Innovation Management Definitions and theories

1. Innovation ManagementDefinitions and theories Dr.Vesselin Blagoev

2. Introduction to innovation • Introduction to innovation • The study of innovation • Innovation and invention: definitions • Different types of innovation • Models of innovation • The Linear models of innovation • Simultaneous coupling model of innovation • Interactive model of innovation

3. Importance of economic growth • Innovation is the engine of growth • Provides growth regardless of the economic cycle / conditions

4. Importance of economic growth • Marx:innovations could be associated with waves of economic growth • This is macro view of innovation as cyclical

5. Importance of economic growth • Schumpeter(1934,1939,1942): the new products are stimuli to economic growth

6. Importance of economic growth • Schumpeter (1934, 1939) , Kondratiev (1935-51) , Abernathy and Utterback(1978) and other argued that the capitalist will not decline, which Marks taught, because of the impact of innovation (Long-wave theory of innovation)

7. Joseph Schumpeter(1943) “…the fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forces of industrial organisations that the capitalist enterprise creates.” (1943)

8. Kondratieff’s Waves of innovation The economy grew on the basis of major innovations in product, process and organization with the relevant changes in the social domain. 1st wave players: Britain, France, Belgium 2nd: USA and Germany 3rd: USA and Germany strengthening 4th : and Japan, Sweden 5th : and Korea, Taiwan, Ireland, Finland

9. Kondratieff’s Waves of innovation K5 Information & communication K2 Steam power & railway K3 Electrical & heavy engineering K4 Ford(ism) K1 Early mechanization Prosperity Economic activity Recovery Recession Recession Depression 1770s-80s 1830s-40s 1880s-90s 1930s-40s 1980s-90s UK, France, Belgium USA, Germany USA, Ger +Jap, Sweden +Ko,Ta,Ir,Fin

10. Importance of economic growth • After the World War II: • military R&D • industrial R&D

11. R&D main steps • USSR: First Sputnik (1957), First Live Creature (dog Laika 1958), Yuri Gagarin First Man in the Space (12 April 1961) • USA: JFK(1960) - A man on the moon before the end of the decade

12. New findings • Economists soon found that there is not direct correlation between R&D spending and national rates of economic growth

13. New studies • 1950s: cross-discipline approach, incorporating economics, OB, management. It was found that the firms have different characteristics, behave differently. But still – why different results of R&D?

14. Importance of economic growth • Abernathy and Utterback(1978) A radical product innovation would start any new industrial sector, followed by radical innovation in the production processes. After that – widespread incremental innovation

15. Neo-classical theories • Explain how savings, investments and growth respond to population growth and technological change • The rate of technological change influences the rate of economic growth, but economic growth does not influence the technological change. They are exogenous (external).

16. Neo-classical theories • Neo-classical theory tends to concentrate on economy/industry level • Ignores differences among firms in the same industry • The differences are assumed to reflect differences in the market environment (Trott, 2008)

17. Schumpeterian view Creative individuals Firm’s Operating Functions and activities Scientific and technolo-gical develop-ments inevitably lead to knowledge inputs Firm’s architecture and external linkages Firms develop knowledge processes and products Societal changes and market needs lead to demands and opportunities

18. Schumpeter • Modern firms with R&D labs have become the central innovative actors

19. Other names & theories • Nelson & Winter (1982) :Evolutionary theory of dynamic firm capabilities (Schumpeterian theory, see also Prahalad & Hamel, 1990; Patel & Pavitt, 2000 and other) • Success depends on ability to acquire and utilize knowledge to develop new products and technologies

20. Innovation and Marketing • The importance of uncovering and satisfying the needs of customers is the important role played by marketing and these activities feed into the process of new product development (Trott, 2008) • Ironically, the firms may need to innovate not-expected or even not-wanted products to develop new industries

21. Disruptive vs. Sustaining Innovations • Christensen (2003) : • Sustaining= incremental innovation appeals to existing customers (improvements of existing products) • Disruptive=radical innovation, create new markets and customers

22. Organizational context • Innov must be viewed as a management process within the organization, in the context of organizations. • But, firms do not operate in a vacuum. • Which/what activities are needed to ensure the success of R&D activities? Why Apple could develop iPod and iPhone, and the other giants could not do it in spite of multibillion R&D and marketing budgets?

23. Other names & theories • Michael Porter: Reinvest additional profit into activities

24. In-class team work • Imagine two different firms, similar in size, operating in the same industry, spend the same on R&D. • Will their innovation results be the same? Why yes or why no?

25. Innovation Management as a Managerial Process External inputs: macro factors, competition Organization and business strategy Organisation’s knowledge base accumulates knowledge over time External inputs:scientific and technological development, competitors, suppliers, customers, university departments External inputs:societal needs, competitors, distributors,customers, strategic alliances Marketing Research & Technology

26. General overview of the innovation process Other firms Other firms Other firms Technology and product effects Firm’s innovating architecture The firm’s functions Individuals Interaction Knowledge and technology providers Effects MICRO ENVIRONMENT MACRO ENVIRONMENT

27. Innovation and invention • Creativity: The thinking of novel and appropriate ideas • Invention: Conception of the idea Source: Trott (2008, p.15)

28. Innovation and invention • Innovation: the successful implementation of those ideas in the organization • Innovationis the management of all the activities involved in the process of idea generation, technology development, manufacturing and marketing of a new (or improved) product

29. Innovation Def: Innovation is not a single action but a total process of interrelated sub processes. It is not just the conception of a new idea, not an invention of a new device, nor a development of a new market. The process is all these things acting as an integrated fashion. Source: Myers and Marquis (1969)

30. Innovation • Innovation is the application of knowledge • Technology is knowledge applied to product or production processes. The technological innovation can be accompanied by additional changes, often referred to as innovations.

31. Leading through innovation • CreativityInnovation • Innovation =Theoretical conception + Technical invention+ Exploration (Commercial exploitation ) • The creativity is the generation of new ideas, while the innovation is making money out of those ideas

32. Innovation – New or What? It matters little, as far as human behaviour is concerned, whether or not an idea is ‘objectively’ new as measured by the lapse of time since its first use or discovery… If the idea seems new and different to the individual, it is an innovation. Source: Rogers and Shoemaker (1972)

33. Types ofInnovation • Product innovation • Process innovation • Organizational innovation • Management innovation • Production innovations • Commercial/Marketing innovations • Service innovations

34. Theories of innovation • Serendipity (luck) • Linear models of innovation • Technology push • Market pull • Simultaneous coupling model • Interactive model

35. Conceptual framework of innovation : interaction of science base Creation of new knowledge, dominated by universities and large science-based organizations Technology development, dominated by organizations Consumers express their needs and wants through the consumption of products Science and technology base Technological development Needs of the market

36. Linear Models of Innovation Technology push model Research and Development Manufacturing Marketing Market pull model Marketing Research and Development Manufacturing

37. Simultaneous coupling model Manufacturing Research and Development Marketing

38. Interactive model of innovation Technology push Latest sciences and technology Advances in society Idea R&D ManufacturingMarketing Commercial product Needs in society and the marketplace Market pull

39. The role of the state ? • The public knowledge underpins innovation – granting intellectual property rights to products of knowledge, legal infrastructure to support these rights, subsidies • Uncertainty of the ends of innovation– subsidies, tax advantages, tax exemptions, joint R&D projects

40. The role of the state ? • The need for technological support – road, electricity, water supply, development of communication superhighways, legal and marketing support from the state • Governance– development of networks which help for the easier diffusion of innovations, better communications

41. The role of the state ? • Politics – international and local business standards: environmental, safety and human rights standards, loan guarantees, higher (monopolistic) prices for early models

42. The role of the state based on Porter Education Regulation of competition Financing R&D Factor conditions Labor, capital, row mat Major Purchaser Innovative firm Institutional setting Customers Environment & safety regulations Political stability, Information & decision centre Supporters & supporting industries Infrastructure building Macroeconomic conditions

43. Theories about organisations and innovation • Classical or scientific management perspective • Human relations approach • Contingency approach • Systems theory

44. Classical or scientific Taylor (1947), Weber (1964) • The organisation is an instrument for achieving established goals. The organisation is made working/serving those goals by management’s use of reward, motivation and penalizing techniques. • All tasks confronting the organisation can be rationalized. • People can be combined with machines to produce the orderly output. • Technology-push model.People produce innovations following the plan

45. Human relations approachRoethlisberger & Dickinson(1939), Harvey & Mills (1964) • Informal and non-legitimised group processes in the organisation(1930s).They matter in regard of innovation • The organisation as a political system – change will result in some conflict between different units in the organisation when a unit perceives that an innovation or change might reduce its influence or benefits

46. Human relations approach • The notion of routine and innovative solutions. Harvey & Mills (1970): the organisation will tend to use routine solutions unless there is a pressure on the organisation’s structural arrangements. Innovative solutions will only be imposed when the organisation is in a higher stress-threat situation

47. Contingency approach • There is not necessarily a single best organisational structure, but rather the structure should be adapted to the activities being performed. Organisational activities or tasks are the things that individuals do as part of groups in order for the organisation to achieve its purposes • Different characteristics: certainty vs uncertainty, stability vs instability

48. Systems theoryKatz&Khan (1966) Checkland (1989) • The system is defined as any set of elements linked in a pattern which carries information ordered in some pre-determined rules • All systems have both structures (relatively stable elements) and processes (dynamic relationships among system elements over time)

49. Systems theoryissues that need to be managed (Trott 2004)

50. A new product in the market inspiring leaders