1. Innovation, Research and Development (L1) Learning Objective – Explain the role of innovation, research and development Learning Outcomes – Describe innovation, research and development – E Explain when innovation, research and development are appropriate - C Analyse the advantages and disadvantages of innovation, research and development - A

2. Starter activity The great debate – what are mankinds greatest invention? List the 5 you think are greatest and be prepared to discuss your reasons why. This is very subjective but years ago it was believed the wheel was mans greatest invention!

3. Innovation, research and development Research – investigate and discover new ideas in order to solve a problem or create an opportunity Development – change ideas into products, materials, systems or processes; select the idea that shows most promise, consider pay back (there is no guarantee of success) Innovation – the commercial exploitation of an invention

4. Starter activity Read the handout research, development and innovation – IS2a(i) Activity – Draw a thought shower of the purpose of innovation, research and development Example – solve problems The purpose of innovation, research and development

5. Solve problems eg develop drugs to cure disease Improve quality eg improved safety in cars Develop new products – extend maturity stage or replace products at end of life cycle Reduce costs eg robots in factories reduce labour costs Develop new materials eg DuPont created Tactel; within 2 years it had 50% of the ski wear market Reduce environmental damage – cut wastage, energy consumption, emissions, increase recycling

6. Activity Activity – I will now show you some short video clips for each one I want you to write down the benefits of innovation and also consider whether innovation has gone to far? (You may also want to draw upon your own knowledge)

7. Activity Watch the video clips. Ext question - Discuss how important is innovation? Facebook - http://news.bbc.co.uk/player/nol/newsid_7000000/newsid_70004 00/7000477.stm?bw=bb&mp=wm&news=1&nol_storyid=7000477 &bbcws=1 http://news.bbc.co.uk/player/nol/newsid_7000000/newsid_70004 00/7000477.stm?bw=bb&mp=wm&news=1&nol_storyid=7000477 &bbcws=1 China – http://news.bbc.co.uk/player/nol/newsid_6910000/newsid_6913700 /6913767.stm?bw=bb&mp=wm&news=1&nol_storyid=6913767& bbcws=1 Japan – http://news.bbc.co.uk/player/nol/newsid_6680000/newsid_6681800 /6681865.stm?bw=bb&mp=wm&news=1&nol_storyid=6681865& bbcws=1 Dyson – http://tutor2u.net/blog/index.php/business- studies/comments/innovation-protecting-a-business-idea- classroom-video/

8. Activity Having watched the video clips – draw a table of the advantages and disadvantages of innovation, research and development (Pg338 of textbook can help) AdvantagesDisadvantages

9. AdvantagesDisadvantages Competitive edgeCost Improved working environment Time ImageRisk Motivation Consumer benefits

10. Problems of Innovation… Innovation can bring new competitors into your market – Wrigley was threatened by Trident’s entry into the chewing gum market. Kodak was attacked by Sony’s entrance into the camera market Gillette was challenged by King of Shaves’ move into the razor market It can also make markets obsolete - VHS cassettes, Typewriters etc

11. Ext Activity Question 1 page 338

12. Innovation, research and development (L2) Learning Objective – Explain the role of innovation, research and development Learning Outcomes – Describe innovation, research and development – E Explain when innovation, research and development are appropriate - C Analyse the advantages and disadvantages of innovation, research and development - A

13. Starter question In pairs estimate how much the following top UK firms spend on R&D a)GlaxoSmithKline b)BT c)Ford d)Rolls Royce

14. Starter answers In pairs estimate how much the following top UK firms spend on R&D a)GlaxoSmithKline - £3.14bn b)BT - £0.73bn c)Ford – £0.69bn d)Rolls Royce – £0.35bn Analyse why it is important that they spend so much on R&D

15. How much to spend? The R&D budget will vary according to: – Retained profits available – Nature of the industry, eg pharmaceuticals has high R&D costs – Commitment of the firm to innovation; may be part of the firm’s ethos – Large firms generally have larger R&D budget – Firms may be forced to innovate in order to compete eg technology – A booming economy encourages investment; R&D funding is generally cut during a recession

16. Activity Dyson case study page 149 of the Surridge and Gillespie textbook

17. Risk and Innovation Allocating resources to R&D is extremely risky. Setting a budget for R&D is difficult, R&D departments often spend more than their allocation. Businesses may have to raise funds externally to finance R&D projects. It may be possible to reduce risks by taking out a patent – what is a patent?

18. Protecting successful innovation If an innovation is genuinely new a firm may protect it by taking out a patent. Under the 1988 Copyright, Designs and Patents Act the holder of a patent has the right to be the sole user of a process or manufacturer of a product for 20 years after it is registered. The owner of a patent may sell the right to produce the product or use a process to others, which can be a valuable source of income. If one firms suspects another of illegally producing a patented product or using its patented technology it can sue the offender. The work of artists, writers and musicians is automatically protected by copyright, copyrights do not have to be registered. Designs and logos can be protected by registering a trademark.

19. Implications of innovation strategies Firms which encourage innovation and creativity often have informal cultures A policy of innovation will have implications for other functional areas of the business Finance: innovative companies spend a greater proportion of their money on risky ventures; this may put off investors and put pressure on cash flow Marketing: the marketing dept must inform the R&D centre of customers needs. Once developed, it is the job of the marketing dept to convince consumers to trust the new product HR: there may be a reliance on recruitment of graduates. Working practices may be more flexible. http://www.workplaceinfo.com.au/human-resources-management/hr- strategy/case-study-of-organisation-culture-google

20. Activity Case study – Video games market page 341 of Hall

21. Innovation, research and development (L3) Learning Objective – Explain the role of innovation, research and development Learning Outcomes – Describe innovation, research and development – E Explain when innovation, research and development are appropriate - C Analyse the advantages and disadvantages of innovation, research and development - A

22. Sources of Ideas Task - List all the different internal and external sources of ideas for innovation

23. Sources of Ideas Task - List all the different internal and external sources of ideas for innovation Internal – employee suggestions. External – Patent office records, franchises, customers, competitors.

24. Innovation, Culture and Structure To encourage innovation internally a business will want a culture that encourages people to try out new ideas. Innovation requires a culture that encourages people to try new ideas, that does not punish failure and that rewards those who do come up with new approaches. The leaders of the business will have a big impact on the culture and how innovative the culture is. Ext Task – Google case study page 156 of Surridge and Gillespie

25. Innovation as a strategy Some organisation put innovation at the heart of their strategy, especially companies in industries such as electronics, pharmaceuticals and computers. A failure to innovate in these industries means you will fall behind. If innovation drives your strategy – You must be prepared to invest in the long term. You must be prepared for failure. Your marketing strategy may well be one of differentiation

26. Why might firms not invest in innovation? Question - Why might firms not invest in innovation?

27. Why might firms not invest in innovation? Question - Why might firms not invest in innovation? Lack of internal finances Unable to raise capital from external sources such as banks and investors Pressure from investors for short results, may discourage investment in the long term. Low success rate The firms business strategy may be one of imitation rather than innovation.

28. Activity Read the case study on page 120 of the Surridge and Gillespie and answer the question – To what extent would increasing the budget for R&D be a good idea for Pramus pharmaceuticals? (18 marks) Ext – What would be the best way for Pramus plc to become more innovative? Justify your answer. (18 marks)