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?