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Summary Innovation Management (Grade: 8.5/10)

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  • February 13, 2023
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Innovation management

Chapter 1. Introduction
Importance of technological innovation

Innovation: implementation of creative ideas into new devices or processes requiring
combining of creativity + resources + expertise

Technological innovation: act of introducing a new drive/method/material for application to
commercial or practical objectives
 Most important driver of competitive success
 Many firms earn over one-third of sales on products developed within last five years
 Product innovations help firms protect margins by offering new, differentiated features
 Process innovation help make manufacturing more efficeint

The increasing importance of innovation due to globalization of markets + advances in info
technology
1. Introducing new products: protect margins
2. Investing in process innovation: lower the costs

= Firm does not innovate quickly margins diminishing as products become obsolete

“As firms such as Toyota, Samsung, and others adopt these new technologies and increase their
pace of innovation, they raise the bar for competitors, triggering an industrywide shift to
shortened development cycles and more rapid new product introductions. The net results are
greater market segmentation and rapid product obsolescence”

Impact of technological innovation on society
1. Fostering increasing GDP
2. Enabling greater communication and mobility
3. Improve medical treatments
4. However, may result in negative externalities *pollution

Gross domestic product: Total annual output of an economy as measured by its final purchase
price

,Technological innovation increased the amount of output achievable from a given quantity of
labor and capital creation of new knowledge applied to practical problems

Solow residual:




Results of technological innovation:
1. Shorter product life cycle
a. Mobile phones (Greater market segmentation more personalization
demand for more unique offerings)
2. More rapid new product introductions
3. Greater market segmentation
Externalities: costs/benefits that are borne by individuals other than those responsible for
creating them/
 If a business emits pollutants in a community, imposes a negative externality on the
community members
 If a business builds a park in a community, it creates a positive externality for
community members

While government plays a sig role in innovation industry provides the majority of R&D funds
that ultimately applied to technological innovation

Innovation by industry: The importance of strategy
• Successful innovation requires carefully crafted strategies and implementation
process
Higher innovation higher GDP
Popularity depicted as a freewheeling process that is unconstrained by rules and plans

Innovation funnel
Most innovative ideas do not become successful new products
 Only one out of several thousand ideas result in a successful new product
 According to product development and management association only about 1 in 9
projects that are initiated are successful and is launched to the market, only about half
earn a profit

,Innovation management: art and science of managing the process of implementation of ideas
into valuable products, process, or services
The strategic management of technological innovation
Improving a firm’s innovation success rate requires a well-crafted strategy
 Innovation projects should align with resources and objectives, leveraging its core
competencies and helping it achieve its strategic intent.

A firm’s organizational structure and control systems should encourage generation of
innovative ideas while ensuring efficient implementation.
 Should maximize the likelihood of projects both being technically and commercially
successful

To achieve this a firm needs to
1. In-depth understanding of the dynamics of innovations
2. Well-crafted innovation strategy
3. Well-designed processes for implementing the innovation strategy

, Chapter 2: Sources of innovation
Innovation: The practical implementations of an idea into a new device or process
 It can originate with individuals, as in the familiar image of a lone inventor or users,
research efforts



Primary engine of innovation: FIRMS
 They have greater resources than individuals
 Face strong incentives to develop differentiation of new products/ services

“Linkage/Network of innovators”: leverage knowledge and other resources from multiple
sources are one of the most powerful agents of technological
advance




Creativity
Idea: something imagined or pictured in the mind
 Innovation begins with generation of new ideas
Creativity: ability to produce novel and useful work
 Ability to generate new and useful ideas creativity

The degree to which a product is novel is a function both of how different it is from prior
experience

Reinvention: a product can be novel to its immediate audience, yet be well known somewhere
else in the world

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