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Based on a particular class of firm (Small to Medium Enterprise or Large Scale Enterprise) this article will complete a critique of the innovation audit literature with a view to achieving a solid understanding of the utility of the audit process in diagnosing the innovative potential of firms and ultimately facilitating innovative output
Based on the type of firm nominated by the group, few academic papers are selected and their applicability critiqued alongside an analysis of how any gaps in the recommended audit approach will be filled.
The submission opens with a critique of the innovation audit domain as articulated in the literature and as applicable to the class of firm selected. The next stage is:
â€¢ critique of few academic papers followed by a conclusion
â€¢ brief critique of the papers based on selected criteria that is seen as a priority
The primary aim of the audit is to
â€¢ enable diagnosis of innovative potential of the firm selected
â€¢ facilitate/maximise innovative output after analysis of the current innovative potential
Introduction - Innovation Audit Critique
McKeown (2008) opine innovation as a change in the thought process for doing something, or the useful application of inventions or discoveries. It may indicate incremental, emergent, or radical and revolutionary changes in thinking, products, processes, or organizations. In following the thoughts of Schumpeter (1934), contributors to the academic arena on innovation typically distinguish invention as an idea made manifest, with innovation as ideas that are applied successfully in practice.
Innovation audit of the organisation will help in understanding how the innovative potential can be improved and used in an optimum way so that majority of the employees in the organisation can think and act to increase innovation.
Hallgren (2009) suggests that multiple types of innovation audits exist, but very little work has been done to see how these audits actually effect the functioning of the company. It is mentioned further that even less information is available on how the innovation audits can be used by the organizations in a more efficient manner so that they can actually benefit from it.
Chiesa Et Al (1996) believes innovation audit helps in understanding the gap between the current level of innovation in the organisation and the level that it aims to reach.
The firm selected here is LM Ericsson Athlone that is involved in making software that is used by the Operators to manage their Telecom Networks. There are currently around 950 employees based in Athlone out of which around 200 would be contractors from Outsourcing partners in India. Ericsson in Ireland is a subsidiary of Swedish Ericsson and is called Product Development Unit (PDU) having the mandate for developing Operation Support System (OSS) suite of products, used by Network Operators all over the world for managing their Networks.
Conclusion - Innovation Audit Critique
Chiesa et al. (1996) surmise innovation audits can help managers and decision makers improve their product innovation process. They assess whether the conditions necessary for innovation are established and the degree to which best practice is employed. The use of innovation scorecards provides an overall assessment of the practices adopted with respect to best practices. It also enables decision makers to identify whether or not the required managerial processes and practices are in place.
The product innovation management measure is a self-assessment audit that consists of 50 statements, or traits, based on the best practice model. The scorecard requires respondents to circle the extent to which they agree or disagree with the statements as illustrated by Cormican & Sullivan (2004).
They further indicate that companies that score high have a better correlation between their current management practices and characteristic indicated as best practice in innovation. On the other hand, an organisation that does not score well indicates that appropriate practices are not followed and will have more problems in developing innovative products and processes. This allows managers and decision makers to acquire an overview of their strengths (to be exploited) and weaknesses (to be improved) with regard to product innovation management in each category.
Diagnosis of Innovative Potential
Basing on the Product Innovation Management Measure it can be noted that LM Ericsson Athlone Ireland would be scoring middle to high on all the different topics like Strategy and leadership, Culture and climate, Planning and selection, Structure and performance and the final aspect of Communication and collaboration.
The improvement areas for LM Ericsson Athlone Ireland mostly would be related to structure and performance because from studies it is noted that organic structure is more conducive for innovation as opined by PierceÂ J.L. (1977), but in Ericsson the structure is mainly hierarchical and matrix due to which the environment for innovation to thrive is not readily available.
Regarding the audit approach to be taken to find the innovative potential, Hallgren (2009) mentions that even though traditional innovation audits are helpful, there is also a need for a new type of audit approach in which employees themselves decide on what audit approach to take, so that it gives the optimum benefit to the organisation. van der Wiele et al. (1996) confirm this by stating that not all companies benefit from traditional innovation audits as sometimes they may lack resources or training, or would be unable or unwilling to implement the proposed improvements. This new way of executing an audit as suggested by Hallgren (2009) attempts to involve employees, letting them decide on the contents of the audit that needs to be looked in detail. This ensures that the employees are directly participating from the initial stage of the audit, thereby ensuring their full involvement in the overall process of finding the current level of innovation of the organisation and steps to improve it. The term used to describe it is 'facilitated interactive innovation audit' by Hallgren (2009).
Facilitate/Maximise Innovation Output
Chiesa (1996) opine auditing as checking the current practices used in an organisation and comparing it with the best practice. For maximising the innovation output the first step is to get the best benchmark that is challenging and at the same time achievable. The next step is to involve all the relevant employees in the audit formation process so that they feel a part of the improvement program and not left out. This is in line with Hallgren (2009) opinion. The final step is to involve the employees in any improvement program that is planned for execution to reach the goal of innovation benchmark that is decided.
Penttila (2008) explores that Company leaders are searching for the one innovation measurement that will tell them everything, so many companies will look for gross margins and they will be focused on that only. Blank (2010) opines measuring actual 'innovation' among firms is not up to the mark. Most of our measures are indirect, such as measuring investment in computer related equipment or in research and development (R&D) efforts. It's further investigated that innovation cannot be measured very well, leading to argument over the kind of investment that will lead to productivity. On the one hand there may be direct investment in research and design that will lead to increase training and skills among workers and conversely improvements could be in terms of intangible changes in organizational structure and management effectiveness. They are not independent factors as it is suggested that workers skill and capital are complementary factors, thereby informing that the magnitude of the contribution of each of these factors on total productivity growth is difficult. Haskel (2007) concludes that innovation process is difficult to measure in complete and standardized ways and such a complex issue obviously requires composite measures and a high reliance on proxy indicators.
The key decision would therefore be to identify the sets of measurements over which conclusion can be drawn on the innovativeness of company. Haskel (2007) explores that the process of innovation is idiosyncratic in many ways, as firms individually respond to their particular market and technological challenges. It's required to explore the process of innovation within company itself which can used to identify the variety of indicators to measure its various elements. Tang et al.(2007, p. 501) state "Innovation is a complex process and has multiple dimensions. To better measure innovation, one needs a combination of several indicators to account for the fact that innovation has many dimensions, and different companies or industries may undertake different innovation activities. Clearly, this can only be achieved if we have data on different innovation activities that firms undertake."
Consensus amongst academics and consultancy firms is that successful innovation management involves a multidimensional holistic approach with simultaneous performance across a number of areas. There are various in-depth studies done to identify key indicators for innovation management diagnostics by Adams, et al. (2006), Goffin and Mitchell (2005), Loewe and Dominiquini (2006). In addition to that case studies can be done to get an in-depth look at some of today's most talked-about innovators which will enable to discover secrets behind companies like IKEA, Apple, and other innovative companies across multiple domains. Therefore, it is required to identify if one or combinations of all of the reasons of being an innovative company can be used for any particular company depending upon the innovation process within that organization and also depending on the time and resources available for conducting the research.
Ericsson's organizational structure is based around three main business units (BUs), one for each of Ericsson's primary business segments: Networks, Professional Services, and Multimedia - BNET, BUGS, and BMUM. (A fourth segment Phones is pursued by its joint venture Sony Ericsson). Business Unit Networks (BNET) consists of three Design Units (DUs) and their associated Product Areas (PAs). PDU OSS (Product Development Unit Operation and Support Systems) is responsible for the development of Ericsson's network management systems. It is one of several PDUs within Design Unit Radio (DURA). PDU OSS's HQ is in Athlone, Ireland, where approximately 700 staff work. Several hundred more work at sites in approximately 7 other countries.
This structure is shown in the picture on the next page.
Innovation Systems require both Processes and Teams. Management and steering teams defining, enforcing and following up the Innovation Strategy. Teams executing the process include surveillance, idea management, steering, and portfolio management. A typical view of this is taken from one of the PDU website in Ericsson. Cross-functional teams executing innovation projects, external partners, project steering groups, internal organizations and processes that promote and fund innovation activities .Also known as internal innovation market-places or corporate venture programs, universities and research Institutions, Technology and Business Partners ,Partner Customers, Private and Public Organizations
Kanchan et al.(2009,p.502) suggest that "The emergence of globalization and increasing competition created a threat for the organizations to survive in market thus innovation and differentiation became necessity to sustain economic development and competitiveness". Innovation seems to be a key driver for change. Ahmad (1998) opines no matter how strong any company is currently in the market, in contemporary competitive environment resisting change is a threat to the existence of the organization. The key driver of the organization's ability to change is innovation. Ahmad (1998) further stresses that innovation has to be backed by concrete actions and should not be based only on talks and action points. The actions which will create innovation friendly environment and positive culture provide a platform for innovation. In conclusion innovation is the key to survival for any organization in highly competitive landscape of contemporary environment.
Ericsson's CEO pictures Ericsson in five years as "A bold innovator that is consistently delivering tremendous value to its customers, stakeholders and employees". Innovation is described as 'invention to meet a market need', which joins two key issues for innovation, namely that of 'creativity' with 'implementation', or of 'thinking' with 'doing', and as such is close to ideas mentioned by West (2002). Technology-driven innovation is one of Ericsson's core strengths. But in today's fast-changing global business environment, where the boundaries between media, internet and telecom are blurring, it is also important to encourage innovative ability in other key areas, such as exploring new business models, innovation with customers and partners in eco-systems, innovative service offerings, and new ways of working that will leverage the synergies and optimize the value provided to the Customers of Ericsson.