughs are the source of innovation that can’t be overlooked by businesses. Companies that refuse to adapt to the changes inspired by new discoveries are doomed to fail. New knowledge, however, can be applied in every aspect of the company – from learning more about the customers through analytics through improving the supply chain to hiring the best employees.

Demographics

Companies are affected in one way or another by the change of demographics. These changes affect the markets as they determine the demand for products, who is buying these products and what quantities of the product are bought. The demographic changes in age, education, employment, affect the direction that the business takes and can open new horizons to the company if it manages to appropriately identify the opportunity.