Ultimate Innovation Process

SCHOOL OF MANAGEMENT - BTH

Ultimate Innovation Process Submitted to: Prof. Urban By Salman Ahmad P # 830820-8399

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BLENKIGE TEKNISKA HOGSKOLAN

2011

Table of Contents Abstract ........................................................................................................................... 3 Introduction ..................................................................................................................... 3 Innovation:....................................................................................................................... 4 Understanding Process: .............................................................................................. 5 Innovation Process ...................................................................................................... 5 Innovation‟s Barriers........................................................................................................ 6 Innovation Happens ..................................................................................................... 6 Believe in only Innovation Proverbs ............................................................................. 6 Innovation Soley on Technologists Shoulder ............................................................... 7 Creating an Obstacle course of IDEAS........................................................................ 7 Scares from “Different” & “New”................................................................................... 7 The Good Ideas handing over to Legal & Finance Department ................................... 8 Being Extremely Afraid of Failure ................................................................................ 8 Innovating only when you need ................................................................................... 8 Leaving it up to the “INNOVATORS” - ......................................................................... 9 Innovation Processes .................................................................................................... 10 Innovation Process & Knowledge Management ........................................................ 10 Top Management Cooperation .................................................................................. 11 Customer in innovation Process ................................................................................ 11 Integration with suppliers ........................................................................................... 12 Coupling of R&D and marketing (3G) ........................................................................ 12 External interface for open innovation ....................................................................... 13 Business Model Innovation ........................................................................................ 14 Horizontal Management & Innovation - Rewarding.................................................... 14 Conclusion .................................................................................................................... 15 References .................................................................................................................... 16

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Abstract

Innovation is a debatable term in our existing environment. Several books & articles, journals and other publications has been written on this term and its going on. This is understood that for business survival innovation is crucial to compete in market by providing values to their customers. Several authors define innovation in their own way of understanding. Innovation definition itself innovates with passage of time and come up with many new term of innovation. Frequently, responding to market with innovative way of product or services is need of today perhaps its breath for every company. In this assignment, my effort will take several companies as an example and try to elaborate its innovation practices and its consequences. Then in conclusion we will be able to come up with solution that what can be the ultimate way of innovation process so company follow it. We are going not to take any individual industry for to come up with result but as general we have to discuss it.

Introduction The importance of innovation in today business culture is as crucial as breaths taking for living things. But this is not a new term at all, it born with the day when human being exists. Find out new and better ways of doing things and bring it in to practice is the human inherent.[1] Think about the Stone Age that was time when human being concern only to feed their hunger and now today globalization and advancement era is the result of innovation. Innovation is the desire and want of individual which he need

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with passage of time. Mankind becomes the habitual of some radical innovation. I mean laptop, mobile phone, automobiles, airplanes and numerous other examples, without that life is useless and will be stuck. [1] Innovation is the conspicuous weapon of economic development. The fast growing economy of the world like USA, China and Japan are the example of among the countries, which understand the need of innovation and their major contribution to Gross national product. USA and Japan are more concentrate on product and Service innovation while China is tiger of process innovation. Lets understand innovation and process and separately. Since we are more interested to innovation process, therefore we will go in details to understand what are factors which restrain innovation and also elements which may accelerate innovation process respectively.

Innovation: “The term „innovation‟ has its roots from the Latin word „novus‟, which means „new‟ and is derived into the verb „in+novare‟ that covers the meaning „to make new‟. Therefore, in the broadest context, „to innovate‟ is „to begin or introduce (something new) for the first time‟, and „innovation‟ has the meaning of „the act of introducing something new‟ “(The American Heritage Dictionary, 2000). [2] Joseph Schumpeter describes “Economics development had to be seen as process of qualitative change, driven by innovation, taking place in historical time”.[3] Fagerberg (2005) has tried to show that innovation must not be something new but can be new adaptation or modification of old knowledge or Innovation as a new combination of existing resources.[1] Innovations in this point of view can be new products, new way of production, the opening of new markets, new organization models or new sources of supply. Further to say business models itself need to be innovative, because it is important to develop innovation culture in

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organization. “We are just at the beginning of a new era that focuses on the innovation of business Models”. [4]

Understanding Process: Thomas h.Davenport defined process, “A process is simply a structured, measured set of activities designed to produce a specified output for a particular customer or market. It implies a strong emphasis on how work is done within an organization, in contrast to a product focus‟s emphasis on what. A process is thus a specific ordering of work activities across space and time, with beginning, an end, and clearly identified inputs and outputs: a structure for action. This structural process of element is key to achieving the benefits of process innovation.” [5]

Innovation Process As the innovation process is consisting more than one process, thus have variation in nature therefore, it‟s hard to organize an innovation process due to dependency of nature of innovation and its environment of task. It likes knowledge, type of innovation, economic sector, historical background and geographical concern. Additionally, the process may change or have variation is also dependable upon the organization capacity, its strategic objectives and frankly to write its past memory of experiences in term of innovation. Therefore, “innovation processes can be said as contingent who leads the process to different dependencies and finally to complexities”. Moreover, as there is no widely accepted theory of the processes of innovation at firm level that satisfactorily integrates the cognitive, organizational and economic dimensions of innovation processes in a firm. [1] It is crucial to understand to know the reasons or barriers which make innovation process discourage in firms specifically in large organizations. Cell of innovation exist in

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every organization but there is need to understand or identify these capabilities and utilize it and eliminate these hurdles which restrain innovation. “There may be possible reasons which kill innovation process”. [4] These are discussed as follow.

Innovation’s Barriers Innovation Happens One of the prominent reasons which hang innovation process is that organization‟s faith in “innovations happen”.

No doubt there are some cases where in organization

innovation was not intentionally but it just happen its mostly happen in medical sciences where some other experiments are in cycle in laboratories and some other unique things happened but less likely. Strategic planning is crucial in even your daily life, it is similar that I come to arrive on bus stop without knowing exact time of bus and it just arrive at the same time when I came to bus stop. But can one only rely on this always, of course not. One need to know the bus schedule and then strategically s/he has to schedule, if not consequences is understood. Similarly, in organization only believing in this that innovation just happens is the worst thinking and non serious attitude to survive in market and it does really kill innovation process.[4]

Believe in only Innovation Proverbs It must understand that ideas itself is not innovation but seeds of innovations. It not only surround from innovation sayings, “think outside the box,” spending a few hour in meeting with a few bright creative professional and or asking management consultant to have a meeting with us and do some brainstorming session and come up with dozen of new ideas. Get happy that we have new ideas and we are innovative. Question arise that how to develop this idea? How or who will evaluate it ?

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Innovative organizations have created a proper culture where it ensures that it flourishes. They build an environment; their tasks implemented and communicate a process to support innovation and not only top management but everyone knows how it works and is also able to participate. Within organization every individual are connected through a local area network, where online forum exist and everyone suggest their ideas and then best possible ideas selected and develop it, Google, Microsoft is one of the prominent example of this practice. [4]

Innovation Soley on Technologists Shoulder – No doubt technology is crucial for innovation to support, but does it leads innovation too? According to Koulopoulos, innovation should support by technology but not to lead it. The reason behind is innovation is first an issue of corporate culture, concerning things like rewards, inspiration, and motivation. [4]

Creating an Obstacle course of IDEAS Koulopoulos, believe that if you want put hurdles in your innovation process, to kill innovation spirit, then force your employees to take time away from their regular jobs to defend their new ideas. He explains that bureaucracy and Byzantine process discourage enthusiasm and participation. As ideas needs a safe place to take shape. [4]

Scares from “Different” & “New” Some firms are not willing to do different, because its seems to them that it will not appreciable, is not a market taste, expensive and avoiding new ideas only because its existing is ongoing well. Here innovation process line they cut it because they scare. Apple always gives new and different taste even though Apple product is comparatively

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a bit expensive but reliability, new taste and different looks compel market to change behavior. Simple is that if you scare other will take it and then consequences will face you as tough competitive market. [4]

The Good Ideas handing over to Legal & Finance Department Yes some ideas need to discuss with Legal and Finance Department to know or understand the financial position and legal issues if there is any. But handing over to them is something like you expect from car driver to fly Air Jet. Of course for ideas analysis and evaluating and then developing need an innovation champions. I want to clear that it does not mean that innovation can only happen from top management but certainly need a charismatic leader to make it enable and inspire his/her team.[4]

Being Extremely Afraid of Failure Every individual scare from failure so as organizations. But do they need not to do anything new or different because of failure chances. Scaring exists in everyone but failure tolerance is one of the most crucial among components of innovation culture. Strategic planning required predicting future with help of their past experiences. Learning usually come from mistakes but it does not mean to believe totally in this that last do a mistake intentionally and then we will learn it. Simply to explain is an organization that does not have failure- tolerant capabilities is actually does not have faith on innovation and thus survival for them in today smart market is for sure very short.[4]

Innovating only when you need Innovation process need time frame to enable innovation, it is not magic which just happen in a second. Organization believe in such kind of phenomena is actually like you are arms less while you are in a battle. When battle start you trying to buy some arms to

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win the battle! And therefore, most of them companies acquired by others because they cannot survive anymore and or simply sweep out from the market. So this sort of thinking that innovating only when you need is simply cannot enable process of innovation. [4]

Leaving it up to the “INNOVATORS” Every organization has numbers of creative people without in respect of their job designation. Sometime they are the leaders, other time well tenured individual, and sometimes people tasked with coming up with big ideas. In all these cases the implication is that only these big thinkers can come up with big ideas. No doubt these leaders are the brightest minds of the organization, but ideas can and should come from anyone in the organization. Believing on just that “big” ideas or just the “big” minds is equally dangerous as it creates hurdles for incremental innovation and encourages ideas to find an exit elsewhere. It means focusing only on certain people regarding their designation that they have expertise in innovation is actually discouraging rest of your team to participate in innovation process and might loosing numerous that may be valuable ideas. [4] The above discussion makes sense that these possible barriers which come across in innovation process which make it discourage or disable to grow on. Let‟s discuss possible reasons those help and cause of encouragement of innovation process.

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Innovation Processes – Here we discuss what possible factors which are crucial in innovation process are.

Innovation Process & Knowledge Management Using new knowledge to offer new products or services keeping in mind customer wants is known as innovation. It is the recipe of invention and commercialization. [6, 7] The Knowledge can be discovering from data, it can be from empirical study and or can also be from lesson we learned through these phases. (Meliha Handzic, 2004). [8] According to Afuah, new knowledge can be technological which consist of components, processes, and linkages that become part of an output. He further said it can be market knowledge that means understanding customer expectation, distribution channels, marketing strategies etc. [9] According to Amidon that knowledge comes through data, information and then knowledge. She explained that facts come from data, information is data with context and knowledge is form of information with meaning on the basis of which you can take decisions. The organization needs to understand the importance of knowledge and their implications.[10] As discussed above knowledge come through different resources, it can be from inside and or outside of organization. From inside it can be from organization practices and experiences. So here is need to understand and identify these resources and then utilize them on the right time. According to Davenport & Prusak, they defined knowledge as mixture, which includes framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information.[11] Thus the importance of knowledge from several authors and researchers are discussed in this, which clearly means that innovation process is accelerate accurately with help of accurate knowledge and the management of these knowledge too. I am confident to write that innovation lead by knowledge. McElory, explain that today smart companies are now just Page 10

beginning to put more effort in the knowledge management programs in the area of knowledge creation and learning which is referred to as second generation knowledge management.[12][13]

Top Management Cooperation For successful innovation achieve with high pace top management commitment and support is important within organization with their subordinates and different departments. (McDonough and Barczac, 1991). Without support of top management, the corporate culture will not have proper flow and positive results, product delays are one of the prominent reasons of this. (Gupta and Wileman, 1990). In addition, management should be involved in the development process from the start page where late involvement occurs; it often leads to design changes that are very costly (Sommerlatte, 1990).[14]

Customer in innovation Process Customers are some time an instructors to companies help them in their innovation process. Several research projects come up with result that successful innovation in huge number of industries is actually the mixture of different productive domain and their integration with each others, these are research, production, marketing and the involvement of customers (Dodgson, Gann and Salter). The UK government‟s innovation survey of 2,634 manufacturing firms in 2000 found that 66 per cent of firms source knowledge and information for innovation from customers (DTI 2003). [15] Cisco‟s accept that when they share their tools with customers rather than just updating them about the technological improvement, we learn a lot more. Cisco‟s senior vice president of operations, processes and systems, accept in a Cisco CIO customer workshop in 2004 that several of their customers become true partners in design with

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them. Michael Schrage writes in his article namely “My Customer, My Co-innovator” that Cisco‟s engineers and architect believes that most of their current and potential customers simply wouldn‟t understand their internal, informally assembled aids. He writes about several those up to date customers of Cisco who weren‟t satisfied with “solutions”; these customers are more curious about to see and understand the thought process behind the company proposal. Thus Cisco open door to customer for its in house simulations and the consequences of this was that these customers expressed a desire to adapt these design, configuration and optimization models for their self use.[

Integration with suppliers Innovation Technology enables more effective management of the integration of suppliers into the innovation process. The UK‟s innovation survey shows 68 per cent of firms‟ source knowledge and information for innovation from suppliers of equipment, materials, components, and software (DTI 2003).[15]

Coupling of R&D and marketing (3G) According to Rothwell, R. (1994) the mid 1970‟s to the mid-1980, rationalization is necessary under the pressure of inflation and stagflation. At that time they focus on to strengthen corporation and resulted in product portfolios. Since the main focus was on corporate unification thus companies no more concentrate on their individual R&D projects.

Structured innovation process together the Marketing and R&D to work

closely and the main reason behind the coupling model of Marketing and R&D was reduction in operation cost. Technological opportunities and need of markets together

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brings technological innovation. It is crucial that the combination of both technological and market needs bring innovation, in a very rare case it may possible that individually innovation possible by purely technology force or market means. R&D and marketing both have equal importance in innovation process and focus remains between these two with accordance to their interface. [14] According to Berkhout (2006), he explained the third generation models as a open R&D models, where the preference given to product and process innovation in technical manners only and for granted the non-technical innovations i.e. organizational and market innovation. This indicates that third generation model focus on new technological capabilities of company. The need of society and organizational problems and issue remain un-tackle in this model. [16]

(Source: Rothwell, R. (1994)

External interface for open innovation P&G internal researchers are about 9000, but still the company doesn‟t limited to this and excess to almost 2 millions external researchers believing in open innovation. The reason is clear that they want to sustain the flow of success for new products. P & G has established its External Business Development organization and its Connect &

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Develop Organization to execute Open Innovation and to channel external solutions and ideas into the company, innovation management needs an effective external interface. The intention of this sort of external interface is to realize the potential for innovation, which slumbers in the outside world, through the development of external networks thus in consequences dramatically enhance the innovation process of P&G. [17]

Business Model Innovation Business model innovation means to innovate business itself. I believe personally that innovation comes itself if your business model is innovative. However a business model consists of two essential elements – the value proposition and the operating model. “Dell Inc. is not a computer manufacturer but introduced “Direct Sales Model”. The features of this model is to take orders from customer directly, customer can configure their product through online or from phone. The most prominent feature of Dell Inc. is that they don‟t have any distribution channels which cut of their cost and benefit to customer. This BMI is actually transforming capability of Dell Inc. which help enable customers to integrate in innovation process. eBay did not just create a market for auctions; it changed the way in which we look at the very experience of shopping and how community plays a role in the experience. Thus sort of example is the dynamic capabilities of an organization which not only attract customers but also get them direct ideas and participation of them too. [4]

Horizontal Management & Innovation - Rewarding Not only top management but also believing in to encourage lower staff to participate in innovation strategy by conducting meetings and brainstorming session to come with new ideas and rewarding them for their creativity. This sort of strategy will attract everyone in organization to think creative and strive to be winner among others and

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thus numerous ideas will come to play. Additionally, it also eliminate the communication barriers among employees from top to lower management and also “the greater empowerment at lower levels reduces the number of approvals required and the reduction of hierarchy reduces approval delays” (Dumaine, 1989).[18]

Conclusion Since innovation process is contingent, thus we cannot say that innovation need a specific framework needs to follow will lead an organization to all type of innovation. However, this is clear from the above discussion that there are some hurdles in innovation process which should be eliminates so that innovation grow on. On the other hand some possible solution or ingredients has stated which need to follow on may enable innovation process. This is crucial that organization understand the market trends and most also have capabilities to predict the market as well. The organization must also have dynamic capabilities not only to face and survive, but also have a transforming capability to change the game when game is tough.

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References

[1] Fageberg, J. et al (2004) Oxford handbook of innovation. Oxford: Oxford University press. [2] Multu, Bilge. & Er,A. (2003). Design Innovation: historical and theoretical perspectives on product innovation by design, 5th European academy of design conference, Barcelona. [3] Schumpeter, J. (1934), The Theory of Economic Development, Cambridge, Mass: Harvard University Press. [4] Koulopoulos (2009) The Innovation Zone. Davies-Black Publishing Mountain View, California [5] Process Innovation: Reengineering work through Information Technology by Thomas h. Davenport (Ernst & Young, Center for Information Technology and Strategy), Harvard Business School Press. [6] Freeman, C. (1982). The Economics of Industrial Innovation, Cambridge, MA, MIT Press [7] Roberts, E. B. (1988). What We‟ve Learned: Managing Invention and Innovation, Research Technology Management, 31(1), 1-29 [8] Handzic, M (2004), Series on innovation & knowledge management – vol.2: Knowledge Management through the technology glass. [9] Afuah, A. (1998). Innovation Management: Strategies, Implementation, and Profits. New York, NY: Oxford University Press, Ch. 2. [10] Amidon. D. M. (2002). The Innovation Superhighway: Harnessing Intellectual Capital for Collaborative Advantage, Butterworth-Heinemann [11] Davenport T. H. & Prusak L. (1998). Working Knowledge-How Organizations Manage What They Know, Harvard Business School Press [12] McElroy M. W. (2003). The New Knowledge Management- Complexity, Learning, and Sustainable Innovation, Butterworth Heinemann

[13]James A.Albers & Steve Brewer. (2003). Journal of Knowledge Management Practice, Knowledge management and the innovation process: The Eco-innovation Model. [14] Towards the Fifth-generation Innovation Process by Roy Rothwell,Science Policy Research Unit, University of Sussex, UK. [15] Dodgson M, Gann D. and Salter A. (2005), Think, Play, Do: Technology, Innovation, and Organization. Oxford: Oxford University Press. [16] Berkhout, A.J., Hartmann, D., van der Duin, P. and Ortt, R. (2006), Innovating the innovation process, Int. J. Technology Management, Vol. 34, Nos. 3/4, pp.390–404. [17] My Customer, My Co-Innovator by Michael Schrage: is published by Booz & Company Inc. [18] Dumaine, B. (1989) „How managers can succeed through speed‟, Fortune, 13 feburary

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