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Joseph Schumpeter is referred to as the father of modern innovation and he defines innovation as encompassing the entire process, starting from a kernel of an idea continuing through all the steps to reach a marketable product that changes the economy. The concept of innovation is not restricted to this generalisation of a new idea but rather refers to the actual introduction and use of the new idea in the economy (Baker 2002).
1.2 Innovation Typologies
According to Baker (2002) innovation can be categorised into three major types , vis-a vis process; product/service; and business concept innovations and are distinguish according to the following levels of innovation (incremental to radical and sustaining versus discontinuous). However an exhaustive literature search by Chandy and Prabhu (n.d) describes the following types of innovations
1.2.1 Major Types of Innovation
Process innovation: this defines the use of a new approach to commercialise and create products and service. For instance Henry Ford's innovated the automobile manufacturing process by introducing the use of the assembly line in the manufacture of automobiles.
Product/Service Innovation: This involves the commercial introduction of a service or product to customers. For instance in the 1900 Kodak introduced the Kodak brownie which made photography easier and cheaper to consumers; this is an example of a product innovation. More so FedEx and UPS introduced a service to customers that allowed documents and packages to be delivered overnight; this is an example of service innovations.
Business model Innovation: This involves systemic changes to the value proposition of products or services, and to the incurred cost structure of the firm. For instance Amazon.com introduced an innovation relative to bricks and mortar bookstores both book retailers that involved a greater variety of books, redefined the process of distribution by retailing on the internet, and a promotion process where Amazon created and had access to online customer reviews (Chandy and Prabhu, n.d).
Radical Innovation: This employs substantially different core technology and offers substantially higher customer or user benefits relative to existing products, services, or processes in the industry. A radical innovation combines the technological novelty of technology breakthroughs, and the dramatic improvements in customer and user benefits evident in market breakthroughs. As such, radical innovations tend to get fairly rare.
Incremental innovation: This is one that involves only minor changes to technology or minor improvements in benefits.
Disruptive innovation: This involves introduction of a different set of features, performance, and price attributes relative to existing products. For example the rapid acceptance of Canon's slower but inexpensive tabletop photocopiers in the late 1970s relative to Xerox's high-speed big copiers by small enterprises and individuals who appreciated convenience and price despite poor resolution.
Discontinuous Innovation: This alters existing patterns of use or creates new patterns of use. For instance typewriters and microwaveable foods were discontinuous innovations, as they altered tradition patterns of use and behaviour among customers (Chandy and Prabhu, n.d).
1.2.2 Other Innovation Variations
Architectural innovation or design innovation: this describes reconfiguration of product components it however still relies on the same basic technology of the existing products, services, or processes. For instance the floppy disk industry witnessed a constant reduction in floppy disk size but still relied on the basic magnetic recording technology.
Drastic innovation or revolutionary innovation: this describes a product, process or service innovation that renders current products or services obsolete. For example, the introduction of electronic calculators made slide rules obsolete.
2.0 Management Imperatives and Challenges in Existing Operations and Innovations.
Innovation management is the process of managing innovations throughout its stages in the innovation cycle. The innovation cycle is the sum total of all activities involved in taking an innovative product or service to the market place. Therefore the innovative cycle consists of two phases
Developing the innovative product or service.
Building the business to market the product or service (Downey et al, 2007).
2.1 Management Imperatives
To ensure that the entire process of innovation is effectively managed the table below summarise the various components of the innovation cycle and the necessary management action
Table summarising management actions during the innovation process
Innovation cycle component
Identify a market opportunity
Organise people, finance and facilities to match the goals of the organisation
Research the possibilities
Protect the intellectual property
Model and test it for users
Improve the technology
Advertise and inform people
Communicate with the customers
Source (Downey et al, 2007).
2.1.1 Innovation Funnel as a Management Tool
This is a framework for managing innovation and it provides discipline and control ensuring that only positive innovations are pursued
1. Concept: Generating ideas and concepts and measuring them up against strategic fit, market opportunity, organisational impact and the chances of success. This would provide the necessary information to decide on the worthiness of the concept exploration.
2. Feasibility: This involves an evaluation of market acceptability, the investment risk/reward, and the availability of the required resources
3. Development: After a successful pilot, an assessment of a likely competitor response, and ability to deliver the required supply chain, marketing and pricing/margins.
4. Implementation: Execution of the innovation business plan, and assessing if the implementation was successful and what, if any, changes need to be made (Downey et al, 2007).
Figure showing the innovation funnel of Stagegate (source Downey et al, 2007)
2.2 Challenges in Managing Innovation
New technology-based business development and venturing: In a globalised business environment innovation is used by organisation to claim a competitive advantage. As such a main challenge would be how to manage the persistent strive to grow and maintain competitiveness through building products and services in adjacent and new business areas.
Determining the Innovation: With firms realising the need for consistent innovation they may find difficulties in conceptualising an appropriate innovation agenda. This may require designing different agendas in the area of product, process, market positioning and underlying business model.
Knowledge management: the process of innovation requires that effective knowledge management system is in place to allow documentation and ease at which information on skills and research can be accessed. Continuous learning is critical the development of the organisation and thus management would need to develop some 'good practice' model.
High Innovation Involvement: Organisation need to increase their innovative capacity to remain competitive, one approach to achieving this is by extending participation in the innovative process to a much wider population. However, high level participation in the innovation process is unfamiliar, relatively untested and risky. Therefore building routines- establishing and reinforcing behaviour patterns would be a challenge management would need to overcome (Eager et al, 2011; Parbha n.d).
3.0 Theory and Practice of Disruptive Innovation
The theory of Disruptive Innovation refers to a process by which a product or service is rooted in an initially simple application at the bottom of the market and then over time relentlessly move up the market, eventually displacing established competitors (Innovation Zen, n.d).
3.1 Practice of Disruptive Innovation
Chandy and Tellis, (2000) observed that the approach of large incumbent entrepreneurs to radical innovations is somewhat characterised by incompetence and underinvestment, resulting in a general reluctance to radical innovation. This is so because they already have steady investment and large share in the existing market. This allows for new entrants who are relatively small and unknown entrepreneurs to bring about radical innovations that upsets the market to their favour and to the detriment of the incumbent (Constantinos and Constantinos, 2003). For instance every change in the configuration of the computer hard disk drive industry was initiated by nonincumbents, and this innovation led to the subsequently led to the downfall of the previously dominant firm (Chandy and Tellis, 2000).
Constantinos and Constantinos, (2003) further posits that disruptive innovations share three common characteristics
Disruptive innovation is characterised by the use of different product and service attributes significantly different from the traditional approach.
Disruptive innovation is usually initiated by small and low-margin enterprises
Disruptive innovation is developmental, and grows to lay hold of a large proportion of the established market.
Established companies find it relatively difficult to adapt to a disruptive innovation due to the existence of tradeoffs. A company that tries to manage both traditional and disruptive approaches run the risk of degrading the value of its existing activities, and any attempt to manage the innovation with the company's old system, process, incentives and mindset will eventually kill the innovation.
3.2 Reason for Incumbent reluctance to Disruptive Innovation
The following have been reported to be essential in driving value network
the context within which a firm identifies and responds to customers' needs,
react to competitors
strive for profits.
For an incumbent organisation operating under these factors of value network might lead to a perception that the organisation listens too much to its main customers. This would result in the organisation lack of sensitivity in realising or recognising potentially disruptive innovations that serve only marginal customers. In addition incumbents are usually large enterprises that often not interested in small markets since small markets hardly offer any significant growth prospects. This assertion will lead incumbents to completely ignore the disruptive innovation posit by this markets or to wait until the market is significantly large enough to be attractive, and it is through the small markets that new entrants attack incumbent's turf, and by the time the incumbents realise (when the market becomes attractive) it is usually too late (Zen Innovation n.d).
Christensen and Overdorf, (2000) and have also describe the following as factors result in innovation reluctance from incumbents.
Low Perceived Incentives
4.0 Resources and Capabilities Required Sustaining Innovation in the Long-term
Innovation is a pressing concern for many companies across all industries as such in other to sustain an innovative strategy for a long term the following resources and capabilities are required.
Resources: Managers of firms require resource to effectively know what the company can or cannot do. These resources are categorised into the tangible and intangible resources, and these resources help propagate and sustain the firm's innovative practices.
Tangible resources include people, equipment, technologies, and cash. The intangible ones consist of product designs, information, brands, and relationships with suppliers, distributors, and customers.
Processes: This describes procedures and format in which employees transform resources into products and services. It consists of the pattern of interaction, coordination, communication, and decision making used by employees. Examples of which include the processes that govern product development, manufacturing, and budgeting.
Values: organisational values refer to the standards by which employees set priorities that enable them to judge whether an order is attractive or unattractive, whether a customer is more important or less important, whether an idea for a new product is attractive or marginal. The laid down company values would allow employees to be sensitive and help develop and sustain innovation (Christensen and Overdorf, 2000)
The following capability factors which are categorised in their various levels are considered important for sustenance of innovation.
The Individual Level: Factors here include the capacity for individuals to perform at the individual level and include; employee empowerment and engagement, trust, training, job rotation, and the extent and range of individual networks.
The Project Level: this describe the ability to create and maintain a diverse mix of project team members, conversation rules and management, and an initial openness to new ideas and withholding of criticism to a later point in the process. At this level attention on how to speed up innovative projects and to distinguish product conceptualisation, analysis, and definition from activities of product design, piloting, production and early marketing is crucial
The Organizational Level: Organizations should possess effective, efficient, and speedy systems and processes that will allow the following.
Environmental scanning, identifying discontinuities, surveying customer needs, and encouraging new ideas.
Sustained, innovative strategizing and strategy implementation.
Classify, screen and prioritisation of new ideas
Managing the innovation stream
Effective innovation project management.
Effective innovation utilization, transfer, diffusion
Effective change management.
Motivating, rewarding, and recognizing innovation.
Environmental Level: this include factors that are present in the business environment which can aid sustenance of innovation and they are composed of competition, geographical location, inter-organizational associations and communities of practice, partnerships and alliances, and government regulation (Baker 2002).
Creative disruption is an innovative paradox that occurs when new approaches products or services render established ones obsolete. This recurrent trend referred to as the incumbent curse by allows new entrants to initiate innovations that become attractive for customers and difficult to adopt by incumbent companies. This results in the exit of the incumbent from the market. Extensive literature search has revealed that for well established company that are incumbent to maintain the traditional approaches whilst also gearing to adopt the latest innovation the organisations should create an independent business unit whose size matches the emerging market, rather than ignore radical innovations. This is exemplified by Quantum Corporation, a leading producer of 8-inch drives. When the innovation of the 3.5-inch drives came up they realised that the innovation could have some applications in the computer industry, but were not certain of its application or its market success. Instead of shelving the project they created a spin-off unit to develop such 3.5.inch drives. After ten years the 8-inch market had completely disappeared while their small venture had grown to become the world largest disk drive producer. This is also seen in the guardian article as Norway an established oil producing country is poised to centre policy that would increase their stake renewable energy, and fund developing countries. As of today the energy market is ruled by oil and gas but a radical innovation in renewable energy has sprouted.