CHPT 1-10 INNO MGT.pdf

PERSPECTIVES ON INNOVATION  LEARNING OUTCOMES At the end of this chapter, students should be able to: ❑ Describe the various definitions of innovation. ❑ Distinguish between innovation, invention and creativity. ❑ Discuss the factors that affect innovation. ❑ Ide...

PERSPECTIVES ON INNOVATION  LEARNING OUTCOMES At the end of this chapter, students should be able to: ❑ Describe the various definitions of innovation. ❑ Distinguish between innovation, invention and creativity. ❑ Discuss the factors that affect innovation. ❑ Identify the sources of innovation. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3  INTRODUCTION ❑ The word innovation originates from the Latin word “innovare”, which means ‘to make something new’. ❑ Innovation includes both new technologies and new ways of doing things. ❑ Innovation as a process which has to be established in an organization for continued enhancement. ❑ Innovation management is the systematic processes that used to develop new and improved products, services and processes. ❑ Innovation is a major part of any organization, essential for growth by distinguishing the organization from others. ❑ Success of innovation depends on the future vision of and the encouragement from the organizational culture. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 4  IMPORTANCE OF INNOVATION ❑ Innovativeness has become a force in wealth creation and business success. ❑ It leads to new business ideas and technological revolutions. ❑ The survival aspect that an established organization would need is to innovate, or face the consequences of extinction. ❑ Innovation, apart from products and services, also includes processes, supply chain systems, marketing methods and leadership/management styles ❑ With the impact of globalization, coupled with technological and knowledge revolutions, organizations and businesses will have to constantly adapt to an ever changing business climate. ❑ Innovation will help add value and propel organizations forward towards overall improvement. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 5  INNOVATION, INVENTION AND CREATIVITY ❑ Innovation – Ideas, concepts, and inventions are the precursors of innovation. Ideas and concepts cannot generally be implemented. – Innovation is about introducing something new or doing something in a new way. The goal of innovation is to take an idea from concept to realization and improve business performance. – Innovation begins with an idea that is transformed into a concept that includes some new combination of what is already known and can be implemented to serve a purpose. – Invention and innovation involve creativity. – The goal of innovation is positive change, to make someone or something better. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 6  INNOVATION, INVENTION AND CREATIVITY ❑ Invention – Invent something did not exist. – Example of invention: Components, assemblies, mechanisms, and various types of equipment used in daily living – Inventions normally associated with patents, however many inventions are never patented. – Many organizations do not patent their processes but instead treat them as organization–confidential – Because once a patent is issued, knowledge of the invention becomes available to all who choose to search the patent literature. – To be competitive is to have patents that add significant value. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 7  INNOVATION, INVENTION AND CREATIVITY ❑ Creativity – Creativity is the generation of ideas that result in the improved efficiency or effectiveness of a system. – Creativity (or creativeness) is a mental process involving the generation of new ideas or concepts, or new associations between existing ideas or concepts. – Creativity allows the entrepreneur to manufacture products that are different from products manufactured by competitors, allows a product to stay in the market and have preference among customers. – Creativity has close connections with revolution, evolution and dynamism. – Innovation and creativity work in a kind of critical tandem, but successful innovation requires more than just creativity Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 8  THE INNOVATION CONTINUUM ❑ Innovation lies on a continuum of events that begins with a raw idea, which is developed into a concept, which then yields some type of invention, and which is finally implemented and commercialized. ❑ These are progressive and iterative stages that describe the innovation process. ❑ Too often words like ‘ideas’, ‘concepts’, ‘inventions’, and ‘innovation’ are used interchangeably. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 9  THE INNOVATION CONTINUUM ❑ Ideas – Raw ideas provide little value unless someone pursues them. – Few idea generators take the time to adequately describe the idea, and many organizations, though not suffering from a lack of raw ideas, suffer from a lack of interest in pursuing them. ❑ Transforming Idea to Concept – Transforming an idea into a workable concept involves taking account of the system in which the idea will be implemented. – In the formative stages of the concept, the available information may be limited but still needs to be considered. – In addition, new information needs to be gathered and factored into the decision process. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 10  THE INNOVATION CONTINUUM ❑ The work effort in transforming ideas into developing concepts includes the following tasks: Identifying the available resources—the required resources from either within or outside the organization Understanding the organizational infrastructure—the infrastructure that supports innovation Assessing the competencies and capabilities of the organization—individual, team, and various group competencies that are required to develop into organizational capability Interpreting economic and global demographic information—information related to the context of the concept under consideration Evaluating the competencies of all the support functions—the skill levels of the organizational support functions, noting the deficiencies Managing the interfaces—those involved in bringing any concept to fruition Integrating individual, team and group competencies into organizational capability—individual competence that develops into organizational capability. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 11  FACTORS THAT AFFECT INNOVATION ❑ Resources – Organizational resources include people, money, intellectual property, access to information, capability, time, customers, suppliers, plant and equipment and financial reserves. – All the resources mentioned play a vital role in producing innovative products or services for an organization. ❑ Infrastructure – The organizational infrastructure includes the purpose of the organization, its objectives, its strategies, management attributes, and its support of innovation. – The infrastructure of an organization will also provide support for any new ideas, invention and innovative ideas. – A strong organization with such strategies will encourage employees to co-operate in producing new products. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 12  FACTORS THAT AFFECT INNOVATION ❑ Culture – An organizational culture includes shared values, beliefs, legends, rituals, past history, intellectual and operational traditions, pride in past accomplishments, policies and practices, rules of conduct, the organization’s general philosophy of operation, and other artifacts that define the organization. – A healthy culture will make employees feel easy to give suggestions to the organization’s management team. ❑ Process – Consists of an idea from some recognized need that is developed into a concept, followed by an invention, and then taken through development, production, diffusion and adoption by end users. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 13  SOURCES OF INNOVATION ❑ The Unexpected Event – An unexpected failure, an unexpected success or an unexpected outside event can be a platform of a unique opportunity. ❑ The Incongruous – A discrepancy between reality and what everyone assumes it to be, or between what is and what ought to be, can create an innovative opportunity. ❑ The Process Need – This one is task-focused rather than situation-focused. A process is perfected, redesigned or a weak link replaced. ❑ The Industry and Market Structure Change – The opportunity for an innovative product, service or business approach occurs when the underlying foundation of the industry or market shifts. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 14  SOURCES OF INNOVATION ❑ Demographics – Changes in the population’s age structure, size, income, level of education and employment can create opportunities for innovation. ❑ Changes in Perception, Meaning, and Mood – Innovative opportunities can develop when a society’s beliefs, attitudes and general assumptions change. ❑ New Knowledge – Advances in scientific and non-scientific knowledge can create new products and new markets. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 15  INNOVATION CULTURE AND MYTHS Myths Reality Individuals drive innovation. Innovation is a team sport. Innovation begins with brainstorming. Innovation begins with understanding the customer. Innovation requires creative people. Innovation requires effective problem solvers rather than creative people. An innovation process will give the The innovation process is only one tool results you need. for successful innovation. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 16  SUMMARY ❑ Innovation encompasses four major components: culture, resources, process and infrastructure. ❑ An organization needs to be innovative in order to survive in the marketplace. ❑ Innovation involves ideas developing into concepts, materializing into invention, ending with innovation. ❑ Innovation happens when an invention matches implementation and is finally commercialized. ❑ Innovation effort must be nourished by a supportive organization culture. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 17 FORMS AND TYPES OF INNOVATION  Learning Outcomes At the end of this chapter, students should be able to: ❑ Distinguish and describe the different forms of innovation. ❑ Describe the different types of innovation. ❑ Analyze the impact of innovation types on society, human behaviour and business. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3  Introduction ❑ Innovation is about the commercialization of ideas and inventions and is not a simple and easy process. Much effort and time is required to successfully commercialize inventions. ❑ Innovations vary in scope, time for completion and organizational and societal impacts. ❑ Innovation consists of diverse activities and processes and different people interpret innovation differently. ❑ One of the ways to reduce this difference in innovation interpretation is to group innovation into various groupings. ❑ The grouping of innovation is based on two categorizations. The different forms of innovation, which indicates the application of the said innovation The degree of newness or originality associated with the innovation Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 4  Forms of Innovation ❑ Product Innovation ❑ Service Innovation ❑ Process Innovation ❑ Component Innovation ❑ Marketing Innovation ❑ Organizational Innovation ❑ Social Innovation ❑ Business Model Innovation Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 5  Forms of Innovation ❑ Product Innovation – Product innovation is embodied in the outputs of goods or services of an organization. – Product innovations include consumer products, such as smart phones and personal health gadgets as well as industrial products such as machinery and equipment. – The long-term success of a product-driven organization depends on developing new products. – A product family is a set of individual products that shares common technology and addresses a related set of market applications. – Product example: Hewlett-Packard, 3M, Black & Decker, and Compaq Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 6  Forms of Innovation ❑ Service Innovation – Service innovation is as important as product innovation, although not as popular. It is usually in the form of new service applications. – Most of the time, service innovation is entirely a new business model. This new business model will contribute to increased revenue. – The new service is able to generate higher productivity because these services are provided with cheaper cost and faster delivery. – With appropriate online computer services, cheaper and more productive methods could be offered to the public. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 7  Forms of Innovation ❑ Process Innovation – Process innovation includes innovations to improve the techniques or processes used by the organization and often focuses on improving effectiveness and efficiency. – Process innovations are considered to have a bigger influence on society compared to product or service innovations even though innovation is synonym with product innovations. – Process innovation can be grouped into two types: Technological - related to new types of technology Organizational - related to new ways to organize work. – Organizational innovations contributes to the bigger process, such as reorganization of the entire industries. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 8  Forms of Innovation ❑ Component Innovation – Component innovation creates an improvement in the capabilities of the individual components in a system – Component innovation does not involve a whole new design, but does involve new or at least significantly different components. – Component innovation is either about changing the relationships that transform the entire system or swaps out one for another that results in an incremental improvement. – The key feature of component innovation is the use of new or different components integrated with new components integrate new technology, but the configuration remains unaffected. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 9  Forms of Innovation ❑ Marketing Innovation – Marketing innovation focuses on the implementation of a novel marketing concept in a firm. – Involves the implementation of a new marketing method, which results in significant changes in product design, packaging, product placement, product promotion or pricing. – The objective of marketing innovation is to increase firm’s revenue and the purposes of marketing innovation are to fulfill customer needs, to develop new markets, or to position the firm’s product on the market. – Marketing innovation is all about how the new tools are used to get messages out to the target market effectively. This is to keep existing customers and at the same time, attract new customers. All Rights Reserved – Management Innovation © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 10  Forms of Innovation ❑ Organizational Innovation – a dynamic process of creating or modifying an idea and developing it to produce new groups of products, services, processes, structures or policies. – It encompasses how organizations and individuals manage work processes in areas such as customer relationships, employee performance and retention, and knowledge management. – Continuous learning is a requirement of organizational innovation success. The new knowledge is essential as the basis for new ways of thinking, creativity and change. – Organizational innovation therefore requires a culture of innovation that supports new ideas and new ways of doing business. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 11  Forms of Innovation ❑ Social Innovation – Social innovation refers to new strategies, concepts, ideas and organizations that meet both social needs and create new social relationships. – Social innovation can take place in the government, private and non-profit sectors and across the boundaries between these sectors. – The social innovation emphasizes on three key dimensions: i. The innovations are usually new combinations or hybrids of existing elements, rather than being totally new. ii. The practice involves cutting across organizational and disciplinary boundaries. iii. It develops a persuasive new relationship between individuals and groups. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 12  Forms of Innovation ❑ Business Model Innovation – A business model must have three core elements to be of value (1) a unique central idea that defines the business; (2) a grasp of future market trends, and (3) profitability from an offering that cannot be easily copied. – The business model innovation refers to the recreation or reinvention of a business itself. It is an important tool to capture, design, innovate and transform the business. – The business model innovation should be in connection with the main business goals of the organization. – A company with a new business model innovation will capture new market segments. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 13  Types of Innovation Innovations are usually differentiated based on the degree of novelty. This types of innovation can be applied on product, service or process innovations. ❑ Incremental ❑ Discontinuous ❑ Architectural ❑ Systems ❑ Radical ❑ Disruptive Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 14  Types of Innovation ❑ Incremental – Incremental innovation improves on the design of the existing components. – These improvements are not radical changes to the components but a gradual change. – Most incremental innovations involve little technological change rather than the creation of a totally new product. – The product or services do not require much marketing effort and has a lower failure risk. – This type of innovation is the least likely to encounter consumer resistance. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 15  Types of Innovation ❑ Discontinuous – Discontinuous innovation requires a significant change in consumer behaviour. – Consumers may want to use new technology because it creates substantial benefits. – Discontinuous innovations are new products perceived by customers to be radically new and also usually require extensive technological breakthrough. – Example: MP3 player; cassette tapes; LP records Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 16  Types of Innovation ❑ Architectural – Architectural innovation requires overall reconfiguration of the design without changing the components. – The changes are achieved in its design through the changes in the underlying components and the ways those components interact. – The influence of architectural innovation is mostly on industry competitors and technology users, where the influence is widespread and complex. – As an example, the transition of a bicycle from high-wheel to the safety bicycle was an architectural innovation. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 17  Types of Innovation ❑ Systems – Systems innovation could be viewed as massive kinds of activities which require significant resources from many disciplines. – It causes complete changes in both social and technical dimensions, as well as interrelations between the two dimensions. – Social dimensions include values, regulations and attitudes, whereas technical dimensions are infrastructure, technology, tools and production processes. – For example, communication networks from fixed line to mobile phone; satellite operations; and the World Wide Web. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 18  Types of Innovation ❑ Radical – Covers both the newness and the level of change in the innovation. – Impact the most in terms of product and service commercialization that consists of significant technological contents. – May offering wholly new customer benefits, provides significant changes towards positive customer expectations. – Example: the introduction of wireless telecommunication, where product development requires new manufacturing and service processes. – This type of innovation requires newness in every facet of the innovation. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 19  Types of Innovation ❑ Disruptive – Disruptive innovation usually replaces an earlier technology. – Usually, initial product/services introduced were inferior compared to the existing product/services available in the market, but simpler and convenient. – Disruptive technologies usually are more flexible, cheaper and applicable to bigger segments. – Established and large companies are more accustomed to sustaining innovations to meet the needs of high-end customers. – These companies have to innovate, otherwise they leave the door open for new entrants who will make advancements to their products and ultimately compete for the high-end customers. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 20  Product Classifications ❑ An Improvement to the current product ❑ A novel (New) replacement product ❑ A new-to-the-market product ❑ A breakthrough product ❑ A me-too product Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 21  Product Classifications ❑ An Improvement to the current product – These include improvements that are more than just cosmetic and provide defined benefits to users. – These products are able to sustain business as well as market share. – They are more than just slight improvements and may carry innovations on the technology front or considerable change in the design of existing products. – Examples: copiers, personal computers and automobiles. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 22  Product Classifications ❑ A novel (New) replacement product – The product serves the same purpose as the current product. However, the development of the new product does not occur very often. In every new product, significant improvement is always focused on new features. – One of the strategies employed is repositioning, where the products are existing products, but targeted at new segments or new markets to increase market share, to fight local brands, etc. – Another strategy is cost reductions in which these products are functionally similar to the existing product, but launched at a reduced price. – Marketing innovations is another strategy more into improving or altering existing products in terms of packaging, branding and easy availability, rather than a change in the substance of the All Rights Reserved product itself. Innovation Management © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 23  Product Classifications ❑ A new-to-the-market product – Entrepreneurs usually enter business with new products, processes and services to the marketplace. These products are absolutely new to the world and will create their own market. – Significant improvements with these products are not born out of a major invention but offer superior performance, hence replacing existing products. – Examples are Apple computers and Magnetic Resonance Imaging (MRI). Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 24  Product Classifications ❑ A breakthrough product – Product or process breakthrough seldom occurs. Breakthrough means coming up with something new (not to be compared to any existing item). Usually the breakthrough product is in the areas of technology and markets. – Technological innovations are products that are really innovative and have the highest degree of innovation. These products will create new industries. – Examples include 3M Post-it notes, gene technology, lasers and facsimiles. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 25  Product Classifications ❑ A me-too product – A me-too product is a product introduced into the market in direct competition with one already in the marketplace (same functions). The product may not even have extra features, but has a better distribution system or delivery, even a better marketing system. – An example of a me-too product is Dell computers. Dell is available via direct selling, which is completely different to that in its class. Dell customers can make purchases via the official website and Dell sends the order straight to the customer’s home. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 26  Summary ❑ The innovation types and forms outlined in this chapter are not entirely watertight and there will be some overlaps. ❑ Judgments are required to decide the innovation category. ❑ What really matters is the outcome from the process of attempting to categorize an innovation. ❑ The categorization of innovation and the form of categorization indicates that innovations are not homogeneous. ❑ The categorization of innovation might be the best explanation to the different responses to the introduction of new technologies. ❑ Systemic linkages between knowledge and the market known as the genesis of innovation shall be discussed in the next chapter. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 27 THE ORIGIN OF INNOVATION  Learning Objectives At the end of this chapter, students should be able to: – Identify the innovation issues and practices in matured organizations and new business venture; – Describe the innovation issues and practices in top- down and bottom-up management styles; – Explain the innovation issues in teamwork and transforming individuals into teams; – Discuss the behavior of innovators, how they change the rules of the game, and how they manage the pressure of innovation. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3  Introduction ❑ No one has a monopoly power on innovation. ❑ Innovation is open to all of us who has the courage and the energy to take-on the challenges of promoting something new that change the current status. ❑ For example, a well-structured organization with an established comfort zone view organization from a more formalized perspective. ❑ On the other hand, an independent innovator will take- on innovation as a critical success factor. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 4  Innovation in Mature Organizations ❑ often face the daunting challenge of growing their core business while pursuing new business opportunities and developing new markets. ❑ Normally they blame the economy, government policies, management failure, the bureaucracy, stock market and lack of mission and vision. ❑ they always promote past accomplishments without realizing that success will not last long. ❑ The challenge: to design an organization with agile functions and processes. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 5  Innovation in New Business Ventures ❑ Developing a successful new technological company is a very difficult, risky and time consuming exercise. ❑ factors to consider to concluding the new business venture. – Viable business model – Gross margins are attractive – Market is large to interest investors etc. ❑ taken when we believe that the commercial opportunity is sufficiently attractive to secure the necessary support and resources through the incubation and early stage development period. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 6  Innovation in New Business Ventures (cont.) ❑ Some of these elements may be put into place after a decision to pursue a start-up strategy is made, though our preference is to have them all in place beforehand. In addition, process of innovation in a new business venture presents a situation similar to that of bottom-up innovation process. ❑ A new business venture requires a particular type of person to run the business; able to tolerate uncertainties and risks. ❑ among the issues encountered is that too many new business ventures want to start big. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 7  Innovation Issues and Practices Top-down Innovation (Directive style management) ❑ Innovation were initiate from the top management and pass to the lower level employees. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 9  Innovation Issues and Practices ❑ Top-down Innovation (Directive style management) – Management set the pace and the targets and objectives as well as providing the resources. – While functional areas and professional disciplines will interact with each other in order to achieve the objectives. – For example, Apple, the CEO made all the decisions; everything had to go through him from design to launch of a product. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 10  Innovation Issues and Practices (cont.) ❑ Bottom-up Innovation – innovation originating someplace in the lowest level of the organization Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 11  Innovation Issues and Practices (cont.) ❑ Bottom-up Innovation – Every employee is strongly encouraged to get involve in bottom-up innovation. – Employees think differently, ask so many questions, have so many interests, dissatisfied with current conditions, are arrogant, bring different thinking or values, who always ask “why not” more often than “why”, who make problems for first-level managers, but who are the lifeblood and future of the organization. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 12  Innovation Issues and Practices (cont.) ❑ Bottom-up Innovation – These are the people who throw valuable ideas and are willing to go through the tedious process of first convincing themselves and then convincing several levels of management of the value of those ideas. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 13  Innovation Issues and Practices (cont.) ❑ The Challenges – To transform the ideas to concept Idea born for its simplicity has become very complex since more thought raises new questions and complexities. – The competency to put all information, knowledge and experience from different sources. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 15  Innovation Issues and Practices (cont.) ❑ The Challenges – Bottom-up innovation depends on a specific type of individual as follow: one who is willing to put in personal time and effort to reaching a goal; one who has the drive to pursue a goal in spite of a possible negative career impact; one who will not take no for an answer Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 16  Team Functions in Innovation Not just support the Distribute info innovation process, they Information on innovation actually undertake all to people who facilitation the steps generate ideas Four Roles Execution of Opportunity delivery Innovation consultant Team Connect ideas Evaluate and ensure with those who the ideas being Opportunity have the pursued match with resources to enabler organization execute them objectives. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 18  Team Functions in Innovation (cont.) ❑ Ten tips for growth companies in search of high- performance teams that deliver. 1. Start by building a bigger box rather than trying to think outside the box 2. Select your team for who they know as well as what they know 3. Pick one leader and provide him or her the autonomy they need to be successful 4. Build a team that can both identify gaps in the market and markets in the gap! 5. Find team members who tell great stories Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 19  Team Functions in Innovation (cont.) ❑ Ten tips for growth companies in search of high- performance teams that deliver. Con’t: 6. Understand the difference between good and bad conflict 7. Supplement the innovation core team with an external provocateur 8. Remember to set goals and measure progress 9. Think like a startup entrepreneur 10. Ensure team members have “both feet in” Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 20  Transforming Individuals Into Team Members ❑ Innovation starts with an idea that eventually is transformed into a real-life concept. ❑ To develop a real operational and partnership team: – involves everyone and every participating group. – involves every function and recognized their roles in this process. – breaking the rules. – develop a functioning team that focuses on the business objectives-not functional objectives, – looking for common ground. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 21  Innovators’ Behavior ❑ Innovation takes off anywhere; in the kitchen; the garage; or the basement. ❑ The Innovators’ behaviors – Have a dream; driven to achieve that dream – Persistence; go for it relentlessly – Committed; spend their valuable time and effort – Strategic planner; have a vision and mission. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 22  Managing the Pressure in Innovation The Change Agents and Status Quo The Focus of Following and Short-and Long- Leading Dynamic term Pressures of Routine and Innovation Constraint and Creativity Freedom Stability and Change Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 24 Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 25 Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 26 Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 27 Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 28 ORGANIZATION INFRASTRUCTURE  Learning Outcomes ❑ At the end of this chapter, students should be able to: 1. Describe the organization infrastructure needed to support innovation. 2. Discuss the importance of vision, mission and objectives in an organization. 3. Explain the external and internal routes of innovation 4. Compare mechanistic and organic organisational structures. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3  Outline Vision Mission Objective Strategy Structure Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 4  4.1 The importance of a vision ❑ Vision statement addresses the inquiry, "What do we want to become?" ❑ vision gives the basis to create a complete mission statement. ❑ the first step in strategic planning. ❑ short and single sentence. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 5  4.2 The importance of a mission ❑ characterizes what an organization is and its explanation for being. ❑ mission addresses the inquiry, "What is our business?" ❑ A clearly stated mission statement is fundamental for viably building objectives and strategies. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 6  4.2 The importance of a mission Product or Customers Markets Services Survival, Growth, Technology Philosophy profitability Self-Concept Public Image Employees Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 7  4.3 The importance of a objectives ❑ specific outcome that an organization looks to accomplish in seeking after its fundamental mission. ❑ the organization hope to attain in the short and long term and by what implies in connection to growth, products, technologies, and markets. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 8  4.3 The importance of a objectives Specific Objectives set must be specific and clear. Objectives should be expressed in quantitative Measurable terms so that success or failure is easily measured. Achievable Objectives set should be achievable and attainable. Objectives should be realistic and within reach Realistic with the resources we have. Objectives set must have a time limit when it Time frame should be accomplished. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 9  4.3 The importance of a strategy ❑ process of planning that takes into account the objectives, goals and policies for the organization. ❑ should consider environmental factors and resources owned by the relevant organization. ❑ gives broad direction to the organization. ❑ can focus on many different organizational areas, such as marketing, finance, production, research and development, and innovation. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 10  4.3 The importance of a strategy The hierarchy of strategies Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 11  Innovation strategy Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 12  4.4 The importance of a structure Candler Strategy-Structure Relationship Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 13  4.5 Models of Organisational Structure Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 14  4.5 Models of Organizational Structure Simple Traditional Functional Geographic Divisional Product Process Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 15  4.5 Models of Organizational Structure Team Structure Contemporary Matrix Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 16  Functional Structure Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 17  Divisional Structure a) by geographic b) by product Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 18  Divisional Structure c) by process Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 19  Matrix Structure Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 20 THE INNOVATION PROCESS  Chapter 5 The Innovation Process 5.1 Process Considerations 5.2 Process Models Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3  5.1 Process Considerations Type of Innovation of Importance Innovation the Timing Time Completion the Expected forand of Innovation Sources Resources Organizational Moment Innovation The Infrastructure Organizational TheUnknowns of Number Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 4  Type of Innovation Incremental Innovation Radical Innovation Modular Innovation Architectural Innovation Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 5  Importance of Innovation Innovation Begins with an idea that is transformed into a concept, includes some new combination of what is already known & can be implemented to serve some purpose or Starts as invention plus implementation/commercialization. Invention involves the process of taking an idea & developing it into a concept, which finally leads to an innovation INNOVATION = INVENTION + IMPLEMENTATION/COMMERCIALIZATION Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 6  Timing and the Expected Time for Completion ❑ requires consideration of the amount of change that the innovation creates. ❑ Too early means the market may not be ready to accept the innovation. ❑ Too late may give the competition an opportunity to gain a greater market share. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 7  Sources of Innovation Structures Market Industry 7 Sources for innovation opportunities: Needs Process 1st four sources are: Incongruities Unexpected The last three concerning the societal environment: Changes Demographic New findings scientific technology Changes in perception Public Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 8  The Innovation Moment ❑ Why did someone think of an idea at some specific moment in time and go on to pursue it? ❑ organizations struggle with finding ways to motivate people to become innovators. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 9  Organizational Infrastructure Vision Mission Objectives Strategy Structure Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 10  Organizational Resources People involvement, intellectual access to capability property information interactions & competencies Learning that focuses on time customers suppliers developing breadth of plant and financial equipment reserves knowledge, Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 11  The Number of Unknowns Unknowns technology market Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 12  5.2 Process Models ❑ Rothwell ❑ Roberts & Frohman ❑ Van de Ven ❑ Cooper Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 13  The Rothwell Model Rothwell (1994) identified five (5) model in the process of innovation Figure 5.1 The technology push model process. Figure 5.2 The demand push model process Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 14  The Rothwell Model Figure 5.3 The coupling model process Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 15  The Rothwell Model Figure 5.4 The integrated model process Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 16  The Rothwell Model Planar Lithium battery (Sony) Interface controller CPU (Portal (Texas Player) Instrument s) iPod (Apple) Digital-to- 1.8 inch hard analog disk drive converter (Toshiba) (Wolfson) Power Management system (linear Technologie s Inc) Figure 5.5 Network model: the iPod—Apple and its partners Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 17  The Roberts and Frohman Model i. Recognition of the opportunity ii. Idea formulation iii. Problem solving iv. Prototype solution v. Commercial development vi. Technology utilization and/or diffusion Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 18  The Van de Ven Model Proposed 3 Period Period 1: Initiation Process Period 2: Development Period 3: Implementation/Termination Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 19  The Cooper Model Figure 5.6 Stage-Gate® System Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 20  Summary Innovation Process consideration include: type; the importance; timing & expected time for completion, sources; the moment; organizational infrastructure; resources & the number of unknowns Four models in the innovation process: Rothwell, Roberts and Frohman, Van de Ven, & Cooper Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 21 Innovation Process Design  Learning Outcomes At the end of this chapter, students should be able to: ❑ Explain the invention and commercialization phases ❑ Discuss the innovation process stages. ❑ Distinguish between a model and a prototype in the development process. ❑ Describe the types of production system. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3  The Innovation Process Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 4  Step 1: Insight/Research ❑ Insight ❖ the outcome of human intelligence. ❖ ideas for innovation - quite literally something triggers an idea. Eg: ‘AHA’ moments - from customers. Eg: surveys, focus groups, complaints, suggestions - from suppliers, distributors, employees. Eg: direct or indirect suggestions, complaints, interview Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 5  Step 1: Insight/Research ❑ Research ❖ the result from a long research process; associated with new technologies application ❖ carried out over many years often by large teams of people ❖ conducted in research laboratories: - universities laboratories - government laboratories - organization’s research centers Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 6  Step 2: Development ❑ involve transforming ideas into products. ❑ at this stage, the product ❖ will not be ready to sell to consumers ❖ have a lot of the operational characteristics of the final product ❖ able to demonstrate the feasibility of placing it on the market ❑ prototypes and models will be constructed to evaluate design, engineering and manufacturing concept ❑ is all about testing, modifying and improving the product. ❑ has to take place to ensure ❖ the product works in the way intended and work consistently ❖ performance that consumers are likely to demand Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 7  Step 2: Development Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 8  Step 2: Development ❑ Models ❖ to convey the form, style and 'feel' of an object. ❖ used to give an impression of what the product will actually look like. ❖ normally non-functional, thus cannot be operated. ❑ Prototype ❖ all about function and constructed as a one-off. ❖ typically constructed on a 'jobbing' basis, not using the manufacturing process that will be used to make the final product. ❖ often made with different materials from those that will go into the final product. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 9  Step 2: Development Integration Learning Testing & Risk evaluation reduction Prototype Functions Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 10  Step 3: Design ❑ come in to the innovation process at various points. ❑ forming the first step of the commercialization part of the innovation process. ❑ In fact, some design would almost certainly have occurred earlier. ❑ the concept sketches associated with 2D models. ❑ the designer now has to give it the attributes and features required by the consumer. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 11  Step 3: Design ❑ detailed design is required to determine the attributes and features of the final product that will be offer to the market. ❑ involve specifying: ❖ the precise shape of the product ❖ the tolerances to which it will be manufactured ❖ the materials to be used in manufacture ❖ the process by which the product will be manufactured ❑ constraints: ❖ Marketing: attractive design and appeal to consumers ❖ Finance: design does not prove too expensive to produce. ❖ Manufacturing: product can actually be made without too much difficulty, with available resources. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 12  Step 3: Design ❑ 5 goals that designers need to consider: ❖ Appearance: Form, line, proportion, and color are used to integrate the product into a pleasing whole. ❖ Utility: Product should be safe, easy to use, and intuitive. ❖ Communication: Product designs should communicate the corporate design philosophy and mission through the visual qualities of the products. ❖ Ease of maintenance: Product maintenance and repair guidelines must be communicated easily. ❖ Low costs: Design team must considered the form and features as it have large impact on tooling and production costs Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 13  Step 4: Production Engineering ❑ concerned with making the product. ❑ also associated with the application and design of manufacturing techniques to produce a product. ❑ determines how inputs, activities, flow and process output are organized. ❑ 4 basic process structures: ❖ Job shop ❖ Batch ❖ Line ❖ Continuous process Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 14  Step 4: Production Engineering ❑ Selecting the most appropriate production system ❖ decision on the way the product is made. ❖ the type of manufacturing system being used. ❖ the product is often revised to make it easier and cheaper to manufacture. ❑ Examples of design changes of this type: ❖ Reducing the parts count ❖ Using standardized components ❖ Using self-aligning parts ❖ Using assembly operations that require a single, linear motion ❑ Design changes reflect the volume of production that is anticipated. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 15  Step 5: Pilot Testing ❑ to ensure: ❖ it is will be safe in the hands of consumers. ❖ the product can be made in a way that will ensure it appeals to consumers. ❑ involve interaction with consumers. ❑ may be a statutory requirement or necessary for the product to gain type approval or certification before it can be used to provide public services. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 16  Step 6: Full-Scale Manufacture ❑ Before full-scale manufacture: ❖ equipment that forms part of the manufacturing system has to be commissioned. ❖ those who are going to operate it have to be recruited and trained. ❑ Finally, manufacturing can begin. ❑ Firms will deliberately plan their production so that initially they are producing at perhaps 20% or 30% capacity. ❖ This allows those operating the system to move up the 'learning curve' as they become more familiar with the system. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 17  Step 6: Full-Scale Manufacture ❑ Reasons why firms will typically ‘ramp up' production gradually: ❖products produced during the ramp up can be evaluated to spot potential flaws. ❖can also be supplied to preferential customers who will evaluate the product but also provide valuable marketing data in terms of their perception of the product. ❖help with stock building. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 18  Step 7: Market Launch ❑ addresses how organizations introduce product to the market and marketing efforts involved. ❑ concern on when, where, who and how to launch the product. ❑ some of the activities include: ❖ preparing sales kits and product literature ❖ conducting demonstrations ❖ preparing promotion activities ❖ participating in trade shows and conferences ❖ creating and designing suitable advertisements ❖ preparing press releases or holding press conferences ❖ ensuring that sales channels have sufficient stocks Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 19 Organizational Resources  Learning Outcomes At the end of this chapter, students should be able to: ❑ Define organizational resources ❑ Describe the key components of organizational resources ❑ Explain the importance of organizational resources components ❑ Discuss how organization resources effect organization setting Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3  Organizational Resources ❑ People ❑ Intellectual Property ❑ Access to Information ❑ Technology ❑ Marketing and Sales ❑ Time ❑ Distribution ❑ Customers ❑ Suppliers ❑ Production Capability ❑ Operational Facilities ❑ Finance Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 4  People ❑ the most important organizational resource/asset. ❑ may be the most difficult resource to manage. ❑ can come from different: ❖disciplines ❖ethnic backgrounds ❖philosophies of life and living, ❖aspirations ❖talents Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 5  Intellectual Property ❑ organization/intellectual property is an organizational asset and needs to be actively protected and disseminated throughout the organization. ❑ much of the experience and knowledge is seldom documented in such a way as to be of use in the future. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 6  Access to Information ❑ The inability to communicate adequate information at the appropriate level continues to limit performance. ❑ There is no doubt that certain information must be limited to those who have a need to know. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 7  Technology ❑ The many descriptions of technology: ❖Technology is what it takes to convert resources into products and services. ❖The knowledge and resources needed to achieve a goal; ❖Body of scientific and engineering knowledge that can be applied to the design of new products ❖Represents the artifacts developed from applying the principles of science and engineering Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 8  Marketing and Sales ❑ innovation = invention + implementation/ commercialization ❑ something must be sold or some action must take place for innovation to occur. ❑ The innovator may or may not be knowledgeable in marketing and sales, but the innovator needs to understand the role that marketing and sales will play in the success of the innovation. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 9  Time ❑ a vital resource in today's competitive global marketplace. ❑ A major issue - the time-to-decision. ❖guided by a timetable ❖Managing cycle time provides a better approach when dealing with innovation. ❑ Cycle time includes three distinct interacting elements: ❖Time ❖Timing ❖Cycle duration Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 10  Distribution ❑ The distribution system involves three distinct functions: ❖the means by which the organization sells its products ❖the physical plant and equipment that move the product from the warehouse to the customer ❖customer service ❑ Too often organizations fail to recognize the costs associated with developing and maintaining these three distribution function Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 11  Customers ❑ Can provide valuable input, but primarily for improving products and processes that already exist. ❑ Do not expect a breakthrough innovation from a customer. ❑ Can be a valuable resource when the organization: ❖knows the customer's needs ❖understands how the customer uses the equipment or service. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 12  Suppliers ❑ provided a major resource long before downsizing and outsourcing became popular. ❑ suppliers in all business areas provide a valuable resource. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 13  Production Capability ❑ Innovators need to understand the availability of both the facilities and the process know-how. ❑ Several questions must be considered and answered within the scope of the innovation. ❖Will the proposed product be produced on existing equipment, or will new equipment be needed? ❖If existing equipment is used, will it lengthen the development time? ❖If new production equipment is necessary, what level of investment may be necessary? Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 14  Operational Facilities ❑ essential resource for innovators and help reduce the time from concept to implementation/commercialization. ❑ The innovator requires adequate tools to perform at a high performance level ❑ Example: ❖Computer: using the best of available search engines provides the means for simplifying the acquisition of required data. ❑ All of these tools allow the innovator and the team to reduce the time from idea to implementation. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 15  Finance ❑ To recognize the limitations of the organization's financial resources. ❑ Investments will vary depending on the scope of the innovation. ❖incremental innovation: not a problem. ❖radical innovation: require significant funding. ❑ The ability to finance an innovation in innovation process stages needs to be assessed in relation to the organization's ability to provide the financial resources. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 16  Finance ❑ Financial resources may also be required to fund: ❖additional people with new competencies and skills ❖upgraded information resources ❖royalty payments on imported technologies ❖new resources for marketing, sales, and distribution Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 17 SOURCE OF INNOVATION  Learning Objectives 1. Identify the internal sources of innovation. 2. Analyze the external sources of innovation. 3. Evaluate the importance of internal and external sources of innovation 4. Compare the functions of internal and external sources of innovation. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3  Introduction ❑ Sources of innovation can be defined as the supply of knowledge that an organization utilizes to enhance innovation and achieve success in the marketplace. ❑ Innovation sources come from many way and it be divided into internal and external sources Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 4  Introduction Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 5  Internal Sources ❑ Internal sources is defined as ideas or knowledge of innovation generated from inside the organization. ❑ Any of the functions within a firm's value chain can be a source of innovation. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 6  Internal Sources - Employees ❑ Employees become one of the main sources of Innovation. ❑ Our employees know the specific part of the things that they are involved with very well Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 7  Internal Sources – In-house R&D ❑ Research and Development (R&D) is a process intended to create new or improved technology that can provide a competitive advantage at the business, industry, or national level. ❑ During the process the researcher will find new things that will benefit to the business organization Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 8  Internal Sources – Process Need ❑ Entrepreneurial opportunities could also surface throughout the process of discovery such as the process of research and development done by the researchers and technicians of a product or service ❑ Process needs exist within the process of business, an industry or a service. It perfects a process which already exists, replaces a link that is weak, redesigns an existing process and so on Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 9  External Sources ❑ All business organization is affected by changes in their external environment and these changes can be other sources of innovation. ❑ As organizations struggle to realign with their new business environment, they must innovate their products and services or processes accordingly. ❑ External sources of innovation have become an important complement to the business internal capabilities Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 10  External Sources- Customers/Users ❑ It is widely recognized that the innovative process often involves interaction between the manufacturer and users of products. ❑ Usually such interaction between producers and end users involves not only an exchange of technical knowledge but also important information about market requirements and trends Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 11  External Sources- Customers/Users ❑ Their ideas plus their frustrations with existing solutions lead to experiment and prototyping and create early versions of what eventually become mainstream innovation ❑ An innovation must add value to customers to make them purchase or consume the product or service that offer in the market. ❑ An innovation equal to commercialization of products or services. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 12  External Sources- Competitors ❑ Most of successful business organizations reveal that some sort of collaborative arrangements develop between business partners as well as between competitors. ❑ Competitors can also be an important source of innovation. ❑ To sustain in the market all business organization need to do something different as compare with our competitors. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 13  External Sources- Supplier ❑ Suppliers would be another important source of innovation. ❑ Suppliers of machine, equipment and material can bring important insight into the organization of production, logistics and other functions. ❑ Suppliers always dealing with many business organization or customer. ❑ They always get feedback directly from their customer and it can be source of innovation for us Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 14  External Sources- Spill-overs ❑ Spill-overs typically occur when one firm benefits from another firm’s investment in research and development or R&D. ❑ The nature of spill-overs can be different, but they might for instance result from one firm making an investment in R&D that leads to a scientific discovery or development of a new product that other firms are able to imitate or copy Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 15  External Sources- University ❑ The role of universities in the innovation system is particularly important in countries specialized in low- technological industries. ❑ The commercialization of university knowledge (especially knowledge from university-based technologies) has increased considerably due to patenting, joint ventures in research and firm creation (spin-offs from universities). Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 16  External Sources- Research Organization ❑ Research organization means an entity, such as research institute, irrespective of its legal status (organized under public or private law) or way of financing, whose primary goal is to conduct fundamental research, industrial research or experimental development and to disseminate their results by way of teaching, publication or technology transfer. ❑ Research organization can be divided into two types; public research institutions (PRO) and Contract research organization (CRO). Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 17  External Sources- Research Organization 1. Public Research Institution (PRO) ❑ Public Research Organization (PRO) is an organization that performs research activities as part of its mission and receives at least some public funding to support these activities. ❑ PROs are essentially ‘knowledge factories’ and as such linkages with them have become an important knowledge sourcing strategy for industrial firms in knowledge-intensive industries. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 18  External Sources- Research Organization 2. Contract Research Organization (CRO) ❑ A contract research organization (CRO) is an organization that provides support to the pharmaceutical, biotechnology, and medical device industries in the form of research services outsourced on a contract basis. ❑ A CRO may provide such services as biopharmaceutical development, biologic assay development, commercialization, preclinical research, clinical research, clinical trials management, and pharmacovigilance Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 19  External Sources- Think Tanks ❑ A policy institute (often termed "think tank" by journalists) is an organization that performs research and advocacy concerning topics such as social policy, political strategy, economics, military, technology, and culture. ❑ Most policy institutes are non-profit organizations, which some countries such as the United States and Canada provide with tax exempt status. ❑ Other think tanks are funded by governments, advocacy groups, or businesses, or derive revenue from consulting or research work related to their projects Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 20  External Sources-Independent Researchers ❑ Independent researchers are not part of a university, government, hospital or corporation. ❑ Independent researchers may have close relationships with larger institutions such as universities, are not part of the larger institution and operate under their own authority. ❑ Normally there are some benefits by having the independent researcher. Firstly the company can remove any suspicion of bias in the findings. ❑ Bias, be it perceived or actual, can cast a shadow over research and is unnecessary. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 21  Summary ❑ In business, innovation can come from a variety of different sources. ❑ The sources of innovation can be grouped into internal and external sources Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 22 ORGANIZATIONAL CULTURE AND INNOVATION  Culture and innovation ❑ The innovation process is highly influenced by environment, motivation and culture. ❑ A positive organizational culture fosters innovation, and innovation is the main engine for the business venture to survive in an uncertain market Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3  Definition of Culture Culture can be defined as: ❑ The collective programming of the mind which distinguishes the members of one group from another, which is passed from generation to generation. Culture is changing all the time because each generation adds something of its own before passing it on. It is usual that one’s culture is taken for granted and assumed to be correct because it is the only one, or at least the first, to be learned (Hofstede, 1980) Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 4  Definition of Culture ❑ The set of distinctive spiritual, material, intellectual and emotional features of society or a social group, and that it encompasses, in addition to art and literature, lifestyles, ways of living together, value systems, traditions and beliefs (UNESCO, 2002) Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 5  Hofstede’s Cultural Dimension Theory ❑ Power distance ❑ Uncertainty avoidance ❑ Individualism v. collectivism ❑ Masculinity v. femininity ❑ Time orientation Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 6  Power Distance ❑ Organization with high power distance : – 1. Tight control 2. Centralized decision making 3. Detailed instruction 4. Formal communication ❑ This type of organization is less innovative because they are always restricted by rules and formal communication Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 7  Power distance ❑ Example of country with high power distance are Latin, Asian and African. ❑ Malaysia score is 104, considered a very high power distance country. ❑ Country with low power distance believe that inequalities among people should be minimized. Hierarchy in the organization is just for communication convenience not to represent the level of authority. ❑ Example country with low power distance are Western countries, the United Kingdom and Australia. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 8  Uncertainty avoidance ❑ Societies with strong uncertainty avoidance, rules are perceived as important and should be carefully followed. This society is said as less innovative. ❑ Example : Latin, Asian and German-speaking countries. ❑ Malaysia scores 36, shows that societies are fearless towards uncertainty. ❑ US and UK are considered as uncertainty- accepting countries. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 9  Individualism v. collectivism ❑ Countries with individualistic culture is more innovative compared to those with collectivistic. ❑ In collectivistic society, recognition towards innovation initiation is given to entire group not to the individual who contributed the idea. ❑ This will lessen the motivation to invent because it is normal for an individual to expect compensation and recognition for the invention compared to a group of people. Innovation Management All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 10  Masculinity v. femininity ❑ Countries with masculinity culture are said to be more innovative because the society is driven by competition, achievement and success. ❑ In contrast, countries that practice femininity culture are less innovative because their concern is towards quality of life and the people. ❑ Masculinity countries such as US, Japan and some European like Germany, Austria and Switzer