Managing Innovation(Chapter-4)

By

Syed Shahid Hussain

Innovation

To make something newTo make something new

A process of turning opportunity into new A process of turning opportunity into new ideas and of putting these into widely used ideas and of putting these into widely used practicepractice

Innovation is a high risk idea that is new to Innovation is a high risk idea that is new to the sponsoring organization. The the sponsoring organization. The innovation process is any system of innovation process is any system of organized activities that transforms a organized activities that transforms a technology from idea to commercialization technology from idea to commercialization (Souder, 1987).(Souder, 1987).

Innovation…Innovation refers to new products, Innovation refers to new products, new processes, new managerial new processes, new managerial approaches, and combinations of the approaches, and combinations of the above.above.

An important aspect of innovation is An important aspect of innovation is ““AdoptionAdoption and and implementation of ITimplementation of IT.” .”

CreativityCreativity is the generation of is the generation ofnew ideasnew ideas

InnovationInnovation is the process of is the process oftransformation of creativetransformation of creativeideas into desired outputs.ideas into desired outputs.

What is Creativity & Innovation?

Distinction between ”Invention”, ”Discovery”, and ”Innovation”

An ’invention’ or ’discovery’ is an idea, a sketch or model An ’invention’ or ’discovery’ is an idea, a sketch or model for a new or improved device, product, process or for a new or improved device, product, process or system. It has not yet entered into economic system, and system. It has not yet entered into economic system, and most inventions never do so.most inventions never do so.

An ’innovation’ is accomplished only with the first An ’innovation’ is accomplished only with the first commercial transaction (transform a technology from commercial transaction (transform a technology from novel idea to commercialization) involving the new novel idea to commercialization) involving the new product, process, system or device. product, process, system or device. It is part of the It is part of the economic system.economic system.

Variables related to Innovation (Burgelman & Maidique 1988)

Resource availability and allocationResource availability and allocation

Ability to understand competitors’ innovative Ability to understand competitors’ innovative strategies and industry evolutionstrategies and industry evolution

The business’s technological environmentThe business’s technological environment

Structural and cultural context of the BusinessStructural and cultural context of the Business

Strategic management capacity in dealing with Strategic management capacity in dealing with entrepreneurial behavior entrepreneurial behavior

Framework for Reviewing Technological Innovation: 8 Stages

Discovery of a new idea or productDiscovery of a new idea or product

Emergence of the proposed idea or design concept which brings together the Emergence of the proposed idea or design concept which brings together the existing knowledge and technique of the technical conceptexisting knowledge and technique of the technical concept

Verification of the theory or designVerification of the theory or design

Demonstration of a prototypeDemonstration of a prototype

Trail and evaluation of alternative versions of the conceptTrail and evaluation of alternative versions of the concept

Commercial introduction or initial operation of the innovationCommercial introduction or initial operation of the innovation

Innovation adoptionInnovation adoption

Innovation proliferation leads to extensions for new markets or new applicationsInnovation proliferation leads to extensions for new markets or new applications

Innovation lifecycle - Adoption of technology

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Component knowledgeComponent knowledgeKnowledge of each of the components that performs a Knowledge of each of the components that performs a

well defined function within a broader system that makes well defined function within a broader system that makes up the product. This knowledge forms part of the ‘core up the product. This knowledge forms part of the ‘core design concepts’ (Henderson and Clark, 1990) embedded design concepts’ (Henderson and Clark, 1990) embedded in the components.in the components.

System knowledgeSystem knowledgeKnowledge about the way the components are integrated Knowledge about the way the components are integrated

and linked together. This is knowledge about how the and linked together. This is knowledge about how the system works and how the various components are system works and how the various components are configured and work together. Henderson and Clark (1990) configured and work together. Henderson and Clark (1990) refer to this as architectural knowledge.refer to this as architectural knowledge.

Components vs System Knowledge

Types of innovation

One can differentiate innovations in terms of One can differentiate innovations in terms of the degree of novelty associated with them. the degree of novelty associated with them. Some innovations employ a high degree of Some innovations employ a high degree of novelty, while others involve little more than novelty, while others involve little more than ‘cosmetic’ changes to an existing design. ‘cosmetic’ changes to an existing design. Following are the main types of innovation:Following are the main types of innovation:

Incremental innovations Incremental innovations

Radical innovationsRadical innovations

ArchitecturalArchitectural

ModularModular

Types of innovationIncremental innovationsIncremental innovations – – improves in existing functional improves in existing functional capabilities e.g, quality and reliability such as improvement in capabilities e.g, quality and reliability such as improvement in computer memory etc.computer memory etc.

Radical innovations – Radical innovations – new functionality that represents a new functionality that represents a discontinuity in existing technology. A radical innovation calls for a discontinuity in existing technology. A radical innovation calls for a whole new design, ideally using new components configured (i.e. whole new design, ideally using new components configured (i.e. integrated into the design) in a new way(e.g, transistors, ICs, Lasers integrated into the design) in a new way(e.g, transistors, ICs, Lasers etc.).etc.).

Architectural Architectural - With architectural innovation, the components and - With architectural innovation, the components and associated design concepts remain unchanged but the configuration associated design concepts remain unchanged but the configuration of the system changes as new linkages are instituted.of the system changes as new linkages are instituted.

Modular – Modular – Modular innovation uses the architecture and Modular innovation uses the architecture and configuration associated with the existing system of an established configuration associated with the existing system of an established product, but employs new components with different design concepts.product, but employs new components with different design concepts.

Dimensions of innovation

Changes associated with Types of Innovation

Innovation Components System

Incremental Improved No change

Modular New No change

Architectural Improved New configuration / architecture

Radical New New configuration / architecture

Innovation at the System Level

Competitors

SuppliersLeading edge

customers

Strategic

partnerships

Innovation

activities

in the firm

Forms of InnovationBased on the idea of applications or uses for innovation. By Based on the idea of applications or uses for innovation. By this we mean areas or fields where innovations are usedthis we mean areas or fields where innovations are used

Product innovationProduct innovation: changes in the things (products or services) which : changes in the things (products or services) which an organization offersan organization offers

Process innovationProcess innovation: : changes in the ways in which they are changes in the ways in which they are created and deliveredcreated and delivered

Position innovationPosition innovation: : changes in the context in which the product changes in the context in which the product or services are introduced i.e brand image or services are introduced i.e brand image

Paradigm innovationParadigm innovation: : changes in the underlying mental models changes in the underlying mental models which frame what an organization doeswhich frame what an organization does

‘4 Ps’ of innovation

Forces of InnovationInnovation is related to firm size or industry structureInnovation is related to firm size or industry structure

Two School of ThoughtsTwo School of Thoughts Schumpeter (1934) – developing markets and large firms are the Schumpeter (1934) – developing markets and large firms are the

driving forces behind innovation – driving forces behind innovation – ‘carrot’ of large potential ‘carrot’ of large potential profitsprofits

Belief that the more competitive the market structure, the Belief that the more competitive the market structure, the smaller are the gain to innovationsmaller are the gain to innovation

This assumption is the basis of almost all existing patents This assumption is the basis of almost all existing patents and copyrightsand copyrights

Robertson, (1984) – desire to enter and compete in competitive Robertson, (1984) – desire to enter and compete in competitive markets – markets – stick of destructionstick of destruction

Basic assumption is as competitor’s intention to encroach Basic assumption is as competitor’s intention to encroach one’s marketone’s market

Both mechanisms are valid under certain conditions. Both mechanisms are valid under certain conditions. Some organizations set up businesses to compete Some organizations set up businesses to compete within and threaten to ‘cannibalization’.within and threaten to ‘cannibalization’.

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Forces of Innovation:Market Pull - R&D Push

Market pull looking for the best way of satisfying a newly emerging

customer demand improvement of the existing products, extension of the

existing offer or decrease of price impulses for continuous, incremental innovations or for

process innovations

Research and development push looking for commercial use of new impulses resulting

from the R&D results generating of new markets for conceptually different

products

SOURCES OF INNOVATION IMPULSES

Internal environment

Own R&DOwn R&D Technical divisions – design, technologyTechnical divisions – design, technology Production divisions (production, provision Production divisions (production, provision of services)of services) Marketing and salesMarketing and sales Logistics (purchase and supplies)Logistics (purchase and supplies)Guarantee and post-guarantee serviceGuarantee and post-guarantee serviceOwnersOwners

SOURCES OF INNOVATION IMPULSES External environment

CustomersCustomersSuppliersSuppliersCompetitorsCompetitorsConsultants, R&D Consultants, R&D institutionsinstitutionsSchools, universitiesSchools, universitiesProfessional Professional publications, Internetpublications, InternetExhibitions, fairs, Exhibitions, fairs, specialized seminars specialized seminars and conferencesand conferences

Advertising agenciesAdvertising agencies

InvestorsInvestors

MediaMedia

Authorized testing Authorized testing laboratories, laboratories, certification agenciescertification agencies

State institutions, State institutions, public sectorpublic sector

LegislationLegislation

GlobalizationGlobalization

Important contextual factors

Type of sectorType of sector Size of firmSize of firm The country and regionThe country and region The stage in the industry life cycleThe stage in the industry life cycle Political regulationsPolitical regulations GlobalisationGlobalisation SustainabilitySustainability Networking organisationNetworking organisation

Saleh and Wang (1993) Model

Key Organizational Attributes for Effective Key Organizational Attributes for Effective InnovationInnovation Entrepreneurial Strategies Entrepreneurial Strategies

Risk taking – decisions with incomplete informationRisk taking – decisions with incomplete information Proactive approach – scanning environment regularlyProactive approach – scanning environment regularly Management commitment – top managementManagement commitment – top management

Organizational Structure / Group FunctioningOrganizational Structure / Group Functioning Flexible structure – organic structureFlexible structure – organic structure Synthesis – interdisciplinary and integrative activitiesSynthesis – interdisciplinary and integrative activities Collective orientation – common organizational norms Collective orientation – common organizational norms

and beliefs not just reward and recognition systemand beliefs not just reward and recognition system

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Saleh and Wang (1993) Model…

Key Organizational Attributes for Effective Key Organizational Attributes for Effective InnovationInnovation Organizational ClimateOrganizational Climate

Open/Promotive climate – trust building and mutual Open/Promotive climate – trust building and mutual respectrespect

Collegiality – authority and power are shared equally Collegiality – authority and power are shared equally among colleagues among colleagues

Reward Systems – “culture of pride” that expects and Reward Systems – “culture of pride” that expects and rewards high levels of achievements and assumes that rewards high levels of achievements and assumes that investments in people pay off.investments in people pay off.

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Risks and Successes in Innovation

According to the study of Schewe (1994):According to the study of Schewe (1994):

Is Innovative success, function of firm-related variables Is Innovative success, function of firm-related variables (i.e. innovative experience, markets and customers’ knowledge, supply (i.e. innovative experience, markets and customers’ knowledge, supply

chains etc.)chains etc.)??

Is innovation success, function of project-related variables Is innovation success, function of project-related variables (i.e. technical skills, development cost, development time (i.e. technical skills, development cost, development time etc.)?etc.)?

He concluded that the innovation’s success is He concluded that the innovation’s success is determined by the overall capabilities of the innovative determined by the overall capabilities of the innovative firm.firm.

Firms need to promote cross-functional perspective Firms need to promote cross-functional perspective The impact of key decisions on firm’s innovative capabilities The impact of key decisions on firm’s innovative capabilities

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Risks and Successes in Innovation…

Steele (1989) findings: Steele (1989) findings: A new technology should offer a real value to the customers A new technology should offer a real value to the customers

in terms of functionality or performancein terms of functionality or performance System view is required for innovation successSystem view is required for innovation success Customer is the ultimate judge of innovation success. The Customer is the ultimate judge of innovation success. The

multidimensional and varying criteria of customer’s judgment multidimensional and varying criteria of customer’s judgment must be considered while bringing up any innovation.must be considered while bringing up any innovation.

Standards and infrastructure should be aligned with new Standards and infrastructure should be aligned with new product or innovation.product or innovation.

It is important to note the type of innovation; radical It is important to note the type of innovation; radical innovation requires a new business organization for innovation requires a new business organization for success.success.

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Models of InnovationsDifferent models have been developed by researchers to describe the complexity of the innovation process. The limitation of these models is that some focus on consumer product, some on industrial product and others may be on more universal applications. It is generally concluded that no model can be utilized as general model for innovation process:

Stage Models – Stage Models – viewed as linear sequential model i.e whole process is viewed as linear sequential model i.e whole process is divided into discrete stages (function or activity)divided into discrete stages (function or activity)

Nonlinearity and complexity of system is overlookedNonlinearity and complexity of system is overlooked

Conversion ModelConversion Model (Technology Push and Market Pull Models) – (Technology Push and Market Pull Models) – inputs are converted into products or processes through steps; inputs are converted into products or processes through steps; Twiss (1980), Rothwell (1985) and other have developed such Twiss (1980), Rothwell (1985) and other have developed such modelsmodels

More realistic, addresses needs of the market and presented More realistic, addresses needs of the market and presented opportunities through new technologyopportunities through new technology

Still underrepresentation of the complexitiesStill underrepresentation of the complexities

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Models of Innovations…Integrative Models – Integrative Models – attempt to integrate process and attempt to integrate process and product innovation in respect to the technology lifecycleproduct innovation in respect to the technology lifecycle It is dynamic in nature where innovation process is changed as It is dynamic in nature where innovation process is changed as

industry is evolved contrary to the previous where focus was on industry is evolved contrary to the previous where focus was on efficiencyefficiency

This model failed when tested across the industries i.e. it is industry This model failed when tested across the industries i.e. it is industry specific model specific model

Decision Models Decision Models – Throughout the innovation process, – Throughout the innovation process, many decisions need to be made. Innovation process many decisions need to be made. Innovation process based on these decision points and offer management a based on these decision points and offer management a practical approach to the processpractical approach to the processCooper and More (1979) Model presents evolutionary nature of the Cooper and More (1979) Model presents evolutionary nature of the decision making processdecision making process

Same generalizability problem i.e. it is industry specific modelSame generalizability problem i.e. it is industry specific model

Critiques on Innovation Models

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Overlook the Overlook the complexitycomplexity of pre-innovation stage; idea of pre-innovation stage; idea generation and screeninggeneration and screening

Not useful for firm’s strategic planning process because of Not useful for firm’s strategic planning process because of failing to include failing to include time dimensiontime dimension..

Lack of environmental consideration – PEST Lack of environmental consideration – PEST

Human elements are overlooked – employees, govt., trade Human elements are overlooked – employees, govt., trade unions, employer bodies etc.unions, employer bodies etc.

Strategic Alliances are ignored which have a significant impactStrategic Alliances are ignored which have a significant impact

Fail to consider cumulative and chaotic nature of innovation; Fail to consider cumulative and chaotic nature of innovation; any innovation process is dependent on feedback and flexibility any innovation process is dependent on feedback and flexibility to address the nature of innovation. to address the nature of innovation.

Einstein's statement:Einstein's statement:

““I never came upon any of my discoveries through a I never came upon any of my discoveries through a process of rational thinking”process of rational thinking”