Innovation Management Definitions and theories

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Innovation ManagementDefinitions and theories

• Dr.Vesselin Blagoev

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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

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Importance of economic growth

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

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Importance of economic growth

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

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Importance of economic growth

• Schumpeter(1934,1939,1942)
• the new products are stimuli to economic growth

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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)

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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)

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Kondratieffs 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

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Kondratieffs 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
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Importance of economic growth

• After the World War II
• military RD
• industrial RD

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RD 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

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New findings

• Economists soon found that there is not direct
  correlation between RD spending and national
  rates of economic growth

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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
  RD?

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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

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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).

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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)

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

• Modern firms with RD labs have become the
  central innovative actors

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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

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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

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Disruptive vs. Sustaining Innovations

• Christensen (2003)
• Sustaining incremental innovation appeals to
  existing customers (improvements of existing
  products)
• Disruptiveradical innovation, create new markets
  and customers

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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 RD activities? Why Apple could
  develop iPod and iPhone, and the other giants
  could not do it in spite of multibillion RD and
  marketing budgets?

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Other names theories

• Michael Porter Reinvest additional profit into
  activities

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In-class team work

• Imagine two different firms, similar in size,
  operating in the same industry, spend the same on
  RD.
• Will their innovation results be the same? Why
  yes or why no?

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Innovation Management as a Managerial Process
External inputs macro factors,
competition
Organization and business strategy
Organisations 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
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General overview of the innovation process
Other firms
Other firms
Other firms
Technology and product effects
Firms innovating architecture
The firms functions
Individuals
Interaction
Knowledge and technology providers
Effects
MICRO ENVIRONMENT
MACRO ENVIRONMENT
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Innovation and invention

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

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Innovation and invention

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

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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)

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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.

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Leading through innovation

• Creativity Innovation
• 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

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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)

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Types of Innovation

• Product innovation
• Process innovation
• Organizational innovation
• Management innovation
• Production innovations
• Commercial/Marketing innovations
• Service innovations

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Theories of innovation

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

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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
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Linear Models of Innovation
Technology push model
Research and Development
Manufacturing
Marketing
Market pull model
Marketing
Research and Development
Manufacturing
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Simultaneous coupling model
Manufacturing
Research and Development
Marketing
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Interactive model of innovation
Technology push
Latest sciences and technology Advances in
society
Idea
RD Manufacturing Marketing
Commercial product
Needs in society and the
marketplace
Market pull
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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 RD
  projects

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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

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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

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The role of the state based on Porter
Education
Regulation of competition

• Financing RD

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
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Theories about organisations and innovation

• Classical or scientific management perspective
• Human relations approach
• Contingency approach
• Systems theory

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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 managements 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

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Human relations approach Roethlisberger
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

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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 organisations structural
  arrangements. Innovative solutions will only be
  imposed when the organisation is in a higher
  stress-threat situation

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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

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Systems theory KatzKhan
(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)

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Systems theory issues that
need to be managed (Trott 2004)
Issue Characteristics
Adaptation Ability to meet the changing environment using new ways
Coordination Enabling different parts of the organisation to act as one
Integration The ability to harmonize a diverse range of activities and people
Strain (tension) Coping with friction in the organisation
Output Achieving purposes and goals
Maintenance Keeping elements of the system active
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A new product in the market
inspiring leaders
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Many followers
inspiring leaders