Innovation and Change - The Key to Being an Innovative Organization Is Research and Development - Essay Example

Critically examine the claim that the key to being an innovative organisation is Research & Development – more expenditure equals more innovation. Every organization aspires to go beyond what it can presently do. That is why successful organizations thrive on innovation. It is the process of bringing ideas to reality. “Innovation is linked to performance and growth through improvements in efficiency, productivity, quality, competitive positioning and market share. It typically adds value by changing old organizational forms and practices” (Business Improvement Architects, 2014, para. 2). Organizations that strive to be innovative can achieve its goal through various ways. One is through research and development which may entail a lot of expenditure especially if “breakthrough innovations” are targeted. Other ways include modifications in organizational practices, hiring expert consultants from outside the organization to breathe in fresh ideas to develop and many more (Business Improvement Architects, 2014). Team effort is a necessary ingredient in innovation strategies and usually, the most creative in ingenious people comprise the team because successful innovation is usually “at the boundaries of organizations and industries where the problems and needs of users and the potential of technologies are linked together in a creative and collaborative process that challenges both” (Business Improvement Architects, 2014, para. 4). In that junction of uncertainty, brainstorming possibilities give birth to innovative ideas. Relationship Between Innovation and Entrepreneurship. In business, innovation is a prized feature because it paves the path towards entrepreneurship. Although related, the processes of innovation and entrepreneurship are different. Innovation is sparked by a new idea. The idea can be a new technology such as a gadget that can provide more convenience to consumers, a new service like an alternative form of relaxation, a new product, or even a new administrative procedure. Such ideas are driven by needs that are seen by the innovators. Innovation requires creativity. In organizations, innovation becomes the growth of a new idea from its initial state into its actualized form as a full-blown innovation (Roberts, 2006). The people who drive and protect the innovative ideas are the entrepreneurs. They are responsible in designing and developing a program of activities that push the innovative idea forward. They gauge their participation in the innovation in accordance with how popular the idea is, how acceptable it is, supportive people are to it. For innovation to occur, entrepreneurs are necessary, but they are not sufficient elements for its existence. They may inspire the development of new ideas and propel these forward through the innovation process. They may fail or succeed depending on how their ideas are supported by others. Eventually, the innovative idea may have grown to be an innovation that takes a life of its own. By that time it becomes a separate entity from the entrepreneur, even if he has given it life (Roberts, 2006). Entrepreneurship may be viewed as trying out new ways of “doing” business. It does not follow that all managers or business owners are automatically entrepreneurs. The openness of trying of new ideas and new production methods are what make entrepreneurs and such an endeavor is the innovation itself. Schumpeter, who has done studies on innovation and entrepreneurship, makes a clear distinction between entrepreneurship and risk taking in capitalism. Company owners may take risks but they do not necessarily innovate. Likewise, people who introduce new products, processes or new forms of business organizations are innovators and most likely, become capitalists as well (McDaniel, 2000). Schumpeter (1939) also distinguishes innovation from invention. For him innovation transcends invention. Invention becomes an innovation only when it is used productively as applied to a long-known process and a new production function results. Roberts (2006) compares the two processes: The innovation process oversees the evolution of a new idea over time, whereas the entrepreneurial process oversees the activities that entrepreneurs develop to promote and defend the idea against its detractors. In other words, innovation is the function of a sociological type of individual known as the entrepreneur (Sweezy, 1943). The Innovation Process Innovation and Entrepreneurship are significant factors of Research and Development in organizations. McDaniel (2000) chronicles the development of an idea into an innovation: First, it goes through research. Two types of research are basic and applied. Basic research is like brainstorming of concepts and identification of new phenomena and new activities. Applied research is the process of applying basic research data to evolve into a specific product or process that has some potential, practical use. The next stage is development. The actual potential of the idea is tested in a controlled laboratory setting. This is to transform the idea into a more concrete example such as a physical product or process. Once the potential product or process has been created, it moves to the demonstration stage when a prototype is created. Once development of a product or process in a contrived and controlled setting has been accomplished, it is tested against reality. Real world application is tested to prove its operational success (McDaniel, 2000). Finally, the next stage is commercialization which takes the demonstration model or prototype to be offered for sale in the marketplace. Many factors are considered. Foremost is profitability. This usually requires a combination of increasing the efficiency of the innovation, reducing costs of production as output increases, and continued refinements to improve usefulness of the innovation. These steps increase marketability of the innovation and thus usually increase profitability (McDaniel, 2000). Thus, innovation can be thought of as consisting of a series of challenges and revisions that move the new idea from an initial state to its final state (Roberts, 2006). Tidd, Bessant & Pavitt (2009) have a different process view of Innovation. Their model follows an idea turn into reality beginning with the process with the question of search. This involves bringing feasible ideas to the system which can come from a wide variety of sources. Research and Development Dynamic organizations put much priority on their Research and Development Department. When the innovation is successful, there is a clamour for more improved versions or alternative uses. Thus, research and development go on overdrive. As the organisation hires more people as research staff, there becomes a tendency for this division to become separated and isolated from other divisions of the company. The downside may be that the goal of this research division becomes a theoretical proof of potential rather than the ultimate goal of commercialization at a profit. Another negative effect is that the marketing division of the company becomes estranged from the research division due to the many tasks between them. Usually when this happens, the success of research projects subside (Mansfield, 1987). It is ideal that the marketing division and the research division maintains its harmonious relationship and close links at all times, so when customers or potential clients inquire about the innovation, any member from the marketing or research division can answer in accordance to the common knowledge of both divisions. It is safe to conclude that the closer the link between marketing and Research & Development divisions, the greater the probability of commercialization (Mansfield, 1987). Kinds of Corporate Innovation There are various kinds of corporate innovation. Baumgartner (2004) enumerates four. One is customer-oriented innovation which refers to all types of interactions involving customers such as in marketing, sales, delivery, customer service, among others. The main purpose of this kind of innovation is to better serve customers. For example innovative advertising can attract a new niche of customers or entice old customers to come back to the company with new business. Or better after-sales service can put an edge for the company over its competitors. Product or strategic innovation should keep the customer in mind and ensure that such innovations are delivered to them successfully (Baumgartner, 2004). Another kind of corporate innovation is product innovation (Baumgartner, 2004). It comes as a novel product that is capable of making companies industry leaders such as the highly innovative Apple Macintosh technologies. However, product innovations do not have to be as grand. Even small improvements in existing products can push a company to the top. Since they already have an existing base of customers, adding features to the product will only delight them and even attract more customers if existing ones spread good word about it. A radically innovated product demands innovative marketing strategies as well to educate potential consumers of its features and help them become aware of its necessity in their lives. From this, it may be concluded that the expense of the company depends on the scale of research, development and production and marketing it would take to sell the innovated product. Still another kind of innovation is process innovation. People in middle management, human resources, accounting, finance, administration, among others may discover something wrong with internal processes in the running of the business and find innovative ways to improve the process. Most of the time, such process innovation may result in cost-cutting or better efficiency in the delivery of services. Changes introduced may take time to be implemented smoothly but with good intentions and persistence, they eventually fall into place and employees realize its benefits (Baumgartner, 2004). Finally, strategic innovation refers to fundamental changes in the operation of a company. It is a daunting task for everyone because it requires an innovative leader with vision and determination (Baumgartner, 2004) whom everyone will follow. The results are possible as grand as the success of Jorma Ollila’s transformation of Nokia from a Finnish conglomerate with a forestry background into a widely successful mobile telecommunications company (Baumgartner, 2004). Science-Related Innovations Most innovations are products of scientific research (Gittleman & Kogut, 2003). For example, the pharmaceutical industry thrives on ever-evolving research and development using biotechnology (Sorescu, Chandy & Prabhu, 2003). It has grown to be the most science-intensive sectors of the economy (Pisano, 2006). A firm’s level of science intensity reflects its willingness to engage in exploration with R&D. Although science-based R&D is uncertain and expense-filled, it tremendously comes back to the company when it is successful (Atuahene-Gima, 2005). It follows that the more science-driven in its R&D a company is, the more willing it is to invest in innovative technological developments (Kim & Park, 2010). More focused firms implement findings of scientific developments faster and more effectively than their competitors (Cockburn, Henderson and Stern, 2000). Science-guided research usually leads to high-impact innovations especially when it is complemented with complex innovations as opposed to innovations borne out of research with modular components such as computers (Fleming and Sorenson, 2004). Having scientific knowledge aids researchers to focus on areas with the most opportunities for success, ruling out costly and time-consuming research involving trial-and-error. Researchers are motivated to continue on with distant searches despite their early failures, if any (Kim & Park, 2010). Fabrizio (2009) argues that “scientific knowledge provides an understanding of the underlying fundamental properties involved in generating the observed outcome (i.e., theories about why it occurs), and this understanding facilitates more focused and effective searches” (in Kim & Park, 2010, p. 46). Sustainable Development Popular innovations nowadays are in the field of Information and Computer Technology (ICT). Costanza (1999) contends that technology and progress bring much hope to people for better things to come. The invention of computers and the internet has indeed provided so many opportunities as well as opened a portal to unlimited information and communication. Who would have thought that the dream of communicating to somebody a thousand miles away with either a click of a button to send a message or email, or see the person in real time on screen via video chat can come into reality? On the other hand, the innovation of ICT has caused the neglect of human resources and depletion of natural resources. Much energy and by-products of nature have been used in the process of technological innovation, causing adverse effects on the environment. To balance things off, Lovins, Lovins & Hawken (1999) recommend an approach they call Natural Capitalism which involves four major shifts in business practices. First, significantly increase the production of natural resources so it is not depleted when technological innovation maximizes the use of available natural resources such as energy, minerals, water, forests, etc. to increase profits while garnering much savings. The second shift of Natural Capitalism is made towards biologically-inspired production models. Natural Capitalism purports elimination of the concept of waste. In this approach, output is either returned to the ecosystem or reused for the manufacturing of another product. Thirdly, the authors recommend a solutions-based business model. Rather than stopping at the manufacture of products to sell, innovative companies can go beyond this basic service and provide a flow of services. For example, light bulb sales that ensure consistent brightness can also be bundled with the services of installation of the light bulbs, consultation services of which bulbs to use in specific areas of the home or office, etc.(Lovins, Lovins & Hawken, 1999). This way, they not only expand their business but they also establish business networks that would hopefully keep coming back due to their favourable services. This then brings new meaning to the business by bringing continuous satisfaction to consumers despite the ever-changing “expectations for quality, utility and performance” (p. 174). Finally, reinvesting in natural capital is advised, as it is the company’s corporate social responsibility to replenish resources by restoring, sustaining and expanding the ecosystems. This also ensures sustainability of organizations due to its energy-saving, productivity-enhancing improvements (Lovins et al., 1999). Sometimes, though, a company’s sustainable development and innovation may not coincide. One may be sacrificed in order to achieve the other. One example is a company reaping much profit on their innovative production of fruits and vegetables to the detriment of the soil which was abused with a variety of chemicals to grow the vegetation. This may cause illnesses in the people surrounding the testing grounds. The company may not even be aware of the negative impact on their stakeholders of the innovation implementation they just had (Hall & Vredenburg, 2003). One realization of a CEO of a company that failed in this manner was expressed this way: “We’ve learned that there is often a very fine line between scientific confidence, on one hand and corporate arrogance, on the other… It was natural for us to see this as a scientific issue. We didn’t listen very well to people who insisted that there were relevant ethical, religious, cultural, social and economic issues as well” (from Hall & Vredenburg, 2003, p. 62). In such a case, the research and development processes of the company may have saved them money initially, but in the long run, they will incur much more expenses to answer for the consequences of the negative effects of their innovation, or even suffer a lawsuit for such negative effects. Entrepreneurial Management of Innovation Innovation is key to the development of new products and services catering to a wide spectrum of customers in the global marketplace as well as in the company’s global competitiveness (Kim & Park, 2010). Firms exploit their existing resources while they develop new ones as they innovate by combining existing and/or new technologies. (Atuahene-Gima, 2005). Companies look into two sources of innovation, namely, internal development and external collaborations (Kim & Park, 2010). For example, state-of the-art technologies are usually borne out of in-house tacit knowledge developed through the process of “learning by doing” (Teece, 1992). Still, it would greatly open more possibilities when this is joined with external Research & Development (R&D) collaborations (Fabrizio, 2009). Drucker (1985) advocates all leaders to become skilled in entrepreneurial management to keep pace with changes in economy and society. This would include creating a market niche and filling a consumer need. For example, if management has observed that their consumers complain about their product’s lack of features, the research and development team heads to work on possible features on the product that can satisfy the needs and desires of the consumer. One example is the mobile phone which has evolved so many times over a span of just a few years. First, it was just a portable gadget that provided convenience in communication. Then, it not only provided communication with two parties, but took pictures, plays music, plays games, browses the internet and so on. Small and large enterprises as well as non-business organizations have innovative opportunities such as new knowledge and industry changes, demographics and consumer perceptions (Drucker, 1985). Also, leaders should be adept in the practices and policies that must be followed in the marketplace. The strategies of Drucker centre on aiming for market dominance, whether with the new niche or the existing one and transforming the economic characteristics of a product, market or industry. Leaders and managers who strive for continual innovation in their organizations must likewise know how to keep an environment that is conducive to creative thinking. Positive organizational climates support the creative efforts of employees and encourage them to act on their ideas towards scientific productivity (Taylor, 1963, 1975). These environments encourage interaction, autonomy and production of knowledge which leads to creative achievement (Pelz, 1956). In contrast, organizations wherein distrust, lack of communication, limited autonomy and ambiguous goals prevail can inhibit scientific innovation (Mumford & Gustafson, 1988). Critical Reflection on Innovation, Research and Development In analyzing the statement, “the key to being an innovative organisation is Research & Development – more expenditure equals more innovation”, this essay has presented various points. To agree with the statement, one needs to believe that research and development emphasis in companies make them more innovative than their counterparts who do not maximize their R&D arm. It is also presumed that the company needs to invest so much to reap tremendous rewards for the innovation such R&D will produce. Kim & Park (2010) contend that the more science-driven in its R&D a company is, the more willing it is to invest in innovative technological developments (Kim & Park, 2010). This is more applicable for large-scaled product innovations that would require costly scientific research with the help of technology and manpower. It also entails more risk. If it fails, it is possible to lose company finances for damages the project may have caused (Lovins et al., 1999 Hall & Vredenburg, 2003). When the innovation is successful, there is a clamour for more improved versions or alternative uses. Thus, research and development go on overdrive, creating a corresponding effect on the rise of marketing efforts. All these entail much expenditure. On the other hand, it is also possible to be innovative with less expense. It is the process of cost-cutting with innovative strategies to still sustain the company which counts as innovation itself (Baumgarten, 2004). This does not mean that it will do away with R&D, for how will innovation come about without it? Companies can rely on the team effort of its workers in the implementation of innovations from the modifications in organizational practices, or coming up with their own innovative ideas to implement (Business Improvement Architects, 2014). Encouragement of creative and innovative behaviours within the organization is nurturing potential innovation and entrepreneurship (Taylor, 1975; Pelz, 1956 & Mumford and Gustafson, 1988). This was practiced by Richard Branson, CEO of the Virgin Group of Companies, as he was open to the ideas of his employees no matter how ridiculous they thought it was. He thought “out-of-the-box” and came up with so many innovations in his business empire that “includes airlines, cellphone companies, banks, hotels, health clubs and even a space travel business” (NPR, 2012, para. 1). Being successful at innovation can promote a company as an industry leader, but it should not be complacent when it does. As with everything else, one needs to be vigilant and persistent in the pursuit of excellence lest the competitor comes up with something better. Research and development divisions of companies should balance internal and external sources of information and incorporate market preferences and needs and collaborate with the marketing division to launch their innovations and deliver it to their customers. A good formula to follow is the incorporation of scientific knowledge and creativity to yield an innovation that will attract a larger market share. Customers deserve something new or at the least, an upgrade of an existing trusty product or service. So, companies should keep on innovating! References Atuahene-Gima, Kwaku (2005), “Resolving the Capability–Rigidity Paradox in New Product Development,” Journal of Marketing, 69 (October), 61–83. Baumgartner, J. 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