INNOVATION AS A MANAGEMENT PROCESS INNOVATION & TECHNOLOGY MANAGEMENT BAHRIA UNIVERSITY, ISLAMABAD. LECTURE 3: INNOVATION AS A MANAGEMENT PROCESS INNOVATION & TECHNOLOGY MANAGEMENT

Evolving models of the innovation process Can we manage innovation? Introducing the concepts of Organizational Routines or Capabilities Specify the different phases of the innovation process How context affects innovation

THOMAS ALVA EDISON Over 1000 patents Inventions like: Electric Bulb 35mm Cinema Film Even the Electric Chair He realized that the real challenge in innovation was not inventing, but making it work technically and commercially. After inventing the electric bulb, Edison Corp. developed the infrastructure for electricity generation and distribution, including designing lamp stands, switches and wiring. Worth of Edison’s business empire in 1920 = $ 21.6 B Hence, Innovation is not simply coming up with new ideas; it is the process of growing them into practical use.

INNOVATION AS A CORE BUSINESS PROCESS The process involves: Searching: Scanning the environment (internal & external) for, and processing signals about, threats and opportunities for change Selecting: Deciding which of these signals to respond to. Implementing: Translating the potential into something new and launching it in an internal or external market. This involves: Acquiring the knowledge to innovate Executing the project under uncertainty Launching the innovation and managing initial adoption Sustaining adoption or re-innovating as necessary Learning to innovate better in the future

THE INNOVATION MANAGEMENT PROCESS

EVOLVING MODELS OF THE INNOVATION PROCESS

First and second generation models First generation (50’s-60’s): Need PULL & Technology PUSH “Linear model” R&D DESIGN & ENGINEERING MANU- FACTURING MARKETING SALES Second generation (mid 60’s-70’s): Demand PULL MARKET NEEDS MARKETING DEPT. R&D MANU- FACTURING SALES

3rd generation model (70s-80s)

4th generation model (80s-90s) Marketing R&D Product development Components manufacture Product manufacture

4th generation model marketing R&D Product development Components manufacture Product manufacture Reduced time to market

5TH generation model (90s-2000s) University Financial System R&T Centres INDUSTRY Users Suppliers Government

Innovation processes – 5th generation model Relevance of external sources of knowledge “firms do not innovate in isolation” Related to Innovation System concept Focus on networking Still strong emphasis on R&D and formal knowledge (ICT)

6th generation of innovation processes NOW “Revolve around knowledge and learning” Networks embrace all knowledge types, not only R&D. Most innovative firm is the one that learns fastest It is the use of knowledge that makes the competitive difference, and creates the advantage

Table 2.2 Rothwell’s five generations of innovation models

Innovation can come: From the market (demand pull - 2nd) From the “R&D department” (tech push - 1st ) From any department (interactive – 3rd) From process reinvention (integrated – 4th) From external sources of information (networks - 5th) From intangible assets (6th)

Managing complexity Radical product Market R&D Networks Capital Incremental R&D Networks Intellectual Capital processes

Can we manage innovation? The majority of failures are due to some weakness in the way the innovation process is managed. Technical resources (people, equipment, knowledge, money, etc.) Capabilities in the organization to manage them

Routines are firm-specific and must be learned. Organizational routines or capabilities are “the way we do things around here (in this organization)” as a result of repetition and reinforcement Routines are firm-specific and must be learned. “To manage” innovation means to create an organisation where routines can be learned as to cope with the complexity and uncertainty of the innovation process Here emerges the negative side of routines. They represent behavioural patterns which become reinforced to the point of being almost second nature. By analogy with driving a car, our driving behaviour is reinforced by traffic rules embedded in traffic lights, signs, etc. However, if driving a car has been made more effective (for example in reducing the number of car accidents) by enforcing everybody to follow the same rules, routines for managing innovation can become difficult to change when the ‘way we do things around here’ becomes inappropriate and the organization is too committed to the old ways to change. So it is important, from the standpoint of innovation management, not only to build routines but also to recognize when and how to destroy them and allow new ones to emerge.

Searching –looking for threats and opportunities for change within and outside of the organisation. Technological opportunity Changing requirements on the part of the market Selecting – deciding (strategically from how the enterprise can develop and taking into account risk) what to respond to. Flow of opportunities Current technological competence Fit with the current organizational competence Fit with how we want to change

Implement – turn potential ideas into a new product or service, a change in process. Acquiring – to combine new and existing knowledge (available within and outside the organization) to offer a solution to the problem Executing – to turn knowledge into a developed innovation and a prepared market ready for final launch Launching – to manage the initial adoption Sustaining – to manage the long term use

In the implementation phase Cope with uncertainty about: Technological feasibility Market demand Competitor behaviour Regulatory and other influences Replaced by knowledge accumulated → technology & market research

Learning – to learn from progressing through this cycle so that they can build their knowledge base and can improve the ways in which the process is managed. Restart the cycle Failure – why? Refine, improvement → next generation Learning about technology, routines & organization

Almost the same - again

Almost the same - again SCAN Definition: Activities Detecting signals in the environment about potential change (market niches, technology development, etc) Activities Scanning environment for technological, market, regulatory and other signals Collect and filter signal from background noise Scan forward in time Process signals into relevant information for decision making

Almost the same - again FOCUS Definition: Inputs: Selection of the various market and technological opportunities. Inputs: (1) the flow of signals coming from the previous phase (2) the current technological base of the firm (3) the fit with the overall business strategy.

Almost the same - again RESOURCE Definition: Activities: Combining new and existing knowledge to offer a solution to the problem. Activities: Invent in-house through R&D activities Create the conditions for creativity Use existing knowledge in-house Technology transfer and knowledge transfer Licensing..etc

Almost the same - again IMPLEMENT Definition: Activities: Close interaction between marketing related activities and technical activities to develop the idea into a marketable product or service. Activities: Develop to maturity Technical development Development of the market Launch After-sales support

Almost the same - again LEARN Definition Activities: Analysing the failures and success to input the innovation process Activities: Continuous improvement Knowledge and IC management

Table 2.3 Problems of partial views of innovation

Table 2.3 Problems of partial views of innovation (continued)

“Innovation is a risky process. but also a mandatory one” “Innovation is a risky process....but also a mandatory one”. Success depends of a variety of: Internal factors Good management Core competencies Clear innovation strategy Right technology External factors Links with market and suppliers Learning from competitors Institutional support: financing, human capital, etc

Successful innovation New products, processes and services account for an increasing share of sales Lower prices Better-performing products Better features for certain users (niche) ½ of resources devoted to the development of new products go to unsuccessful projects 35% of products launched fail commercially

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