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Innovation Management

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CHAPTER OUTLINE

• Introduction• Definition of innovation• Process of innovation• Innovation factors• Classification of innovation• Technological innovation process modeling

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Introduction• The management of innovation requires technology

but the management of technology does not necessarily require innovation.

• If the processes, products and structure of the organization are fairly stable and the environment is mature, innovation may not be appropriate.

• A process that converts knowledge into useful products and services that have socioeconomic impact. Has significant effect in today’s fast-changing business environment.

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Definition of innovation

• The process whereby new and improved products, processes, materials and services are developed and transferred to a plant and/or market, where they are appropriate.

• Innovation is any system of organized activities that transforms a technology from idea to commercialization.

• A complex set of activities that transforms ideas and scientific knowledge into physical reality & real-world applications.

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Innovation management

• A comprehensive approach to managerial problem solving and action based on an integrative problem-solving framework, and an understanding of the linkages among innovation streams, organizational teams, and organization evolution.

• It is about implementation- managing politics, control, and individual resistance to change.

(White & Bruton, 2007)

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Process of managing innovation

Pixar Animation Studios:• Pioneered the development of

new computerized animation technologies– RenderMan– Marionette– Ringmaster

• Has creative individuals heading the firm (Steve Jobs, founder of Apple Computer) and others through out the firm.

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The case of Pixar:• Illustrated the way to build a supportive environment for

innovation.

• To ensure that individuals in the firm have the range of skills necessary, the firm started Pixar University, which allows individuals in the firm to study for 3 months on a variety of topics related to Pixar’s work.

• The company seek to further encourage creativity by limiting its bureaucracy.

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Individual characteristics that enhance innovation initiative

• Asking questions to identify problems and opportunities

• Learning new skills

• Taking risks and being proactive

• Aligning strong personal beliefs and values with the organization’s values and goals

If an organization manages the work environment in such a way as to encourage these behaviours, then

innovation is more likely.

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Factors that promote innovation

• Greater control of the process and the outcomes

• Greater understanding of the technology produced and how to apply it

• Greater ability to potentially develop the next generation of technology

• Greater profit potential as a first mover

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Factors that disrupt innovation

• Longer time is needed to develop internal innovation strategy compared to purchased from outside the firm.

• There is greater risk of failure to develop the right product at the right time.

• Keeping a pipeline of new products and/or processes is difficult at best. There is always the danger that another firm will enter the market first.

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Disruptive innovation?Prior to the development of hydraulic shovels, established manufacturers were focused on developing larger mechanical earth-moving equipment designed to move greater and greater amount of earth.

However, many customers were not interested in moving larger amounts of earth;

they needed an efficient

machine that was

compact and flexible.

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The case of hydraulic shovels• A relatively small firm, JCB introduced the first

hydraulic shovel or backhoe.

• The established firm had focused only on large mechanical equipment, and the development of their own version of the backhoe took time.

• Their innovation failed to generate the right product at the right time for their market.

• In this case, the hydraulic shovel can be considered as a disruptive innovation to the established firm.

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Classification of innovation

• Innovations can be classified in a number of ways, however one of the most common is from the perspective of product and process innovations.

• Both concepts are related and there is rarely one without some effect on the other.

• Product innovation:– Basic research, applied research and systems integration

• Process innovation:– Restructuring and reengineering

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Product innovation

• For most organizations, product innovations are the center of their research and development efforts.

• The types of innovation efforts found in the R&D process include:– Basic: pure research and development– Applied: new product development– Development (systems integration): product improvement

or market expansion

• A firm may have any or all of these different types going on at any given time.

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Process innovation

• To increase the efficiencies or the effectiveness of an organization.

• Offer the organization and its personnel opportunities to improve the value of the organization and to continue the organization’s viability.

• There are 3 types of process innovations:– Restructuring– Reengineering– Value destruction

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Restructuring• Refers to a major reorganization of a firm.

• Periodically, organizations need to undertake a major review of what it does and why.

• Mainly caused by:– Slow decision making due to information delay.– Opportunities and threats being missed by the organization.– Disruption in the environment that caused extreme stress to the

organization.

• Common activities in restructuring are downsizing

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Downsizing• Occurs when a firm either sells some of its units or lays

off employees.

• However, many firms that downsize have experienced negative results.

• Survivors of the downsizing often feel overworked and are uncertain if they might be laid off next.

• This will effect in expected financial benefits of the restructuring are often not met. Therefore, the planning and goals of downsizing should be extensive and clear.

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Reengineering

• Requires fundamental rethinking and radical redesign of work processes.

• Has 5 specific goals:– Increasing productivity– Optimizing value to shareholders– Achieving quantum results– Consolidating functions– Eliminating unnecessary levels and work

• The main idea is to identify processes within the organization that create no value for the firm.

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Value destruction• Obsolescence, or being leapfrogged may require the firm

to destroy value in one area to gain resources to undertake value creation and/or appropriation in another.

• Important so that firms could focus their attention and resources in a given area that offers the greatest opportunity.

• Eg: in 1990, IBM had to undergo radical changes that involved restructuring units and laying off employees for the first time in its history. The actions were necessary so that IBM could promote new products that would allow it to prosper in the future.

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Technological innovation process modeling• There are many models that have been developed to

help describe the complexity of the process.

• There is no universal model to describe the process. There are 4 general types of models:– Stage models

– Conversion models

– Integrative models

– Decision models

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Stage models

• Innovation is viewed as a series of discrete stages.

• The unit of analysis within each stage is generally activity or functional responsibility.

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Conversion models (technology push/market pull models)

• Inputs being converted into product or processes through a number of steps.

• Addresses the needs of the marketplace and the opportunities presented by new technologies.

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Integrative models

• These models attempt to integrate process and product innovation in respect to technology life cycle.

• The dynamic nature of the innovation process was stressed & the process was represented as changing over time as the industry evolved and matured.

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Decision models

• Approach the innovation process in terms of these decision points.

• Offers management a practical approach to the process.

• Points to the evolutionary nature of decision-making process.

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ReferencesTarek Khalil, 2000. Management of Technology: The key to

competitiveness and wealth creation, McGraw-Hill International Edition, Singapore.

Harrison, N. and Samson, D.,2002. Technology Management: Text and International Cases, McGraw-Hill Irwin, US.

Narayanan, V.K., 2001. Managing Technology and Innovation for Competitive Advantage, Prentice Hall, US.

Betz, F., 2003. Managing Technological Innovation: Competitive Advantage from Change, 2nd edition, John-Wiley & Sons, US.

White, M.A. & Bruton, G.D. (2007). The management of technology and innovation: A strategic approach, Thomson South-Western, US.