Ch-12

Innovation Process

Innovation

Process by which new goods and services or

new production and operating systems are
developed
Organizations can then better respond to the
needs of their customers.

Copyright 2004 Prentice Hall

What is 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

Innovation
Understanding the concepts

Research,

Development

and

Innovation (RDI) are realities very

Research

close to each other, although they

represent different concepts.
Development

Innovation

Copyright 2004 Prentice Hall

Types of innovation?
Product/service: introduction in the market of
new or significantly improved products or
services, in what respects to their features and

usability.
Process: implementation of new or significantly
improved processes (manufacturing, logistics,
and distribution).

Types of innovation?
Organizational:

Innovation

within

the

organization foresees the implementation of

new

organizational

methods

in

business

practice and in external relations.

Marketing: implementation of new marketing
methods

and

tools,

involving

significant

improvements in the product design, package,

price, distribution or promotion.

Types of innovation?
Organizational:

Innovation

within

the

organization foresees the implementation of

new

organizational

methods

in

business

practice and in external relations.

Marketing: implementation of new marketing
methods

and

tools,

involving

significant

improvements in the product design, package,

price, distribution or promotion.

Grades of Innovation

Grades of innovation

Incremental

Distinctive

Disruptive

Grades of innovation

Grades of Innovation

Incremental innovation:
The
Incremental
Distinctive
Disruptive

new

incorporates

product
a

few

new

elements than the previous

one, without changing the
basic functionalities of the
product.

10

Grades of innovation

Grades of Innovation

Distinctive innovation:
Although
Incremental

possessing

some

traits similar to the previous

product, the new product

Distinctive

incorporates a few attributes

which

Disruptive

previously
functions.

correspond

to

non-existing

Progress
is a
Winning
Appeal

Grades of innovation
Disruptive innovation:
This type of innovation is

Grades of
Innovation

Incremental
Distinctive

characterized by a complete
breakdown of the previous
existing products. It

may

arise in response to the

Disruptive

satisfaction

of

certain

need, or by creating a new

need which previously did
not exist.

Closed and Opened Innovation

Henry Chesbrough (2003): A company may approach

innovation in 2 ways:
Closed Innovation: research and development is
performed

in-house

and

any

or

little

external

knowledge is used
Open Innovation: the organization uses external

partners to achieve research and development

Closed Innovation
For most of the 20th century,
many

leading

corporations

industrial

adopted

this

model.
A company generates, develops
and commercializes its own
ideas.
Tight

control

of

all

the

knowledge and assets needed

to pursue innovation.

Opened Innovation

Company commercializes its inhouse ideas and also innovations

from other organizations.

It brings its own ideas to market

(exploring different markets).

Boundaries with the surrounding

environment are easily crossed.

External
company

knowledge
is

competitors,

used

from

the

(suppliers,

entrepreneurs

scientists, among others).

Figure 13-2: Product Life Cycle

17

Copyright 2004 Prentice Hall

13.9

Approaches to Organizational Change

Technology-based

Redesign

Sociotechnical systems
Information technology

Reengineering
Restructuring

Organizational
Change

Task-based

People-oriented

Job specialization
Job enrichment

OD
HRM systems
Adapted from Figure 13.3

Technology Based Approach

Goal is to increase organizational efficiency
Sociotechnical Systems - works toward satisfying
employee needs while simultaneously producing goods
efficiently
Information Technology - networking of computers, and
telecommunications systems used to link organizations
to its suppliers and its customers

Redesign Approach
Redesign approach involves internal
structural changes
Reengineering - creating new ways to get work
done
Restructuring - making changes in the distribution
of authority, responsibility, and control in the
organization

Task Based Approach

Task Based Approach - changing employee
responsibilities and tasks
Job simplification - discovery of procedures that
produce maximum output for the minimum input
(economic of scale and economic of scope)
fast food restaurants

Job enrichment - changing job specifications to

add challenge to the tasks required in order to
increase productivity

Long-Run Cost with Economies of Scale

Cost
($ per unit
of output

SAC1

SAC3
SAC2

$10

LAC

$8
B

SMC1

SMC3

LMC

SMC2

Q1
Chapter 7

Output
Slide 22

People Oriented Approach

People Oriented includes activities
intended to improve individual
competencies and performance levels
Organizational Development
planned long range behavioral science approach for
understanding, changing, and developing an
organizations workforce to improve its
effectiveness
individual growth, group growth, organizational growth