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The Management of Innovation within Firms
1. Introduction
2. Organisations and innovation
3. Organisational characteristics that facilitate the innovation
process
P Trott innov in firmslec Slide 1
process
4. The dilemma of innovation
5. Managing uncertainty
6. The role of the individual
7. Establishing a creative environment
8. Summary and Recap
EXTERNAL INPUTS:
organisation &
business strategy
EXTERNAL INPUTS:
macro factors; diversification
competition; costs & input prices
Profit; political influences
Entrepreneurship Growth;
Innovation management
framework
New product
Development
process
P Trott innov in firmslec Slide 2
EXTERNAL INPUTS:
societal needs;
competitors;
supplier partnerships;
distributors;
customers;
strategic alliances.
EXTERNAL INPUTS:
scientific & technological
development;
competitors;
suppliers;
customers;
university depts.
Source: Trott, 2008
“The fact is coming up with an idea is the least important
part of creating something great. The execution
and delivery are what’s key.”
How do we manage innovation?
P Trott innov in firmslec Slide 3
and delivery are what’s key.”
Sergey Brin, Co-founder of Google.
Interview with Technology Guardian, p 1, 18 June 2009.
Table 1: World’s most innovative companies
2006 RankCompany
Margin Growth
1995-2005 %
Stock Returns
1995-2005 %
1 Apple 7.1 24.6
2 Google NA** NA**
3 3M 3.4 11.2
4 Toyota 10.7 11.8
5 Microsoft 2.0 18.5
P Trott innov in firmslec Slide 4
6General Electric
5.7 13.4
7Procter & Gamble
4.4 12.6
8 Nokia 0.0 34.6
9 Starbucks 2.2 27.6
10 IBM -0.7 14.4
Source: Business Week April 24, (2006)
Explanations for innovative capability (survey of CEOs)
Innovative Firm Explanation for innovative capability
Apple
Samsung
Procter &
P Trott innov in firmslec Slide 5
Procter &
Gamble
IBM
BMW
Starbucks
Toyota
Explanations for innovative capability (survey of CEOs)
Innovative Firm Explanation for innovative capability
Apple Innovative Chief executive
Google Scientific freedom for employees
Samsung Speed of product development
Procter & Utilisation of external sources of technology
P Trott innov in firmslec Slide 6
Procter &
Gamble
Utilisation of external sources of technology
IBM Share patents with collaborators
BMW Design
Starbucks In-depth understanding of customers and their
cultures
Toyota Close co-operation with suppliers
2. Some firms have built a reputation for being innovative
• Long-term success is associated with innovation
• Science or technology based companies often associated
with innovation
• 3M, Microsoft, Pfizer are regarded as examples
P Trott innov in firmslec Slide 7
• 3M, Microsoft, Pfizer are regarded as examples
of innovative companies
£3.7billion
every year!
• The role of research & development (R&D) (Siemens)?
• Can you acquire technology from outside?
• The role of “prior knowledge”
Firm related factors:
Organisational heritage
Experience
R&D team
Strategy towards
Innovation
Organisational structure
R&D intensity
Product related factors:
Relative price
Relative quality
Uniqueness
Technologically advanced
Technological
viability
Commercial
viability
Successful
marketable
product
3. Organisational characteristics that facilitate
the innovation process?
P Trott innov in firmslec Slide 8
Project related factors:
Complementarity
Management style
Top management
support
Market related factors:
Concentration of
Target market
Timing of market entry
Competitive pressure
Marketing
viability viabilityproduct
Framework category Measurement area
Inputs People
Physical & financial resources
Tools
Knowledge management Idea generation
Knowledge repository
Information flows
Innovation strategy Strategic orientation
Strategic leadership
Organisation & culture Culture
Structure
Innovation
management
measurement
areas
P Trott innov in firmslec Slide 9
Structure
Portfolio management Risk/return balance
Optimisation tool use
Project management Project efficiency
Tools
Communications
Collaborations
Commercialisation Market research
Market testing
Marketing & sales
Source: (Adams et al., 2006).
areas
Studies of Innovation management
1. Carter & Williams 1957 Industry & technical progress
2. Project Hindsight- TRACES 1968 Historical reviews of US gvt funded
(Isensen) defence industry
3. Wealth from knowledge (Langrish et al.) 1972 Queens Awards for tech innov
4. Project Sappho 1974 Success & failure factors in chemical
industry
5. Minnesota Studies (van de van) 1989 14 case studies of innovations
Studies of innovation management-50 years
P Trott innov in firmslec Slide 10
5. Minnesota Studies (van de van) 1989 14 case studies of innovations
6. Rothwell 1992 25 yr review of studies
7. Sources of innovation
(Wheelwright & Clark) 1992 Different levels of user involvement
8. MIT studies (Utterback) 1994 5 major industry-level cases
9. Project NEWPROD (Cooper) 1994 Longditudinal survey of success &
failure in new products
10. Radical innovation (Leifer) 2000 Review of mature businesses
3. Summary of organisational characteristics that facilitate
the innovation process
Organisational Characterised by:
Requirement
1 Growth orientation A commitment to long-term growth rather than short-term profit.
2 Vigilance The ability of the organisation to be aware of its threats
P Trott innov in firmslec Slide 11
and opportunities.
3 Commitment to The willingness to invest in the long-term development
technology of technology.
4 Assemble knowledge The ability to assemble knowledge into business opportunities.
5 Acceptance of risks The willingness to include risky opportunities in a balanced portfolio.
Organisational Characterised by:
Requirement
6 Cross-functional Mutual respect amongst individuals and a willingness to work
co-operation together across functions.
7 Receptivity The ability to be aware of, to identify and to take effective
advantage of externally developed technology.
Cont’d
P Trott innov in firmslec Slide 12
8 "Slack“ An ability to manage the innovation dilemma and provide room
for creativity.
9 Adaptability A readiness to accept change.
10 Diverse range of skills A combination of specialisation and diversity of knowledge and skills.
organisation
The efficient
day to day
operations
within an
The development
of new products
and services
requires creativity
effi
cien
cy g
ain
screativ
ity g
ains
4. The innovation dilemma:Managing the tension between
the need for creativity and efficiency
P Trott innov in firmslec Slide 13
within an
organisation
require stable
routines. This
is usually
achieved in
stable &
controlled
environments.
requires creativity
and room to try
out new ideas.
This is usually
achieved in a
loose and flexible
environment.
effi
cien
cy g
ain
screativ
ity g
ains
5. Managing uncertainty
3. Applications
engineering
1. Exploratory
research
High
Uncertainty
About
output
P Trott innov in firmslec Slide 14
4. Combining market
Opportunities
with technical
capabilities
2. Development
engineering
LowHigh
output
Uncertainty about process
6. Key individual roles within the innovation process
• Technical Innovator
• Technical & commercial scanner
• Gatekeeper
P Trott innov in firmslec Slide 15
• Gatekeeper
• Product Champion
• Project Leader
• Sponsor
7. Propagating a virtuous
cycle of innovationThe organisation’s
reputation for innovation
Attraction of
creative people
organisational
Motivates people
within the organisation
High morale and
retention of creative people
P Trott innov in firmslec Slide 16
organisational
encouragement of
creativity & innovation
development of
innovative productsA willingness within
the organisation to
accept new ideas
within the organisation
and reduces frustration
The end
Any questions?
Thanks for listening.
Health warnings on food?
P Trott innov in firmslec Slide 17
Classical mgt theoryContingency theory
Activities within
The need for multiple perspectives
P Trott innov in firmslec Slide 18
Human relations
theory
Systems theory
Activities within
the organisation
