Innovation and New Product Development: - Essay Example

The Oslo Manual, published by OECD (1997, 2nd Edition) decided to set a standard for innovation analysis and research for its members. The manual decided to concentrate on the first two categories set by Schumpeter. A technological product innovation involves new or improved product whose quality/characteristics is different from the already introduced product. A technological process innovation is the adoption of "new or significantly improved production methods, including method of product delivery." (p.49) An innovation is any new or substantially improved goods or service which has been commercialized or new or substantially improved process used for the commercial production of goods and services.

New' means new to your business. (ABS, The Definition Of Innovation) The direction and tone established by top level management shapes the way the firm will pursue new product opportunities. A company can pursue two general strategies with its product development. In the first approach, the firm attempts to achieve a continuous stream of modestly successful new product introductions. Each of these new products builds on the firm knowledge of its customer and its technology, the firm never strays far from its competencies.

Individually, these new products do not remake the market or the organization itself. However, in sum, they add up to a consistently successful company. This approach requires a modest, but continuous investment of resources to sustain it. The second strategy is to search for a revolutionary product that changes the market and the company. Such an approach requires a substantial commitment of resources and a relatively long development period.

This is probably accompanied by the reshaping of the product market, or even the creation of new one. There is no doubt that internal innovation is also must to improve the managerial side of the firm. It contributes in creativity and idea management and helps to evolve a strategy. But internal innovation is largely invisible to the outside whereas, external innovation is palpable for customers, consumers and partners. Henry William Chesbourg in his, "Open Innovation", published in 2006 propounded a new paradigm of open innovation.

To him an open innovation is a paradigm which assumes that firm can and firm should use external ideas as well as internal ideas. It helps to germinate a new market and by exploiting external ideas a new product or process can be introduced to enhance the strength of the business. IBM conducted a study in 2006,