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The word 'Innovation' has its origins from the Latin word "innovationem", which means 'to renew or change'. Innovation in today's competitive business environment is not about having the cutting edge in product and managerial leadership; rather it has become a necessity for survival in the rapidly changing and evolving times of today.
Microsoft's Chief Research and Strategy officer Craig J. Mundie presents his views on innovation in today's business environment "Driving innovation in today's global environment requires passion, a willingness to take calculated risks, and a focus on collaboration. Without a team of people working together to make a vision into reality, solving tough problems is impossible. In order to innovate, you must have an open mind, be willing to explore uncharted territories, and appreciate the insights of many individuals."
Industry analysis for Consumer Electronics Industry
Consumer electronics industry covers wide range of appliances and electrical goods and other home entertainment products like TVs, DVD players and portable music players, cell phones, etc.
The consumer electronic industry is £ 4,200 Billion industry Worldwide, and it is still going through a transformational growth. And in the age of total convergence and digitisation of every aspect of life, innovation is a prime influential factor. And a majority of the revenue and market share in the consumer electronics industry rests in the hands of a small number of giant technological corporations from around the globe, Countries like South Korea, China, USA, Japan, etc are the leaders in technological innovations brought to end consumers, and set new benchmarks in managerial efficiency for the World to match up to. We shall be exploring some of those companies and how they stimulate innovation within their organisation.
The CE industry is resilient but not immune from the business cycle. In a tough economy our products offer high value for entertainment and an entry point for entrepreneurs creating new businesses," said Shapiro. "Innovation will kickstart the economy. The 2009 International CES is a cause for optimism with some 20,000 new products and 300 new exhibitors."
The Consumer Electronics industry has witnessed sustained growth in 2008 not greatly set off by the economic recession. Consumer Electronics Association's estimate of end of the year revenues for 2008 depict that the industry crossed a new ceiling of $172 billion, a respectable increase of 5.4 percent compared to 2007. While in the fiscal year 2009, the domestic shipment revenues remained unchanged at $171 billion, declining by 0.6 percent by 2008 standards.Â
The product wise segmentation of the consumer electronics industry shows that primary income generating product for the industry are the digital TV displays, constituting 15 percent of total industry sales. And with the change in the recent trends the shipping of digital television closed on to 35 million in the year 2009, increasing by almost 6 percent over the previous years estimates. And the most competitive industry is the LCD tv manufacturing industry forming up to 77% of the consumer base.
The worldwide Consumer electronics market including OEM (original equipment manufacturer) and the retailer's sales were valued at approximately $681bn in 2009, a decrease of 1.7% over 2008. Growing at a consistent CAGR of 8.4% during the years 2005-10
(Data Source: )
Key Industry facts
Key Industry Figures
Industry Gross Product
Number of Enterprises
(Source IBISworld, 2009)
These figures indicate that the consumer electronics industry is a very large industry with high amounts of revenue and production. Also it possesses exponential growth possibilities. Given the availability of technological advancements and resources at disposal, innovation is of indispensible importance to cash in on the wide and large consumer base.
Structural analysis for Consumer Electronics Companies
"Organisational structure is the way, the chain of command works within an organisation, as every organisation is made up of a large number of people, it will need some form of organisational structure."(Cuneen.P, 2008) The way the structure is set up, defines the way in which new ideas and communication can flow within the organisation. Therefore choosing the right kind of structure depending on the organisation is necessary, ending up with an overtly rigid or flexible structure can be fatal for an organisation's survival.
A flatter organisational structure means more personnel working at the same hierarchical level, promoting more horizontal communication, vice versa a tall structure means more levels of hierarchy means the scope of ideas and communication is limited with the number of barriers and levels.
Apart from the technological aspect of innovation, another very important aspect to be kept in mind is cultivating innovation within the organisation by promoting smooth flow of new ideas to be communicated within the organisation quickly and efficiently. This depends largely on the managerial structure or the hierarchical steps present in an organisation. Henri Fayol(1916) propagated the term 'Scalar Chain' referring to the authority/command relationships from the top to bottom in an organisation, the shorter the scalar chain, the more flexible the communication is.
Structural Innovation is centred on the systematic approach that organizations use to communicate new ideas for products and services. It is based on tapping the creative ideas of the organization's employees while at the same instance using those ideas to create a consistent stream of beneficial innovations to the consumers, in a productive manner.
To better understand the structural factors in the consumer electronics industry, let us take some real life examples of companies and see how they stimulate innovation within their organisations.
Structural Innovation in consumer electronics companies:
The Korean electronics giant in 2010 spent $ 25 Billion on its R&D budget and plans to grow its current 27,000 R&D staff to 30,000 in 2011. Comparing LG's 2001 R&D investment $ 1.7 Billion, the company has a minimum 21% growth per annum in its R&D investment since then. This reflects the company's efforts and measures to promote innovation. Also LG is promoting innovation within its organisation structure by encouraging its employees to actively participate in pilot projects to develop new products with various service providers.
(Data source: http://www.telecomskorea.com/business-7737.html)
Also LG has set up its own LG Electronics' Institute of Technology to train and cultivate its employees and to enable them to have the knowledge about the latest cutting edge technologies. They have separate research laboratories for IT technology, Cellular communication, LED and Multimedia processing labs, etc.
(Source: LG U.K official Website)
A report fromÂ Bernstein Research depicts that in 2010 HTC spent $ 500 million in its R&D budget, and plans to increase it to $ 800 million in the financial year 2011. The Taiwanese phone maker, gained considerable lead in the cell phone market in the past 4 years by producing high quality smart phones at highly competitive prices in its segments in collaboration with successful mobile OS platforms like windows phone 7 and android. It is now one of the front line cell-phone manufacturers and it relies heavily on its pricing and innovative smart-phone designs. Htc encourages its employees to come up with smart ideas for its phones and considers them for mass production, the 'Htc Sense' HTC's proprietary, intuitive user interface. Which is a highly successful product by Htc was an idea of an engineer from its hardware department.
(Data source: https://www.bernsteinresearch.com/brweb)
HTC considers itself an innovation centric company, not only has it invested in a strong R&D team forming 25% of its total employees and the company also boasts a high-class manufacturing premises, situated in Taiwan.
Samsung spent a record breaking $22.9 Billion on its manufacturing and R&D development in 2010, in order to strengthen its position in the Global market, and to further carry out its extensive research on flash memory chips and LED displays. Samsung has had a tradition of pioneering in display technologies, and has reiterated that fact a numerous times. This is the outcome of its extensive interest in innovative research and diverting adequate manpower and resources that are at its disposal into its organisation's core structure.
Figure Samsung Innovation Philosophy
The Korean electronics Titan considers 'innovative products' as one of its key strengths, and it aims at promoting the values of the company on the basis of its employees and partners, Samsung President and Chief Design officer Boo-Keun Yoon discusses about innovation in the organisation that, "1. Differentiation: Create products with higher value (in picture quality and product performance and design) than existing products offer. 2. Cost efficiency: Provide the greatest value with the least costs. 3. Speed: Introduce the best products first in the market."
(Data Source: Samsung UK official Website)
Corporate Culture analysis for Consumer Electronics Companies
McKinsey explains an organisations corporate culture as "the way we see and do things around here" (Edersheim.E.H, 2006). Culture generally means the values that the organisation cultivates within itself and it affects each and every aspect of its functioning, culture is the identity of any organisation. The culture encompasses what the organisation is good at, and what in the past has worked well for the organisation.
Depending on its values and vision, the corporate cultures in various organisations may vary and have a great influence on the innovative activities, like the power culture, which is very dominance centric and rigid, or the person culture which is very individualistic and flexible. Let us discuss the corporate cultures of some leading consumer electronics organisations and see how they infuse innovation into their cultures.
Most successful and innovative companies, mould their cultures around the values of liberating ideas and resources and allow them to turn into something of a value to the world and to the company, some very familiar and related examples are enlisted as follows.
Sony is a market leader in the gaming and display manufacturing sector, 'Playstation' their hugely successful and innovative gaming platform is a product of a creative innovation strategy, which involved a combined team of R&D and gaming experts put together, they created a 'Play' room in their company, which allowed the team members to play games on their console and improvise and test their games within the organisation in a 'slack' and relaxed atmosphere, this irons out the possibility of rejection from the consumer side, as the product has gone through extensive real-life testing and modification by the company's engineers. This is a curiosity driven innovation activity and has yielded successful products to many companies.
Apple's corporate culture is quite different, when compared to its competing organisations like Samsung, Sony and LG. Apple believes in a closed environment research or rather an 'insulated' approach towards an organisations corporate culture. However it does not in any way undermine the importance of innovation. Apple ipod, the most successful product of the company, that gave it the stage to reach where it is today, was in its initial stage a rejected product as Tony Fadell, the engineer who came up with the concept of a portable mp3 player as the ipod, However Steve jobs the CEO of Apple inc saw it as an opportunity and thus it became the turning point for the company. This reflects Apple's culture of acceptance of mistakes, and positively encouraging risk taking.
Motorola Computers Ltd:
Motorola has been a well known name in the consumer electronics industry for its cell-phones, accessories and networking devices. It has been a long standing name, since the earlier days of technological innovation. The company has been able to survive and conquer its numerous new competitors by cultivating a culture of 'Identification of Originality and Inventiveness'. A very good example of its culture is that the Motorola 'Razr' phone, was discarded as a prototype by its Board of Directors. But the CEO of the company saw it as a unique and Original approach of Research and Development, and brought it to the masses, the device sold 100 million units worldwide.
The Japanese gaming company, behind the iconic super Mario bros. And other wildly popular gaming titles are a true innovator in terms of fresh ideas and new approaches towards traditional challenges. Nintendo's organisation culture promotes "Out of the Box" thinking. At Nintendo, a part of each of its employees time at work is allocated to focus on new and far-out ideas. The Nintendo Wii console, the first one in the industry to integrate movements and gaming, and come up with the concept of 'Motion Gaming' was indeed a brain child of such 'Out of the Box thinking'. This reflects the importance given to new ideas and opportunities in Nintendo's corporate culture.
These examples clearly indicate how, the core values and culture cultivated in an organisation, is clearly linked to innovation and successful management.
Human Resources and Innovation
In the words of Michael Armstrong, "Human resource managementÂ (HRM) is theÂ strategicÂ andÂ coherentÂ approach to theÂ managementÂ of an organization's most valued assets - the people working there who individually and collectively contribute to the achievement of the objectives of the business." (Armstrong. M, 2006)
Innovation and Human Resources are directly related, as HR is the process responsible for employing new blood in the organisation, which in turn shall come up with innovative ideas and strategies. The people working in an organisation are the actual strength of any company, thus recruiting and maintaining the right people is a necessity for any company to healthily survive and stay up to mark with the competition. Thus the prime function of HR in any company is to acquire and develop efficient and strong personnel. Also it is essential to keep the organisation's core values intact while infusing innovation with new ideas and new employees, they are evaluated for their performance and compatibility with the role they are required to fill.
To understand the relationship of innovation and HR better, let us take some practical, real life examples of some companies and how they stimulate innovation with Human Resource management.
Apple is one of the most visionary organisations in the consumer electronics industry, the result of which can be clearly seen in its productive and innovative products year after year. "Visionary companies are premier institutions in their industry, widely admired by their peers and having a long track record of making a significant impact in the world around them" (Collins and Porras, 1991, P.39). Apple clearly sets innovation as a top priority when it comes to recruitment, it defies the conventional recruitment and assessment tools, their approach towards hiring new people is stated by the following words "Don't expect business as usual"(Apple U.K official website).
Apple's recruitment mottos:
Equal opportunity recruitment:
Apple gives equal opportunity of being selected for a job to freshers, college graduates, and veteran engineers, they want people who fit the role rather than people who fit the recruitment specs sheet.
'Prepare to be inspired'
Apple doesn't want its employees to be victims of bureaucracy and red-tapism. Apple believes in recruiting inspired new people, who have original and innovative ideas, they propagate open communication, and open communication of ideas.
Casual approach to work:
Apple doesn't believe in having its employees wear neck-ties and suits, they are more interested on the end results rather than show business. They give their employees the freedom to choose to wear what they are more comfortable in.
Apple doesn't bind its employees with the stereotypical '9 to 5' working hours, they encourage employees to work when they feel they are at their productive and innovative best.
Nokia has come a long way from being a small wood pulp and paper, factory in Finland, to the largest Cell-phone manufacturer in the World. Most of the credit of this enormous achievement is given to its 'Superior Process' of recruitment, Nokia's key innovation strength comes from its people.
Not only does Nokia hand pick the cleverest and technology-focused people with experience and creativity, but also it searches for people who are better suited to the company's culture. Nokia is more aimed at recruiting people abroad, because it is hard to find a large and efficient work force in a country with a population of only 5 million. According to Dan Steinbock, whose book chronicles the Nokia revolution, was that Nokia acquired 'the most technologically savvy individuals in all of Scandinavia'(Steinbock. D, 2007).
Some of the processes involved in Nokia's innovative Human resource management are:
Rigorous and extensive interview process
Team-Based Compensation Methods
Team focus and Job Flexibility
As an organisation's size grows, it is difficult to maintain the same high levels of innovation, but Nokia found a novel way of dealing with this challenge, setting up NVO, or Nokia Ventures Organisation, the company's approach to nurturing natural innovation. NVO created new opportunities for Nokia by venturing outside Nokia's traditional scope of business and the new ventures constantly bring new ideas and people into the company. In this manner, Nokia successfully sustains innovation through human resource management. (Press.Nokia.Com)
LG Electronics Limited:
LG's human resource policies aim at creating a working environment where an employee is encouraged to develop all their skills, and also rewarding them for their achievements. This naturally develops an attitude among employees to be more innovative and productive, as they are given rewarded for their contribution to their company.
When it comes to recruitment, LG is inclined towards recruiting the 'Right people', as it is stated on LG's recruitment website. They need People who are committed and enthusiastic team workers, also they must be professional and experts in their respective field.
LG's HR policies:
Creativity and Autonomy:
Lg respects the creativity of its employees, it allows each of its employees to practice their creativity to the maximum and also support their method of getting things done.
Performance based rewards:
The performance of the employees is measured and they are rewarded as per their targets.
The employees of LG are given equal opportunity for selection and progress, regardless of their sex, age, gender, nationality, etc
Long term perspective:
It is a fundamental factor for LG to maintain a long term perspective for its human resource policies.
Training and Development:
LG has set up education centres all over the world to train and cultivate its employees and constantly upgrade their skills and creativity, so as to keep the company full of skilled and innovative personnel. It has set up various specialised labs to train its employees in their field of specialisation. And it also gives the employees, access to the latest technologies.
Retaining and Rewarding the Employees:
LG offers its employs, the benefits of fixed salaries and flexible salaries, the fixed salariesare determined every year through an evaluation process, while the flexible salary model yields immediate rewards to the employees for their performance and innovation.
The benefits such of an extensive recruitment policies and the level of inputs put into them is sure to reward the company in return. For example: The Korean LG R&D team designed the LG 'Cookie' a simple $200 smart-phone, which reinstated the LG's position as the World's third largest smart-phone manufacturer.