Innovation management

Innovation management

Lecture 1: an introduction to innovation

Importance of innovation

Invention: an idea, a sketch or model for a new or improved device,

product, process or system.

Innovation: the process and outcome of creation and commercialization

of something new. Innovation includes opportunity identification, ideation or invention to development, prototyping, production, marketing and sales.innovation = invention + exploitation.Entrepreneurship only needs to involve commercialization.How can innovation benefit us as a society? Eg electric cars, a technological innovation pushes a change in a specific industry. Eg amount of deaths from major infectious diseases decreased a lot over time.The increase of total factor productivity declined over time, why is

innovation so hard work? Explanations for this gap: eg average wait time

on patent applications increased, or federal R&D spending decreased, or over time the amount of degrees in technology and science research decreased so less research.Innovation is about creation (and destruction), change and novelty.

Why so difficult? Innovation funnel: most innovative ideas do not

become successful new products.Carefully crafted strategies required.Barriers, competitors, innovation pattern, environment.

Innovation and failure: most new ideas fail in the market (estimated 70-

90%) Innovation emerging from failure.Sources of innovation (creativity, R&D, firm linkages, clusters) Firms, individuals, universities, private non-profit, government funded research.

R&D by firms: refers to research activities as well as development

activities.Research refers to both basic and applied research: 1 / 4

-Basic research aims at increasing understanding of a topic or field without an immediate commercial application in mind.-Applied research aims at increasing understanding of a topic or field to meet a specific need.Development refers to activities that apply knowledge to produce useful devices, materials or processes.R&D thus refers to a range of activities that extend from early exploration of a domain to specific commercial implementations.

R&D spread over the world: most in north America, Europe and Asia.

Top R&D spenders: amazon, Volkswagen.

Two models to explain where innovation comes from, both originate from

linear models:

-Technology / science push : scientific discovery > invention >

manufacturing > marketing. Linear model emphasizes supply side.

-Need / Demand pull : customer suggestions > invention >

manufacturing. Linear model emphasizes demand side.Innovation process likely to be non-linear; before a invention will be introduced in the market there can be feedback loops, going back to make modifications until the final product is ready.Most current research emphasizes that innovation can take a variety of sources and follow a variety of paths.

Supply determinants of innovation:

-Technological opportunity: state of the relevant scientific and

technological knowledge.

-Cost and availability of inputs: knowledge workers, scientific personnel,

equipment.

-Appropriability: ability to capture profit from innovation.

Demand determinants of innovation:

-Cost reduction potential from innovation (process innovation, new sources of supply, organizational change).-Consumer or producer benefit from novel product (product innovation).-Consumer or producer benefit from improvements (product innovation).Technology push / demand pull risks 2 / 4

-Technology push: development for which there is no problem.

-Demand pull: missing ability to invent technology to solve problem.

Development of innovation models

External sources: all sources of innovation that lay outside the boundaries

of the firm.-Licensing, purchasing.-Externalities (technological, pecuniary) -> knowledge spillovers entering organization

Combination of external and internal sources: strategic partnership, cross

licensing, (networks for exchange, joint venture, collective research associations).

Innovation in collaborative networks:

Technology clusters are regional clusters of firms that have a connection to a common technology.Though todays information technology enables fast, cheap and easy communication across the globe, knowledge does not always transfer so easily.Encompass an array of industries that are linked through relationships between suppliers, buyers and producers of complements.Reason for clustering can be technological spillover / knowledge

externalities:

Technological spillovers occur when the benefits from the research activities of one entity spill over to other entities.

Likelihood of spillovers is a function of:

-Strength of protection mechanisms (eg patents, copyrights, trade secrets) -Nature of underlying knowledge base (eg tacit, complex) 3 / 4

-Mobility of the labour pool.Types of innovation

Product innovation: embodied in firm output (good or service). A new

product for the firm.

Process innovation: techniques of producing output. More efficient

production. Affects the cost function of the company.

In reality appear often in combination: product innovations can enable

process innovations and vice versa. Eg new machine (process) allows adjustments to product.A product innovation for one firm may be a process innovation for another firm. Eg one firm makes a new machine (product) other firm implements that machine in process.Level of newness Radical vs incremental innovation, a degree of departure from existing practices.Radical: high degree of newness / differentness. Incremental: marginal degree of newness / differentness.Competence-enhancing vs competence destroying innovation Always from the perspective of a specific actor (eg firm / organization).Innovation is competence enhancing if the innovation build on the firms’ existing knowledge base.Innovation is competence destroying if the innovation renders a firms’ existing competencies obsolete.Architectural vs component (modular) innovation A component innovation entails changes to one or more components of a product systems without significantly affecting the overall design. Eg adding gel-filled material to a bicycle seat, no change in design of bicycle.A architectural innovation entails changing the overall design of the system or the way components interact. Eg transition from a high-wheel bicycle to safety bicycle as we know now.

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