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8/13/2019 integrative approach to innovation
http://slidepdf.com/reader/full/integrative-approach-to-innovation 1/10
Indian
Management
Studies Journal
Managing Innovation for Competitive
Advantage : An Integrated Approach Model
Gajendra Singh* Rajesh Sharma** Shailender Singh***
* Department of Business Management. HNB Garhwal University.
Srinagar. Garhwal (Uttaranchal)
** Institute of Clinical Research. New Delhi
*** PSMS. Punjabi University. Patiala
Since the beginning of industrialization, management experts have stressed on the
importance of innovation for gaining competitive advantage. In-depth knowledge has been
acquired in the areas of functional and strategic management and the importance of gaining
competitive advantage has been universally accepted. World's best companies have built
their competitive strength by being constantly innovative. 3M, Sony, BMW, General
Motors and several others are actual practitioners of management focusing on innovation.
In spite of proven effectiveness of innovation and its growing importance for developing
competitive advantage, it is still not considered an integral part of management. Innovation
is still considered as something, which happens by chance. Time has come when it should
become a standard part of business process. This article raise the issues related to importance
of innovation for gaining competitive advantage, the need to practice managed innovation,
and a model to manage the innovation process.
In a fast changing world, where even the defInition of change has changed,
corporations have little option but to innovate. Still, a majority of the organizations
have left innovation to the elite group of scientists and the R & D departments.
The last century saw the birth of organizations that were good at optimization and
mass production. But, in this era of global competition, optimization can no longer
save one from retrogression. One important factor relevant for growth of fIrms is
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that the difference between levels of technological strengths of different fIrms hasdiminished to a great extent. It makes it difficult for ftrms to come out with a
technically superior product whose features cannot be replicated by others; therefore,
continual innovation becomes an important tool to stay ahead in the race. There
are numerous examples that highlight the importance of constant innovation :
1. Xerox, which claims to be a document company but missed to widen its
focus from copiers to printers. That change in the market was a fundamental
change in its core business.
2 Coca-Cola has been late to every new beverage trend for the last 10 years.It was late in benefIting from the bottled water boom. It was late to new age
drinks like Red Bull and sports drinks. All these products that they missed
to catch on are all non-carbonated. These facts are crucial considering that
this is the fastest growing segment globally.
3. Sun Microsystems, which makes high margin, proprietary software, could
not anticipate that it's toughest competitor will be Linux and open source,
which is built by volunteers.
It shows that even the world's most renowned organizations are not
always well equipped to handle change, which require them to be innovative
themselves. Companies often make mistake of identifying themselves by their
activities rather than their capabilities. If Coca-Cola considers itself as a soft-drinks
company, it will miss the opportunity to produce and sell mineral water, which it
can do very well. It is important for a company to be constantly aware of its fluid
environment and think beyond its products as its competency. Some of the world's
best management companies have taken to innovation managemenfas an effective
tool for staying ahead in the competition.
The Principles of management advanced by Fredrick Winslow Taylor have
left overly strong impressions on managers. His concepts of optimization were most
suitable for .the industrial age but in this time of saturated markets where further
penetration is getting tougher by the day, companies have to innovate or die.
According to Peter Drucker, innovation is not restricted to high techcompanies only, but is equally important for low tech, established businesses.
Worthwhile innovation is not a matter of chance, it requires well designed, organised
and rational work for results. Though Peter Drucker recognized the importance of
innovation long back, it is still considered as something that takes place by chance
only. Majority of the companies does not give it the kind of importance that they
will give to functional areas like marketing or fmance. But, those who excel in their
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fields have always given strong emphasis on constant innovation. The following
examples will highlight this point clearly :-
• At Johnson & Johnson, autonomous operating units are encouraged to
innovate. Failures are not considered as incompetency.
• At Rubbermaid, 30% of its sales are derived from products that are less than
5 years old
• Hewlett-Packard motivates its researchers to spend 10% of their time on their
favourite projects
• Merck systematically budget resources for high risk projects with a potential
for high pay-out
• General Electric work on joint projects with its customers for developing new
products.
These companies have made conscious efforts to systematically manage
their innovations. They foster an environment where people can be creative and
constructive with an aim to stay abreast of the entire external environment. But all
companies do not believe in same way about innovation. Innovation takes place
in different ways in different companies. Broadly, innovation can be divided intothree categories -
In many cases it is an exception when an enthusiastic employee, against
all odds, will manage to convince his bosses about his new idea. A glaring example
in case is the Sony Online Entertainment System, which makes Play Station. It was
initiated by a young engineer named Ken Kutarogi (later on, the President &CEO
of Sony Computer Entertainment). Sony was averse to entering into video game business because it was not their core competency. Ken persisted with his efforts
and fmally he got an internal sponsor. The rest is history.
He succeeded despite the system. It should not be the case where
innovation is to be encouraged.
1. Innovations at R & D Department
This is the most commonly understood form of innovation. In many
corporations, people relate it to their research division. It is often associated with
technical issues and mostly new product development. This type of innovation has
serious limitations. It does not utilize the potential of the whole organization, but
only a fraction of that. Innovation is not related to a specific functional area; it
encompasses all the activities of a business.
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All the innovations are not technical in nature. Look at the way some
people have used the Internet for providing creative services. Saranam.com is one
such site where devotees can order offering, or perform prayer in the temple of their
choice anywhere in India. Offerings are offered on their behalf from amongst 600
franchises, and are then shipped to their doorstep within seven days! This is not
a technical innovation but a new concept. It is the conceptual innovation that
creates new wealth, not the technology. Take the case of Kev1ar, the super strongfiber invented in 1965 by Stephanie Kwoek, a research scientist at the DuPont
Experimental Station in Wilmington. It is a miraculous fiber with super qualities.
Kevlar has excellent resistance to fire and will not bum even from direct
contact with a propane torch. It is five times stronger than steel. DuPont had
estimated an enormous potential for this super fiber because of its strength and
lightness. It is a classic example of excellence in technical innovation, but it faced
a great problem - there was hardly any application of it (Kevlar is now used in the
production of body armour and tyres).
The Wall Street Journal of October 1, 1987, reported that'Du Pont, who
entered the market as long ago as 1972, still had great difficulty in selling the
product. The investment had been enormous: 25 years of R&D, 700 million $
investment and 200 m$ starting-up losses. No other product had ever warranted
such investments. Only during the past 2 years Du Pont had beheld some profit
from its fiber. Annual sales were estimated at 300 m $, and the Journal stated that
in years to come this will rise by some 10% annually.
This example shows that a technological breakthrough is no guarantee for
fmancial triumphs. The Kevlar Marketing manager, Wayne Smith aptly depicted the
situation by saying: "Kevlar was the answer, but we did not know to what."
INTEGRATED INNOVATION PROCESS MODEL
SETTING CONCEPT ORGANIZING MANAGING
OBJECTIVES RESEARCH INNOVATIONS TRANSFER
1. Link with 1. Idea generation 1. Team 1. Assign to
organizational 2. Scouting building project
objectives technology 2. Screening manager
2. Ability to 3. Trend analysis 3. Resource 2. Minimize risk
control 4. Managing allocation 3. Identify top
and guide information 4. Monitoring innovations
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Innovations without a clear aim of end results are wastage of resources
as one can see from the example of Kevlar. DuPont's objective to make a technically
superior product didn't end up with proportionate profitability. The innovation
objective was not analyzed to link with profit objectives. The first logical step in
managing innovations is to set up clear objectives, which are linked with ultimate
company objectives. They work as controlling guidelines throughout the process
of innovation. Take the case of BMW where innovation is a managed function. In
order to build their brand image and to meet their demanding business targets, theycommit to maintain leadership in technology and the continuity of their brand.
Specifically, BMW has set three controlling objectives. First, they want to have
more than one Unique Selling Proposition (USP) in each of the cars they launch
in future. And secondly, they plan to complete as many breakthrough innovations
as possible. Third, they want to develop concept cars to convey their brand image
at motor shows.
Only such types of objectives can channelise innovation management
towards profitable end· results.
2. Concept Research
Researching for ideas and technology needs a systematic, but flexible
approach. The system for this purpose must bring together two contradictory
objectives. First, it must have rules for systematically channeling the various
innovations to a central point. But at the same time,.it must give people within the
company as much freedom as possible to cultivate the most promising projects in
order to get the most out of a good idea in a creative environment
Concept research should cover the following areas :
Worthwhile ideas are generated in a positive conducive environment where
employees feel motivated and free to express their opinion without the fear
of being evaluated.
It is also crucial that their ideas be judged fairly and constructively. If theyare not, people will not feel motivated to seek new ideas or to share them
with the team. This is detrimental as "when creativity is killed, an organization
lo~s a potent competitive weapon: new ideas. It can also lose the energy
and commitment of its people."
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To keep up with the latest developments and not to miss out on any trends,
companies should scout for technology on a worldwide basis. Organizations
must consider world as a reservoir of different core competencies that they
can access through joint ventures, alliances and acquisitions.
One of the classic examples of this is Swatch, which borrowed Swiss watch
making skills and learnt how to make plastic watches from Lego, a. toy
company in Denmark. Then it engaged designing talent of Italy to make the
watches look fun and interesting. Swatch took competencies from three
different parts of the world and blended them together to achieve what
nobody else has done.
First, the ftrnls should identify their core competency beyond the strengths
of its products or serVices. Then look at competencies that other companies
have.
Bringing out a successful product requires trend analysis of information on
consumer preferences and technological developments. For example, machines,
which can deal with different batch sizes or can adapt to declining part sizes,
have emerged in electronics manufacturing.
It requires employees at all levels to gather and feed intelligence into the
corporate system. This helps to form a clear picture of the competitive
landscape.
Researching for new ideas will lead to a vast accumulation of information. All
of that information may not be really pertinent, and the information needed
by employees also varies at different levels. Setting up an intra organizational
network to provide categorized online information for each level of management
will help a lot in effective utilization of information. Sifting relevant information,
making it available to the concerned employees, and making the access easyand fast will be the main job for those who manage information in organizations.
This is the major part of the innovation management, which involves the
largest number of people and the greatest volume of resources.
The portfolio of innovations generated by a company requires screening,
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a clear evaluation and a specific choice of promising projects. Organizing innovations
also ensures ongoing control and supervision during the management process.
ITeam BUilding~1 Screening ~IResource Allocation ~IMonitoring & Reporting I
Figure 2 : Organizing Innovations
Team Building
Innovation Control is based on Innovation Managing teams having senior
management staff responsible for their portfolios. The teams exchange information
for a kind of cross-functionality overviewing the individual innovations of different
departments and divisions. The advantages of this strategy are obvious, since it
allows focusing on the overall interests of the company as a whole.
Screening
Managing a thousand innovation projects within the individual departments
all focusing on their own projects only will result in all suffering from inadequate
funds and manpower. The system should allow to control and channel the resources
much more efficiently. Organizations should concentrate only on projects, which have
been regarded as most promising. The crucial issue is to fmd out innovation projects,
which are worth being pursued and followed up, and the projects that do not have
sufficient potential. There should be a prioritization process, which can allow a
company to apply various levels of ranking to the individualprojects. Fig. 3 describes
a way to divide projects according to their level of potential for end result.
Resource Allocation
The manpower and fmancial resources provided for a project should be
according to the priority given to each project. Innovation programs should bereviewed regularly-which also means that ongoing projects may be stopped or
re-oriented, possibly because of a change in strategy or new insights gained into
the risks and costs involved.
Monitoring
Since the priorities are different, a variable reporting process will be more
effective in monitoring (see Fig. 3). Top priority projects and breakthrough
innovations will be reported to the Board of Management. This is because such breakthrough innovations involve substantial expenditure and far-reaching effects,
so that the Board has to make the final decision.
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Level of Distinction
1
This last phase of innovation management is of particular significance.
Here it is ensured that a choice of innovations in pre-development phase is offered
to the responsible project managers.
This comprehensive process may last several months, since the project
managers must expect an increase in costs as a result of the innovations proposed.
And since the project managers have to keep a close eye on their budgets, they
may often take a lot of convincing. In the process of transferring innovations, the
objective is to minimize the risk for the various projects. The decisions on a project
should be made after weighing time, cost and quality factors against one another.
Once a balance of the market and technology risk parameters has been established,
the very risky projects can be aborted in good time, avoiding subsequent mistakes
and problems further down the line.
References
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Drucker, P.F. (1985), Innovation & Entrepreneurship - Practices &Principles, New York,
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Holt, D.H. (200 I), Entrepreneurship - New Venture Creation. Prentice-Hall of India.
Lari mer, T. (March 20, 2000), "Sony Plays for the Big Stakes", Time Asia.
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