BJTH3063 Chapter 7

Innovation Defined The new technologies, products, or processes

developed by or that result from the internal creative efforts of firms.

Benefits of Innovation1. Greater control of the process and the outcomes2. Greater understanding of the technology

produced and how to apply it3. Greater ability to potentially develop the next

generation of technology4. Greater profit potential as a first mover

Factors That Discourage Innovation The time required for an internal development

strategy is greater than purchasing an immediately available product externally.

There is a 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.

Product Innovation (R&D) Basic: pure research and development Applied: new product development Systems integration: product improvement or

market expansion Process Innovation

Restructuring/Downsizing Reengineering

1. The firm must acknowledge that the goal of internal innovation is for the firm to outperform its competition.

2. Internal innovation is a process that involves many individuals, capabilities, and resources.

3. Resources are critical to the innovation process.

Determine the Vision

Set the Mission

Establish Goals and Objectives

Set Strategy

Specific Tactics and Actions

Political IssuesPolitical IssuesPolitical IssuesPolitical Issues

CreativityCreativityCreativityCreativity Organization-wide Organization-wide IssuesIssues

Organization-wide Organization-wide IssuesIssues

InnovationInnovationPlanningPlanning

InnovationInnovationPlanningPlanning

Organizational Organizational AssumptionsAssumptions

Organizational Organizational AssumptionsAssumptions

CommunicationCommunicationCommunicationCommunication Reward SystemsReward SystemsReward SystemsReward Systems

Organization-Organization-wide Issueswide Issues

Organization-Organization-wide Issueswide Issues

To plan for innovation, managers need to follow guidelines that will help them develop the right climate for success in innovation activities.1. Recognize innovative individuals exist throughout

the organization. 2. Periodically reconsider how work is accomplished.3. Encourage “turning the prism” to put a new light on

problems.4. Ask employees what their biggest aggravations are.5. Train people to recognize their creative abilities and

participate in the planning innovation process.

To ensure that the plan for an innovation strategy can be implemented, the manager should answer three key initial questions. What should we be doing now, and what can

we do later?

What are the time and/or specialized skills required for the prioritized activities?

What should be delegated and to whom?

The guidelines for implementing an innovative strategy depend on the type of innovation and its goals. In new product development or extension, the guidelines include tactics that depend on characteristics of the new product.1. Relative advantage: How much better is the

product than those with which it is designed to compete?

2. Compatibility with current product usage: How well does the new product fit with the current product usage or end-user activity?

3. Complexity: Will frustration or confusion arise in understanding the innovative product’s basic idea?

4. Divisibility or trialability: How easily can trial portions of the new product be provided and used?

5. Communicability or observability: How likely is the product to appear where potential users can see it?

Therefore, the managerial guidelines for a new product in an existing market, an old product in a new market, or a new product in a new market include the following:1. Determine the relative advantage of the product

in its market.

2. Be aware of the possible influences of the innovative product/ market and how it may affect the previous product/market mix.

3. Realize that if the innovation is too complex, then selling it in the organization and to potential customers will be difficult. The leadership should try to negate complexity with clarity of purpose and planning.

4. Build awareness through providing samples or demonstrations of the new product’s characteristics.

5. Make the product visible—a normally invisible product gains marketing recognition.

Key Evaluations of the Current Status of: The strategic environment The external environment Information systems Structural analysis

What to Measure? Specific outcomes that produce

competitive advantage in the future Measures of outcomes that impact future

competitiveness Measures of future strategic capabilities

Adjustments that must be made if a gap is identified between goals and performance:

1. Rethink business processes by trying to be more cross-functional.

2. Look for improvements by redesigning the processes the firm uses for its internal innovation.

3. Empower those involved in the innovative process to make key decisions.

4. Determine if the goals do not match the capabilities of the firm and develop new goals.

1. Create constancy of purpose.

2. Adopt a new philosophy.

3. Cease dependence on inspection.

4. Move toward a single supplier.

5. Improve constantly.6. Institute leadership.7. Institute training.

8. Drive out fear.9. Break down barriers

between departments.10. Eliminate slogans.11. Eliminate

management by objective.

12. Remove barriers to pride of ownership.

13. Institute education.14. The transformation is

everyone’s job.

1. Ensure that management support and project goals are understood and in the forefront of the organizing effort.

2. Assess the skills required so that the people needed to meet project objectives are involved with the process.

3. Set up the infrastructure for the most likely scenario, but have contingencies for other strong possibilities.

4. Don’t underestimate the influence of the internal culture and the external environment.

5. Set up a monitoring system that is an integral part of implementation and addresses potential technical and market risks.

To ensure the evaluation and control effort is looking at the correct issues, the firm needs to ask two questions periodically.

1. Are we measuring what we are interested in?

2. How do we make adjustments?

In conducting the evaluation and control process managers cannot forget the human element in these activities and should: Maintain a balance among the various

measurement approaches.

Seek the involvement of top management.

Develop a “learning” focus on achieving the ends.

Ensure that objectives are specific and understood.

Include feedback as an integral part of the innovation process; it is not a once a year occurrence.