Innovation and Change of Competition in the Companies - Essay Example

?Introduction Organizations in the 21st century are facing increased competition. According to Henry and Mayle (2002), the organization’s environmenthas become unstable with rapid changes. Customers have also become informed and empowered. They boldly challenge product and services value and means of delivery. In order to improve the chances of survival in this era, firms have to be co-creative. Apart from other organizational activities like cost reduction and efficiency, innovation has been prioritized as it supports core competencies. In addition, reaction to change has to be swift since organizational innovation and change are closely related. Innovations are established from both the internal and the external environment. There is need for organizations to scan the environment constantly in order to determine the threats and opportunities. Different strategic approaches to management exist. These include environment led approach and the resource based view approach. Regardless of the extent of innovation, the need for new knowledge, new markets, and new employees will have significant impact on the organization Goffin and Mitchell (2005). Hence, change has to be considered when dealing with innovation. The advancement of technology in the 21st century has resulted in increased productions in organizations. Today, the economies of scale concerns have become irrelevant. Supply surpasses demand hence increased competition, and the requirement of enhanced continuous innovation. For successful innovation process, an organization has to establish appropriate structures, processes and culture. Through this the workforce, the partners and the customers will know what is valuable to the organization. In the whole process of innovation, the organization will be forced to make difficult and complex changes. Innovation is defined as a process in which ideas are transformed in organizations into superior processes, products or services. This process involves new ideas or reforming the existing ones. Through this, organizations are able to successfully progress, compete and distinguish themselves in the market. Most successful organizations like Google have allowed the workforce to pursue their interest of creativity. The company has become more than a search engine through innovations such as Google maps. In the current markets where the patterns of production are changing, innovation is of great significance. In the Fordist and post-Fordist development path of learning economy, the global competition is based on the dynamic principle of competitive advantage. This relies on the exploitation of the available inputs hence continual innovation is necessary. Organizations face increased international competition, increasing deregulation in industries, increased workforce diversity, decreasing product life cycles, rapid technologies evolvement in communication and information. Turbulence in environment has resulted in changes in the information age. In such an environment, organizations have to be innovative as they face different opportunities and challenges while trying to enhance the operations in existence (Burnes, 2004). Innovation is categorised into 4Ps namely, product, process, position and paradigm. Product refers to things that are physical, while process is the way things are done or delivered. The definition of products and processes is known as positioning. Paradigm refers to viewing the world in a new aspect and living in it. Industrial laboratory and the present call centre creation are considered as innovation processes. Positioning involves re-branding a product in existence and giving it a different identity. An example of positioning is the changes that took place on the Lucozade drink. Initially it was known be convalescents drink. Later it was transformed to be dynamic booster for wellbeing. Paradigm change is key radical innovation. It has substantial impact in a given society. An example of this is the steam engine created during industrial revolution. It was versatile, it drove; pumps in mines, machines in mills and engines in the introduced railway. Another example is the microchip invention. Innovation ranges from incremental to radical. This is reflected in several models that include; the Abernathy-Clark model. In the Abernathy-Clark model, incremental and radical innovations are clearly differentiated. This model seeks to establish the effect of technology on the competencies and relationships in existence. This model highlights two attributes that can be distributed to incremental from the radical innovation. The first is internal dimension, it is established based on the resources and knowledge utilised. In incremental innovation, the knowledge and resources that exist in an organization are used. It is known to be competence-enhancing. However, for the radical innovation new knowledge and resources are required. Hence, known to be competence destroying. Secondly is the external dimension. In this dimension, innovation is distinguished through the technological changes and how it affects the competiveness of the market. Incremental innovations require minor technological changes and the competiveness of the existing products remains intact. In radical innovation however, great advancement in technology is required. Hence, the products in existence become outdated and non-competitive. This model portrays that incremental innovation suits the incumbents, they will use the available resources in conducting the process. However, for the new entrants the radical innovation will best suit them. They will not have to alter their knowledge background. The radical innovation may cause difficulty for the incumbents. This is because they conduct their activities in a constraint managerial mindset. They also lack motivation to commit to the innovation process especially that it might interfere with the existing products. An illustration of this is the Kodak Company. The organization leadership was strengthened by incremental innovations throughout the several years it dominated the photographic industry. However, when the new entrants came into the industry they applied the radical innovation. The introduction of the digital technology was a big challenge to the Kodak Company. This technology required a unique knowledge, resources and mindsets. The second model is the Henderson –Clark model. It seeks to identify whether innovation is modular or architectural. This model investigates why incumbents are faced with difficulty in handling incremental innovations. An illustration here is Xerox Company, though leading in xerography technology; they could not come up with small plain paper copier. The investigation done in this model resulted in division of technological knowledge that was essential in the development of new products. It also played a key role in introducing innovation in two proportions that include knowledge of the components and architectural knowledge. This is illustrated in the diagram below. The evolvement of the hard disk clearly portrays the four cases of innovation. Henderson-Clark model states that incremental innovation utilizes the available knowledge component and the architectural knowledge. In the case of hard disk, magnetic disk capacity and rotation speed enhancement clearly shows this kind of innovation. Secondly is the modular innovation. In this kind of innovation, new knowledge for several other components is important, however, architectural knowledge remains intact. This kind of innovation is illustrated by the replacement of ferrite read or write heads with thin-metal heads, which was conducted by hard disk manufacturers in the 1980s. Architectural innovation is a contrast of modular innovation. Linkage of components is affected by this kind of innovation, but the single components knowledge remains intact. The hard disk industry passed through different miniaturization waves. Initially the package of the mainframe computers had disks which had a diameter of 14-inch. Years later the industry introduced disk drives with the following sizes,8‘, 5,25‘, 3,5’ and 1,8‘. The knowledge of linkages between components continued to evolve while the hard disk size diminished. Similar technology was utilised by the single components. Hence, these changes are known as architectural innovations. Finally, is the radical innovation known to be the revolution of component and architectural knowledge. An illustration of this kind of innovation is the hard disk industry transformation of magnetic technology into the optical one. New components were needed in the disk drive industry when it created the laser. The components form was also transformed in the hard disks. From to this model, it is clear that not all innovations are incremental. Proper analysis on how innovation affects the component and architectural knowledge has to be conducted. Companies should be keen in differentiating all this types of innovations as competencies and strategies differ. Cannon managed to penetrate Xerox’s market share through development of the appropriate architectural knowledge. This was useful in redesigning photocopier with lower proportions. The third model is Abernathy- Utterbuck model which similar to the S-Curve. This model provides a sketchy summary of introduction, innovations expansion and maturity, and technological cycles. This cycle begins from disorganized discontinuity to the settled situation. This model comprises of three phases. These are; the fluid phase, there is increased uncertainty. There is little knowledge on technology potential how it is employed. In addition, what consumers prefer is not clear here. Second is the transitional phase where experimentation dominates. Imitators also participate here. The organizations concentrate on differentiating and branding products. Thirdly, is the specific phase. Incremental innovation is of importance in this phase in order to reduce various costs and increase the market segments. The fourth model is Teece model. This model is mainly used in the prediction of organizations that will benefit from innovation, rather than those that are better placed to conduct innovation. In addition, this model also helps in identifying those companies that have the potential to invest in specific innovations by utilising their higher incentives. In this model, the focus is on the following factors imitability and complementary assets. These factors are used in identifying those who benefit from the innovation process. The duplication of an organization technology by competitors is known as immitability. For protection against this, several barriers can be used which include, intellectual property rights, and internal procedures that are complex. An illustration of this is the creation of diet cola by RC Cola Company. The company did not put in place barriers for protection hence Pepsi and Coca-Cola duplicated. They seized all the profits by utilising their complimentary assets. Complementary assets involve distribution channels, strategic alliances, marketing potentials and customer relations. Table 1; complementary assets Complementary assets freely available tightly held Difficult to make profits Holder of assets profits Innovator profits Highest bargaining power profits From the above illustration, innovation will not be beneficial to a firm if there is high imitability and freely available complementary assets. Innovation becomes profitable to the asset’s holder and not the innovator when the complementary assets are held tightly and existence of high immutability. This was the case in the diet cola. Low immutability places the innovator in an improved position. In addition, he or she earns increased profits when economic factors do not control the complementary assets. Negotiation will be applied in a situation where complimentary assets are held tightly and are of importance. The bargaining power of the involved parts determines the profits proportion. The fifth model is the S-Curve. This model clearly portrays innovations maturation, growth, and technological cycle in organizations. An organization invests huge amount of money, effort and other kinds of resources in the early stages. However, there is minimal improvement in the performance. Swift progress is witnessed when there is adequate technology knowledge. Exponential growth occurs in an organization after the main technical problems are dealt with and when innovation reaches the adoption level. In this phase, performance gains increases with slight increase in the efforts and resources. Performance declines as technology moves towards its physical limit. This is illustrated in the figure below. Figure 1: Performance against time graph A good example is supercomputer industry. Single microprocessors were involved in the original architecture. The industry invested a lot of money in the technology early phases. The first commercial prototype was produced after a long duration. The expansion of the knowledge and expertise for supercomputers took place when the technology attained a given development level. This improved the evolvement speed of these systems. When technology was approaching its physical limit, microprocessors output declined and performance gains dropped. Supercomputer producers while searching for solution adopted new architecture that comprised of several microprocessors operating in parallel. A new S-Curve was created out of this innovation. Its position was to the right of the initial curve and had superior performance limit. Figure 2: S-Curve Innovation is established from an environment, this consists of both the internal and the external. According to Smith (2006), innovation and the environment are linked together. Organizations are viewed as systems that exist in an environment. The environment provides inputs that the organizations utilize in producing outputs for export. The environment shapes innovation’s parameters. Organizations are able to identify threats and opportunities through constant examination of the environment. Constant scanning of the environment helps an organization to come up with innovative ways to distinguish the current changes and then adjust. Through this, an organization boosts its existence. It is important for an organization to conduct PEST analysis in order to understand its environment. This analysis refers to Political, Economic, Social, and Technological forces that keep changing with time (Tushman and Anderson 2004). Michael porter in his work portrayed environment-led approach in strategic management that is, the impact of environment on innovation. This occurs in different levels that include the competitive strategy, the nation, and the industry. Porter indicates that the association of four factors results in relative national advantage. These include the factor conditions, demand conditions, associated and sustaining industries, and national strategies, structures, and rivalries. At the industry level, porter illustrated how five forces influence competition. These forces are suppliers and buyers existing relation, the new entrants ease in entering the sector, the threat of substitute’s existence to the product’s position, and the firm’s rivalry pattern in the industry. In the competitive strategy level, porter described different strategies that include cost leadership, product differentiation, cost focus, and differentiation focus. On the other hand, there is Resource Based View (RBV) approach to strategic management in the organization. This approach states that an organization needs to utilize the available resources in order to gain competitive advantage. When utilised fully, these resources enables an organization to translate the existing short-term competitive advantage to that which is long term. According to this approach, constant scanning of the environment is of minimal value. It states that that the ever changing and complex environment cannot be fully understood. This perspective advocates for core competencies development in organizations in order to avoid imitations of organization strengths in terms of qualities, traits, and aspects. According to Tidd et al (2009), the market pull, the market push and several other models drive innovation. Market pull drivers of innovation refer to the condition where the nature and pace of innovation is determined by the market pressure and various consumers’ demands for products and services that are new and superior. The technology push on the other hand is a situation where innovation results from internal forces. In this situation, an organization adopts a recent technology in order to conduct its activities using the current systems. Both the market pull and the technology push bring about innovation in organizations, (Senior and Fleming 2006). The technology push is comparable to RBV while the market pull is associated with the environment led approach. These two drivers of innovation are best known as simple linear models. In addition, to this are more models that are complex. These include, coupling model, according to this model there is an interaction between the push and the pull drivers of innovation hence the two are not separate. Instead, they generate each other. The second is the fourth generation of innovative models. This model suggests that innovation occurs in an environment which complex. Unlike the coupling and the linear models that concentrate on the organization and its environment, this model focuses on other influences. These are upstream interaction of stakeholders with suppliers and the downstream interaction with customers. According to this model forces, linkages and coalitions brings about innovation in an organization. Thirdly is the fifth generation of innovative models. This model extends to the complex environment in order to incorporate the following, networks that are sectoral and industry-wide, the policy makers in the public and the Vocational and Educational (VET) systems nature. Leadership with regard to entrepreneurship and intrapreneurship has great responsibility in the innovation process. The various roles of leaders include promoting an innovative attitude and expectation in the organization and introducing appropriate policies and strategies that guide the whole process (Howells, 2005). Entrepreneurship as a process combines resources in order to exploit the available opportunities. Innovation is executed through entrepreneurship. Intrapreneurs are known to be entrepreneurs who are inside an organization. An intrapreneur focuses on innovation and creativity. Leaders are committed to convert dreams and ideas to become profitable ventures or realities. Intrapreneurs are keen to change their own environment. They are against the status quo and strive to improve the internal system. They introduce new estimations, utilises available opportunities and transform them into new realities that are beneficial. They fully support change and come up with reactions that are creative within the organization (Johnson, et.al 2005). National Innovation Systems (NIS) plays a role to in the promotion of innovation. According to Nelson (1993), NIS is made up of different structures, processes and policies in a given situation that promotes and advances innovation. All these components are accessible in the national and the local government level. It focuses on the introduction of technology and information to individuals and organizations that have key roles in the processes of innovation at the national level. NIS at the local government level has direct impact on innovation that is considered greater as compared to that of the central government that is far. Proper structures, processes and culture need to be in place for successful innovation. Leaders should develop an organizational culture that supports innovation. Several strategies can be used to establish the appropriate culture. These include Envisioning, Communicating and Sponsoring. Envisioning involves producing a creative vision for the future state. Leaders have to outline clearly the innovation vision that states its importance especially with regard to business vision achievement. Leaders should also clearly communicate how things work, what is valuable and the right way with regard to innovation to the customers, employees and partners. This will help in fostering innovative culture. Organizations have adopted new practices in order to accelerate the culture of change. The creation of an innovative organization may necessitate complex and difficult changes. According to (Afuah, 2003), when conducting innovative processes, organizations faces difficulty in management and control. This is because decisions have to be decentralised and delegation of power when necessary. Conclusion Organizations today are faced with different challenges. Its environment has become unstable with rapid changes and competition is on the rise. Consumers have also become empowered and informed. They boldly fight for their rights in terms of products and services. Organizations have to examine the environment constantly, in order to identify threats and opportunities. For survival, proper innovative processes have to be in place. Innovation is classified into 4Ps; these include product, process, positioning and paradigm. There are also several drivers of innovation in an organization; these are the market pull and the technological push. In addition, several models portray the various innovation processes adopted by organizations. Two strategic approaches to management exist in an organization. These include the environment led approach and the resource based view approach. Leaders play key roles in the whole process of innovation. They introduce appropriate policies and strategies that guide the whole process. Entrepreneurs and intrapreneurs are known to take lead in innovation. They are creative and are committed in ensuring the existing dreams, and ideas become profitable ventures. They are also against the status quo as it might be a barrier to the smooth flow of the innovation process. Innovation is also advanced through National Innovation Systems. This system’s focus is to put in place the appropriate technology and to equip individuals and organizations with information. An organization should establish proper structures, processes, and culture to support the whole process. Complex and difficult changes may be required in the innovation process. These changes include decentralization of decisions and delegation of power. Bibliography Afuah, A 2003, Innovation Management, Oxford university press, Oxford. Bessant, J & Tidd J 2007, Innovation and Entrepreneurship, Wiley, USA. Bettina, von Stamm 2003, Managing Innovation, Design & Creativity, Wiley, USA. Burnes, B 2004, Managing Change, FT Prentice Hall, UK. Carnall, A, C 2007, Managing Change in Organisations, FT Prentice Hall, UK. Goffin, K & Mitchell, R 2005, Innovation Management, Strategy and Implementation Using The Pentathlon Framework, Palgrave UK. Henry, J & Mayle, D 2002, Managing Innovation and Change, Sage, London. Howells, J 2005, The Management of Innovation and Technology, Sage, London. Johnson, G, Scholes, K & Whittington, R 2005, ‘Innovation and Entrepreneurship’ in Exploring Corporate Strategy, FT/Prentice Hall, UK. King, N & Anderson, N 2002, Managing Innovation and Change, Thomson, UK. Nelson, R 1993, National Innovation Systems. A Comparative Analysis, Oxford University Press, Oxford. Senior, B & Fleming J 2006, Organisational Change, 3rd edn, FT Prentice Hall, UK. Smith, D 2006, Exploring Innovation, M Graw Hill, London. Tidd, J, Bessant, J, & Pavitt, K 2009, Managing Innovation: Integrating Technological, Market and Organisational Change, 4th edn, Wiley, USA. Tushman, L, M, & Anderson, P 2004, Managing Strategic Innovation, and Change, Oxford University press, Oxford. Read More