Innovation in Organizations - Essay Example

ll orgniztions need to innovte [Nme of the School] [Nme of the Define wht innovtion is - using exmples, uthors The notion of innovtion cn be viewed from different ngles depending on the industry nd type of chnge tht is being exploited by the innovtor. From the privte sector mngeril point of view, innovtion cn be defined s " development nd cretion of new or improved, in consumer understnding, products or services. The pro innovtion conditions under tht definition re creted by the chnges which impose new consumer needs or offer solutions for existing needs". (Peter Doyle, 1998) ccording to the communiction of the Europen Commission COM(1995) 688, consistent with the Lisbon Europen Council's perception of the innovtion nd competitiveness, innovtion is "the renewl nd enlrgement of the rnge of products nd services nd ssocited mrkets; the estblishment of new methods of production, supply nd distribution; the introduction in chnges in mngement, work orgniztion, nd the working conditions nd skills of workforce." s referred by the Ntionl Institute of Stndrds nd Technology, n gency of the U.S. Commerce Deprtment's Technology dministrtion1 (http://www.tp.nist.gov), innovtion cn be distinguished s technologicl nd commercil innovtion. "Technologicl innovtion is the successful implementtion (in commerce or mngement) of technicl ide new to the institution creting it. commercil innovtion is the result of the ppliction of technicl, mrket, or business-model ingenuity to crete new or improved product, process, or service tht is successfully introduced into the mrket"1. The brod contemporry innovtion definition which corresponds to the OECD nd Europen Union definition nd creted by the 21'st Century Innovtion Working Group in the Ntionl Innovtion Inititive pper (2004) refers innovtion to " process through which the ntion cretes nd trnsforms new knowledge into useful products, services nd processes for ntionl nd globl mrkets - leding to both vlue cretion for stkeholders nd higher stndrds of living2 The gretest inventive genius in recorded history ws surely Leonrdo d Vinci. There is brethtking ide -- submrine or helicopter or utomtic forge -- on every single pge of his notebooks. But not one of these could hve been converted into n innovtion with the technology nd the mterils of 1500. Indeed, for none of them would there hve been ny receptivity in the society nd economy of the time. Every schoolboy knows of Jmes Wtt s the "inventor" of the stem engine, which he ws not. Historins of technology know tht Thoms Newcomen in 1712 built the first stem engine which ctully performed useful work: it pumped the wter out of n English col mine. Both men were orgnized, systemtic, purposeful innovtors. Wtt's stem engine in prticulr is the very model of n innovtion in which newly vilble knowledge (how to rem smooth cylinder) nd the design of "missing link" (the condenser) were combined into process need-bsed innovtion, the receptivity for which hd been creted by Newcomen's engine (severl thousnd were by then in use). But the true "inventor" of the combustion engine, nd with it of wht we cll modern technology, ws neither Wtt nor Newcomen. It ws the gret nglo-Irish chemist Robert Boyle, who did so in "flsh of genius." Only Boyle's engine did not work nd could not hve worked. There re mny other innovtors in different res of development. For the purpose of this pper, the exmples of bove-stted innovtors is sufficient to provide vision on the issue of innovtion. 2. Tke stnce on the sttement do you gree or disgree - why I strongly gree with ll the definitions of innovtion provided in the previous section of this pper. OECD, Ntionl Institute of Stndrds nd Technology, mngeril point of views seems logicl s they strive to dd the vlue to the re of its development. I would slightly disgree with the definition of innovtion provided by Europen Commission COM(1995) 688. It is sooner confusion thn strict nd cler definition. The comprison shows tht lthough the definitions overlp to some extent they keep different generl point of ttention. The hrmonised OECD- UE definition is very nrrow bsed designed for the mesurement purposes nd sttistics. Its min chrcteristic is tht is uses Technologicl Product nd Process s definition object. I think tht it would be more efficient to mke one-sentence definition tht would provide cler vision on the innovtion. Specifying the innovtion would lso mke more esily to understnd of wht is being ment by the definition. 3. Exmine criticlly the theories behind innovtion Models of qulity growth in consumer goods hve become prominent feture of growth theory in recent yers. However, to dte there hve been reltively few ttempts to estimte these models nd little is known bout the mgnitude of qulity growth. It is, of course, esy to explin the slow progress in empiricl work: nlysis of the rte of qulity growth is clouded by mesurement problems. One component of technologicl dvnce, process innovtion, results in reduced production costs nd is redily mesured by existing techniques of dt collection. The other component, product innovtion, results in new or improved products nd is only prtilly cptured by existing techniques. s Zvi Griliches (1994) stted in his presidentil ddress to the mericn Economic ssocition, "Qulity chnge is the bne of price nd output mesurement." Yet qulity chnge is probbly lrge component of technologicl dvnce, nd its bsence from officil sttistics rises potentilly serious problems in productivity mesu rement. . Product For mny orgniztions, creting new products is centrl pth by which they dpt nd sometimes even trnsform themselves in chnging environments (Dougherty, 2002). Hewlett-Pckrd trnsformed from n instruments compny to computer-bsed one through new product development. Similrly, Intel chnged from memory compny to microprocessor firm through product development (Dougherty, 2002). Thus, in the fce of intense interntionl competition, rpid technology evolution, nd customers' mturing expecttions, product innovtion is primry wy in which firms ctully dpt. Product innovation involves: developing new solutions to customer problems, for example, a new technology to produce irrigation water from sea water; making current products more useful, such as developing portable phones that have multimedia properties; adding new services, for example, itrpducing banking by phone or online; challenging the totatl product portfolio (Handy, 1999) Understnding product innovtion nd introduction to the mrket requires ttention to the firm's industry nd competitive strtegy. firm's industry provides the context for product development in nticiption of, or in response to, environmentl trends. Some industries re rich in opportunities, thus inviting compnies to introduce products frequently; others re improverished, thus limiting the firms' bility to introduce new products (Chesbrough, 2006). Still, some industries my rewrd "first-movers" (compnies tht pioneer new product introductions), wheres others inhibit these efforts. (Chesbrough, 2006) Compnies tht fce the sme opportunities nd chllenges often respond to them in different wys, depending on their competitive strtegic posture (Cooke, 2005). Differences in competitive strtegies influence firms' responses to the opportunities nd chllenges in their industries (Cooke, 2005). Some strtegies my encourge compnies to introduce products frequently or to led in introducing products; other strtegies my discourge these ctions (Dodgson, Gnn, Slter, 2006). b. Process Process innovation means changing the way processes such as production, new product development, or product delivery are conducted. In mature product markets, where rates of real product innovation are low and cost pressures are high, process innovation can be a significant means of gaining and sustaining competitive advantage by reducing the costs of generating customer value and making processes faster and more flexible. (Handy, 1999) Process innovtion my be prticulrly helpful or suitble for smll firms, since by this mens they cn shre in dvnced technology developed by lrger firms. The doption of proven process technology my lso hve the dvntges of low risk nd short-term pybck. The strtegic importnce of process innovtion vries widely from industry to industry. Informtion-intensive industries, such s finncil services, where the process is lso the product, rte it highly, while others, such s commodity mnufcturing, my give it low rting. In between re industries in trnsition, such s grocery retiling, where nrrowing profit mrgins nd the need to py greter ttention to customer loylty emphsize the need for new, more efficient processes. (Handy, 1999) Recent success stories suggest tht fr better pproch to deciding the importnce of innovtion is to mke n outside-in investigtion of where dvnces in process technology cn improve customer service - tsk tht requires fundmentl revlution of customer needs. In the UK, for exmple, First Direct developed high-qulity, telephone-bsed bnking service tht helped it chieve lmost double the customer stisfction of more trditionl competitors. (Chesbrough, 2006) nd in the US, Wells Frgo's supermrket bnking service is growing considerbly fster thn industry pundits expected. Customers, it seems, pprecite the extr convenience of being ble to purchse brod rnge of finncil services in the sme plce s they do their shopping. 4. pply to rel life exmples The mericn frmer hd virtully no purchsing power in the erly nineteenth century; he therefore could not buy frm mchinery. There were dozens of hrvesting mchines on the mrket, but however much he might hve wnted them, the frmer could not py for them. Then one of the mny hrvesting-mchine inventors, Cyrus McCormick, invented instllment buying. This enbled the frmer to py for hrvesting mchine out of his future ernings rther thn out of pst svings -- nd suddenly the frmer hd "purchsing power" to buy frm equipment. (Zvi, 1994) Eqully, whtever chnges the welth-producing potentil of lredy existing resources constitutes innovtion. There ws not much new technology involved in the ide of moving truck body off its wheels nd onto crgo vessel. This "innovtion," the continer, did not grow out of technology t ll but out of new perception of the "crgo vessel" s mterils-hndling device rther thn "ship," which ment tht wht relly mttered ws to mke the time in port s short s possible. But this humdrum innovtion roughly qudrupled the productivity of the ocen-going freighter nd probbly sved shipping. (Zvi, 1994) Without it, the tremendous expnsion of world trde in the lst forty yers -- the fstest growth in ny mjor economic ctivity ever recorded -- could not possibly hve tken plce. Wht relly mde universl schooling possible -- more so thn the populr commitment to the vlue of eduction, the systemtic trining of techers in schools of eduction, or pedgogic theory -- ws tht lowly innovtion, the textbook. Without the textbook, even very good techer cnnot tech more thn one or two children t time; with it, even pretty poor techer cn get little lerning into the heds of thirty or thirty-five students. (Zvi, 1994) 5. Conclusions nd evlution Current pper presented discussion on the issue of innovtion. Generl conclusion cn be drwn tht ll compnies tht wish to succeed in contemporry competitive environment need to innovte thus showing its fst rection to the mrket. "Every genertion needs new revolution," ws Thoms Jefferson's conclusion towrd the end of his long life. Innovtion is thus needed in society s much s in the economy, in public-service institutions s much s in businesses. It is precisely becuse innovtion nd entrepreneurship re not "root nd brnch" but "one step t time," product here, policy there, public service yonder; becuse they re not plnned but focused on this opportunity nd tht need; becuse they re tenttive nd will dispper if they do not produce the expected nd needed results; becuse, in other words, they re prgmtic rther thn dogmtic nd modest rther thn grndiose -- tht they promise to keep ny society, economy, industry, public service, or business flexible nd self-renewing. They chieve wht Jefferson hoped to chieve through revolution in every genertion, nd they do so without bloodshed, civil wr, or concentrtion cmps, without economic ctstrophe, but with purpose, with direction, nd under control. Bibliogrphy: 1. Chesbrough, Henry (2006) "Open Innovtion: New Prdigm for Understnding Industril Innovtion," in Henry Chesbrough, Wim Vnhverbeke, nd Joel West, eds., Open Innovtion: Reserching New Prdigm. Oxford: Oxford University Press, pp. 1-12. 2. COM (1995) 688, Europen Commission Communiction 3. Cooke, Philip (2005) "Regionlly symmetric knowledge cpbilities nd open innovtion: Exploring 'Globlistion 2'- new model of industry orgnistion," Reserch Policy, 34, 8 (October): 1128-1149. DOI. 4. Council on Competitiveness, Donofrio Nick (2004), 21th century Innovtion Working Group Finl Report. 5. Dodgson, Mrk, Dvid Gnn nd mmon Slter (2006) "The role of technology in the shift towrds open innovtion: the cse of Procter & Gmble," R&D Mngement, 36, 3 (June): 333-346. 6. Dougherty, Deborh (2002) "Interpretive brriers to successful product innovtion in lrge firms." Orgniztion Science, 3: 179-202. 7. Griliches, Zvi. (1994). Productivity, R&D, nd the dt constrint. mericn Economic Review 84:1-23. 8. Handy C (1999), Understanding Organizations, 4th Edition, London, Penguin 9. Innovtion The new relity for ntionl Prosperity, Ntionl Innovtion Inititive, Wshington DC 10. Institute of Stndrds nd Technology (2003), Between Invention nd Innovtion, n nlysis of Funding for Erly-Stge Technology Development, NIST GCR 02-841, http://www.tp.nist.gov/eo/gcr02-841/chpt2.htm 11. Institute of Stndrds nd Technology (2003), Between Invention nd Innovtion, n nlysis of Funding for Erly-Stge Technology Development, NIST GCR 02-841, http://www.tp.nist.gov/eo/gcr02-841/chpt2.htm 12. Peter Doyle, (1998), Mrketing, Mngement nd Strtegy, Prentice Hll Europe. Read More