PIA3900 Week 2: Innovation and Policy with Gary Hamel and Joseph A. Schumpeter

Innovation Overview

• Innovation is both a process and an outcome that creates something new and valuable for users.
• Gary Hamel highlights the need for radical business innovation in a competitive marketplace, which includes rethinking products, redefining market spaces, and redrawing industry boundaries.
• Joseph A. Schumpeter emphasizes that innovation encompasses the entire journey from opportunity identification to commercialization.

Types of Innovation

• Traditionally, innovation focused on new products and processes, but there is a growing emphasis on new business models that alter how value is delivered.
• Marketing innovation involves significant changes in product design, packaging, promotion, and pricing strategies.
• Organizational innovation refers to new methods in business practices, workplace organization, or external relations.

Novelty in Innovation

• Innovations can be categorized based on novelty:
  • New to the firm (but not new to others)
  • New to the market
  • New to the world
• The degree of novelty is crucial in defining the impact of an innovation.

Challenges in Measuring Innovation

• Innovation is a continuous process, making it difficult to measure linearly or statically.
• The Oslo Manual identifies measurable indicators like expenditures and linkages that influence innovation activities.

Drivers of Innovation

• Financial pressures, such as the need to cut costs and improve efficiency, drive innovation.
• Increased competition and shorter product life cycles necessitate rapid adaptability.
• Demographic, social, and market changes influence rising customer expectations regarding service and quality.

New Conditions for Innovation

• Enhanced competition leads small startups to rely on larger firms for resources, market knowledge, and opportunities.
• Universities play a crucial role in innovation through partnerships with industries and promoting entrepreneurial initiatives.

Government's Role in Innovation

• Governments must adapt policies to support innovation, focusing on efficiency and resource management.
• Public investment is targeted at education, research, and technology to bolster innovation efforts.

Rationale for Government Intervention

• Market failures lead to under-investment in R&D, justifying government funding in these areas.
• Addressing bottlenecks in the innovation system is vital for effective growth and development.

Types of Innovation Policies

• Policy frameworks include both supply-side and demand-side strategies, along with mission-oriented and diffusion-oriented approaches.
• Financial instruments like R&D tax credits, alongside regulatory measures, drive innovation policies.

Socioeconomic Impact of Innovation

• Innovations can be classified based on their socioeconomic impact: incremental, disruptive, or radical.
• Given the variety of innovation types and impacts, tailored policy responses are essential for effective promotion and support.

Explore the concept of innovation with a focus on management innovation by Gary Hamel and the definition of innovation by Joseph A. Schumpeter. Learn about radical business innovation, reconceiving products and services, redefining market space, and redrawing industry boundaries.