Sources of Innovation

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

Introduction

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.

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

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

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

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

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

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.

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.

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

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

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).

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).

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.

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
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
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.
Summary
 In business, innovation can come from a variety of

different sources.
 The sources of innovation can be grouped into internal
and external sources


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SOURCE OF INNOVATION

1. Identify the internal sources of

Innovation Management All Rights Reserved