Exercises: Business, digitalisation and innovation

Explain what the acronym R&D+i stands for and how research, development, and innovation differ from each other, giving an example of each stage in a yoghurt manufacturing company.

Classify these innovations according to their type (product, process, organisational, or marketing): launching a new flavour, installing robots in the warehouse, reorganising the staff into self-managed teams, and updating packaging and brand image.

The diagram shows the four types of innovation according to the area of the business they transform. Identify the missing type, marked with "?", and give an example of that type in a supermarket chain.

Explain what the digitalisation of a business is and describe three specific examples in a local clothing shop (for example, selling online, managing stock with software, taking payment by mobile phone).

Explain in your own words what big data is and how a supermarket that knows its customers' purchases thanks to its loyalty card can use it, stating one benefit for the company and another for the customer.

A jewellery craftswoman sells at craft fairs and is considering opening an online shop. Explain two advantages and two disadvantages of e-commerce for a small business like hers.

Describe two applications of artificial intelligence in a business (for example, a chatbot that serves customers or a system that forecasts demand) and explain what changes for the people who work in it.

Distinguish between digitalising and automating, and classify these two cases: an administrative agency that goes from filing invoices in paper folders to managing them with software, and a factory that installs a robot arm to palletise boxes.

An industrial bakery installs ovens with sensors that automatically adjust the temperature and alert of breakdowns before they occur. Explain what type of innovation this is and analyse two effects it may have on costs and bread quality.

A local bookshop starts selling online as well, offering click-and-collect in store. Analyse what changes this digitalisation entails in its way of operating (sales channel, logistics, customer service, data usage) and what new costs arise.

Distinguish between incremental innovation and radical innovation, give an example of each in the transport sector, and explain why most companies innovate mainly in an incremental way.

A restaurant replaces the paper order pad with orders from an app installed at the table and screens in the kitchen. Analyse what type of innovation this is, what effects it can have on costs and on service, and one risk of digitalising the business in this way.

An olive grower installs moisture sensors and uses drones to monitor his olive trees, watering only where needed. Explain what type of innovation this is, what data it uses and what benefits and barriers this "precision agriculture" has for a family farm.

A canning company with 40 workers collaborates with a university to develop a compostable container, instead of researching on its own. Explain what open innovation is, what each party gains and what risk sharing knowledge with third parties has.

A mechanical workshop wants to digitalise and is considering three actions: online appointments, customer and vehicle management software, and advanced electronic diagnostic equipment. Order the three actions according to their possible impact and cost for a small workshop, justifying your order.

A food delivery app charges restaurants a commission of $25\ \%$ on each order and the customer a delivery fee of $2,50\ \text{€}$. a) Explain what a platform model is and where its revenue comes from. b) Analyse what advantages and what risks depending on such a platform involves for a restaurant.

A traditional furniture manufacturer sees its sales drop due to competition from large online platforms. Propose an innovation strategy combining at least three different types (product, process, organisational, or marketing), explaining what each contributes and in which order you would implement them.

Biotecmar is a canned-food SME with a turnover of 2 million euros that needs biodegradable packaging so as not to lose market share to major brands. Its management estimates that setting up its own R&D department would require an initial investment of $450.000\ \text{€}$ and $120.000\ \text{€}$ annually, with a $40\ \%$ probability of not achieving valid results within three years.

1. a) Based on the data, explain why the characteristics of traditional R&D (financial risk, sunk costs, and maturation periods) represent an almost insurmountable barrier to entry for an SME.
2. b) Design an open innovation strategy for Biotecmar using two specific alternative pathways (such as university agreements or patent licensing), justifying how each one reduces risk and cost compared to the closed model.

The general manager of a bicycle factory in crisis states: «To get out of losses, the only thing that works is designing 15 new models a year; innovating is only about launching new products». However, the audit reveals that its manufacturing costs are $25\ \%$ above the industry average due to logistics failures, orders take a month to be delivered, and $70\ \%$ of the public is unaware of its current catalogue.

1. a) Refute the manager's statement by demonstrating, using the Oslo Manual typology, why focusing solely on product innovation can accelerate the company's bankruptcy.
2. b) Design two non-product innovation proposals (one process and one organizational or marketing) that tackle the inefficiencies in the report at their root, justifying their impact on the profit margin without the need to modify the bicycles.

A chain of traditional opticians is losing customers who buy their glasses online $40\ \%$ cheaper. a) Explain what threat digital disintermediation poses. b) Design a response combining at least three types of innovation (product, process, organisational or marketing). c) Reason which part of the business is hardest for an online competitor to copy.

A logistics chain with 1.500 employees robotizes its warehouses. It lays off 300 freight handlers, but hires 40 specialists in robotics and data analysis. Thanks to the increase in productivity, it reduces costs by $15\ \%$, lowers its commercial rates, and plans to open three new distribution centers next year.

1. a) Classify the tasks being destroyed and those being created according to their nature (routine vs. cognitive/complex) and assess the immediate impact on the company's labor structure.
2. b) Drawing on this case, use economic compensation theory to refute the idea that technology only generates net unemployment: explain the mechanism through which cost savings and price reductions can generate indirect employment across the economy as a whole.
3. c) Reason what conditions must be met to prevent the 300 laid-off workers from falling into prolonged structural unemployment.

A high-end footwear factory with 45 workers evaluates two process innovation options for leather cutting:

• Option A (Full automation): Laser cutting machine for $170.000\ \text{€}$. Net annual savings of $68.000\ \text{€}$ by laying off 4 master cutters, but with a severance cost in year 0 of $34.000\ \text{€}$.

• Option B (Collaborative cobotics): Assisted robotic arms for $110.000\ \text{€}$. No one is laid off; it invests an initial $10.000\ \text{€}$ in reskilling the 4 artisans. It generates waste reduction and net productivity savings of $40.000\ \text{€}$ annually.

1. a) Calculate the payback period for both options, taking into account all initial outlays.
2. b) Justify which one the company should choose, evaluating, in addition to the financial criterion, the impact on the work environment, the retention of artisan know-how, and brand positioning in the luxury segment.

A heavy machinery manufacturer used to sell its equipment for $48.000\ \text{€}$ upfront in cash (with a unit production cost of $36.000\ \text{€}$). To overcome falling sales, it shifts to a "product-as-a-service" model: it leases the machine for a fee of $1.200\ \text{€}$ per month under a minimum four-year contract, taking on comprehensive preventive and corrective maintenance (estimated at $200\ \text{€}$ per month per machine).

1. a) Compare the gross revenue and operating margin that the company obtains per machine after four years under both models.
2. b) Explain what cash flow strain and working capital financing needs this change will cause in the first year for the manufacturer, even though the new model matches the accumulated profit and, in addition, lets the company keep ownership of the asset.
3. c) Reason how this model changes engineering design incentives: is it now in the company's interest to manufacture more durable and repairable components or to implement planned obsolescence? Justify your answer.

A marketing agency with 18 creatives adopts generative AI to create copy and images. Each employee now produces three times as many campaigns per month, but two corporate clients have cancelled their accounts after detecting texts plagiarised from competitors and images with biases and branding errors that damaged their public image.

1. a) Identify the types of innovation (according to the Oslo Manual) present and analyse the clash between process innovation and the degradation of the quality of the delivered product.
2. b) Explain how the profile and skills required of the agency's workers must evolve (from manual execution work to critical curation, verification, and art direction).
3. c) Design an internal governance code with three binding ethical principles that the agency should present to its clients to restore trust regarding authorship, truthfulness, and data privacy.

Unit challenge. Imagine that you work as an innovation and sustainability consultant to revitalise the local productive fabric. Your goal is to design a strategic transformation plan for a real SME in your neighbourhood or municipality.

1. Diagnosis with official data: Go to the INE website (Companies: Information Society section) and look up the percentage of SMEs with online sales or social media use in your autonomous community (for example, figures around $31,5\,\%$). Choose a nearby SME and briefly describe its activity and its starting point compared to that average.

2. Socio-digital audit: Design a diagnostic table evaluating two axes: its degree of digitalisation (sales channels, payment processing, cloud management) and its social impact (physical and web accessibility, work-life balance, workforce inclusion, and environmental footprint).

3. Responsible transformation plan: Write a one-page executive report with three viable proposals: an accessible digital innovation (e.g., omnichannel sales channel or automation), an inclusion measure (e.g., W3C web adaptation or inclusive hiring), and a corporate social responsibility initiative linked to your community.

Evaluation criteria:

• Rigour in contrasting the INE data with the reality of the analysed SME.

• Feasibility and creativity of the proposed technological solutions.

• Coherent and justified integration of inclusion and social responsibility.