LECTURE 2: MANAGING FOR INNOVATION: KEY ISSUES IN INNOVATION MANAGEMENT

1. BAHRIA UNIVERSITY, ISLAMABAD. LECTURE 2: MANAGING FOR INNOVATION: KEY ISSUES IN INNOVATION MANAGEMENT INNOVATION &TECHNOLOGY MANAGEMENT

2. Key Concepts in Innovation Management The aim of innovation... • Depends on the type of firm • Goal is mostly to survive, to grow, to make profit • R&D departments generally strive for the best technical solution... • ... but what matters for innovation is how it influences survival chances, profit and growth opportunities!

3. Innovation and the corporate strategy Innovation management..... • has to be understood as a core process of the organisation -> It is related to what is being produced • Is a long term race • Is about continuity • Has to deal with complexity!! • Is about being systematic  developing routines around innovation

4. WHAT IS INNOVATION? • Invention • Technology? • Innovation • Creating new or improved products, processes and services • Knowledge and learning • Uncertainty

5. Schumpeter’s distinction between ”Invention” and ”innovation” • An ’invention’ is an idea, a sketch or model for a new or improved device, product, process or system. It has not yet entered into the economic system, and most inventions never do so. • An ’innovation’ is accomplished only with the first commercial transaction involving the new product, process, system or device. It is part of the economic system.

6. THE ‘4PS’ OF INNOVATION • Product innovation: changes in the things (products or services) which an organization offers

7. Process innovation: • changes in the ways in which they are created an delivered

8. Position innovation: • changes in the context in which the product or services are introduced.

9. Paradigm innovation: • changes in the underlying mental modes which frame what an organization does

10. TYPES OF INNOVATION • Structural Innovation:Reshaping the structure of an industry. • DELL’s suppliers/partners • Airlines’ Co-development on Boeing 777 • Organizational Innovation: Reshaping the organization and the way it works. May eventually be copied. • Business Process Re-engineering (BPR) • Total Quality Management (TQM) • Customer Relationship Management (CRM) • Enterprise Resource Planning (ERP) • Just-In-Time System (JIT) • Business Scope Innovation: Completely new products – new to the organization, market or to the world. • Color CRT TVs in the 70s (Sony) • Compact Disc in the 80s (Philips) • Plasma Flat Panels in the 90s (LG) • iPOD in the 00s, iPHONE in 06 and iPAD in 2010 (Apple)

11. Dimensions of Innovation

12. Dimensions of Innovation According to the degree of codification: Information to tacit knowledge Wisdom Tacit knowledge Explicit Knowledge Information Data Tacit Codified

13. INNOVATION IN THE FIRM Degree Type Barriers Innovation Learning Creativity Risk

14. CHARACTERISTICS OF INNOVATIVE FIRMS • Future Orientation • Challenging vision • Big Spending on Innovation • Adaptive Structure • Flexible • Clearly defined processes for identifying opportunities • Actively seek high growth markets • Encourage new ideas and experimentation • Reward entrepreneurial behaviour • Recruit and keep top people

15. THE CHALLENGE OF DISCONTINUOUS INNOVATION:Triggers of discontinuity • New market emerges • New technology emerges • New political rules emerge • Running out of road • Change in market sentiment or behaviour • Deregulation or reregulation • Fractures along ’fault lines’ • Unthinkable events • Business model innovation • Shifts in techno-economic paradigm • Architectural innovation

16. PESTLE MODEL • The PESTLEmodel • POLITICAL • ECONOMIC • SOCIOCULTURAL • TECHNOLOGICAL • LEGAL • ENVIRONMENTAL • Analysis of the remote environment must be undertaken at both the corporate and business-unit levels.

17. Dominant design • The design that wins the competition… • Not based on technological superiority but instead on a mixture of market and organizational factors • Creates • What defines the product • What is required by the product • Meets the need of most customers • New proffesions

18. How does it come about? • Interplay between market and technology • Important non-technological factors • Collateral (Complementary) assets • Policy • Firm strategy • Communication

19. Effects of dominant design • Competition • Shifts the basis from product to process • Less and less firms • Slower introduction of change (maybe less true these days…) • Implication  Organisational change is necessary!

20. Organizational implications • Leadership or followership • Sets the boundaries for change (I thought about plastic waterbottles the other day…) • Constraints, users, habits, complementary assets… • Can we spot it? At least three variables • Chance • Technology • Social process • Disruptive change comes from outside of the industry (More on Wednesday)

21. Radical innovation • In industries times of stability are disrupted by times of discontinuity • Example of generations of the ice industry in the USA – manually harvested  mechanical ice-making  refrigerators • In this context we talk about replacive products

22. Dynamics of radical innovation • First inferior to old ones – but with potential • Early, demanding users – but has to have mass market potential • Timing – decline of improvements of old technology, rapid improvement of new • ”Sailing ship” – old technology fights back

23. Old vs New firms • Existing customers • Existing products • Resources (investments) • Other stakeholders (shares, staff, funders…) • Existing organisational structure • Bureaucracy • Mindset – emotionally comitted • More?

24. So, how to be an innovative firm? • Technology, markets and organisation 1) Support radical developments • Wide experimentation • Learning organisation • External vision • Developed and balanced core competences • Strategies • Alliances • Accept change – it will happen!

25. So, how to be an innovative firm? 2)The importance of incremental innovation! • Improve and extend existing lines • Parallell innovation • Right structure • Develop complementary assets

26. The fluid phase – co-existence of old and new technologies • rapid improvement of both →’the sailing ship effect’ • Target: What product and what market? • Technical: What product who will produce it ? • Experimentation

27. The transitional phase • A dominant design • Convergence around one design • Rolling bandwagon → innovation channeled around a core set of possibilities → a technological trajectory • Imitation and development • Reliability, cheaply, higher functionality, quality

28. The specific phase • Rationalization & scale economies • Differentiation through customization • Scope for innovation becomes smaller

29. Important contextual factors • Type of sector • Size of firm • The country and region • The stage in the industry life cycle • Political regulations

30. Important NEW contextual factors • Globalisation • Sustainability • Networking organisation

31. THANK YOU