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BJTH3063 Chapter 7

Innovation Defined

The new technologies, products, or processes


developed by or that result from the internal
creative efforts of firms.

Benefits of Innovation
1.
2.
3.
4.

Greater control of the process and the outcomes


Greater understanding of the technology
produced and how to apply it
Greater ability to potentially develop the next
generation of technology
Greater profit potential as a first mover

Factors That Discourage Innovation

The time required for an internal development


strategy is greater than purchasing an
immediately available product externally.

There is a greater risk of failure to develop the


right product at the right time.

Keeping a pipeline of new products and/or


processes is difficult at best. There is always
the danger that another firm will enter the
market first.

Product Innovation (R&D)


Basic: pure research and development
Applied: new product development
Systems integration: product improvement or
market expansion

Process Innovation
Restructuring/Downsizing
Reengineering

1.

The firm must acknowledge that the goal


of internal innovation is for the firm to
outperform its competition.

2.

Internal innovation is a process that


involves many individuals, capabilities,
and resources.

3.

Resources are critical to the innovation


process.

Determine the Vision

Set the Mission

Establish Goals and


Objectives

Set Strategy

Specific Tactics and


Actions

Organization-wide
Organization-wide
Issues
Issues

Creativity
Creativity

Innovation
Innovation
Planning
Planning

Political
PoliticalIssues
Issues

Communication
Communication

Reward
RewardSystems
Systems

OrganizationOrganizationwide
wideIssues
Issues

Organizational
Organizational
Assumptions
Assumptions

To plan for innovation, managers need to follow


guidelines that will help them develop the right
climate for success in innovation activities.
1.
2.
3.
4.
5.

Recognize innovative individuals exist throughout


the organization.
Periodically reconsider how work is accomplished.
Encourage turning the prism to put a new light on
problems.
Ask employees what their biggest aggravations are.
Train people to recognize their creative abilities and
participate in the planning innovation process.

To ensure that the plan for an innovation


strategy can be implemented, the
manager should answer three key initial
questions.

What should we be doing now, and what can


we do later?

What are the time and/or specialized skills


required for the prioritized activities?

What should be delegated and to whom?

The guidelines for implementing an innovative


strategy depend on the type of innovation and
its goals. In new product development or
extension, the guidelines include tactics that
depend on characteristics of the new product.
1.

2.

3.

Relative advantage: How much better is the


product than those with which it is designed to
compete?
Compatibility with current product usage: How well
does the new product fit with the current product
usage or end-user activity?
Complexity: Will frustration or confusion arise in
understanding the innovative products basic idea?

4.

5.

Divisibility or trialability: How easily can trial


portions of the new product be provided and
used?
Communicability or observability: How likely is
the product to appear where potential users can
see it?

Therefore, the managerial guidelines for a


new product in an existing market, an old
product in a new market, or a new product
in a new market include the following:
1.

Determine the relative advantage of the product


in its market.

2.

3.

4.

5.

Be aware of the possible influences of the


innovative product/ market and how it may affect
the previous product/market mix.
Realize that if the innovation is too complex, then
selling it in the organization and to potential
customers will be difficult. The leadership should
try to negate complexity with clarity of purpose
and planning.
Build awareness through providing samples or
demonstrations of the new products
characteristics.
Make the product visiblea normally invisible
product gains marketing recognition.

Key Evaluations of the Current Status of:


The strategic environment
The external environment
Information systems
Structural analysis

What to Measure?
Specific outcomes that produce
competitive advantage in the future
Measures of outcomes that impact future
competitiveness
Measures of future strategic capabilities

Adjustments that must be made if a gap is


identified between goals and performance:
1.

Rethink business processes by trying to be more


cross-functional.

2.

Look for improvements by redesigning the


processes the firm uses for its internal innovation.

3.

Empower those involved in the innovative


process to make key decisions.

4.

Determine if the goals do not match the


capabilities of the firm and develop new goals.

1.
2.
3.
4.
5.
6.
7.

Create constancy of
purpose.
Adopt a new
philosophy.
Cease dependence on
inspection.
Move toward a single
supplier.
Improve constantly.
Institute leadership.
Institute training.

8.
9.
10.
11.

12.
13.
14.

Drive out fear.


Break down barriers
between departments.
Eliminate slogans.
Eliminate
management by
objective.
Remove barriers to
pride of ownership.
Institute education.
The transformation is
everyones job.

1.

2.

3.

4.

5.

Ensure that management support and project goals are


understood and in the forefront of the organizing effort.
Assess the skills required so that the people needed to
meet project objectives are involved with the process.
Set up the infrastructure for the most likely scenario,
but have contingencies for other strong possibilities.
Dont underestimate the influence of the internal
culture and the external environment.
Set up a monitoring system that is an integral part of
implementation and addresses potential technical and
market risks.

To ensure the evaluation and control effort


is looking at the correct issues, the firm
needs to ask two questions periodically.
1.

Are we measuring what we are interested in?

2.

How do we make adjustments?

In conducting the evaluation and control


process managers cannot forget the human
element in these activities and should:

Maintain a balance among the various


measurement approaches.

Seek the involvement of top management.

Develop a learning focus on achieving the ends.

Ensure that objectives are specific and


understood.

Include feedback as an integral part of the


innovation process; it is not a once a year
occurrence.