Regarding the concept of innovation with ages, there is a main point which can be observed; innovation is not a phenomenon but a complex strategy for organisations.
First of all, the concept of Innovation is a new concept which takes its first form at the beginning of the twentieth century with the Schumpeter view of innovation.
For Joseph Schumpeter, innovation is a "new combinations" of existing resources, like new methods of productions, news sources of supply chain, or new productsâ€¦ From this statement Schumpeter defined this new way of acting in an organization by the term of "entrepreneur". As mentioned Schumpeter, in his first paper (1934) Innovation could be defined as "types" which can be named like this: new products, new methods of production, new sources of supply, the exploitation of new markets, and new ways to organise business.
Even if, "in economics, most of the focus has been on the two first of these", the emergence of the ICT sector has demonstrated that the other types are very important too.
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On another hand, the importance of the innovation concept take a big place with ages, and as far as innovators were concerned a lot of new theories came across. The Creation in 1965 of the Science Policy Research Unit by Freeman (Sussex University) was the big start of the innovation thinks. "Technological innovation, as defined by Freeman (1988), is the process of technological, design, manufacturing, management, and commercial activities in the marketing of a new or improved product or service."
Besides, in 1967 Kight highlights that the innovation important criterion "was that the changes which the organisations adopted were perceived as new by their members". In this way, innovation is not restricted of the concept of a new product in a market as mentioned by Schumpeter.
Inspired by the theory of radical change in Schumpeter's term (1934), Freeman and Soete (1997) pointed out a new classification of innovations. In this way innovations have to be perceived on their "radical" or "incremental" form. By "radical", Freeman expressed the fact that how an innovation is new compared to the current technology in place, whereas "Incremental innovation (sometimes referred to as sustaining innovation) uses existing forms or technologies as a starting point.
It either makes incremental improvements to something or some process or it reconfigures it so that it may serve some other purpose.Gary Hamel a leading author and researcher on innovation suggested that innovation ranges from incremental through to radical."
Last but not least, one of the mains theories developed in these last decades is based on the Stephan Kline and Nathan Rosenberg's work. In an influenced paper in 1986, they pointed out the fact that the linear model based, since the second war on the process of implementing a new product and do all you can to be adopted by the majority without taking care of what the audience think, is definitely obsolete and has to let place to a new model: the "Chain-link model".
This model is based on a new way of thinking in the innovation world, because for the first time a theory highlighted to the importance and the power of customers feedbacks. In this theory, Kline and Rosenberg wanted to point out the fact that each end-user has an advice on what he expects from a company. In another words, they pointed out the importance of feedbacks, and the consumer intimacy that a company has to develop for a sustainable business.
Since 1990, the concept of innovation has never been so well employed regarding the emergence of the ICT sector thanks to the Internet. The concept of innovation for organizations is a wild subject, with a lot of theories, paradoxes and distinction. This is why this paper will be dedicated to the two formers theories explained before; the importance of the radical and incremental innovation, and how the Chain-link model implemented by Kline and Rosenberg, could comfort or reject the innovative enterprise, in order to understand how important the new theories of innovation have to be used for a sustainable business.
The entrepreneur: Michael Dell
Always on Time
Marked to Standard
The story of Michael Dell could be clearly mentioned as the life of an innovative entrepreneur. By 1983 where he was a simple student at the University of Texas, he realised that computers were created with the same readily accessible components, such as Intel Corp.'s chips and Microsoft software.
By assembling his own PCs and selling them directly to consumers, he could avoid the middleman for himself. The leaders of the market were IBM, Microsoft and Compaq Computer Corp. The main problem was that PCs cost a lot and people were obliged to buy a fully pack even if they didn't want some components in their device. "I want to compete with IBM," that's what the 18-year-old student told his father.
Regarding to this, Mr Dell thought there was something to do in this restricted market. That's why in 1984, he decided from his modest student room to run his limited company, based on a new innovative idea: manufacturing computers for his friends first, regarding what they expected in a computer device. It was completely new at this time, and this new way of manufacturing and selling computers directly to the customer and based on his choice, gave him a fast success. The business strategy of Michael Dell was simple and efficient. His strategy was based on the public intimacy, allowing him to manufacture personal and dedicated computers, adding a fast delivering with better prices than his competitors by avoiding the middleman (retail stores).
A lot of people were more and more interested by this service, and the demand began national to worldwide. The genius aspect of the dell strategy was in the early 90's, when Michael Dell decided to use an innovative technology just put in place: Internet.
He was the first on the computer manufacturer sector to understand the power of this new technology for a sustainable business. Thanks to Internet and the Dell website, his strategy of avoiding the middleman was completely figured out. The fact to not use retail stores like his competitors allowed him to propose very attractive prices concerning computers to the end-user.
His main target was at first his friends, colleagues, normal consumers, but he understood very quickly that another target with a big amount of money and particular needs was in companies; B2B and B2C approach.
His business was so sustainable than in 1992 he became the youngest CEO to have his company ranked in theÂ Fortune magazine, which gave the list of the top 500 corporations. "When Dell became the first PC maker on the Web in 1994, its site offered little more than product and pricing information. Soon Dell had turned the Net into an engine for mass customization, a perfect extension to Dell's direct-sales approach. By 1999, Dell was the largest seller on the Internet, trumping Amazon.com, eBay, and Yahoo! combined."
Furthermore, his business activity is not only based on computer selling, because in 1996, when he started selling computers over the Web, his company launched its first servers. With years Dell Inc. combined notebooks, shipments of desktops, and servers grew by 34.3 per cent in a time when competitor's sales were in decline.
Moreover, Dell Inc. realised in 2010 it had $52.9 billion in fiscal revenue, and Michael Dell carries on talking like that fresh-from-college about innovation in products and customer service.One of his first rules to keep an edge in the innovation process is: Failing.
"When you get a business that changes very quickly, you get some of that naturally," he says. "You just have to change. To be successful, what you have to do is have an acceptance of risk and you have to be pretty explicit about that, because if you don't accept risk, you don't get any innovation. And that means part of risk is you have to accept failure because not everything works."
Speaking about Dell innovation, is pointing out the intimacy rule with customers. His innovating process in his company is based on the feedbacks of his customers. By building a strong relationship with its customers, Dell Inc. is able to react quickly with the IT market changes. In this innovative process, the company spent a lot of time building a strong media community based on Dell products. "With the advent of social media, it's easier to manage problems with customers. Dell.com has more than 500 million users per year and 2 billion conversations per year with customersÂ through social media such as Twitter."
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For Michael Dell an innovator has to be willing to take risks and make changes, if he wants to be successful in his business.
"To this day, despite a decade of effort by rivals to emulate his approach, Dell remains the only consistently profitable big PC maker. Dell remade the PC industry in his image and likeness," says University of California at San Diego assistant professor Gary Fields. "He defined the terms of competition."
First of all, regarding to the theory of innovation formulated by Freeman, innovations have to be split in two categories; "radical" innovations or "incremental" innovations. When Michael Dell launched his company in 1984 with $ 1000, the main idea was to manufacture computers in a direct sales process by building a strong relationship with the customer. In this way, the main question is to understand if innovations can be classified just as "radical or incremental". When Michael Dell started his business, his strategy was based on a new way of manufacturing computer devices, with a direct approach by avoiding the middleman. Regards to this, the business implemented by Mr Dell completely supports the "radical" classification of Freeman, which is how an innovation is new compared to the current technology in place. At this time, the only way to sell computers was to use retails stores, that's why this new approach could be classified as evidence which support the "radical concept of innovations".
Michael Dell flipped the home PC market on its head when he decided to sell computers directly to consumers cutting out retail stores and driving down prices throughout the market. Dell made all this possible by reinventing the supply chain into an ultra-efficient distribution network.
On another hand, the main business of Dell Inc. is based on the ability to develop and manufacture products regarding expectations of its customers, using existing technologies. Hence, after a revolutionary implementation on the Internet, the main strategy of Michael Dell is to improve his products and his line-management by using adequate existing technology in order to remain competitive in his market sector. Evidence, which supports the classification of his business in "incremental" innovation, is the fact that since the migration of his business process on Internet, Dell did not bring a new product that revolutionised the IT market.
Nevertheless, it is thanked to this incremental strategy, that Michael Dell built a profitable worldwide company. Moreover, this incremental strategy which allows him to be a "juggernaut" of the computer industry, couldn't have existed thanks to the feedbacks and ideas of his customers.
In another way, and as mentioned above, the main tool of Dell Inc. is its ability to communicate with its customers in order to improve its products. The two theorists Kline and Rosenberg pointed out in in 1986, the fact implementing a new product and do all you can to be adopted by the majority without taking care of what the audience think, is definitely obsolete and has to let place to a new model: the "Chain-link model".
Since the creation of Dell Company and regarding the growth of sales, it is logical to say that Michael Dell was the first personal computer company to organize and build itself around the idea of direct customer feedback.Â "Our attitude was diametrically opposed to the engineering-driven thinking of 'Let's invent something and then go push it onto customers who might be willing to buy it.' Instead, I founded the company with the intention of creating products and services based on a keen sense of the customer's input and the customer's needs. I spend about 40% of my time with customers"Â says Michael Dell.Â
This process of customer intimacy, by improving and creating new products thanks the help of customers is really a success for Dell Inc., that's why, it is not wrong to say that the theory supports evidence. For instance in 2007, Dell suffered a lack of interest from his customers and decreasing sales results. In order to react rapidly Michael Dell decided to review his partnerships in the computer sector and to be more aware of what people thought. So, he created a corporate blog, a Digg-like called idea Storm, a YouTube corporate channelâ€¦
"Dell said it plans to use the feedback collected from the site when designing new products.Â "We're at our best when we're hearing directly from our customers," said company CEO Michael Dell. "We listen, we learn and then we improve and innovate based on what our customers want.""
The importance of this theory of consumer intimacy is also highlighted in the Dell website, "You, our customers, are at the heart of everything we do at Dell. We know that for us to be successful, you need to be successful, and to understand what success looks like, we listen.Â We learn. Then we act. Turns out, this is a good formula." Regarding to the impressive success of Dell Inc. in this last decades, it's not wrong to say it is a good formula. Another evidence of the consumer intimacy for a company is that in June 2010, Dell was honoured "to be a recipient of a Forrester 2010 Voice of the Customer Award.Â The award recognises initiatives that help companies dramatically improve how they collect, interpret and react to customer feedback."
Nevertheless, looking for and waiting for a critical mass before creating a new product or service can be regarded to as lack of innovation for a company, and can put the company in a critical way of thinking, leading to a loss of new profitable products. For instance, whereas the first pocket pcs, manufacturing by his competitors, were sold in retail stores, Michael Dell was not in this market niche because he was waiting a mass demand. After a few months, we could see an increasing demand of pocket pcs and Dell was not here. In January 2010 when AT&T announced that Dell would be one of its smartphones providers for its Android operating system, regarding to his main competitor Apple which earned a lot of money with its smartphone in the US market, it's important to consider the long time it took to Dell to enter in the US market.
During an interview with David Berlind chief content officer of TechWeb and Parretta (Dell spokesperson) "Dell showed off a concept tablet (also based on Android) during a press conference at CES. "It's an area we're looking at. We're looking at and testing some different form factors such as the 5-inch concept tablet that we showed this morning at CES," said Parretta."But it's just a proof of concept. We have nothing to announce in the tablet space.""
All these kinds of evidences show how it is very complicated for Michael Dell to take risks and implement "radical" innovations, which is a contradiction with what he says: "To be successful, what you have to do is have an acceptance of risk".
This analysis of the importance of radical and incremental innovations in the new technology sector for a sustainable business, permitted to draw an important aspect of innovations that has to be taken in consideration by companies. By taking the case of the entrepreneur Michael Dell, this analysis has pointed out the fact that without a first "radical" innovation, Dell Inc. could not be a success story as the world knows it. But this "radical" innovation had to be supported by incremental innovations in order for Dell Inc. to remain competitive by taking care of the expectations of its customers. Nevertheless this analysis also showed that without taking risks with new innovations, a company can lose a profitable market niche.
To conclude, this analysis points out the importance of radical and incremental strategy as two distinctive but linked process innovations. A company can survive with incremental innovations but its needs to take risks by implementing radical innovations. Furthermore, as a lot of theorists mentioned, "incremental" innovations leads a lot of time to "radical" innovations, and in this goal the consumer intimacy is very relevant for a sustainable business. In the sector of new technology, where people have multiple choices and where technologies need change every six months, it's important to take into consideration customer's ideas and feelings. Last but not least, it is very important for a company to understand the needs of its customers, because the need of one customer is often the need of thousands othersâ€¦