Innovation and Leadership - Assignment Example

 Assignment-Innovation and Leadership The effects of globalization, new demographic trends, climate change and the pressures of finding alternative sources of energy are just some of the challenges of the twenty-first century. In the same time, the liberalization of markets, accompanied by an accelerating pace of technology and financial innovation and of new commercial platforms has led to increased integration and interdependence. These developments underline the need for a strong leadership and a competent, constant and consistent management of innovation. As contemporary experts in leadership and academic researchers highlight congruent aspects of the new era and draw attention on potential disruptive points and discontinuities, leadership emphasizes that only innovative, anticipatory, courageous and flexible individuals and organizations are capable to cope with the present uncertain and unpredictable business arena (Bennis, 2001; Neace, 2007; Weiner and Brown, 2005). Development studies confirm that creative companies, able to use innovation in order to improve value creation process or to differentiate products and services surpass their competitors in terms of market share, profitability, growth or capitalization. Innovation and technology management is still a complicated and risky problem: most new technologies fail to be translated into products and services, and those who become products and services not always gain the status of commercial success. In short, innovation can stimulate and strengthen competition, but in order to enhance a strong leadership it needs skills and knowledge different from those used for everyday business management. One of the first issues that arise when analyzing innovation consists in the multitude of interpretations that are attributed to the term; many times people even confuse innovation with invention. In a more limited sense considered by many researchers and practitioners, innovation is the process of transforming favorable situations into new ideas and putting these ideas in practices or products widely spread. Innovation does not necessarily mean selling a single significant breakthrough in a certain moment of technical and technological development (radical innovation) but also includes the use of changes (improvements) of less important technological know-how (an improvement or incremental innovation) (Rotwell and Gardiner, 1985). According to Druker’s (1985) vision, innovation is the specific tool of entrepreneurs, the instrument to manage change as an opportunity to start a new business or activity. Innovation can be presented as a discipline of science, can be learned and used (practiced). Companies gain a competitive advantage through innovation. They approach the concept in the broadest sense, including both new technologies and new ways to solve various problems (Porter, 1990). Innovation is a complex phenomenon, but as Tidd, Bessant and Pavitt (2005) argue, it can be summarized to four dimensions of change known as the four Ps (figure 1). Figure 1: The four Ps of innovation Source: Tidd, J., Bessant, J., Pavitt, 2005. Managing Innovation: Integrating technological, market and organizational change. Third Edition, Chichester: John Wiley and Sons, p.10 Innovation is a multi-faceted process and thus there is a strong need to analyze some key aspects: Continue and discontinue changes. The desire to create at least for a while an advantage that nobody else can offer, can lead companies to investigate not only the technological innovations using existing knowledge, but also those that offer the possibility to change the "rules of the game ". Recent studies have shown the power of such innovations to create and transform large industrial structures: the typewriter, the computer and the automobile. First, such changes occur very often and no industrial branch is immune. Second, organization may be threatened by technological development. If so, new entrants are those who profit from innovation. However, there are many cases of firms aware of the existence of a new technology, but they are reluctant to implement it because it does not fit their perceptions about the industry or the future dynamics of the organization. A well-known example is Kodak, which first denied both POLAROID and digital photography technology. Another famous example is the refusal of Western Union to exploit Bell's invention, the telephone. The above-mentioned suggest that innovation management means both the development of capacity to seize signals indicating change (scanning), and the ability to change the field, enter new areas of activity and giving up old ones. Development through innovation. Both products and services go through certain stages: they start by being new (either worldwide or just for a certain market), develop and mature, advancing to a final point marked by the appearance of a new generation. The various phases of the life cycle of products/services have a different degree of importance for innovation. Last stages are characterized by relatively stable product concepts supporting only minor changes (incremental), process innovation in order to cut costs being the most important. Architectural innovation and component innovation. Another important concept is the idea of ​​new products seen as independent elements or as components of a larger system or architecture. For example, a new type of disk drive is a product innovation at the components’ level, but on the other hand it contributes to the functioning of a computer system whose part it is. Although integrated system-level innovation occurs less frequently than the component level it has a greater impact. Similarly, for services, an addition to a financial package may be a product innovation, with less significant effects than a change of the complete package nature; for example, switching from contracting financial services based on intermediaries to a direct system. Technologic merger. One aspect of innovation is related to technologic fusion implying the convergence of different technology trends so that products with different identities merge and form a new structure. An example is consumer electronics manufacturing industry, where technologies’ fusion as computer, telecommunications, or industrial control enhanced the emergence of a new generation of applications, integrating enjoyment capabilities, environmental control (heating, air conditioner or lighting) and communication. Incremental innovations. Even if the focus is on radical forms, even dramatic innovation, it is also important to pay attention to potential incremental changes. Research on incremental development processes (Hollander study of DuPont rayon manufacturing units) suggests that the accumulation of efficiency gains over time is usually more significant than those that occasionally accompany radical changes. In recent years, ongoing improvements detained increased attention within the TQM concept (Total Quality Management) reflecting major advantages that Japanese manufacturers were able to obtain by improving quality and productivity based on minor modifications. Robust design. The ability to modify and develop a basic design is essential much depending on the capacity to build a base platform or family that can be extended. Rothwell and Gardiner (1985) provided some examples of robust design, which could be extended and modified in order to widen product range and life, such as Boeing aircrafts and Rolls Royce engines. Intangible innovations. One last thing to mention is that the innovation involves the release and disclosure of knowledge, but they are not always incorporated into a product or piece of equipment. Innovation is associated with physical changes, but many changes are of a less tangible nature, as it is the development of new methods or techniques. A good illustration is the transformation of Western automotive and electronics industries with the adoption of so-called Japanese production techniques. Under the concept of “learn manufacturing” they represent a new way of organizing the same basic elements of equipment and processes that dominated the industry since the days of Henry Ford. A general systematic application of the knowledge “extracted” from the Japanese automotive industry has led to salient production advantages. In the early 1980s, Japanese cars were built, transported and sold in the U.S. at a cost with $ 2,000 less than if they were designed in Ney York or in Europe. Even if innovation is seen as an important way of ensuring a competitive advantage and as a safe approach to defend the strategic market position, its success is far from assured. History of process and product innovation is rich in examples of seemingly good ideas that failed with spectacular consequences. For example, the E model created in 1952 by Ford to counter the new automobile models offered by General Motors and Chrysler received with indifference by the public forced the company to abandon the project with significant losses; Bristol Brabazon initiative of creating a new transatlantic transport aircraft simply became obsolete only after flying 1,000 miles and caused considerable financial losses; the ambitious project of Motorola, Iridium offering a mobile telecommunications service accessible worldwide completed, but never put into operation because of its exorbitant costs. As it is a risky and uncertain process, many organizations decide not to innovate even if potential benefits are very attractive. This attitude- of doing nothing- is rarely an option, especially in a turbulent environment and in economic sectors subject to rapid pace of change. Basically, as long as organizations are not prepared to renew their products and processes in a steady pace, their existence is seriously threatened. In mid-1980, a study by Shell showed that the average firms’ life is half that of human beings (Leuca, 2008, p.19). Since then pressures from all directions have dramatically increased, leading to an even further reduction of life expectancy. An analysis of Fortune 500 companies including the most powerful and successful organizations in the world, indicates that since 1970, in every decade failed between one third and 50% of them. From the list of 1970, 60% were bought or collapsed. Of the 12 companies included in Dow Jones index in 1900, only General Electric is still active. Even giants like IBM, GM and Kodak could disappear. Some companies have had to undergo radical changes to survive. For example, Nokia has started by providing the necessary equipment and accessories for wood manufacturing industry in Finland. After a while, they changed their core competencies, entering the area of paper manufacturing and processing, and later joined (with success) the IT industry and mobile telephony. Innovation is not limited only to finished products; spectacular changes due to innovation are also present in the case of services offered by public and private sectors. With the help of innovation, hospitals and public health institutions have made ​​significant progress in terms of speed, quality and efficiency of provided services. The banking sector illustrates similar results (tele-banking and Internet banking). The same is true for insurance services. Several online companies such as Amazon.com have changed the way a certain category of products (for example books, music, holidays) is sold, while companies like E-bay.com or Hood.com brought auctions in many homes. Although new products are the result of innovation in an environment called market, the process innovations play a strategic role equally important. To be able to do something no one else can do, or do something in a better way is a powerful source of advantage. For example, Japanese domination in the late XX century in many sectors-automobiles, boats and ships, consumer electronics, was based on superior skills in production, due to a constant preoccupation for innovation. Toyota production system and its equivalent at Honda and Nissan have led to additional advantages in terms of performance indicators of quality and productivity of 2-1 compared to Western manufacturers (Leuca, 2008, p.6). The ability to provide superior services in a faster, cheaper and more qualitative manner, has long been seen as a source of differentiation from competitors and leadership. Citibank was the first bank to offer ATM service gaining a strong market position, known as a leader in banking technology just because of this innovation. In the U.S., Southwest Airlines had enjoyed an enviable status, being considered one of the most efficient air transport companies, although it was much smaller than its rivals. The company's success was due to process innovation that allowed the reduction of aircrafts residence time. With the development of Internet, the need to innovate services has grown tremendously. The challenge of the Internet era does not impact only major banks and large retail firms, but also thousands of small business. A good example is the travel agent and how he used to work-shelves full with brochures looked over when people wanted to make a choice, offices where agents searched for details and booked or sold a holiday package, procurement of tickets, insurance, so on. Now all this can be done through a simple mouse click from the comfort of your own home with the advantage of having access to a larger database, thus a wider offer and to lower costs. That explains why dotcoms with the highest increase are represented by websites like lastminute.com, expedia.com and hailmare.com which have become leaders in this field. Not everyone will make purchases online, but no matter what the future would bring, there will always be leaders and they will be those who are able to modify their products and services under the innovation umbrella. The importance of understanding innovation as a process is linked to how organizations approach and manage it. Models of innovation process have changed over time. Early models, both implicit and explicit ones considered innovation as a linear sequence of activities. There were two possibilities: either the opportunities provided by research materialized in applications and adjustments offered to customers (technology push) or the market signaled the emergence of the need for something new, properly responded with requested product or service (need pull-the necessity is the source of innovation). However, in practice, innovation is a process of matching and settlement with interaction having a vital role. Successful innovation is based on the inter-linkages between the two (push and pull). The nature of innovation has evolved from linear models to complex and interactive schemes as reported below (table 1): Table 1: Rothwell’s five generations of innovation models Generation Basic features of the model First/second generation Linear simple models-need pull, technology push. Third generation Linked model- recognizing the interaction between different elements and the existence of feedback connections. Fourth generation Parallel model- integration in the company of the relations with suppliers (upstream) and customers (downstream), emphasizing linkages and alliances. Fifth generation Integrated and extensive networks, flexible and tailored responses to customer needs, continuous innovation. Source: Rothwell, R., 1992. Successful industrial innovation: critical success factors for the 1990s. R&D Management, p. 227 Academic literature and empirical experience of the last 50 years approached innovation from different perspectives. Various innovations and industrial sectors, firms with different sizes, locations and leadership were subject to a variety of analyses (inter alia, SAPPHA Project, Minnesota studies, NEWPROD project, MIT studies). All these researches clearly show that is no unique solution and that innovation differs in terms of importance, type or sector. Basic ideas of main studies present as follows: Innovation is a process and not a single isolated event that has to be managed as such; Impact factors can be manipulated to influence the outcome, which means that the innovation can be managed. The successful management of innovation involves four major steps: Strategic approach of innovation and its management; Development and efficient use of structures and implementation mechanisms; Development and widening of an organizational framework to support innovation; Building and maintaining efficient external links. These four groups of routines can be superimposed to the model described in the figure 2; the circle shows what should be managed in any innovation process, while the boxes indicate the features of a proper management. Figure 2: The four elements of the innovation that must be managed Source: Tidd, J., Bessant, J., Pavitt, K., 2001, Managing innovation, Second Edition, Chichester: John Wiley and Sons, p.59 In general, most companies would have a portfolio of innovations. Of these, some would be incremental developments and improvements of existing tested products and processes, while others would focus on variations or radical changes. One of the basic features of an efficient innovation management is the ability to balance the portfolio weights and to adapt it to the organization core competencies and capabilities in terms of technology and markets. The same as large companies, small businesses should be concerned about market position, technology trends, development of skills and their organizational processes. For management and leadership, the challenges of small firms take a different shape. Table 2 points out the controversies on the role of small firms (with less than 500 employees) in technological innovation. Table 2: Wrong statements on innovation in small businesses Statements What observations show Small businesses provide the most important innovations. Depends on the product and technology. Small business innovate less because of their low level of R&D activities. Small business R&D activity is has an informal nature, superficial, non-quantifiable, proving a number of innovations directly proportional with the outcome and the number of employees. Small firms are much more innovative than large companies as the innovation share is higher than the R&D one. Not if included non-quantifiable R&D activities. Small young businesses create more jobs. They also increase the unemployment, because of the high birth and mortality rates. Source: Tidd, J., Bessant, J., Pavitt, K., 2001, Managing innovation, Second Edition, Chichester: John Wiley and Sons, p.82 Compared to large innovative companies, small innovative structures have the following characteristics: Similar goals- to develop and combine technological skills supporting difficult to imitate products and services that satisfy customers better than market alternatives; Organizational advantages-easy communication, high speed of decision making, strong commitment and responsiveness of new employees. This explains why small businesses do not need formal strategies- as large organizations do- to ensure proper communication and coordination. Technological weaknesses- of a series of specialized technological skills, inability to develop and manage complex systems, impossibility to finance long-term risky programs. Different sectors- small firms do contribute through innovations in certain sectors such as mechanical equipment, machinery, software and less in the chemical industry, electronics and transportation. One of the main factors that explain small businesses ability to survive in a business environment with a high competitive level lies precisely in the complexity of their offerings (processes or products). The latter acts like a barrier for new entrants that wish to learn and improve their technology. In the context of innovation gaining increasing importance mindful leadership (Leuca, 2008) is essential and must be supported as it helps conduct skills repertoires (assemblies) through proper education of organizations involved in environmental and social problems. Going beyond the core literature of leadership, strategy, strategic entrepreneurship and innovation, “mindful” leadership was useful to other disciplines such as: the work of Silsbee (2004) on training tailored from the Buddhists and Westerners works on taxonomy of consciousness and conditioning; the study of Clarke (2004) which discusses how empathic behavior towards individuals and society motivates leaders to guide their organizations to success in a world of uncertainty and change; the research of Kabat-Zinn (2005) that uses experiences in medicine and stress reduction for healing; Weick and Sutcliffe's analysis (2001) on large, complex systems, like the electric power transmission centers, air traffic control systems, nuclear aircraft carriers, nuclear power stations, hospital emergency departments, negotiation teams in case of hostage taking, illustrates leadership solutions under uncertainty and high pressure. Mintzberg (2004) argued that the best education for leaders is the reflective practice that helps them understand and modify their own conduct. The above mentioned studies present the reshape of leadership through knowledge borrowed from other disciplines-particularly when it deals with new issues or special opportunities. It points to Wheatley's conclusion (2006) in the reprinted version of the classic Leadership and the New Science: Discovering Order in a Chaotic World that management benefits from a different perspective and key metaphors of the new science evolution such as non-linearity (Lorenz, 1993), dynamic change (Langlois and Richardson, 1995), unpredictability (Hawking, 1982), self-organization (Johnson, 2001), fork (Gleick, 1987) and edge of chaos (Holland, 1998; Waldrop 1992), contributing to the conceptualization of inherent situations in new intuitive ways. Such insights are clearly relevant to meet the demands of contemporary leadership, adding value to existing management structures, full of continue uncertainties. The dispute between the radical and the incremental innovation strategy has two sets of implications for the leadership, which should be seen as a form of organizational cognitive process, result of various analyses and experiments made ​​for responding complexity and change in a more efficient manner. The strategy setting must consider several key-elements, as presented below: Because of the uncertain environment analyses have to include a number of possible future trends; Ensuring broad participation and informal communication channels; Encouraging the use of a plethora of information sources, arguments and skepticism; Strategy change due to obvious influences, often unexpected. The second set of information shows that leadership practices are not fully reproducible. Under complex and varying conditions there is no single formula for success. Tacit knowledge of individuals or groups (know-how based on experience, which cannot be easily copied and reproduced) is vital irrespective of the concept of an automobile or a medicine, or the strategic management of innovation. Technological leadership does not automatically translate into economic benefits. The company’s ability to benefit from technology investments depends on two factors: 1) the skills to turn technological advantages into commercially viable products and processes and 2) the capacity to defend its advantage against imitation. Therefore, effective protection of patents stopped Kodak to imitate Polaroid technology. The lack of additional resources in production and marketing prevented EMI and Xerox to enjoy commercial benefits from the achievements of medical scanning and IT. In the video recording filed, Matsushita surpassed its more innovative rival- Sony, by setting lighter standards in terms of licensing policy for competitors. Some factors which allow the company to economically benefit from its leader position may be influenced by management, for example providing additional resources to exploit leadership. Other may be influenced in a lesser extent by the company leadership and depend more on the technology nature, product market and existing regulations of intellectual property rights. There are business elements beyond the textbooks and theories that make the difference. Leadership can be learned from unique people, people with grace who know how to do business and inspire generations under the sophisticated touch of innovation. References 1. Bennis, W., 2001. The Future has no Shelf Life. In W. Bennis, G. M. Spreitzer and T. G. Cummings (eds.) The Future of Leadership: Today’s Top Leadership Thinkers Speak to Tomorrow’s Leaders, 3-13. 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Third Edition, Chichester: John Wiley and Sons 19. Tidd, J., Bessant, J. and Pavitt, K., 2001, Managing Innovation. Second Edition, Chichester: John Wiley and Sons. 20. Waldrop, M. M., 1992. Complexity: The Emerging Science at the Edge of Order and Chaos. 21. Weick, K. E. and Sutcliffe, K. M., 2001. Managing the Unexpected: Assuring High Performance in an Age of Complexity. San Francisco: Jossey-Bass. 22. Weiner, E. and Brown, A., 2005. Future Think: How to Think Clearly in a Time of Change. Upper Saddle River, NJ: Prentice Hall. 23. Wheatley, M. J., 2006. Leadership and the New Science: Discovering Order in a Chaotic World. San Francisco: Berrett Koehler. Read More