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Innovation can be defined as an improvement of an existing system or product, an invention that may be considered as completely new or an existing innovation that is diffused into new application (McAdam & McClelland 2002). Changes can be defined as the different structure, form, situation, condition or quality of an organisation over the time (McWilliams & Williams 2010).
The differences between innovation and change are innovation is a completely new idea while change is the way we carry out the innovation. Innovation is more on creative ideas, introducing something new, new concepts or something that is out of the box that derives from a group or an individual. On the other hand, change is managed by a project that specific tasks should be focused on to get expected result.
Why innovation matters to a company? It is believed that innovation can sustain long term stability and business growth. All of the organization should be more innovative so that the organization would not face run down or extinction easily. Many of the companies have started to pay attention on the innovation. However, some of the organisations lack the skills to develop innovation (Cottam & Ensor & Band 2001). There was a research of all FTSE100 companies. The purpose of the research is to examine whether the organizations are investing into innovation or not. The result shows that most of the organization (71%) have no invested into innovation and few of the organization (8%) were unsure how to manage innovation (Cottam & Ensor & Band 2001). From the result, we can realise that more effort should be put into the innovation. Innovation brings a lot of advantages to an organisation.
Firstly, innovation is important because of technology cycles. Technology cycles is a cycle that starts with a new technology, after the technology reaches its peaks, a better technology will replace the old technology (McWilliams & Williams 2010). Each of the technology will go through the technology cycle. There is a S-curve pattern of innovation. Initially, there is a slow progress of new technology, follow by rapid progress and then slow progress again when it reaches its limits (McWilliams & Williams 2010). When the performance of a technology reaches its limits, it is unable to have better performance. In this case, there will be another new S-curve that represents a new technology (McWilliams & Williams 2010). Innovation and creativity are encouraged to be generated in this situation. Since the technology is changing fast, there are many competitors in the market. Therefore, the organisations have to learn how to adapt to the new technology and changing environment hence not losing the opportunity to make profit and remaining competitive.
Secondly, innovation matters because of innovation stream. Innovation stream defined as "the patterns of innovation over time that can create sustainable competitive advantage" (McWilliams & Williams 2010, p.134). Every company needs to have innovation stream so that their technology can create sustainable comparative technology. However, technological innovation can create competitive advantage and also competitive disadvantage. When the performance of a technology reaches its limits, there will be a technological discontinuity. Technological discontinuity is the significant breakthrough or re-packaging of the existing technologies of a new technology (McWilliams & Williams 2010). There will have technological substitution and design competition after the discontinuous change. Technological substitution is the customers will purchase the new technologies instead of the old technologies because the new ones offer customers better benefits. Design competition is the competition between the design of new and old technologies. Some of the alternative designs will be introduced when there is a new technology. When the design is widely accepted or popularly used by the consumers and market, the design has become a dominant design. Dominant design is the most important thing in the innovation stream because it indicates the losers and winners (McWilliams & Williams 2010). This is because the dominant design will be widely used in the market hence maintaining sustainable competitive advantages. In this way, the direct sales of the product will grow significantly and show efficiency improvement. However, there is a risk of innovation if the company bet on the unsuitable design. The company may face technological lockout and competitive disadvantage. Therefore, the decision making of the innovation team is very important. Once the team makes a proper decision, the organisation can enjoy the competitive advantage.
There is a good example of networked innovation from a telecom company (Ericsson) from Swedish. The innovation project is focused on the AXE110 "mini-exchange". Before the innovation of AXE110 "mini-exchange", AXE10 exchange is popularly used around the world which is the dominant design of telephony exchange. It showed that there was a success sale of mobile telephony system in Russia (Hellstrom & Malmquist 2000). However, when a technology cycles reach its limits, a better technology will be demanded to replace the previous technology. The customers started to demand for a smaller and cheaper telephone exchange since the AXE10 exchange is too big and costly. The company started to realise that they have to innovate hence remaining competitive. A network organization of 350 people was formed to develop a new telephony exchange. Firstly, they have a general idea which is create a light, small and easy to install telephony exchange. The development of new telephony exchange shows that there is a new S-curve. There is a slow initial progress of new telephony exchange. Few years later, the network organization started to figure out how to make the new telephony exchange that is much lighter, cheaper and smaller than initially. Lastly, the new "mini-exchange" is ready for shipping and launching. The new AXE110 "mini- exchange" has more advantages compared to AXE 10 exchange. For example, AXE 110 is a small version of AXE 10 exchange and it only weights 20kilos. Furthermore, AXE 110 is easier to install and the cost of installation and maintenance are relatively lower (Hellstrom & Malmquist 2000). AXE110 telephony exchange is widely accepted by the customers and market and it has become the dominant design. The Company is able to maintain sustainable competitive advantages now.
In conclusion, innovation is very important to an organisation. Innovation can maintain sustainable competitive advantages, lead to direct sales growth and efficiency improvements. There are some advises from the developers in the network. Firstly, innovators are encouraged to fit the idea to industrial product step by step and understand the circulation of the product of the market. Besides that, innovators should have confident to go for idea and encouraged to be creative. However, there is no specific pattern in each innovation because radical nature determines each innovation (Fernandez 2001). The managers have to go through the learning process, which are trial and error and overcoming the failure hence developing innovation (Fernandez 2001).