Chapter 1: Introduction
Innovation:
- Innovation is the implementation of creative ideas into some new device or
process.
- Requires combining creativity with resources and expertise.
OK But why technological innovations?
Technological innovation now the single most important driver of competitive
success in many industries
- 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 innovations help make manufacturing more efficient.
Importance of Technological Innovation
Advances in information technology have enabled faster innovation.
- CAD/CAM systems enable rapid design and shorter production runs
- Shorter product life cycle. Think of mobile phones.
- Greater market segmentation -> more personalization -> demand for
more unique offering
Importance of innovation and advances in information technology have lead
to:
- Shorter product life cycles (more rapid product obsolescence)
- More rapid new product introductions
- Greater market segmentation
- e.g. 3D printed house, made on demand, customizable by customers.
Impact on Society
Innovation enables a wider range of goods and services to be delivered to people
worldwide
- More efficient food production, improved medical technologies, better
transportation, etc.
- Increases Gross Domestic Product by making labor and capital more
effective and efficient
- However, may result in negative externalities,
- e.g., pollution, erosion, antibiotic-resistant bacteria
Innovation: The Importance of Strategy
Successful innovation requires carefully crafted strategies and implementation
processes.
Innovation funnel: Most innovative ideas do
not become successful new products.
- e.g., The New Product
1
, Development Funnel in Pharmaceuticals
Innovation Management: Innovation management is the art and science of
managing the process of implementation of ideas into valuable products, process or
services.
Chapter 2: Sources of Innovation
Innovation can arise from many different sources and the linkages between them.
(firms, individuals, universities, government-funded research, private nonprofits)
Creativity: The ability to produce work that is useful and novel.
Individual creativity is a function of:
- Intellectual abilities (e.g., ability to articulate ideas)
- Knowledge (e.g., understand field, but not wed to paradigms)
- Style of thinking (e.g., choose to think in novel ways)
- Personality (e.g., confidence in own capabilities)
- Motivation (e.g., rely on intrinsic motivation)
- Environment (e.g., support and rewards for creative ideas)
Innovation by Users
- Users have a deep understanding of their own needs, and motivation to fulfill
them.
- While manufacturers typically create innovations to profit from their sale, user
innovators often initially create innovations purely for their own use.
- E.g., Laser sailboat developed by Olympic sailors; Lego Ideas
Organisational Creativity
Organisational Creativity is a function of:
- Creativity of individuals within the organization
- Social processes and contextual factors that shape how those individuals
interact and behave
Methods of encouraging/tapping organisational creativity:
- Idea collection systems (e.g., suggestion box; Google’s idea management
system)
- Creativity training programs
- Culture that encourages (but doesn’t directly pay for) creativity.
So should we encourage creativity?
- We should encourage employee choice and strengths
- Ideas require intentional effort and oversights
- Cross-departmental collaboration
case study: Inspiring innovation at Google. Google uses a range of formal and
informal mechanisms to encourage its employees to innovate. Google maps, gmail
are all side projects.
2
,Innovation by Organisation
Research and Development by Firms
- Research refers to both basic and applied research.
- Basic research aims at increasing understanding of a topic or field
without an immediate commercial application in mind. No intention to
immediately commercialise our ideas into products.
- Applied research aims at increasing understanding of a topic or field
to meet a specific need. We refine the understanding and apply it with
a goal to meet a specific need. We think about how we can apply
knowledge into something that can bring value in the practice
community.
- Development refers to activities that apply knowledge to produce useful
devices, materials, or processes.
Science Push approaches suggest that innovation proceeds linearly:
- Scientific discovery → invention → manufacturing→ marketing
Demand Pull approaches argued that innovation originates with unmet customer
need:
- Customer suggestions → invention → manufacturing
- asking customers how they can benefit better from the product we offer and
based on those suggestions we can use this information as an input for the
R&D department
Most current research argues that innovation is not so simple, and may originate
from a variety of sources and follow a variety of paths.
Firm Linkages with Customers, Suppliers,Competitors, and Complementors
Most frequent collaborations are between firms and their customers, suppliers, and
local universities.
External versus Internal Sourcing of Innovation
- External and internal sources are complements
- Firms with in-house R&D also heaviest users of external collaboration
networks
- External innovations does not mean that you would have to invest less
in scientific push. There’s evidence that firms that engage heavily on
R&D also rely heavily on external -- users and consumers. And more
reliance on external entities requires a higher level of absorption
capacity for external knowledge.
- In-house R&D may help firms build absorptive capacity that enables
them to better use information obtained externally.
Research by Government Universities
3
, - Many universities encourage research that leads to useful innovations
- Bayh-Dole Act of 1980 allows universities to collect royalties on inventions
funded with taxpayer dollars
- Led to rapid increase in establishment of technology-transfer offices.
- Revenues from university inventions are still very small, but universities also
contribute to innovation through publication of research results.
- Think of Horizon 2020
- Governments invest in research through:
- Their own laboratories
- Science parks and incubators
- Grants for other public or private research organizations
- Example: The internet and GPS (US DARPA research), KNAW
(Neuroscience, Stem cell), KITLV (Southeast Asian studies)
Private Non-Profit Organisations
- Many nonprofit organizations do in-house R&D, fund R&D by others, or both.
- Example: Solar Road, Hybrid Truck and Bus Engines (Nederlandse
Organisatie voor Toegepast Natuurwetenschappelijk Onderzoek (TNO))
Innovation in Collaborative Networks
Collaborations include (but are not limited to):
- Joint ventures: Joint venture is an agreement between parties for a particular
purpose and usually a defined timeframe.
- Huawei Symantec, digital storage and network security. Established in
2008, Huawei 51% Symantec 49%. Defunct 2012
- Licensing and second-sourcing agreements: Organisation gives license to
other companies to use their innovation, data or technology.
- Coca Cola is famous for licensing, but if you look at Fanta, the taste of
Fanta here might not be the same as in Egypt.
- Joint Strike Fighter 35. F35 produced and developed by the US,
licensed to NATO countries.
- Research associations: Universities Research Associations (URA), 90
Universities in the US. In the Netherlands, VSNU
- Government-sponsored joint research programs: EU horizon 2020 oblige joint
research. Preferably between universities from West and East EU countries
- Value-added networks for technical and scientific exchange:
- conferences
- service offering that acts as an intermediary between business partners
sharing standards based or proprietary data via shared business
processes. The offered service is referred to as "value-added network
services“. For example, EU-ANSA.
- Informal networks: between individuals
Collaborative research is especially important in high-technology sectors
4
