The Key to Being an Innovative Organization - Essay Example

The Key to Being an Innovative Organization Is R & D Innovation is the establishment of new or modified products, processes or new marketing method in business operations or work environment (Yusuf & Nabeshima, 2007, p. 47). Organizations should identify technological trends at the time of establishment and exploit the opportunities that can lead that organization into higher level of product innovation. However, organizations cannot adequately align technological advancement in their goals because the market technological demands are dynamic in nature and changes with market requirements. Organizations are constantly engaging in research and development in order to come up with new approaches of doing things, design new products for the market, acquire new market for the products and expand business capacity to meet the current and future market demand (United Nations, 2012, p. 11). Innovation is a role of all workers in an organization. In order for an organization to be competitive in the market, it has to promote and nurture a culture of creativity among the workers and provide the necessary resources to support innovation. The organizations should have the capacity to recognize the need for innovation and support the ideas that can lead to competence of the organizations. The ideas could be small or big and they follow a particular process. Innovation requires resources including time and finances (Mazzucato, 2013, p. 84). Organizations must be willing to devote the required resources in order to achieve the expected goals. They should engage in research and development in order to explore various approaches to improving products, processes or market and implement the new ideas as their core competences for future growth. Innovation may imply the organization developed their knowledge or acquired the knowledge from another organization. Irrespective of the method, the business, used to innovate, the organization has to incur some cost in order to gain that knowledge. Innovation is an entrepreneurial role of creating a new product or processes for the market. Entrepreneurs earn profit from their innovations by establishing a monopoly (Unit 1: Lecture 1). They acquire patent rights to limit other competitors from producing and selling similar products in the same market. However, the entrepreneurs cannot prohibit the entry of competitors in the market for a long. Competitors start offering similar products with those of the entrepreneur thus limiting the potential for expansion of the business. The entrepreneurs should develop a culture of innovation in order to maintain their customers and avoid stiff competition. The new technology wipes out the existing products and result to establishment of new products. An organization that sticks to the traditional methods cannot withstand the market pressure. An innovative business has potential to meet the needs of the current market (González, Jaumandreu, & Pazó, 2004, p. 33). The survival of the business in the industry depends on whether the technological change is “competence destroying” of whether it is “competence enhancing.” Development of viable business idea is a process that follows specific steps. It starts with "generation of ideas, idea screening, concept development and testing, marketing strategy development, business analysis, product development and testing, commercialization" (UNESCO, 2009). Innovation may be radical or just small changes in the product features, processes or other aspects including the methods marketers approach the market. Innovation has two basic orientations. These are inside out and outside in strategies. The inside out strategy is focused on technological knowhow and the business core competencies (European Union, 2012, p. 64). The organizations have a role to generate, collect, communicate, transfer and manipulate data. Organizations help people to expand their capacities and to achieve the desired results. Innovative position of the product is an essential aspect of business strategy because it ensures the product is taken to a place where it needed most (Unit 5: Lecture 1). Businesses are adopting new methods of reaching the customers by changing the packaging, pricing, product promotion and product placement approaches to make their products appeal to more people. Innovation may destroy or enhance competence. Competence destroying innovation improves the business competence in a different direction by creating different knowledge for the production of products. The business changes to production of unique products using different skills from the original knowhow (Unit 2: Lecture 1). For example, the digital cameras replacing film. If an organization has to acquire new products or process they have to invest in research and development to create that knowledge. On the other hand, competence destroying knowledge improves the production knowledge but does not alter the processes or the business structures. The organizations acquire different approaches of doing things in more efficient manner thus advancing the existing knowledge (Unit 1: Lecture 1). Businesses that acquire competence enhancing innovation locks out competitors by increasing the barriers to entry into that venture and making substitutes ventures unattractive in the market. An example of competence enhancing innovation is the adoption of computerized production system in an organization to replace the manual system. The research and development result to the creation of knowledge in the society. The society uses information to gain competitive advantage in an innovative and productive manner (United Nations, 2012, p.19). The exploitation of the knowledge available in the society is essential for wealth creation. The generation of business idea has taken a new dimension with the invention of social network because clients share their feedback and give suggestions to the investors on what they want and how they want it done. Producers are able to identify the specific needs of the consumers and design products that can articulate well with those specific needs (Torun & Ciceki, 2007). Value addition to the products comes in a number of ways and does not necessary require the product to be changed. That may require the producers to adopt better production processes, supply, distribution and the services offered to the consumers. Organizations may engage in various innovative activities that may lead to increase in productivity and output of the organization (Eni & Mattei, 2006, p. 47). Innovative activities refer to business, technological, scientific, financial or commercial processes that result to innovation in an organization. For example, the organization may conduct basic research to change the processes and products of the organization (Greenhalgh & Rogers, 2010, p. 112). This is known as in-house or intramural research and development. Some knowledge may be purchased from the public and private research institutions such as universities and institutions sponsored by the government to conduct research activities. This is known as extramural research and development. The research and development do not involve only development of ideas but how to put the ideas into practice (European Union, 2012, p. 32). The organization does not always continue its operations with the existing resources. They have to acquire equipments and machinery to implement an innovative idea. The business has to match the productivity with the market demand for the goods. Matching the production capacity with the market demand is an innovative process that enables the company to remain competitive in the market. It helps the company to save the cost of unnecessary stock inventory. The idea was first implemented by Ford automobile company in which they produced products whenever there was a demand for such goods. The process is known as just-in-time method (Pickett & Wilkinson, 2010). In order for an organization to be able to meet just-in-time production process, they have to invest in research and development so that they can be able to determine the exact needs of the customers and produce goods and services as required. Training of the workers is another essential practice of an organization intending to achieve a higher level of innovation. The idea is developed by an individual, a department or purchased from an external source. The management has to train the entire workers in the organization on how to integrate the idea production processes or any other activity (Unit 3: Lecture 1 The training may take time and has some cost. Research and development is the hub of continuous innovation process in the market economy. The ideas generated can be turned into goods and services that provide returns to the business after they are sold in the market (Nooteboom & Stam, 2008. p. 27). Intensive research and development result to generation of stock of ideas for commercialization. The availability of research institutions and quality learning institution results to availability of quality human resources for research and development. The quality of research and development is influenced by regulatory and institutions that determine research activities taking place in the economy. The availability of simple and transparent rules, affordable registration cost and extensive use of information technology facilitate research and development hence increasing innovation. In an economy which has complicated procedure for research and development the demand for innovation is low and organizations are incompetent (Mazzucato, 2013, p. 114). For example, developing countries have engaged in little research and development activities thus the innovation level is relatively lower than their counterparts in the developed nations. The rates at which developing economies commercialize their ideas remain low compared to developed economies (Government of the Republic of South Africa, 2002). Poor communication and interaction between businesses and research institutions is the main hindrance for innovation and marketing of ideas. The lack of connection between science and business is a major drawback to investors in the modern economy due to lack of innovation. The inadequate interaction between innovators and investors has slowed the rate of diffusion of innovation in the economy. In addition, disconnect between innovators, business, regulatory authority and uncertain property rights prohibit investments in research and development and contributes to inappropriate patenting of inventions in research and learning institutions (González et.al, 2004, p. 51). Consequently, the poor innovations, business and regulatory institutions results to poor recognition of market needs and slow economic. According to Pickett and Wilkinson (2010), lack of research and development has contributed to low performance of some businesses and others have been phased out of the market completely. The lack of innovation is either as a result of the high cost, inadequate policies to protect the patent rights of the innovators, inadequate time or lack ideas. Inadequate protection of patent rights for the innovators has been a discouraging factor to the research institutions. The universities have not recognized the individual effort thus causing discouragement to the innovators. The universities are the main research and development institutions and should formulate a comprehensive policy to safeguard the process in which ideas will flow from the institutions to the investors (Yusuf & Nabeshima, 2007, p. 73). They should distinguish the patents owners of research inventions and ensure those researchers share the income generated by the patented ideas. According to the Research and Innovation Council of Finland (2010), the developing economies should come up with means to finance research and development in order to increase innovative business ventures. The challenges posed by inadequate financing have resulted to poor performance of the economy. The financing carried out by business angels and venture capital firms is underdeveloped thus a well organized financing system is necessary. Innovators should be funded from the public resources in order to stimulate economic development (Unit 2: Lecture 2). The government should coordinate research institutions and venture companies to finance inventions. A study conducted by IBM on 1500 Chief executive officers revealed that creativity is the most essential for “leadership competency in the future.” In addition, Google is a very innovative organization and it uses social media to recruit creative employees (Huang et.al, 2010, p.46). They invite graduates in a competition of sharing ideas after which the best innovator gets a reward of ten-thousand dollars. Also, the best twenty candidates are given job opportunities to work in the organization. Firms’ managers are adopting open innovation that requires firms to incorporate both internal and external ideas and structures to expand market through advancement of technology (Unit 2: Lecture 2). The collaboration of business partners in innovation activities enables the firms to share rewards and risks. The Enterprise Europe Network is composed of about six-hundred partners from around forty-four nations and has about four-thousand workers assisting the European businesses to strengthen their competitiveness (Huang et.al, 2010, p. 54). The main aim of the network is to increase the innovation capacity of the Small and medium enterprises. The innovation union suggests that the innovation in products, services and business models is the best way to increase competition among the European organizations amidst aging population and global competition. For that reason, the European community has put into consideration the innovation to the heart of the 2020 strategies for growth and job creation. The innovation union targets to raise funds for research and development in Europe to ensure commercialization of viable ideas by turning them into products and services that can lead to economic growth and creation of jobs. Also, the union intends to increase research and development in the European Union by about three per cent and encourages the members to safeguard and prioritize expenditure on research and training (Greenhalgh & Rogers, 2010, p. 152). Therefore, research and innovation is very crucial in innovation and inadequate facilities and capital has limited the research capacity of various businesses. The European nations have established Global Innovation networks to provide a platform for the international community to generate business ideas and other innovative ideas to satisfy the needs of the people with greater efficiency. For example, since 1990s the European firms have engaged in collaborative research and development with firms bases in USA to harness the available knowledge and skills in information technology and biotechnology (Unit 5, lecture 2). Therefore, as many institutions take innovation to a global level through Global innovation Network, more expenses are required to manage the networks due to increasing complexity. In the year 2011, the UK research and development accounted for 1.79% of the national gross domestic products (GDP) while the average research and development of the EU-27 is 2.03 % of the total GDP(Unit 4, Lecture 2). Every year, the government allocate significant promotion of their revenue to research and development. In February 2012, the minister for Universities and science in UK declared that the government had increased fifty million Euros for research and development of graphene that has broad applications in electronics, sensors, and flexible touch screens and so on (The Research and Innovation Council of Finland, 2010). In addition, the UK government introduced patent box credits that will result to a reduction in corporation tax from the revenues earned on patented innovations as an incentive to the innovators to encourage innovation. Organizational innovation that involves the use of new or changes of management styles to within the organizations and the way the organization relates to an external community (Unit 4: Lecture 2). The business has to use creative approaches for diffusion of the knowledge among the workers. Constant innovation is the greatest driving force of capitalist. Technology is the best approach for competitiveness rather than pricing strategies. the factors influencing firms ability to innovate include the firms potential which is determined by its structure, competences and processes, the existing opportunities and threats in the national system of innovation, the firms power and position in the value chain and its capacity to identify and exploit external sources of innovation (Unit 5: Lecture 1) Creative destruction is a process in which the new technology replaces the existing technology completely. Only 31 percent of the original companies in Great Britain survive. Competence destroying implies the new technology results to advancement but away from the prior knowledge. For example, the development of the transistor replaced the vacuum tube, and the flat screen displays replaced cathode-ray tubes (Unit 5: Lecture 2). That was a creative innovation that advanced the existing knowledge along the same trend. Innovation is subject to spill-over. The inventing firms rarely benefit from their effort because the imitators fill the market with cheap imitations of the original products (UNESCO, 2009). The challenge is that the original inventor incurs many expenses in research and development while imitators require little effort to acquire the idea of the original invention. A means of compensating the innovator is necessary in order to promote innovation. Increase in market competition and over surplus of products in the market call for the organizations to find differentiated products and services through by purpose, form and added value by identifying specific needs of the customer and exceeding them. Information technology has increased organizations competence (Unit 4: Lecture 1). Economic exploitation of knowledge offered through IT has increased the wealth of the economy. Innovation should result to value addition in the manufacturing process, supply, distribution and servicing. For example, the jus-in-time production process an innovative strategy that improves business returns on investment by reducing in-process inventory and associated carrying cost (Torun & Ciceki, 2007). This strategy has been used in various organizations such as Toyota automobile company to ensure the production is based on specific customer needs. The invention of mobile phone was a development of new product for the market. However, the firms dealing with production of mobile phones have constantly changed the features of mobile phone to target different clients in the market (Eni & Mattei, 2006, p. 79). The invention of smart phones has turned the mobile phones into very useful products that have almost everything a person would need in a personal computer. The mobile internet has almost replaced cybercafé due to the convenience of using mobile phone. Large institutions have been associated with the development of new products in the market that are capable of revolutionizing the lives of the people and contributing to economic growth. For example, in 1980’s many automobile firms engaged in manufacturing of small computers for personal use (Unit 3: Lecture 1). However, IBM was able to develop a personal computer and the idea was acquired by other firms and modified into the current personal computers. Consumers have become used to new products developed by large companies and they are always willing to try new products from large organizations. However, even small and medium businesses have continuously engaged in the creation of products for the market. Large organizations have research and development department that is responsible for creating new products. Research and development is a corporate culture of the large organizations because they can afford to pay for it. However, small and medium organizations make some changes driven by market demand or imitate the ideas of other companies in order to survive in the market (Unit 2: Lecture 2). The recent trend indicates that small and medium institutions contribute about twenty-four percent of the total research and development expenditure while large organizations contribute about thirty-two percent. Innovation increases demand the company’s products and reduce the production costs. Productivity-enhancing process innovations give the new product cost advantage over those of other competitors in the market under the current market price (Unit 2: Lecture 1). If a product is price elastic, the innovator can gain an advantage over its competitors by reducing the price of its products to increase the profitability. The firm can be able to acquire those benefits in case the innovation results to the development of the product that cannot be easily emulated by the by the competitors and whose production cost is below that of its competitors (Nooteboom & Stam, 2008. p. 78). Furthermore, the products should appeal more to more consumers such that sales volume remains higher than that of that of competitors. The modern day invention has focused on increasing the lifespan of the light bulb and reducing the power consumption. The invention of products such as light bulbs in 1872 was highly appreciated because it did not produce smoke (The Research and Innovation Council of Finland, 2010). However, the bulb could only last for twelve hours. The modern bulbs have the capacity to last up to ten thousand hours and are highly efficient and economical. Companies are struggling to improve the product quality and make them more efficient. In conclusion, the challenges facing creativity is lack of support of ideas from the organizations and failure to convert their ideas into profitable ventures. The innovation of products involves the production of unique products or modifying the existing products in respect to the product features or the intended use of the product. The producer may change the packaging material of the products and use more attractive, durable and user friendly materials. The equipment, software or techniques may be varied or improved to streamline operations. Organizations are interested in the way they get the final products using the most efficient technology. Innovation has shifted from individual effort to industrial and later became collaboration between different stakeholders such as the government, business and research institutions. Various institutions have continued to invest resources in research and development to strengthen joint infrastructures and standards. The institutions and governments have intensified research and development in order to be more innovative. Businesses should be ready to pay a higher price in order to be competitive by supporting innovation; the gain is worth the cost. Bibliography European Union, (2012). Internationalization of Business Investments in R&D and Analysis of Their Economic Impact. pp. 1-84. Retrieved from Http://ec.europa.eu/research/innovation-union/pdf/internationalisation_business- rd_final-report.pdf Eni, F. & Mattei, E. (2006). Examining the Factors Influencing Environmental Innovations. pp. 1-32. Retrieved from Http://ageconsearch.umn.edu/bitstream/12041/1/wp060020.pdf González, X. Jaumandreu, J. & Pazó, C. (2004). Barriers to Innovation and Subsidy Effectiveness. pp. 1-45. Government of the Republic of South Africa. (2002). South Africa’s National Research and Development Strategy. pp. 1-82. Retrieved from http://www.istafrica.org/home/files/RSA_NationalResearchDevelopmentStrategy_Aug20 02.pdf Greenhalgh, C. & Rogers M. (2010). Innovation, Intellectual Property, and Economic Growth. UK: Princeton University Press. Pp. 1-366. Huang, C, Arundel, A. & Hollanders, H. (2010). How Firms Innovate R&D, Non-R&D, And Technology Adoption. Pp.1-62. Retrieved from Http://www.merit.unu.edu Mazzucato, M. (2013). The Entrepreneurial State: Debunking Public Vs. Private Sector Myths. Anthem Press. Pp. 1-266 Nooteboom, B. & Stam E. (2008). Micro-foundations for Innovation Policy. Amsterdam University Press, Pp. 1-221. Pickett, K. & Wilkinson, R. (2010). The Spirit Level: Why Greater Equality Makes Societies Stronger. Bloomsbury Publishing, The Research and Innovation Council of Finaland, (2010). Research and Innovation Policy Guidelines for 2011–2015. Retrieved from Http://www.tem.fi/files/30413/Research_and_Innovation_Policy_Guidelines_for_2011_2015.pdf Torun, H. & Ciceki, C. (2007). Is Innovation the Engine for the Economic Growth? Retrieved from Http://www.tcmb.gov.tr/yeni/iletisimgm/Innovation.pdf Unit 1: Lecture 1: Innovation and change: Introduction Unit 1: Lecture 2: Innovation and change: Introduction Unit 2: Lecture 1: Innovation and Change: The Organization and Its Environment. Unit 2: Lecture 2: Innovation and Change: The Organization and Its Environment. Unit 3: Lecture 1: Innovation Change: The Innovative Organisation Unit 4: Lecture 1: Innovation and Strategy Unit 4: Lecture 2: Innovation and Strategy Unit 5 Lecture 1: Innovation and Change: Into the Future- Collaboration. Unit 5: Lecture 2: Innovation and Change: Into the Future- Collaboration. UNESCO, (2009). Measuring Innovation: Training Workshop on Science, Technology and Innovation Indicators. UNESCO Institute for Statistics. United Nations, (2012). Fostering Innovative Entrepreneurship. United Nations Economic Commission for Europe: Challenges and Policy Options. PP. 1-34. Retrieved from Http://www.unece.org/fileadmin/DAM/ceci/publications/fie.pdf Yusuf, S. & Nabeshima, K. (2007). How Universities Promote Economic Growth. World Bank Publications. pp. 1-286 Read More