This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
The concept of innovation is not a new one (Verloop 2004). This is relevant from history as some of the greatest and most revolutionary innovations took place from the invention of the wheel, light bulb, etc. Innovation has however over the last 30 years gained more light in organisations (Cooper 2005). It has come to the realisation of most organisations that innovation is critical to their survival and competitive advantage whether for profit or market shares (Hamel and Prahalad, 1998).
Cooper (2005) expressed the importance of innovation by liking it to war and a matter of survival. Innovation however essential is in no way an easy practice. History has shown us that even the greatest organisation at one point in time fell short in innovation projects. (Utterback, 1994). This is mainly due to the fact that organisations and people in general do not easily adhere to change (Leonard-Barton, 1992). Even more so when their usual practices work well for them. This often leaves them behind when the environment around them is constantly changing (Benner and Tushman 2000).
Peter Drucker (1986) defined innovation as change that creates a new dimension of performance. Freeman (1974) also defined it as all activities involved in the commercialization of a new product or process. 'Innovation is the successful exploitation of ideas' (BIS 2008). From the above one thing is clear; Innovation means different things to different people. There is however one underlying factor. It involves the development of something new or improved that delivers value (Dance 2012).
From the diversity of definitions of innovation and different forms of innovations in history, it is obvious that innovation is multi-dimensional. Typology in line with various authors has been classified differently. The first centres on different forms of innovation. The first dimension of innovation focuses on the application of the innovation (Eveleens, 2010). Table 1 below shows a brief description of the various forms of innovation.
Forms of innovation Example
The commercial introduction of a new or improved product
The design of a new improved process that delivers value. E.g. Simple introduction of a photocopier into administration process; New/improved manufacturing process
Introduction of a new venture, department or system into the organisation.
Deals with the management and organisation of employees. E.g. TQM (total quality management) systems, BPR (business process re-engineering)
Innovations in the production process. E.g. Quality circles, Lean Manufacturing, JIT manufacturing system etc.
New financing arrangements, new sales approach, e.g. direct marketing
New/Improved way of providing a service. E.g. e-bay/Amazon; telephone insurance; Internet banking, etc.
The second classification is Bessant and Tidd's 4 Ps of innovation which focuses more on the novelty or radicals of the innovation in classifying the typologies. Figure 1 below shows this.
Product innovation refers to innovations in the products or services which an organisation offers
Process innovations are those in the process of manufacturing or creation and delivery of a product or service.
Position innovation refers to the context in which the products or services are framed and communicated
Paradigm innovation refers to innovations in mental models which shape the organisation.
In this model of typologies the degree of novelty is considered. Jacobs and Snijders (2008) speak of this approach to novelty where all innovations are assigned along an axis from incremental to radical.
Incremental innovation is that which builds upon existing knowledge and resources while radical refers to new innovations requiring completely new knowledge and/or resources. Incremental innovation has therefore been referred to as competence enhancing as it builds on existing competences and uses les resources as it requires little technological change. Radical on the other hand has been referred to as competence-destroying as it puts old resources aside and renders existing products obsolete and focuses on new. It is also usually technologically intensive.
(Innovation Zen 2006)
Van de Ven (1986) identified four central challenges of innovation in organisation.
The human problem - Organisations and people in general are designed to focus on, maintain and sustain existing practices and resources. They are not easily adhering to change and as such focus less on innovation. This is even more so when organisations are already very successful at what they do and do not see the need to change.
The process problem - The management of new ideas to ensure their development and nurture them into commercialization. Whereas the conception of a new idea may be by an individual implementation requires a collection of activities and people. This coalition brings to light the socio-political dynamics of innovation needed to develop those ideas.
Structural problem - The innovation process requires diverse resources, activities and disciplines to institutionalise an innovative idea. The challenge here is managing all these harmoniously so that the innovative process is seen as whole.
The strategic problem - organisations have to create environments conducive for innovation for this to strive. They not only need to be included in the strategy of organisations but also to transform the organisations. One main challenge of innovation for organisations is to ensure that all resources and support needed for innovation are in place.
THE INNOVATORS DILEMMA
Organisations are faced with the dilemma of using all forms of their resources to secure a steady flow of returns on investment by developing what they already know.61 Researchers have referred to this as exploitation. This can lead to stability and strong knowledge building.62 However exploitation can make firms over dependent on their practices ignoring the relevance of environmental change and competion.63 Therein lays the problem to be faced. In ever changing environments organisations need to adopt and try to develop a differentiation strategy to have competitive advantage. Differentiation calls for radical innovation as opposed to what others are already doing. 64. This seeking of new knowledge or radical innovation is Exploration. Organisations are poised with the confusion of managing both practices as they require different activities. Exploitation is low risk and very frequent where as exploration is high risk and irregular. 67 Some organisations try to manage this by taking occasional risks in investment in research and development in the areas of technology and marketing. 71 Exploration sometimes brings about disruptive innovations. which open up whole new market segments and potential applications (Benner & Tushman, 2003).
Progress of Sustaining and Disruptive Technologies
Source: Christensen (1997)
Company's capabilities can sometimes become their disabilities when faced with continuously changing markets and technology. Christensen defines this form of technology "sustaining" (Christensen 1997). They improve and enhance the relative performance of established products already existent in the market. These products are usually improvements of previously existent technologies. The second type of technology is "Disruptive" which carry very different attributes that markets and customers are not familiar with. They usually start out by underperforming and this causes large firms to be oblivious to their capabilities as they look at their more stable, profitable and risk free markets. Products based on a disruptive technology have different attribute sets than existing products based on sustaining technologies. These new products are considered to have low performance attributes by customers in the mainstream markets. Christensen and Armstrong (1998) state that initial performance for disruptive technologies are low because customers are more need focused and as such unimpressed by new technologies, however, performance of these products increase over time and eventually supersede that of sustaining technologies. This then becomes a threat to existing markets. (Danneels, 2004). Disruptive technologies change the competition for large firms (Danneels, 2004) and sneak past them. Large organisations are sceptical to follow through because it is difficult to analyse markets that do not exist (Christensen 1997).
Disruptive innovation has been used to describe innovation that is of highly revolutionary or discontinuous nature, in which customers are provided with products or services which were not available to them before (Christensen, 1997). A disruptive innovation represents a new paradigm of customer offering that can generate new net wealth whilst transforming or displacing some or all of an established market (Overdorf, 2000), forcing established companies to lose market share and often causing the end of industries as we know them (Christensen, 1997; Foster and Kaplan, 2001). Disruptive innovation creates a new market and value for a product or service which eventually disrupts the market for an existing market for a product or service.
Disruptive innovation initially bore the idea that incumbent firm fail because they do not keep up with technology. Christensen et al however dismissed this theory by proving that large incumbent firms know of the innovations surrounding them. They however are unable to pursue when they arise because they require the investment of resources which they require to sustain their business and sustain their existing innovations which they require to remain competitive. Due to this, and the initial non-existence of markets for radical innovations incumbents choose to stick with that which is more profitable. They do not put sufficient importance on disruptive innovations. New entrants starting up their business have different value networks and perspectives. At least until their disruptive innovations gain advantage in markets. At which point it becomes difficult for incumbent firms to keep up and all they can do in response is to adopt a me-too strategy to survive (Christensen 1997).
Anthony et al (2008) described a process or three principles which disruptive innovation over the years has shown.
Target Overshot Customers and Non-Customers - Disruptors tend to target non-consumers who usually have barriers constraining them from using existing products or services. Example; parents who for obvious reasons cannot attend school. Universities took advantage of this by offering distant learning programs for such people. Initially conventional universities dispelled this method by assuming that people would prefer the more conventional attendance. They also tend to target customers who choose not to patronise a product because its features or capabilities surpass their need for the product.
Good enough can be great - Disruptors also do not see to over engineer or over develop a product because they realise that the use or quality of a product may be relative to different people. Some customers are delighted by simplicity and convenience. Example; Inbuilt phone cameras as opposed to better quality high resolution digital cameras. The fact remains that having a camera on your phone and being able to instantly share photos with contacts is attractive to others.
Do what competitors wouldn't - Disruptors usually enter the market by offering products and services large organisations usually wouldn't to minority markets they assume irrelevant. By so doing they manage to sneak their way up in market share and before incumbent firms realise this it is usually too late to manage this displacement.
Anthony et al (2008)
OVERCOMING THE INNOVATORS DILEMMA
Certain companies have established barriers to innovation which make it difficult for them to divert resources into disruptive technologies. Having been in existence for some time they have set strategies for their approach to innovation which makes them rigid to change (Leonard - Barton, 1992). Their organisational units, equipment and training are structured in such a manner that they hinder a quick response to disruptive technologies. In addition, these large firms have established customer bases that prefer improved versions of existing products instead of completely new technologies. This predicament has been well documented by Chandy and Tellis (2000) who argue that large, incumbent firms fail to introduce radical innovations as they tend to solidify their existing market position with relatively incremental innovations. According to them, large incumbents in a particular product generation are so engrossed in their success or so hampered by their bureaucracy that they fail to introduce the next generation of radically new product offerings (Chandy and Tellis, 2000:2). They aptly term this as the "Incumbent's Curse". According to Christensen (1997), due to this very reason, some firms choose not to invest in disruptive technologies until they become more attractive profit wise. Chandy and Tellis (2000) define radical product innovations as new products that incorporate a substantially different core technology and at the same time provide higher customer benefits as compared to previous products in the industry. Organisational theorists state that large firms develop organisational routines or rigidities as Leonard-Barton (1992) likes to call it, while carrying out repetitive tasks of manufacturing products efficiently. Within innovation driven firms like in the case of the pharmaceutical industry, the routines are driven towards efficiently developing incremental innovations based on the current technology available. However, radical innovations represent a shift, from current technologies which constitute those technologies that have been refined and mastered by incumbent firms over the past years to disruptive technologies, those technologies which firms are totally unfamiliar with. Therefore, adoption of such technologies for the development of radical innovations would mean that large firms would have to let go of their current rigidities and develop new capabilities which is difficult, risky and costly. However, Christensen (1997) argues that these disruptive technologies eventually surpass sustaining technologies in satisfying customers. When that happens, incumbent firms who don't invest in radical innovation lose out. Christensen describes this as the "Innovator's Dilemma." Therefore, in order to overcome the Innovator's Dilemma, Chandy and Tellis (2000) point out that, dynamic organisational structure and strong technological capability are two key elements that firms need to adopt to be successful and innovative. They must include research and development in their organisation planning and seek to discover new technologies and combine it with existing capabilities thereby balancing both, exploration and exploitation. This will be discussed in further detail in the following section of this paper.
THE AMBIDEXTROUS ORGANISATION
There has been a great amount of literature in organisation theory that aims at explaining a firm's behaviour and its corresponding success. Ever since it became apparent that firms face contradictory environments, scholars have looked for answers that best fit these circumstances. One of those answers is for firms to take an ambidextrous approach (O'Reilly and Tushman, 2004). Ambidextrous firms require balancing both exploitation of existing competences and exploration of new competences to survive in changing environments and achieve competitive advantage. Duncan (1976), who introduced the term 'ambidextrous organisation', focused on the ability of organisations to design dual structures that facilitate the initiating stage and implementation stage of the innovation process. More recently, Tushman and O'Reilly (1996: 24) defined ambidexterity as the "ability to simultaneously pursue both incremental and discontinuous innovation and change". Eisenhardt (2000) acknowledged the movement towards paradoxical thinking in management research. She argued that paradox is "the simultaneous existence of two inconsistent states, such as between innovation and efficiency, collaboration and competition, or new and old (Eisenhardt, 2000: 703). Rather than aiming at compromising between opposite poles where the organisation chooses the right mix of opposites, Eisenhardt (2000: 703) posited that "vibrant organisations, groups, and individuals change by simultaneously holding the two states." Increasingly, therefore, academicians have long argued that firms capable of overcoming this paradox by simultaneously balancing the two inconsistent states of exploration and exploitation obtain superior performance and enhance their long term survival in the market (Duncan 1976; Gibson & Birkinshaw, 2004; Tushman & O'Reilly, 1996). Tushman et al (2004) suggest that firms that employ an ambidextrous organisational design tend to be more effective in hosting new innovation streams than any other organisational designs employed.
In conclusion, in light of such regulatory and technological changes, firms within the 'innovator' group have let go of their 'core-rigidities' which they developed during the process patent era and have increasingly transformed themselves from 'make and sell' to 'sense and respond' companies by putting in place 'dual structures' and hiring senior managers with peripheral vision; capable of balancing the contradictory tensions of both exploration and exploitation in order to become ambidextrous organisations
Dance 2012 http://freshconsulting.com/what-is-innovation/
Christensen, Clayton M. (1997), The innovator's dilemma: when new technologies cause great firms to fail, Boston, Massachusetts, USA: Harvard Business School Press,