Managing the Process of Innovation
This article will focus on managing the process of innovation. The article will provide an overview of the main types of innovation found in organizations, including incremental and breakthrough innovation, the trajectory of innovation, barriers to innovation, and the history of private and public sector innovation. This overview will serve as a foundation for discussion of managing the innovation process. The issues associated with managing breakthrough innovation will be addressed. A case study of Boeing's formalized innovation program will be in included. The case study will provide an example of how a company can effectively manage the innovation process on an extremely large scale and the ways in which successful innovation creates competitive advantage in the marketplace.
Keywords Breakthrough Innovation; Competitive Advantage; Incremental Innovation; Innovation; Private Sector; Public Sector
Management: Managing the Process of Innovation
There is an established relationship between business strategy, innovation, and organizational performance. Innovation, which refers to the use of a new product, service, or method in business practice immediately subsequent to its discovery, influences economic success and market share in increasingly competitive global markets. In response to new technology-driven global markets, companies have increased their use of advanced technologies as well as their innovation efforts (Zahra, 1993). Innovation is associated with competitive advantage in both growing and mature markets. Innovation, unlike most other business practices, can change the competitive balance in mature markets (Brown, 1992). The concept and practice of innovation became closely associated with economic gain and competitive advantage in the 1930s. In the 1930s, economist Joseph Schumpeter (1883-1950) created a theory of economic development based on five types of economic innovations: set up or discovery of a new product, a new manufacturing process, a new market, source or new organization (Leteneyei, 2001). Contemporary business theory argues that companies must compete to keep or gain market share. Innovation is considered to be the key to creating competitive advantage (Stalk, 2006).
The following sections will provide an overview of the main types of innovation found in organizations, the trajectory of innovation, barriers to innovation, and the history of private and public sector innovation. This overview will serve as a foundation for discussion of managing the innovation process. The issues associated with managing breakthrough innovation will be addressed. A case study of Boeing's formalized innovation program will be in included. The case study will provide an example of how a company can effectively manage the innovation process on an extremely large scale.
Types of Innovation
Numerous types of innovation occur in organizations. Examples include marketing innovation, technological innovation, organizational innovation, product innovation, service innovation, and process innovation.
- Marketing Innovation: Marketing innovation refers to a process in which people gradually become familiar and accepting of a new idea. Marketing innovation is a social learning process that results in consumers slowly changing their attitudes and values. Market innovations are often technologically driven. When a technology is developed, the new technology is often in need of a new type of market application. Market innovation is based on the following assumptions: Innovation is driven by a learning process within social groups; some individuals have a higher propensity to try innovative products than others; and the speed of adoption may vary from one business to another (Brown, 1992).
- Technological Innovation: Technological innovation is the process by which industry generates new and improved products and production processes. Technological innovation includes activities ranging from the generation of an idea, research, development and commercialization to the diffusion throughout the economy of new and improved products, processes and services. Effective technological innovation includes either the diffusion process or the spread of the innovation commercially (Zairi, 1992). Technological innovation requires and is followed by new technology exploitation. New technology exploitation (NTE) refers to the utilization of new technology or scientific developments to improve the performance of products or manufacturing processes. The failure of management to recognize and manage breakthrough technology innovation often results in organizational inefficiencies and frustration (Bigwood, 2004).
- Organizational Innovation: Organizational innovation can be defined as the process of changing the organization by introducing different methods of production or administration. Organizational innovation includes the adoption of ideas from outside the organization and the generation of ideas within. Organizational innovation involves planning initiation, execution, selection, and implementation (Spender & Kessler, 1995).
- Product Innovation: Product innovation involves the introduction of a good that is new or substantially improved.
- Service Innovation: Service innovation involves the introduction of a service that is new or substantially improved.
- Process Innovation: Process innovation involves the implementation of a new or significantly improved production or delivery method.
All of the innovation types described above has elements and trajectories in common. There are two main approaches to innovation that span and characterize all innovation processes: incremental and disruptive innovation. Incremental innovation refers to improvement of technology performance or product feature enhancement. Breakthrough innovation, also referred to as disruptive, radical, or discontinuous innovation, refers to innovation based on technologies previously new to the world. These two different types of innovation have separate development trajectories and associated management strategies (Hacklin, 2005).
The Trajectory of Innovation
The trajectory of innovation is most often conceived of as an s-shape pattern with three distinct levels of diffusion and adoption of the innovation. For example, the s-curve for technology innovation includes three main phases (Hacklin, 2005):
- Pacemaker Technology Phase: Emerging technology is called a pacemaker technology as it is new to the world and the future potential and applications are identified. The diffusion of the innovative technology has not yet started in this phase.
- Disruptive Technology Phase: Established technology evolves into disruptive technology when it has managed to outperform competing technologies in respective mainstream markets. The diffusion of the innovative technology is occurring at a rapid pace in this phase.
- Key Technology Phase: The performance of the technology becomes more efficient and the technology become widely-adopted by the customer base. The diffusion of the innovative technology is complete in this phase. The innovative technology, if successful, has saturated its market and become ubiquitous technology among its users.
Organizational Barriers to Innovation
Innovation, which requires active learning, risk-taking, insight and vision, does not occur in every firm. Common organizational barriers to innovation include (Brown, 1992):
- A heavy reliance on market research to minimize risk when drawing up and approving plans for new products.
- The use of financial techniques, such as risk minimization, to assess innovation projects that are inherently risky.
- A tendency to invest in and rely on what has served the company well in the past rather than what may serve it better in the future.
- Systems of rewards and promotion that encourage a low-risk, custodial approach to management rather than a high-risk management approach.
History of Private
Innovation in the twentieth century was characterized by public and private sector partnerships and relationships. The private and public sectors significantly influence one another's innovation processes. The relationship between public and private sector innovation became very close during the Cold War from the...
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