Why Innovation Is Important in Business - Case Study Example

Abstract: The thought of business innovation mainly emphasizes the newer process regarding specific criteria that can be served for a global purpose. Innovation usually involves new or modified product, newer technique or newer market etc. Worldwide famous company Unilever has a number of innovative programs, which are playing an important role in achieving its business purpose. Definition of Innovation: Several authors who have expertise in this topic have identified innovation differently. We may also well know about the multiple definitions about this concept that seem to be much simpler while they are also vague. Simply, innovation can be any item, thought, & process, which is new to a specific area but not essentially to the whole world. According to Austrian economist Schumpeter, J. A. (1982)1, there are 5 cases of innovation, such as- Introducing a completely new product or service to the marketplace of which the customers are still unknown or unconscious. Introducing a new or organized technique of production. Creating a distinguished origin of semi-defined product or raw materials supply. Creating a new market within a nation. Placement of new structure within the market. There are also 2 major issues of which all authors have equal opinion. Like- Failure of the acceptance of new product, service or process in the market will not be considered as innovation. Innovation has been created to make a product familiar & introducing a competitive advantage for a specific company in the market place. Thus according to Michel Porter, the innovative & improvement power of a countries industrial sector facilitates its competitive advantage & if the companies can innovate, they will get advantage. Categories of Innovation:- Innovation can be categorized primarily as- Product Innovation: The changed nature of a product that can be commercialized & technically distinctive is considered as an innovation of a product. Process Innovation: When there is a significant change in techniques of production & a variation in the direction system & its organizational method, it is called process innovation. Innovation can be differentiated by the grade of originality2- Radical Trend: Modern application of existing technology or the combination of all is the main theme, thus the objective of radical innovation is to achieve a completely new thing. Increasing Trend: It states the improvement of a product, service & present methodology. It is oriented by cost reduction. Innovation can also be classified from the view point of diffusion. Such as- Continuous Innovation: It is similar to product innovation. An example is the continuous change & development in the automobile industry. Dynamically Continuous Innovation: It involves the creation & radical change of a product. Example is compact disks as in case of this, 2 dependable factors are regarded. Like- dependence on the application & dependence on originality. Discontinuous Innovation: It is the total invention of new product which has not been seen before, so there is complete change in consumer’s purchasing & utilization pattern. We may also notice 5 important characteristics of innovation.3 That are- Relative Advantage: This idea can be judged on the basis of other facts like advantage of storage or unpredictable & uncontrollable facts like war because relative advantage in innovation do not require so many labors who may be absent in the war time. Compatibility: Compatibility is the innovational fitness in a specific society, as much as it is smooth in a culture; it is the indication faster rate of adoption. Complexity: If the innovation is hard to understand or least perceived value to implement, the adopter will consume it less. For example, though the online trade policy of Amazon.Com is easy, for a person who does not use internet system will be very much intimidating. Divisibility: This is the ability of a user of giving the innovation a testing part before the decision of adoption. Communicability: It simply states that when the advantage of innovation does not promptly solve a consumer’s problem, it will refuse to diffuse through a community or society relative to the innovation that is more appropriate for problem solution.4 Stages of Innovation: According to “Smart Spenders, 1000 Global Innovation” which is an article in strategy & business magazine, writers like Rakesh Bordia, Barry Jaruzelski, and Kevin Dehoff have identified 4 basic stages of innovation. But we can elaborate these stages into 8 major parts that are described below- Idea Generation: - Basic research and conception are initiated here, thus it is the systematic search for new product ideas. Major sources of new product ideas include internal & external sources.5 Internal sources include formal research & development programs by picking the brain from company executives, scientists, engineers, manufacturing staffs & sales people. External sources include watching & listening to customer motive. For this, company engineers or salespersons can meet with & work alongside customers to get suggestions & ideas. Idea Screening: - The first idea reduction stage is idea screening, which helps spot good ideas & drop poor ones as soon as possible. Concept Development & Testing: - Concept testing involves testing new product concepts with groups of target customers. Marketing Strategy Development: - It involves designing an initial marketing strategy for introducing the invented product to the market. It consists of three parts. Business Analysis: - Once management has decided on its product concept & marketing strategy, it can evaluate the business attractiveness of the proposal which involves a review of the sales, cost & profit projections for a new product to find out whether they satisfies the company’s objectives.6 Product Development: - For many new product concepts, the product may have existed only as a word description, a drawing, or perhaps a crude mock-up. If the product concept passes the business test, it can moves into product development. Here, R & D engineers develop the product concept into a physical product. The R & D engineers will develop & test one or more physical versions of the concept. R & D hopes to design prototype that will satisfy & excite consumers & that can be produced quickly & at budget costs. Test Marketing: - Here the product & marketing program are introduced into more realistic market settings. Commercialization: - This is the final stage of product innovation. When the company goes ahead with commercialisation that means, it will introduce the new product into the market & will face high cost. The company launching a new product must first decide on introduction timing. Next, it must decide where to launch the new product- in a single location, a region, the national market or an international market.7 Theoretical Approach: Business innovation closely relates in the introduction & exposure of a new product. So, a company’s new product needs to overcome or pass several stages, commonly known as PLC or Product Life Cycle. In each stage, such innovative idea makes a company experienced in different categories. Figure- Product Life Cycle (PLC) 1) Introduction Stage: The introduction stage starts when the new or innovated product is first launched. Introduction takes time & sales growth is apt to be slow. In this stage, profits are negative or low because of the low sales & high distribution & promotion expenses. A company, for example, Unilever, as a market pioneer, must choose a launch strategy that is consistent with the intended product positioning. As it has the best chance of building & retaining market leadership if it plays its cards correctly from the start.8 2) Growth Stage: If the innovated product satisfies the market, it will enter a growth stage in which sales will start climbing quickly. The early adopters will continue to buy, & later buyers will start following their lead. Attracted by the opportunities for profit, new companies will enter the market. They will introduce new product features, modification, or some other innovative ideas to expand the market. The increase in competitors leads to an increase in number of distribution outlets, & sales jump just to build reseller inventories. Price remains where they are or fall in slightly. 3) Maturity Stage: At some point, a product’s sales growth will slow down, & the product will enter a maturity stage. It normally lasts longer than the previous stages & it posses strong challenges to marketing management. Here, the overcapacity leads to greater competition. Competitors begin marking down prices, increasing their advertising & promotional efforts & mostly upping their R & D budget to find better version of their product. Here the weaker competitors are dropped out & industry eventually contains a number of well-established competitors like famous companies like Unilever, J & J etc. lead toiletries industry. 4) Decline Stage: The sales of most product forms & brands eventually dip. Sales may plunge to 0, or they may drop to a low level, where they continue for many years, it is the decline stage. Carrying a weak product is very costly to a firm which may take up too much management time. It requires advertisement & sales force attention, so management may decide to maintain its brand valuation by harvesting a product.9 So, in each PLC stage, a company needs to provide newer & newer ideas to sustain the profitability, customer satisfaction & getting competitive advantage in the marketplace. Organisational Approach: While we are concerned about business innovation, the best example that may suit in this purpose would be worldwide famous company-Unilever. From 1885, the company has been showing its organisational innovative approaches by offering the largest line of consumer goods. To keep in touch with the customer’s needs as well as increasing profit, by 2004, the company has aimed of consolidating its 1600 brands to 400. For 123 years of continuous movement to satisfy a huge number of customer’s desire & hunger for consuming newer & modified items, Unilever has been showing its innovative effort by developing a large number of organisational strategies. Like- Reducing the negative impact on environment by waste reduction, energy conservation & opportunity exploration for which it is using modern idea of recycling & reusing along with profit maximization motive. Unilever also uses the PLC theory in introducing its new product. We can identify the company’s special approach of Life Cycle Assessment (LCA), which is a number of techniques to help in understanding environmental impacts. It uses it in 3 ways, like- Product Innovation: By using LCA routinely, the company designs new products in order to compare the latest & existing items as well as to estimate the differences in the environmental issues. This information provides guidelines to the product developers to the assistance in launching new products, additionally, informing the customers about the environmental concern of the products.10 Product Category: For two decades, it has been using LCA home as well as personal care business accompanied by laundry, deodorant & products of skin care. Strategic Focus: The Company’s yearly corporate activities to the contribution of the world economy, study relates to emission of greenhouse gas, transport aspect & global water imprint are carried out with the association of LCA. Contribution of Innovation: From the beginning to the existing, Unilever is continuing the concept of eco-innovation. It undertakes the activities like- increasing economic efficiency by innovative programs, research of customer attitudes, partnership development etc. It also introduced the big idea of consumer insights & brand innovation, the company’s engineers & scientists are always engaged in exploring & developing the capacity meeting customer hygiene, nutrition & personal care. The idea of vitality for product development implements the strong science capabilities & customer philosophy for looking & feeling good & getting more from life. Their innovative approach seems into Surf Excel’s idea of ‘Dirt is good!’, Fair & Lovely’s ‘Beauty is Strength’, Gel tablets brilliance in cleaning, continuous investment in R & D for the advancement of ice-cream products, for the focus of creating the attention to the challenge to the choice of healthier choice proposal etc. Additionally, Roxanne’s body-care technology offers a better competitive advantage in the marketplace by deriving optimized satisfaction of the customers.11 So, the historic development & each aspect of its product line can see the contribution of innovation in Unilever’s overall strategy. Like- Creation of worldwide supply schedule. Simplification of process of business. Variety of product in specific brands, quality, test, flavor, shape.12 Vast customer range. Vast expansion of consumer goods. All classes of customers etc. Conclusion: At last, we can also identify some of the drawbacks of a company’s invented new product, like- Sometimes the market size may be overestimated. Incorrect positioning, low promotional effort. Higher cost of production etc. However, companies that get new & improved products to the market faster than competitors often gain a big competitive edge. They can respond more quickly to emerging consumer tastes & charge higher prices for more advanced design. Traditionally, innovative trend is the major indicator of a company’s viability. Although there are several risks of innovation, with that effort a company can prove its intrinsic drive to exist in the long run by promising the society with the supply of updated products & services. Bibliography: Baylis, T., (2000), Clock This: My Life as an Inventor, 1st ed, Headline Book Publishing, ISBN-10: 0747263329 Dyson, J. (1998), Against the Odds, 2nd ed, Orion Bain, London, UK Griffin, R. W. (2006), Management, 8th Edition, Houghton Mifflin Company, Boston New York, ISBN: 0-618-35459x Kotler, P., Armstrong, G. (2006), Principles of Marketing, 11th Edition, Prentice-Hall of India Private Limited, New Delhi, ISBN: 81-203-2825-6 McElheny, V. K., (1999), Insisting On the Impossible: The Life of Edwin Land, 1st ed, Basic Books, ISBN-13: 978-0738201900. Packard, D.(1996), The HP Way: How Bill Hewlett and I Built Our Company 1st ed, Publisher Collins, ISBN-13: 978-0887308178 Schumpeter, J. A. (1982) The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, Transaction Publishers, ISBN-13: 978-0878556984 Skinner, S. J., & Ivancevich, J. M. (2003), Business for the 21st Century, Homewood, Boston, ISBN: 0-256-09222-2 Stoner, J. A. F., Freeman, R. E., Gilbert, D. R. (2006), Management, 6th Edition, Prentice-Hall of India Private Limited, ISBN: 81-203-0981-2 Unilever (2004), Annual Report and Accounts, UK. Unilever Food and Health Research Institute Symposium (2005), Healthy for Longer, Scientific & Communication issue, Vlaardingen, The Netherlands. Webandmacros (2007), Definition of I+D+I, Investigation, development, innovation, available at: < http://www.webandmacros.net/Investigation-innovaton-development.htm > [accessed on 11th April, 2008] Read More