Key Issues In Innovation Management PDF

1 KEY ISSUES IN INNOVATION MANAGEMENT Why innovation is one of the most strategic but also complex processes managed by firms? Silvia Zamboni, Ph.D. Lecturer ...

1 KEY ISSUES IN INNOVATION MANAGEMENT Why innovation is one of the most strategic but also complex processes managed by firms? Silvia Zamboni, Ph.D. Lecturer  2 What does innovation mean to you? What is innovation “in one sentence”?  3 Some academic definitions…. Innovation as “the doing of new things or the doing of things that are already being done in a new way” (Schumpeter, 1947). “the search for, and the discovery, experimentation, development, imitation, and adoption of new products, new production processes and new organizational set-ups” (Dosi, 1988) “the creation of a new product-market-technology- organization-combination” (Boer & During, 2001). “the results of a creative process involving different actors from one or more organizations, which leads to a qualitatively new means-end combination that is introduced to the market or the operations of a firm for the first time” (Gemünden & Salomo, 2004).  4 Innovation as a process…. Baregheh, Rowley and Sambrook (2009), proposed the following definition: “innovation is the multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace”, underlying that innovation is a process, not a discrete act.  5 Different sources of innovation Voice of customer analysis (customer insights) Design research Product / service (new meanings and Concept generations development languages) Technology research (new technological opportunities) 5  6 Different outputs of innovation Market Technology Process Product Service Value Design / meaning Business model  7 The outcome of the innovation process PRODUCT / SERVICES “a new or improved good or service that differs significantly from the firm’s previous goods or services and that has been introduced on the market”, The Oslo Manual for Measuring Innovation (OECD & Eurostat, 2018) Made for 50% from post- industrial plastics and 25% bio-based plastics energy-efficient C2C product: created from recycled, reusable or sustainable materials  8 Product innovation: dental floss Improving performances of existing products…. …or adding new meanings (design driven innovation)  9 The outcome of the innovation process PROCESS: “a new or improved business process for one or more business functions that differs significantly from the firm’s previous business processes and that has been brought into use by the firm”. The Oslo Manual for Measuring Innovation (OECD & Eurostat, 2018) Hauschildt and Salomo (2011) maintained that, besides products and processes, also organizations, corporate identities, contracts, distribution channels and commercials are objects of innovation. Using existing technology for new application  10 Process simulation thanks to IT 11 11 https://www.youtube.com/watch?v=EVbd3ejEXus KONE and service innovation  12 Product and service innovation: mass-customization  13 Business model innovation “[….talking about the 914 professional model of a printer….] Because the 914 was expensive, it [Xerox] adopted a leasing model to make it more affordable. Customers were able to cancel the lease with only 15 days’ notice, demonstrating Xerox’s confidence in its value proposition. Xerox added a pay‐per‐copy plan in order to monetize what they believed would become a copy addiction, but included the first 2,000 copies for free. It’s thanks to this innovative business model that earnings from the technology far exceeded earnings had they just sold the machine.” https://www.strategyzer.com/business-model-examples/xerox-business-model  14 Value innovation 14  15 15  16 Market innovation Glocalization: globalization + localization New geographical markets New target customers  17 Market innovation: new application Saturated market, so?  18 https://www.bcg.com/publications/2020/why-the-new-competitive-advantage-demands- sustainability  19 Source: https://www.bcg.com/publications/2020/why-the-new-competitive-advantage-demands-sustainability  20 Reshaping Corporate Strategy. [...] “Reshaping Corporate Strategy. Many progressive corporations are paying greater attention to environmental, social, and governance (ESG) measures. They are broadening their approach to building competitive advantage and new business in a way that includes thinking deeply about their activities’ impact on environmental sustainability and societal needs—sometimes explicitly in connection with achieving the SDGs. Such efforts demonstrate that companies can rethink how to factor societal issues into corporate strategy and performance and ultimately be rewarded by investors.” [...] (source: D.Young, Wendy W., 2019, Innovation Is the Only Way to Win the SDG Race, available at: https://www.bcg.com/it-it/publications/2019/innovation-win-sdg-race.aspx)  21 https://www.lg.com/global/sustainability/ https://www.lgnewsroom.com/2022/05/lg-electronics-honored-by-u-s-epa-as-2022-energy-star- partner-of-the-year/  22 Why should companies innovate? Create value (for customer, for the company, for the society) Maintain their competitive advantage (that is unfortunately temporary) Growth (or survive in a competitive environment)  23 Compani\es must innovate but… Innovation disturbs both operations and logistics Innovation does cost Innovation is risky Innovation does not ensure a long term competitive advantage More than innovation, innovativeness Continuous, seamless process of innovation Efficient and controlled Before design a new product, design the right innovation process  24 Innovation is a complex process The importance of the time to market (respecting the strategic window of opportunity): financial issue (balancing investments and expected returns in a strategic timeline) The difficulty to intercept the «right» problem: the industry issue (different levels of communication with the market) and the demand issue (different evolution of tastes, needs, segments, …) The convergence issue: boundaries among industries are blurred and solutions (product, services, processes, business models,….) imply multiple competencies Information are easier to find, information asimmetry between companies and customers are reduced, solutions can be often comparable in an accessible way: the competitive issue  25 The financial issue: the value of speed Cash flow Pay back period (t) or Break Even Point (Volumes, €) + Time to market Profit Time Companies strategically decide a specific moment (window of opportunity) to launch - their products (it can be based on seasonality, specific international event/exhibition fair, specific moment during the year in which it makes more sense to launch new product/services)  26 The financial issue: the value of speed Cash flow Pay back period (t) or Break Even Point (Volumes, €) + Lower and Cash flow postponed Time left to our Time to market competitors Profit profits Delayed Cash Flow Time - Delay in If this window of Time to opportunity is not Market respected profits can be lower and postponed Delay in Financial breakeven  27 The industry issue: some insights Percentage of Percentage of projects that are projects that actually introduced actually break-even B2C 15% 7% B2B 30% 15% SERVICE 40% 25% Source: The Economist  28 28 The industry issue: some insights The failure rate Innovation is always risky: introduction of something new /not known before (commercial risk, financial risk, technical risk, ….). The acceptance of the innovation from the market is a key factor for the success of the new launch. Possible needs of B2C market are more difficult to intercept compared to B2B markets Services industries have (often) the possibility to quickly align the offer to the requests of their (potential or actual) customers  29 The convergence issue Products / services are more complex and implies the combination of competencies from different fields/industries/ technologies  30 Industrial Internet of things Better services (servitizations of products) https://www.ibm.com/watson/stories/kone/  31 New business model: SERVITIZATION Fonte: https://www.rolls-royce.com/media/our-stories/discover/2017/totalcare.aspx  32 The competitive issue Customers can easily compare offers (on prices, characteristics, feedbacks, …). Lower information asymmetry compared to the past.  33 The technology issue Final products/services are the results of a series of new release of technologies (beta tests approved and improved).  34 Innovation Management: Critical success factors for process design Strategy Learning Processes Linkages Organization Source: Tidd, Bessant, Managing innovation, 4° edition, 2009