The Most Critical Component of Innovation - Case Study Example

Role of Innovation in Business Development s Submitted by s: Introduction Among the critical factors of success for any business is the ability to develop new ideas in regard to operations and products (Annacchino, 2007, p. 56). Transforming the developed ideas into reality involves a process referred to as innovation. Developing new ideas is one phase of a whole process, and businesses have more responsibilities to transform the generated ideas into real products that will be beneficial to the customers. Even though innovation might have various meanings depending on the industry that defines it, the main attributes of the process remain the same. It involves improving things that had been developed before, through the evolution of convenience, efficacy and productivity. The companies that adhere to the components of innovation ultimately emerge as being the most successful and achieve sustained triumph (Vila and MacGregor, 2007, p. 28). In the broad sea of innovation, the businesses that do not fear taking risks and identify the newest opportunities are considered true innovators. These companies, along with the businesses that are considered true innovators, have set themselves apart from their competitors in their respective industries. Most of the business experts are in agreement that innovation is important to the success of businesses, and most of the executives have the belief that long-term business accomplishment is dependent on the ability to come up with new ideas. Innovation Innovation cannot be considered as a single activity, as it has a series of events and hence can be said to be a process. In regard to business, innovation is the creation of new concepts, continuous development of products, and commercial applications associated with these concepts (Neely and Hii, 1998, p. 8). The most critical component of innovation is creativity because it is the genesis of the entire process. Creativity involves the generation of new ideas while the innovation process entails making sure these ideas become reality. Creativity goes to waste if there are no processes created to capture ideas and transform them into elements that have market potential. Innovation also involves money-making and practical application of notions and philosophies, as well as inventions. Business environments utilise innovation to commercially exploit the feasible ideas they come across (Teece, 2010, p. 184). Innovation comprises management of the creation of ideas, technical development of such as ideas, as well as manufacture and marketing of the developed products. Types of Innovation When businesses are seeking to be innovative, they can pick from an array of approaches, and each of these strategies has its own benefits and limitations. Open innovation The open strategy for innovation was developed by Henry Chesbrough and entails the use of internal and external ideas by the company to assist in the advancement of its activities (Huff, Möslein and Reichwald, 2013, p. 5). According to Chesbrough, open innovation involves utilization of purposive inflows as well as discharges of information in the acceleration of interior innovation and the expansion of the markets for outward utilization of innovation correspondingly. This archetype postulates that organizations are supposed to utilize external ideas along with the internal ones, and internal and external routes in marketing as they seek advancement in the technology they possess (Herzog, 2011, p. 48). Open innovation is believed to have a higher profitability in regard to innovation methods since if it is executed in the correct manner, it may decrease costs, speed the time it takes to market products, and enhance differentiation in the market while creating new sources of revenue. Disruptive innovation The term created by Clay Christensen who is a professor and author and entails the creation of new products that start at the bottom of the marketplace and progress to ultimately displace the products that were at the top. This theory of innovation explains the occurrence through which an innovation can transform a market that is in existence through making the process simple, convenient, accessible and affordable where complication and high costs remain constant. Originally, disruptive innovation is created in a particular market, which may be perceived as unappealing or irrelevant to the products or companies that are already in the industry, but the introduced product or company ultimately transforms the industry entirely. Disruptive technology was evident in the introduction of the refrigerator to replace the icebox and the creation of the mobile phone to take the position of the traditional land-line telephones. In both instances, the products were not readily accepted in their initial stages, but with the improvement of the initial designs, the customers eventually accepted these new products. Reverse innovation This form of innovation entails the development of products for use in the developing countries as it creates solutions that can be initially embraced in the developing countries which are relatively poor. These products eventually establish themselves in the developing countries’ markets which are perceived as being richer (Wankel and DeFillippi, 2006, p. 249). Reverse innovation has been used in the development of noodles, which were meant for India, but they eventually became widespread in Australian and New Zealand markets as well as the smaller Wal-Mart stores which were created to for the Mexican market but went on to become popular in the United States. Incremental innovation This entails companies making minimal adjustments to their products to make sure they maintain their position in the markets they operate in. Instead of changing the products entirely, this form of innovation builds on the product that already exists (Leifer, 2000, p. 2). Some examples of incremental innovation are the razor blades men use to shave, which began with having a single blade and now have increased the number of blades to three or four, as well as the vehicle industry that is regularly reviewed to include newer aspects and technology. Breakthrough innovation This innovation is also called radical innovation and involves the creation of entirely new ideas and concepts that do not improve on the products that are already in existence. This form of innovation is in most developed by the research and development departments using newer technologies as a medium to quickly get to the top of the emerging markets. Instances of breakthrough innovation have been exhibited in the advancement that has been seen in the internet as well as the technologies that developed transistors (McElheran, 2011, p. 2). Importance and Benefits of Innovation to Businesses In the continuously evolving world, innovation is the main tool that can sustain continued growth of various countries (Paul and Barrett, 2007, p. 81). The number of firms that are acknowledging the significance of innovation is increasing, and this has increased the competitive advantage they have in the market. Consequently, these companies are taking part in a number of innovative activities that vary from manufacturing procedures, product enhancement, and creation of brand initiatives up to the satisfaction of customers (Lindgart et al., 2009, p. 2). Currently, the business setting has developed dynamism making the customers become more demanding, thereby increasing market competition. To achieve this, companies are coming up with new products that will lead to a fundamentally enhanced experience for the customers. Innovation does not entail technology only as it also encompasses appreciation and exploration of the needs of the users that have not been catered for in a manner that is effective (Contini and Lanzara, 2009, p. 75). Innovation must take part in all the phases of the development of a product or the release cycle and therefore the management of innovation is increasingly gaining primacy in the worldwide business set-up. The organizations that have embraced innovation usually survive and improve to a larger magnitude. The people that are considered as most successful people in the prevailing business setting are those that have the ability to be innovative in the activities they take part in. The successful people are also those that are willing to inspire others and help them embrace innovation in the different aspects of their work. Some of the main areas where innovation can take place include the development and enhancement of products and the creation of entirely new goods and services (Gifford, 1998, p. 71). In regard to supply chain management, innovations may assist in making sure the supply chain is more responsive, supple and effective. Innovation in the supply chain assists in the reduction of costs, development of better variety of products for the consumers, reduce the time needed to get the products to the market and increase growth. Innovation is the central notion that shapes corporate life and assists companies to embrace varying tactical options. It also facilitates the reduction of the costs associated with production while increasing the sources of income and maintaining effective operating structures. It allows the company to identify possible acquisitions on the basis of cost as well as a means of increasing the growths of revenue, and the improvement of capacities. It also enhances research and development structures of the company while bringing the newest technologies closer. This provides an advantage in the ability to make entry in new markets in a quicker and more effective manner. Therefore, the word innovation is correctly denoted as a phenomenon that develops changes to products as well as business models that are associated with a business (Verburg, Ortt and Dicke, 2005, p. 228). To increase their growth and achieve newer heights, organizations need to identify the importance of innovation for the maintenance of the competitive advantage while motivating additional growth. Innovation can be associated with performance and growth the improved efficacy, production, quality as well as viable positioning and increased market share. PESTLE-C Analysis Issues concerning science and technology cannot be addressed without considering the wider context of social and economic factors in regard to hurdles and obstacles to the development of technology. As knowledge in science and technology advances in ways that are influenced by social structures and processes, a PESTLE analysis can be utilised to assess the factors that might affect the innovation process. For a business to be successful with its innovation endeavours, it has to exist in a country that has a stable monetary and political environment. The setup of the industry the business is operating in should be free from excessive government interference so that the business can innovate freely. In terms of the economy, an increase in purchasing power has a positive effect on innovation activities and economic advancement. The economy should be supported by structural shifts that are critical for the sustenance of rise in productivity and log-lasting stable growth. High inflation reduces consumption and consequently economic growth which negatively affects innovation as there are no economic factors to motivate it in such as setting. Social factors that may affect innovation include the educational structure of the population and the number of entrepreneurial hurdles such as bureaucracy and low purchasing power in the businesses operating in a certain industry. The demographics in terms of development in particular countries where businesses operate also affect the rates of innovation and the motivation to achieve it. The level of technology existing is the business setting also affects innovation as this will determine the amount of resources that will be dedicated to research and development in specific fields. The number of researchers who are employed by the company also matters, and companies to strive to maximise the effective resources that they have already invested in. Adjusting technology and innovation to environmental challenges brings about additional costs, but it also comes up with several new innovations and advancement opportunities. An increase in the competition and efficiency of a particular sector results in a rise in the potential to innovate in the entire industry. Companies should develop a commitment to sustainable development in regard to the environment and the society. On the other hand, competition is among the universal concepts that exist in economics and is important in the growth and functioning of businesses. A high degree of competition is advantageous to the business environment as it results in a more adequate allocation of resources. Companies also have to seek ways of producing goods that will appeal to the customers and fetch profits without increasing the costs of production through innovation. Conclusion The innovation process is important and necessary in the development of a company. Innovations create a difference, which allows the company to acquire a competitive advantage in the markets they operate in, domestically and internationally (Potecea and Cebuc, 2011, p. 1). Being innovative means that companies have to be truthfully entrepreneurial, but the executives of companies cannot do everything, making it necessary for the rest of employees in a company to embrace innovation too. More often than not, managers do not pay attention to finding and using funds to encourage and motivate innovation; instead, they follow their respective goals and ambitions. Being entrepreneurial assists in fostering innovation in a company, but management tools must be employed regularly for daily tasks and other processes. The size of a company does not affect the implementation of particular instruments – what matters is the availability of motivation that increases the inspiration to be innovative (Nijkamp and Siedschlag, 2011, p. 178). Regardless of the importance of innovation, most workers in different companies have the perception that their companies are not doing enough to foster innovation. The main deterrent to innovation is that most of the companies are trying to come up with newer ideas in unproductive ways, and the leaders of these of companies do not encourage the creation of new concepts. References Annacchino, M. 2007, The pursuit of new product development, Butterworth-Heinemann, Amsterdam. Contini, F. and Lanzara, G. 2009, ICT and innovation in the public sector, Palgrave Macmillan, Basingstoke [England]. Gifford, S. 1998, The allocation of limited entrepreneurial attention, Kluwer Academic, Boston, Mass. Herzog, P. 2011, Open and closed innovation, Gabler, Wiesbaden. Huff, A., Möslein, K. and Reichwald, R. 2013, Leading open innovation, MIT Press, Cambridge, Mass. Leifer, R. 2000, Radical innovation, Harvard Business School Press, Boston. Lindgart, Z., Reeves, M., Stalk, G. and Deimler, M. 2009, Business Model Innovation, When the game gets though, change the game, The Boston Consulting Group. McElheran, K. 2011, Do market leaders lead in business process innovation? The case(s) of e-business adoption, Harvard Business Review. Neely, A. and Hii, J. 1998, Innovation and business performance: a literature review, The Judge Institute of Management Studies, University of Cambridge, pp.0--65. Nijkamp, P. and Siedschlag, I. 2011, Innovation, growth and competitiveness. Springer, Berlin. Paul, G. and Barrett, V. 2007, My business life cycle, Purdue University Press, West Lafayette, Ind. Potecea, V. and Cebuc, G. 2011, The importance of innovation in international business The USV Annals of Economics and Public Administration, 10(3), pp.157–161. Teece, D. 2010, Business models, business strategy and innovation, Long range planning, 43(2), pp.172–194. Verburg, R., Ortt, J. and Dicke, W. 2005, Managing technology and innovation, Routledge, London. Vila, J. and MacGregor, S. 2007, Business Innovation: What it brings, what it takes. IESE Alumni Magazine, 8, pp.24–36. Wankel, C. and DeFillippi, B. 2006, New visions of graduate management education, IAP, Greenwich, Conn. Read More