The Management of Innovation - Essay Example

?The Management of Innovation XXXXXXXX Number: XXXXXXXX of XXXXXXXXX XXXXXXXX XXXXXXXX Name: XXXXXXXX Date of Submission: XX – XX – 2011 Table of Contents Table of Contents 1 Introduction: 2 Microsoft 5 Google 6 Microsoft 8 Google 8 Human Resources 10 Microsoft 11 Google 11 Bibliography 13 Introduction: In the ever changing market environment innovation is one of the most important elements for every business in all industries. With the advancing technology, changing customer needs and desires, and also the need for more competitive products, processes and services, innovation is a necessity rather than a luxury. Peter Drucker explains, “Innovation is the specific instrument of entrepreneurship... the act that endows resources with a new capacity to create wealth” (Drucker, 2011). Considering the growing importance for innovation, this paper aims at identifying three organisations from a single industry and to study and analyse the innovation attempts by these companies. Chosen Industry and Companies: The industry chosen here is the IT and Computing Industry. The chosen companies here for this study include a) IBM, b) Microsoft and c) Google. The main reason to choose this industry is the every changing market for these products and services. Also, IBM, Google and Microsoft are multinational companies with a wide presence across the globe hence these are the best companies to be studied for their attempts and approaches towards innovation. Industry Analysis: Several studies have confirmed over the past few years that innovation is becoming an important aspect of the businesses. Almost 90% of the businesses treat innovation as a priority and this has led to a significant increase in the innovation and the need and importance of innovation (Shukla, 2009). It has clearly been noted that innovation has a major impact on the strategic planning in the industry and is also a major factor in wealth creation as well. The information technology industry as a whole is an ever changing environment. According to Peter Drucker, a company which is unable to innovate in the current age of necessitating innovation then the company can face decline and extinction. The information technology industry is one where the companies need to be able to be innovative to be able to compete in the markets. A recent issue in the IT industry was where Microsoft has been faced with a high pressure due to the new Apps created by Google. Microsoft owns as much as 33% of the total markets and the company caters to a majority of the market (Vellante, 2010). Studies have also shown that the determinants of innovation and productivity are mainly competition. The IT industry has a high level of competition and everyday one business or another seem to innovate something new, products, services or even new business systems. As very well identified by Peter Drucker, innovation is generally based a few main factors. Each of these has been discussed in brief in relation to the IT industry. Firstly, every company in the IT industry has faced several unexpected successes and failures. These as explained by Drucker is one of the few reasons and also an opportunity for companies to adopt innovation. Secondly, as seen the IT industry is one which has a constantly changing market, demographics and also market structure. Hence when a company is a part of this industry it is crucial that innovation is focused upon. Also, with the current knowledge and information based world, customers are looking for the best and latest options and prefer to have more innovative options rather than the old products and services with no improvements (Luebke, 2010). Hence a company participating in the IT industry requires innovating not only to meet these new knowledge needs but also to be able to develop and sustain itself in the industry against the competition. Hence considering these factors and elements, it is crucial to be innovative and to device innovative products and services for the customers. Innovation has hence become essential in the industry as almost every business is being affected by globalisation, technological development, knowledge revolution, and also migrations. Innovation allows the companies to add value and also widen the overall options and the quality of life (Shukla, 2009). Structural Factors: Having understood the industry and the need for innovation in the industry, this section aims at identifying how the companies chosen deal with research and development and the organisation structure that they adopt. Also, here the focus is on the methods used by the companies to encourage innovation within the company. IBM: IBM has been in the markets for a very long period of time and the company has been recognised to be among the top diverse organisations. IBM become the pioneers to helping the clients online and was in a way the pioneer for ‘e – business’. Through the years, the company has grown to become known for the innovativeness and technological advancements. The company focuses a great deal on research and development and this is evident from the fact that it kept aside $6 billion for R&D in 2010. Until date the company has been very successful and has been in the top market shares across the world (IBM.com, 2010). The company operates with an open office environment and is focused on innovations and newer developments. The company has developed a complete department which focuses on innovation. This is referred to as the IBM's Global Innovation Outlook (GIO). IBM provides a number of awards not only within the company but also outside the company. There is clearly a major focus on the need for innovation and the company shows commitment in providing continuous support to and cultivates communities to be more effective and innovative. IBM has developed a number of rewards that the company provides for innovative ideas. These include awards like Industry Skills Awards, Scalable Data Analytics, ESA Awards, Eclipse Awards, X10 Awards, UIA Awards, Jazz Awards, and Real-time Awards (IBM University Awards, 2011). The focus and commitment towards research and development is also clearly evident from the fact that the company focuses on providing Ph.D. Fellowship to Ph.D. students. This helps the students financially and allows the students to focus on the research. Also the focus on research and development is clearly evident from the attempts of worldwide brainstorming. The company has a high portfolio of intellectual capital which they use for the innovative ideas within the company. Microsoft Microsoft is recognised world – wide and the company caters to a majority of homes and offices across the globe. The company however has clearly had several difficulties in terms of innovation and although the company focuses on innovations. Microsoft however is one of the few companies that budgets as much as $9.5 billion for the research and development. The Chief Operating Officer of the company Kevin Turner explains that “This is our aspiration. This is how we’re reinventing Microsoft, and what we’re bringing to the marketplace” (PC Launch, 2010). The record of innovation for the company compared to the other companies is a lack buster. Based on the company’s attempts for innovation a few simple lessons have been learnt. Firstly, innovation is hard and is not always a success. Although a lot of funds go into the research and development, the actual implementation might not always be the expected results. Secondly, in the case of a big company like Microsoft changing is not as simple as in the case of a relatively smaller company. Finally, it is essential to sustain the innovation in hand rather than focusing only on new innovations (Hawn, 2004). Google Google has been known for the openness and the freedom that the management adopts for the business. The company has been recognised for the chaos management and is one of the only companies that not only embraces chaos management but has also been able to make profits from it. The following sections will detail an analysis of the company based on the chaos management that the company has adopted for the management and also the power and control within the company. Google has made a mark across the globe and the company has shown immense levels of innovation (Merrill & Martin, 2010). Google focuses on the research and development to a great extent and the company has spent as much as $3.7 billion on R&D for the year 2010 (Google Investor Relations, 2010). As has been expressed by Marissa Mayer, about her experience at Google, it is evident that the main focus of the company is on a few important elements like, ideas come from all around and sharing is one of the best things. The company also follows that if an individual is brilliant, self motivated and innovative then Google is hiring. Google also provides the employees with twenty percent time policy where the employees are expected to work on their dream projects and no ideas or projects are killed at Google, they are only morphed. Also as has been explained by Peter Drucker, Google follows the policy that projects are not instantly perfect, however can be perfected by gaining feedback (Mayer, 2007). Finally other key points that the company focuses on includes, the importance of users and not money, and that data should be used for decision making. The company follows an open communication work environment and all attempts to ensure that knowledge is shared among everyone are made here. Corporate Culture: This section aims at identifying the culture of the company which assist the company in developing the innovation. Here several aspects like the values, and different attempts made by the company will be discussed. IBM: The culture within IBM is one where every employee and ever idea is respected and recognised. Here it is clear that the company has a wide range of programs and sessions to help employee participate and be innovative. Of these one of the important programs was that of IBM Jam. IBM Jam has been one of the underlying factors that have assisted the company in being innovative. As explained by Bjelland and Wood, the website is used for digital recording of the minilectures, The experts from the R&D section work and participate together as moderators and assist in providing easier understanding of technologies and also the needs of the customers (Bjelland & Wood, 2008). The company has used the Jam sessions for development and creation of several businesses like 3 – D internet, Intelligent Utility Networks, Real-Time Translation Services and many more (MIT Sloan Management Review, 2008). The company’s values here clearly show the importance that is given to innovation. The values of the company read as follows: “a) Dedication to every client's success, b)Innovation that matters, for our company and for the world and c)Trust and personal responsibility in all relationships” (IBM , 2011). Microsoft The Microsoft culture is more focused on honesty and integrity. This is clearly evident from the values of the company which reads, “As a company, and as individuals, we value integrity, honesty, openness, personal excellence, constructive self-criticism, continual self-improvement, and mutual respect. We are committed to our customers and partners and have a passion for technology. We take on big challenges, and pride ourselves on seeing them through. We hold ourselves accountable to our customers, shareholders, partners, and employees by honoring our commitments, providing results, and striving for the highest quality” (Microsoft, 2011). The company focuses on providing the employees with a flexible work environment to assist in the overall improvement of the performance as well as to bring about newer ideas. However there is more focus on retaining the current successful products and improvising on them rather than focusing on the newer products. Google Google’s approach in the work environment is one where the employees are given complete freedom to work on projects that they prefer. The company follows expects employees to use 20% of their work time on projects based on their own trial and errors. The company allows the employees to try as many ideas and works basically on the risk taking style of management (Anthony, 2009). It has been noted that the company currently works on a style where chaos management has been noted to be the only method to deal with the modern working environment and working style. The main focus for Google has been on the freedom of creativity and also innovation. Google helps the employees work on self development projects and also provides funding for projects which seem viable. The famous social networking site Orkut was one such project (Girard, 2009). Google believes this to be only effective manner of working as the amount of information available is so high that it can clearly lead to information overload. The company’s approach of chaos management is interesting as it provides the employees with a chance to come up with a wide range of ideas (Conner, 2008). The overall culture within the company is one which has no rules, regulations and the employees are expected to be as innovative as possible. It has been studied that in 2005, of the 50% of all products produced, 20% were a part of the independent projects (Mayer, 2007). Google provides the employees with better benefits and also recognition for all the independent products that are developed. More details on the human resource practices within the company are discussed in the next section. The environment is very effective and a very useful method to be adopted in organisations and in a time like now where information forms the basis of any successful company. The company provides the employees with a chance to work in an informal environment with no rules and regulations and a freedom of space and ideas (Merrill & Martin, 2010). Human Resources Here this section focuses on analysing the companies to identify the human resources practices that have been used to assist and grow the levels of innovation within each company. Here different aspects like the work timing and flexibility at work will be discussed. IBM: In terms of the human resource management of the company, it is clear that innovation is one among the most important aspects. IBM focuses on providing jobs to individuals who are looking to use their knowledge to the fullest extent (IBM, 2011). The company provides excellent rewards system for the employees and uses performance management systems where the salaries are based on the performance and the initiatives taken by the individuals. Individuals can gain a higher salary based on the initiatives taken as well as the innovative thinking and competitiveness of the employees. This in turn helps in improving the morale of the employees and helps in better initiatives, innovation and also better overall performance. The reward systems of the company to a great extent act as a backbone for the innovativeness and also helps motivate the employees to a great extent. The most effective reason that the company is able to retain the innovators is the fact that human resource planning is strategic and in line with the company objectives. Also, the flexibility that the company provides the employees in terms of building the career how the individual likes is a reason for more commitment, innovation and effective work. Microsoft In terms of within the company and the company products there is little innovation that is focused upon by the company. However it is evident that Microsoft pays a lot of attention to innovation in other aspects and elements of the business. The company has developed an innovation centre which focuses on “students, entrepreneurs, academics, professional software developers, startups, IT profession­als, industry organizations and local governments” (Microsoft Innovation Center, 2011). The human resources are used to ensure that the innovation centre operates well and the company uses this as an option to bring innovation and to help contribute to the markets. Microsoft provides a number of awards as well relating to the innovation centre. The company has also received a number of rewards for the innovation centres as well. Microsoft has participated in developing innovation centres for community and to reach out to the students, professional and also academic researchers. The company’s inclination and commitment towards innovations is clear from the contribution that it makes to the society. Google Google has been recognised for several different management approaches and one of the biggest innovations for the company includes the management practice. One such eye catching and teaching moment recently was where Eric Schmidt moved away from the CEO position leaving the position open for cofounder Larry Page (Nussbaum, 2011). Google’s HR policies have also recognized to be very different and innovative as compared to other companies. While other companies have shown intense struggle in development of new products and services, Google has been found to dish out newer projects on a weekly basis. The main reason here is the human resource practices followed by the company. The HR department of the company faces the challenge of ensuring that all employees are motivated and inspired to work. Here with the 20% time policy that the company follows, it is also noted that the employees receive major benefits and rewards for their individual projects. Google’s inclination towards innovation is clear from the fact that the company ensures that employees receive different types of training and development options at the cost of the company. The employees are encouraged to take on as much training and to work on developing their skills and also highlights the company’s commitment towards technological and professional advancements. The main aim and reasons for the trainings is to help encourage more innovations and also to increase the levels of experimentations. Conclusions In conclusion, it is evident that innovation in the current market place is necessary. Companies that have shown focus and interest in innovation clearly tend to perform much better than other companies with little or no innovation. The changing needs of customers can only be clearly and effectively met with innovations and best use of technology. Hence it is evident that most companies even if not within their own company try and participate in developing innovation centres for others to contribute to the markets. Bibliography Anthony, S. D. (2009, June 22). Google's Management Style Grows Up. Retrieved February 14, 2011, from Bloomberg Businessweek: http://www.businessweek.com/managing/content/jun2009/ca20090623_918721.htm Bjelland, O. M., & Wood, R. C. (2008, October 1). An Inside View of IBM’s ‘Innovation Jam’. Retrieved February 14, 2011, from MIT Sloan Management Review: http://sloanreview.mit.edu/the-magazine/articles/2008/fall/50101/an-inside-view-of-ibms-innovation-jam/?type=x&reprint=50101 Conner, N. (2008). Google Apps: The Missing Manual. Pogue Press. Girard, B. (2009). The Google Way: How One Company Is Revolutionizing Management as We Know It. No Starch Press. Google Investor Relations. (2010). Google's Income Statement Information. 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