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Managing Innovation
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MICE: Innovation Management
LECTURE 4Tidd & Bessant (2013) Ch 1-4
Innovation – what it is and why it matters Innovation as a core business process Building the innovative organization Developing an innovative organization
Topics
New products and processes Seeing opportunities New ways to serve existing markets Using new technologies to do things better Improving old products Becoming more efficient New ideas
WHAT IS IT ALL ABOUT?
Competitive advantage Being able to create novelty in offerings, in the
ways they’re created and delivered Business growth Economic growth – due to innovation Entrepreneurship New product development – shorter life-cycles,
environmental concerns, new processes also Businesses need to innovate to survive, to stay
ahead of the competition
Why innovation matters
The changing world makes old business models obsolete
Rate of knowledge production (Table 1.2) Schumpeter’s ‘creative destruction’
Coming up with a good idea that can become reality, and that will satisfy a need
Growing good ideas into practical use Invention leads to innovation Need to also consider project management,
market development, financial management, organizational behaviour
What is innovation?
Where does Innovation come from? What are the sources of Innovation? Do ideas for Innovation come from inside or
outside the organisation? ‘Push’ versus ‘Pull’? Push from internal ideas, R&D, creativity Pull from the marketplace –
customer/society needs Example of 'pull' innovation research
Turning ideas into reality and capturing value from them
Search – R&D, copying competitors, Eureka moments, customers
Select – involving some strategic choices Implementation - -managing time, money,
people, equipment, knowledge Core conditions necessary to allow it to happen Organizational/environmental conditions (e.g. NASA, USA v USSR – Teflon, computers,
food)
A process view of innovation
New inventions, new technologies, new ideas
Conditions and ‘need’ must exist (Penicillin, Microwave oven) New ways to meet existing needs Needs redefined (e.g. ‘Tune’ hotel, Ryanair)
Scope for/types of innovation
Product Process Position Paradigm
Finnegan's Fish Bar
Four dimensions of innovation space
If using one or more Ps, try also using others
Compare organizations for how they do things, to identify gaps, find a different way to innovate
Mapping innovation space
Incremental or radical innovation. Which it is depends on the view from the organization. Continuous improvement (TQM). Learning-curve effect
Platform innovation. One basic model (set of models) that can be stretched out into a family of products (Cadbury’s biscuits/cakes). Also services, e.g. Mortgages, comparison sites. ‘Positioning’ by extending the brand, e.g. ‘Easyjet, Easycar, Easyhotel’, etc
Exploring different aspects of innovation
Discontinuous innovation ‘Creative destruction’ Changes the way the industry operates, e.g.
Kodak, music/publishing industry Sources of discontinuity (Table 1.4)
Knowledge – create new possibilities from different knowledge sets (e.g. Business and Creative industry schools here)
The more we move into uncertain areas, the greater the risk that’s involved
Get those involved at the cutting-edge of respective areas to work together?
Component/architecture innovation
(Figure 1.6) What is being developed and how it is being
developed may vary as competing players vie for superiority, e.g. VHS/Betamax, DVDHD/BluRay
Using different technologies Leads to a dominant design, industry standards Now everybody can move forward together (low-energy bulbs still need bayonet-cap/screw
fitting)
Innovation life-cycle
Through the Fluid, Transitional and Specific stages, some firms are better equipped than others
Changes to an industry may come from outside the industry, e.g. IT in financial services, education, etc
NIH (not-invented-here) effect
Stages in the innovation life-cycle
Search Select Implement Capture value, learn from the process
Solutions from around R&D, engineering, project management, changing customer needs – depends on type of business sector
(e.g. ASDA ‘chosen by you’)
Innovation as a core business process
New products or processes Services and innovation –
Product/process/Position/Paradigm (Table 2.1)
Search for trigger signals – strategic concept – product/market development – launch
Development of product often involves development of service package too
Switch from one to the other?
Variations on a theme
Outsourcing of key business processes Still need to seek improvement Process innovation Not-for-profits also need to innovate Size matters! Advantages and
disadvantages (Table 2.2) Only 2% of high-growth SMEs are high-tech Older companies are more likely to grow
rapidly than the youngest ones
Extended enterprise
Project-based organizations Networks and systems Geographic/industry clusters Local/regional/national systems Do better, do different – degrees of novelty
– the game may have to change altogether Steady-state versus discontinuous
innovation Still follow the same processes, but may
have to look -search- in different places for sources of innovation ideas
Linear models – search, select, etc But needs interaction with other functions,
other organizations -linkages, systems, False starts, recycling, reiteration, stages,
dead ends, etc (Rothwell’s five generations, Table 2.5)
Evolving models of the process
Can we manage innovation? ‘Murphy’s law’ Create conditions where uncertainty is
resolved Manage the process and the obstacles, Manage technical resources and the
capabilities Learned routines – used while navigating
the obstacles Project management – from lessons learned
Basic skills enhanced by broader abilities e.g. expertise in implementing change
Learning, changing the organization Routines can become damaging, set in our
ways Firms vary in terms of awareness of need for
change and the ability to make change (Fig 2.3)
Learning to manage innovation
Innovation is a process, not a single event, and needs to be managed as such
The influences on the process can be manipulated to affect the outcome, that is, the process can be managed
Cycle of learning Search-select-implement-capture Beyond the steady-state – discontinuous
innovation
Successful innovation management
Shared vision, leadership and the will to innovate
Appropriate organization structure Key individuals High involvement in innovation Effective team working Creative climate Boundary spanning - internal and external
forces
Building the innovative organization
Firm-specific knowledge, including the capacity to exploit it, is essential
Innovation strategy should be essential part of corporate strategy
Innovation strategy must cope with eternal environment
Internal structures and processes must balance specialised knowledge with and across functions and divisions
Incremental approach is needed (Porter’s new entrants/substitutes) but technology can change industry boundaries
Developing an Innovation Strategy
Rationalist – appraise, determine, act – SWOT
Environment is complex and fast-changing, so difficult to assess
Rationalist or incrementalist strategies?
Incrementalist – inability to understand present or predict the future, imperfect knowledge of strengths and weaknesses
Make deliberate steps, or changes, towards the desired objective
Measure and evaluate the effects of the steps, or changes, towards the desired objective
Adjust if necessary
Emphasis on analysis and learning Given the uncertainty, explore the
implications of a range of possible future trends
Ensure broad participation and informal channels of communication
Encourage the use of multiple sources of information, debate and scepticism
Expect to change strategies in the light of new (and often unexpected) evidence
Implications for management
Successful management practice is never fully reproducible
Second implication
According to Porter, firms must decide between innovation leadership and innovation followership
Pioneers spend on R&D most likely to be on minor, incremental innovations
Late entrants tend to focus on competencies such as distribution or promotion, or major new product development in an effort to compete
Innovation ‘leadership’ versus ‘followership’
Lead to competitive advantage Changing nature of the environment and
management ability to adapt internal and eternal organizational skills
Match capabilities with user needs, must be unique and difficult to replicate
It’s about where we are (position) and alternative paths available to us
The dynamic capabilities of firms
Institutions: finance, management and corporate governance
Two broad systems that determine the nature of innovative behaviour
Anglo-Saxon versus Nippon-Rhineland (Table 4.1)
They will be sources of firms with a strong capacity to compete through innovation
They are also potential sources of improvement in the corporate management of innovation, and in national systems of innovation
Firms can benefit more specifically from the technology generated in foreign systems of innovation
Learning from foreign systems of innovation
Knowledge of how to replicate competitors’ product and process innovations is costly and time-consuming to acquire
Learning and imitating
The firm’s capacity to translate its technological advantage into commercially viable products or processes
The firm’s capacity to defend its advantage against imitators
Appropriating the benefits from innovation depends on:
Some factors depend on management commitment, others depend more on the general nature of the technology, the product market, the regime of intellectual property
Secrecy Accumulated tacit knowledge
Lead times and after-sales service Learning curve Complementary assets Product complexity Standards Pioneering radical new products Strength of patent protection
Successful innovation strategy requires understanding the key parameters of the competitive game (markets, competitors, external forces, etc) and also the role which technological knowledge can play as a resource in this game
Need some kind of framework that articulates how innovation can help survival and growth, and need to allocate scarce resources
Enabling strategy making
Strategic analysis – what, realistically, could we do? (Four Ps framework?)
Strategic choice – what are we going to do, what will we leave out?
Strategic monitoring – over time reviewing to check is this still what we want to do?