Prof Ganesan

INNOVATION Prof.
Ganesan, Dean,DDGD Vaishnava

College
IET-Research Scholar's MeetJuly,25,2009
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HARLEYDAVIDSON
IET-Research Scholar's Meet-July,25,2009
INNOVATION
Importance of innovation Meaning and nature of innovation A management approach to innovation and its complex nature Changing views of innovation over time Role of key individuals within the process Need to view innovation as a management process.
Importanceof innovation
The ability to change and adapt is essential to survival. The dominant companies, from aerospace to pharmaceuticals have demonstrated an ability to innovate. But why are some businesses more innovative than others? What is meant by innovation?
IET-Research Scholar's MeetJuly,25,2009 4
Whatis innovation?
Innovation is the process and outcome of creating something new, which is also of value. Innovation involves the whole process from opportunity identification, ideation or invention to development, prototyping, production marketing and sales, while entrepreneurship only needs to involve commercialization (Schumpeter). Innovation = Invention + exploitation (Ettlie) Adoption of ideas that are new to the adopting organization IET-Research Scholar's MeetJuly,25,2009
Whatis innovation?
Schumpeter argued that innovation comes about through new combinations made by an entrepreneur, resulting in
a new product, a new process, opening of new market, new way of organizing the business new sources of supply
Whatis innovation?
Today it is also said to involve the capacity to adapt quickly by adopting new innovations (products, processes, strategies, organization, etc) Traditionally the focus has been on new products or processes, but recently new business models have come into focus, i.e. the way a firm delivers value and secures profits.
Mechanismsof innovation
Novelty in product or service (offering something no one else does) Novelty in process (offering it in a new way) Complexity (offer something which others find difficult to master) Timing (first mover advantage, fast follower) Add/extend competetive factors (e.g. From price to quality or choice) Robust design (contribute a platform on which other variations can build) Reconfiguring the parts (building more effective business networks)
Dimensionsof innovation
Extent of change (radicalincremental) Modality of change (productprocess) Complexity of change (componentarchitecture) Materiality of change (physicalintangible) Capabilities and change (enhances or destroys market / technological capabilties) Relatedness of change (replaces a firms existing product or extends it) Appropriability/Imitability (difficult or hard to hang on to) Cycle of innovation (time between discontinuities)
Driversfor innovation
Financial pressures to reduce costs, increase efficiency, do more with less, etc Increased competition Shorter product life cycles Value migration Stricter regulation Industry and community needs for sustainable development Increased demend for accountability Demographic, social and maket changes Rising customer expectations regarding service and quality Changing economy Greater availability of potentially useful technologies coupled with a need to exceed the competition in these technologies
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AssessingInnovation complexity
Dimensions and degrees of innovation
Time to implement
Technology newness
Complexity
Risk
Market newness
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Examplesof analysis
High
Imitability
No profits
Shortterm profits Long-term profits

High
Low profits
Low Low
Core or (relatedness) to existing business and competences
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Classicalmodels ofinnovation
Science/Technology Push approaches suggest that innovation proceeds linearly: Scientific discovery Design & Engg Manufacturing Marketing Sales Demand / Market Pull approaches argued that innovation
originates with unmet customer need:
Market need-- Development-- Manufacturing-Sales.
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Todays basic modelfor innovation managementis interactive
Technological world
Tech-entrepreneurship +
Administrative capabilities
Commercial world
= Research Development Product/process development Market development
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THEORIESOF INNOVATION
The following slides providea numberof theories of innovation. Thesec an be divided into three generalcategories
1) theories that predict who might innovate 2) static theories 3) dynamic theories
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WHO INNOVATES?
Model Key features Value added
Schumpeter I
Entrepreneurs are most likely to innovate.
Attempt to predict who is most likely to innovate.
Schumpeter II
Large firms with some degree of Suggests the type of firm monopoly power are the most that matters. likely to innovate.
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StaticModels
Incremental vs radical innovation Abernathy-Clark Henderson-Clark Innovation Value-added Chain Strategic Leadership Familiarity Matrix Quality and Quantity of New Knowledge Appropriability and Complementary Assets Local Environment Strategic Choice
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Incrementalvs. radical innovation

Organizational view of classifying innovations Innovation is radical if the technological knowledge required to exploit it is very different than existing knowledge (existing knowledge becomes obsolete) Radical innovations are competence destroying Innovation is incremental if the knowledge required to exploit it builds on existing knowledge (competence enhancing)
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STATIC MODELS (continues)

Model Key features Value added
Incremental -Radical dichotomy
Strategic incentive to invest: defines The type of innovation innovation as incremental if it leaves determines the type of firm existing products competitive; radical that innovates. Incumbents if it renders existing products nonare more likely to exploit competitive. incremental innovation, Organizational capabilities: defines the whereas new entrants are innovation as incremental if capabilities more likely to exploit radical required to exploit it build on existing ones; innovations. radical if capabilities required are very different from existing ones. Focus on technological component of innovation; bundles technological and market knowledge; bundles component and architectural knowledge.
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STATIC MODELS (continues) Model Key features Value added
Abernathy-Clark
Unbundled technological and market knowledge. Highlights the importance of market capabilities.
Explains why incumbents may Do well at radical technological innovations.
Henderson-Clark
Unbundled technological knowledge Explains why incumbents into component and architectural. Fail at what appears to be Defines innovation as: incremental if incremental innovations. both architectural and component These are actually knowledge are enhanced; architectural if architectural innovations. component knowledge is enhanced but architectural knowledge is destroyed.
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Abernathy-Clark - Role of Technological and Market Capabilities

Market Capabilities Preserved Destroyed Technical Capabilities Preserved
R e g u la r N ic h e
Destroyed
R e v o lu t io n a r y A r c h it e c t u r a l
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STATIC MODELS (continues.)

Model Key features Value-added
Innovation value-added Extends emphasis to the whole Explains why incumbents may chain innovation value added chain of fail at incremental innovations suppliers, customers and and why they may succeed at complementary innovators. radical innovation. The competence of a firms ecosystem matters too, Strategic leadership Explores the role of top management and argues that whether or not a firm adopts an innovation is a function of top managements dominant logic. Explains why some incumbents are the first to embrace radical innovations.
Familiarity matrix
Suggests that success in adopting an It is how a firm adopts an innovation is a function of the adoption innovation that determines mechanism used. its success or failure.
INNOVATIONVALUE -ADDEDCHAIN
Radical
Electric car DSK Keyboard
Type of innovation
Cray 3
Incremental
Supplier
Manufacturer Customers
Complimentary innovators
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STATIC MODELS (continues) Model

Quality and quantity of new knowledge
Key features
Value added
It is not just how new the new Explains why superior knowledge is, but also how much technologies do not always of that new knowledge there is and win. its nature. It takes more than technological capabilities to exploit an innovation the appropriateness regime of the innovation and complementary assets are also important. A firms innovativeness is a function of its local environment. Explains why inventors are not always the ones who profit from an innovation.
Appropriateness and complementary assets
Local environment
A firms environment matters.
Strategic choice
A firms strategic choices are what Strategy matters. determine whether it exploits an innovation and not so much competence destruction or a lack of incentive to invest in the innovation.
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StrategicIncentive toInvest View
In this view the type of innovation (radical vs. incremental) determines what type of firm is likely to invest to be first to exploit the innovation. A short coming is that this model assumes that firms have recognized the potential of the innovation and, in terms of radical innovation, only the fear of cannibalization prevents them from exploiting it.
OrganizationalCapabilities
Incumbents have two problems with radical innovations:

since change is competence destroying they may not have the capabilities to exploit it existing capabilities may not only be useless, they may actually be a handicap, if culture and processes of the old technology are firmly entrenched
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DynamicModels
A shortcomingof the previous models is they consider firms at a point in time. They donot look at an innovationfollowing first adoption. The models that follow are dynamic in that they take a longitudinal view of innovation.
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VALUE ADDED BY EACH DYNAMIC MODEL

Model
Utterback-Abernathy
Key features
Three phases in an innovations life cycle -- fluid, transitional, and specific. Dominant design defines a critical point in the life of an innovation.
Value added
Introduces dynamism
Concept of dominant design.
From radical product innovation to Industries evolve dominant design to incremental relatively predictably innovation. from one phase to the From major product innovation to others major process innovation. From many small firms offering unique products to few firms offering similar products. From profitable firms to less profitable firms.
VALUE ADDED BY EACH DYNAMIC MODEL (cont.)
Model
Tushman-Rosenkopf
Key features
Value added
Similar to Utterback-Abernathy Technological progress model: technological discontinuity, depends on factors other era of ferment, emergence of a than those internal to the dominant design, and era of incremental technology The more complex change. the technology, The more complex an innovation, the the more it is undermore intrusion from sociopolitical determined by factors factors during evolution of technology internal to it.
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VALUE ADDED BY EACH DYNAMIC MODEL (cont.) Model

Fosters S curve
Key features
The returns on the effort put into a technology fall off as the limits to the technology are approached. The limits of a technology can be predicted from knowledge of its physical limits.
Value added
How to predict the end of an existing technology and the arrival of a technology discontinuity.
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FOSTERSS CURVE
Chart
Physical limit Rate of technological progress
Effort
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TheRole ofIndividuals
Successful innovation requires that a number of roles be fulfilled. These include: idea generators: finders of ideas gatekeepers and boundary spanners: communication facilitator between inside organization and outside champions: entrepreneurs, do what they can to ensure success of the innovation, visionaries with communication skills sponsors: coach or mentor, often senior-level manager that provides behind-the-scenes support project managers: planners, coordinators, rationalizers
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Managerial Innovation
Business Model innovation: involves changing the way business is done in terms of capturing value e.g. Marketing innovation: is the development of new marketing methods with improvement in product design or packaging, product promotion or pricing. Organizational innovation: involves the creation or alteration of business structures, practices and models, the management of staff and may therefore include process, marketing and business model innovation.
SOURCES of Innovation
INSTITUTIONAL PIPELINE (BIG FIRMS) : R&D
NON INSTITUTIONAL PIPELINE (SME): FIRMS (DISTRICTS, CLUSTERS).
CLIENTS, SUPPLY,
PATENTS, COLLABORATION WITH UNIVERSITIES, STPs, OTHER
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The principal phases of implementation of an innovative project : 1. Idea generation 2. Screening 3. Revision within the group 4. Sponsoring and definition of the project leader 5. Planning of the various phases 6. Implementation 7. Commercialisation
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The principal phases of implementation of an innovative project :

Example: Drug Development 1 2
10.000
3
250
5
5
6
1
1. Identification and validation of target structure (cause of disease) 2. Identification and validation of biotech application (possible treatment) 3. Pre-clinical tests 4. Clinical tests, phase 1 5. Clinical tests, phase 2 6. Clinical tests, phase 3 7. Registration and production 8. Commercialisation
Linear model
In the past, the linear model as representation of the innovative process: (V. Bush, 1950)
Science
BASIC RESEARCH
Technology
APPLIED RESEARCH
Firms
DEVELOPMENT
COMMERCIALIZATION
PRODUCTION
Ignored: Market questions Educational system / training (school, univ., prof. training.) relations/exchanges information/knowledge between actors of IET-Research Scholar's Meetinnovation sistem 37 July,25,2009
NON-linear models
Technology Science (es: biotech or new material)
Chain-linked Model
(Kline e Rosemberg, 1986)
Key factors are the interaction and relationships: Inside the firm Between firms Between the different actors inside the innovation system (firms, Univ., STPs, public administration)
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Chain-linked model
New Needs Needs/Necessities of persons/society
Idea Generation development production Marketing/comm. Markets
New Ideas
Scientific and technological state of the art
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Triple Helix model

H. Etzkowitz (2000) Tri-lateral networks and Hybrid organizations
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OPEN INNOVATION
CLOSED innovation VS OPEN innovation H. CHESBROUGH (2003) The firms can and should utilize ideas (and technologies) that are outside of them, in the same way/time they utilize the ones that are inside them. Firms need to use pipeline outside the core business through: start-up licensing agreements joint ventures In the same time ideas arising outside research labs of the firm, are carried inside to be developed and/or commercialized. The firm define new strategies to capitalize the notions of the open innovation.
Stylised facts about innovation

Uncertainty Opportunity Complexity Learning Lock-in Access of various sources Clustering and links with science institutions (spillovers) Users Diffusion (S-shaped curves) (lagged-risk adverse innovators or riskbearing) Dominant design vs. product differentiation and customisation
Degrees of uncertainty in the innovative activity: a map of the two principal dimensions
High Uncertainty of the innovative output Low 2 Engineering applications (applied reasearch) 4 Market researches. Activity of incremental improvement of the technologies. Combination of already existing technological knowledges. Low 1 Exploring Basic Research
3 Development
High
Uncertainty on the modalities of the process

Source: our elaboration from Pearson (1991)

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Thestudy ofinnovation
Schumpeter (1939, 1942): new products as stimuli to economic growth Innovation occurs in bursts or waves (Marx). The diffusion of new technologies by profitseeking entrepreneurs formed the source of economic process.
Todays theoryof populationgrowth argues that rising incomesslow the populationgrowth increasingthe rate opportunitycost of having children. Hence, as technologyadvances, productivityand incomesgrow.
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Romer (Neo-Schumpeterianeconomic growththeory) argues that sustained economicgrowth arisesfr om competitionamong firms. is the economictheory which It underpinsmost innovation managementand new product developmenttheory.
Schumpeter (1939),Kondratieff (1935/51),Abernathy and Utterback (1978) have arguedthe long-wave theoryof innovation. theseviews have failed to offer any All understandingof how to achieve innovativesuccess.
In the 60s correlational studies between expenditure in R&D and national rates of innovation failed to show any direct relationship. Linkages seemed to be more complex. The neo-classical economic approach had not offered any explanation: the rate of technological change influences the rate of economic growth, but economic growth does not influence technological change. This seems to be determined by chance.
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In the 50s a cross- disciplinary approach was adopted, incorporating economics, organisational behavior and business and management. The studies looked at the generation of new knowledge and its application in the development of products and processes, commercial exploitation in terms of financial income generation (Simon, 1957; Woodwards, 1965; Carter and Williams, 1959), and differences in organizational characteristics (Myers and Marquis,1969; Burns and Stalker, 1961; Cyert and March, 1963).
Research within business management and strategy focuses on the differences in the situations in which firms operate. Furthermore the activities that take place within the firm enable one firm to perform better than another, given the same economic and market conditions. So research becomes more focused on endogenous aspects rather than exogenous ones (population and technology).
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Schumpeterian view sees firms as different it is the way a firm manages its resources over time and develops capabilities that influences its innovation performance. Modern firms equipped with R&D laboratories have become the central innovative actors. Success lies in the ability to acquire and utilise this knowledge and apply it to the development of new products.
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Innovatingin aspecific organizationalcontext

Many studies of innovation have treated it as an artefact that is somehow deteached from knowledge and skills and not embedded in know how. Firms do not operate in a vacuum. The role of other firms, competing or cooperating, is a major factor in understanding innovation. Today the resources required (knowledge, skills, money and market experience) mean that significant innovations are synonymous with organizations (rather than individuals) increasingly concentrating their efforts in particular areas.
Innovatingin aspecific organizationalcontext

But stillindividuals matter as organizationsare made of individuals. Key individualsin the innovation process are inventors, entrepreneurs, businesssponsors, or any worker with such attitudesin an enabling organizationalcontext.
Typesof innovation
Product innovation Process innovation Organisationalinnovation Managementinnovation Productioninnovation Commercial/marketinginnovation Service information
Scienceand Technology
Technologyis knowledgeapplied to productsor productionprocesses. Scienceconsists in systematicand formulated knowledge. Technologyis often seen as beingthe applicationof science.
Innovationas amanagement process

Innovationis a processw hich involves a responseto either a need or an opportunitythat is contextdependent creativeeffort that if successful A results in the introductionof novelty The need for further changes.
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Innovationmanagement process
Key factors:
External inputs (macro factors, competition, scientific and technological development, competitors, suppliers, customers, universities, societal needs, distributors, startegic alliances and partnerships) Organisation and business strategy Internal research and technology Marketing Organistions knowledge base accumulates knowledge over time.
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Sharingand exchanging Knowledge

With co-workers Supplyingpartners Distributingpartners Strategic allied .......
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Schumpeterian cycles
Sources of diagrams http://content.answers.com/main/content/wp/en/thumb/d/d2/330pxBusiness_cycle_01.png IET-Research Scholar's Meethttp://www.mega.nu:8080/ampp/corporate2_img/schumpeter.gif

July,25,2009
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Driversof diffusion
Timing of innovation is not in itself of great interest Requires diffusion and uptake in the market to gain economic significance Often significant gap in time
Steam engine, electric motor, camera, computer, laser.
Explanation for gap usually lies in the interaction of supply and demand
Post-innovation improvements gradually increase competitive advantage over substitute technologies and allow to overcome lock-in effects Adaptations to new niches increase the potential market Widespread use may require development of complementary innovations or infrastructure May also be inertia in training and skills development
Economicsignificance
Rosenberg & Frischtak in 1984 in a generally sceptical review of the evidence for long waves identified conditions for a gaining major economic significance Backward linkages to buildings, machinery, raw materials and equipment causing innovations in production goods Forward linkages to innovations and price reductions in other sectors
eg the impact of ICT through productivity improvement in other sectors is much greater than the impact of the sector itself Depends upon pervasiveness of the technology
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PeopleCentric Approach
Innovation begins when we take off our blinders in our business and think of aspirations and motivations of people in their everyday and not so everyday lives We must speak the same language and culture of the people we are innovating for
Innovation comes when this is taken to heart before concept ideation Innovation comes when this is internalized within company culture as well
The path to a people-centric approach
Discovering company culture and Redmond Centric Behavior

Real People, Real Data: Research throughout product Cycle
Learning through failure and humility

A new kind of team work going out with everybody Having a unique manager who hired IET-Research Scholar's Meeton the basis of diversity July,25,2009
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Valuesfrom theheart thatenter the mind

Innovationcomes from chaos and discomfort and learning to see thingsthrough new lenses
Observing everyday people and their everyday and not so everyday lives A willingness to build with these people Allowing values of the heart within your company to be embraced Being humble and practicing humility Taking Risks!
INTERNATIONAL INNOVATION INDEX

Rank 1 2 3 4 5 6 7 8 9 10 Country South Korea United States Japan Sweden Netherlands Canada United Kingdom Germany France Australia Overall 2.26 1.80 1.79 1.64 1.55 1.42 1.42 1.12 1.12 1.02
Innovation Inputs 1.75 1.28 1.16 1.25 1.40 1.39 1.33 1.05 1.17 0.89 Innovation Performance 2.55 2.16 2.25 1.88 1.55 1.32 1.37 1.09 0.96 1.05
Innovation inputs included government and fiscal policy, education policy and the innovation environment. Outputs included patents, technology transfer, and other R&D results; business performance, such as labor productivity and total shareholder returns; and the impact of innovation on business migration and economic growth

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INNOVATION Prof.

Ganesan, Dean,DDGD Vaishnava

IET-Research Scholar's MeetJuly,25,2009

IET-Research Scholar's Meet-July,25,2009

IET-Research Scholar's MeetJuly,25,2009

IET-Research Scholar's MeetJuly,25,2009

IET-Research Scholar's MeetJuly,25,2009

Shortterm profits Long-term profits

Core or (relatedness) to existing business and competences

IET-Research Scholar's MeetJuly,25,2009

Market need-- Development-- Manufacturing-Sales.

IET-Research Scholar's MeetJuly,25,2009

Todays basic modelfor innovation managementis interactive

= Research Development Product/process development Market development

IET-Research Scholar's MeetJuly,25,2009

IET-Research Scholar's MeetJuly,25,2009

Entrepreneurs are most likely to innovate.

Attempt to predict who is most likely to innovate.

IET-Research Scholar's MeetJuly,25,2009

IET-Research Scholar's MeetJuly,25,2009

Incrementalvs. radical innovation

STATIC MODELS (continues)

Incremental -Radical dichotomy

IET-Research Scholar's MeetJuly,25,2009

STATIC MODELS (continues) Model Key features Value added

Explains why incumbents may Do well at radical technological innovations.

IET-Research Scholar's MeetJuly,25,2009

Abernathy-Clark - Role of Technological and Market Capabilities

IET-Research Scholar's MeetJuly,25,2009

STATIC MODELS (continues.)

IET-Research Scholar's MeetJuly,25,2009

STATIC MODELS (continues) Model

Appropriateness and complementary assets

A firms environment matters.

StrategicIncentive toInvest View

Incumbents have two problems with radical innovations:

IET-Research Scholar's MeetJuly,25,2009

IET-Research Scholar's MeetJuly,25,2009

VALUE ADDED BY EACH DYNAMIC MODEL

Concept of dominant design.

VALUE ADDED BY EACH DYNAMIC MODEL (cont.)

IET-Research Scholar's MeetJuly,25,2009

VALUE ADDED BY EACH DYNAMIC MODEL (cont.) Model

IET-Research Scholar's MeetJuly,25,2009

IET-Research Scholar's MeetJuly,25,2009

IET-Research Scholar's MeetJuly,25,2009

INSTITUTIONAL PIPELINE (BIG FIRMS) : R&D

NON INSTITUTIONAL PIPELINE (SME): FIRMS (DISTRICTS, CLUSTERS).

PATENTS, COLLABORATION WITH UNIVERSITIES, STPs, OTHER

IET-Research Scholar's MeetJuly,25,2009

IET-Research Scholar's MeetJuly,25,2009

The principal phases of implementation of an innovative project :

(Kline e Rosemberg, 1986)

IET-Research Scholar's MeetJuly,25,2009

Idea Generation development production Marketing/comm. Markets

Scientific and technological state of the art

IET-Research Scholar's MeetJuly,25,2009

Triple Helix model

IET-Research Scholar's MeetJuly,25,2009

Stylised facts about innovation

Uncertainty on the modalities of the process

Source: our elaboration from Pearson (1991)

IET-Research Scholar's MeetJuly,25,2009