Innovation Management Practises in Consumer Electronics Industry - Term Paper Example

Innovation Management Practises in Consumer Electronics Industry Introduction The technological advancement has a profound impact upon all the major aspects of human life and it has changed the way of living across the globe. This impact can also be seen upon the principles and practices of innovation management that have been undertaken by the industries and business organisations to acquire and maintain a competitive position in market place. Over the period of time the importance and discussion over innovation management has intensified manifold and in this knowledge based economy, innovation is perceived as the most significant factor of success and survival of a firm. This paper makes a critical analysis regarding the innovation management practices adopted by two well known companies of the world. The names of these companies include Apple Inc. and Haier Group. These companies are well placed into consumer electronic industry and are known for their innovative practices at workplace. This paper aims at making critical analysis of organisational culture and human resource management practices in these two companies and their influence upon creativity and innovation of both the organisation. Apple Inc: An Introduction When we talk about innovation and management of innovation in the context of Consumer electronics, we cannot help talking about Apple Inc. It is considered as one of the most leading companies in the field of technology in today’s world. Initially, it was started with a scratch and grew rapidly in such a way that became a symbol of innovation in technology. It is known worldwide that no company can sustain in the market without innovation and creativity and when it comes to consumer electronic devices, continuous innovation and creativity becomes a prerequisite in order to survive and succeed in the market. Steve Jobs, co-founder of Apple Inc. and a great innovator once said, “Innovation distinguishes between a leader and a follower” (Gillam 2012). Apple Inc. has set up itself as one of the most prominent companies in industry of consumer electronics. It has made the most significant position in both hardware as well as software through constant innovation and creativity. It was established in 1976 and since that day, it has been continuously focusing on innovation. It has made a great impact on society through its various major innovative products and features in the field of consumer electronics such as Trackpad, Mouse, GUI, iMac , iBook, iTunes, iPhone, iPod, iPad and so on (OGRADY 2008). Structural Factors Research and development is an integral part of any company especially when dealing in consumer electronics. A huge percentage of revenues or profits are spent by most of the companies across world on its research and development department with an aim to drive constant innovation. Apple Inc. has also been focusing on its research and development and has kept on enhancing the budget on its R & D but it is surprise to see that it has spent very less percentage of its revenues in comparison to its competitors like Microsoft, Cisco and Oracle. In spite of its least budget on R & D it has left behind its competitors in terms of innovative products related to consumer electronics. Figure1.0 Percentage of Revenue on R & D Source: http://gigaom.com/apple/how-apple-gets-away-with-lower-rd-spending/ Above mentioned chart (Figure 1.0) clearly shows that Apple Inc. had spent around 5.5% of its revenues on R & D in the year 2001 which kept on declining on yearly basis and it was around 2% of its total revenues in the year 2011. Decline in percentage does not mean that Apple Inc. has reduced its budget on R & D, company has constantly enhanced the budget on R & D but because of huge growth in revenue generation it’s percentage on R & D kept on decreasing. In contrast to this, competitors like Oracle, Microsoft and Cisco spent huge percentage of revenues on its R & D (Ogg 2012). Organization’s structure is said to be an important part for driving innovation and success. It defines how the job responsibilities have been split among individuals and whether the organization is following formal structure or informal structure. When we talk about formal structure, it means everything is preplanned and responsibilities have been predefined and there is a proper hierarchy is made for the communication and if we talk about informal structure it means there is no proper hierarchy is followed. Initially, when personal computers were introduced by Apple computer the organizational structure used to be informal and flat that resulted in formulation of innovative strategies and later on because of huge competition in personal computer market, structure of organization was redefined. However, company is still following the informal and flat hierarchy structure (Quick and Nelson 2007). Employees at Apple Inc. are always encouraged to take risk in order to bring out something innovative and unique. Apart from this, various approaches are adopted such as open communication sessions where people are encouraged to express their views or discuss any idea if they have. Corporate Culture of Apple Inc. The term culture is often used in workplace conversation in the context of corporate culture. A corporate culture can be described as a set of shared values by the people of an organization and these values distinguishes one organization to another. The term” shared values” can be defined as a set of norms, principles, beliefs, behaviors, religions etc. The culture of an organization immensely influences its people and can have a positive and negative impact at the workplace. An organization’s success and failure can be attributed to its culture (Willcoxson and Millett 2000). The work culture at Apple Inc. is flexible and relaxed with strict commitment to goal. The people at workplace are passionate and value driven. Company allows its employees to take risks and open discussions. Individuals are not bounded to follow organizational hierarchy and they are respected and rewarded according to their talent and innovation. Apple firmly believes and encourages diversity because diverse workforce leads to more creativity and innovation. Apart from fixed salary, company has flexible compensation plan to reward the talent and encourage innovation at workplace (Brenton and Driskill 2010). There are various sound HR policies which have been formulated to accelerate the growth of its employees such internship, on the job trainings and providing them other career opportunities. People at workplace are fostered for bringing out new ideas and imparting those ideas to others to see the feasibility of those ideas. Customer centric approach is followed across the organization. Products are manufactured by taking customer’s needs and convenience into consideration. One of the most significant aspects of Apple Inc. is its high risk taking ability that resulted in many great product inventions such iPod, iPad, iPhone etc (Brenton and Driskill 2010). Steve Jobs firmly believed that task completion is much more important than the process which is used. People at workplace are given autonomy to work in their way but with strict deadlines. Irrespective of position, employees are treated and respected equally at workplace that gives its employees a sense of satisfaction that ultimately leads to more loyalty towards the company and dedication towards the work. There is no specific dress code for the employees of company that gives its employees a sense of happiness (OGRADY 2008). Human Resources in Apple Inc There are many reasons behind the success of Apple Inc., one of the most significant reasons which can be attributed to its success is sound H.R. Policies which have been formulated and implemented by keeping employees satisfaction into consideration. Wearing formal attire is not mandatory at workplace for people of Apple Inc. they are allowed to wear what they wish to. This policy tells a lot about the company and the flexibility which has been given to its employees. At Apple Inc. people are recruited from all over the world depending upon the talent they possess and the requirement of the company (Gillam 2012). There are various good human resource management practices are followed to encourage and retain employees at Apple Inc. Employees at Apple Inc. are always seen as an asset and managers are instructed to assign work as per the employee’s interest. Employees are given opportunity across the organization instead of just a particular process, through internal job posting. Apart from this, all the employees are given a new laptop as a signing bonus with an aim to motivate and delight them at Apple Inc (Schuler and Jackson 2008). The culture of work at Apple Inc. is highly flexible and people are encouraged to work the way they wish to work. The people at workplace have strong commitment towards company’s values. Company’s human resource management policies are formulated in such a way that it motivates employees to take initiatives and risks. Individuals are respected and proper care is given to them at workplace. Apart from fixed compensation, company provides various variables to employees in order to encourage innovation at workplace (Brenton and Driskill 2010). Apple Inc. issues business cards to each employee at the workplace that shows that each individual is equal and respected at workplace. Company has also adopted a very strong on the job training and development program for its employees. The trainings and development programs are designed by taking employee’s needs and objectives into consideration. These programs are highly focused on innovation and creativity (OGRADY 2008). One of the most important factors that differentiate Apple Inc. from other companies is “freedom” which is given to its employees. There are no such restrictions like formal attire, fixed timing etc. Company believes in giving autonomy to its employees and this helps in developing and innovation culture at workplace. Secrecy is highly maintained at workplace. Company follows informal corporate culture which is helpful in bringing out innovative ideas. People at workplace share their ideas, no matter how small it is, to check the feasibility of ideas (Brenton and Driskill 2010). Alike Apple Inc, Haier Group has also marked their presence in the group of the most successful companies of consumer electronics industry. The following discussion focuses at making a critical analysis of innovation management practices at Haier Group: Haier Group: Organisational Background Haier Group is a Chinese multinational company and its headquarter is based in Qingdao, Shandong, of China. The company was founded in the year 1884 by Zhang Ruiming, and over the span of around three decades it has established itself as one of the most successful companies of the world. In the year 2011 company achieved a milestone when it was awarded the status of the world’s number one household electrical appliance company (Yuanyuan 2011). The company manufactures and markets its product under two categories; consumer goods and commercial goods. The product category of consumer goods includes mobile phones, refrigerator, TV, air conditioner, washing machine, dish washers, small appliances, micro wave ovens, water heaters, etc. On the other hand, under the commercial product category the company is known for manufacturing commercial freezers and commercial air conditioners (About Haier 2012). Haier Group: Structural Factors The current position which is being enjoyed by the company is not a matter of chance rather the credit goes to the Haier’s knowledge management practices at workplace. The structural factors of this company can be identified as one of the most important factors of its success in global market. The company has shown a tremendous improvement with respect to the several dimensions of business and this can be observed through analysis of facts and figures. In the year 1998, the company established ‘The Haier Central Research Institute’ in order to promote research and development (R&D) among the employees, and to make innovation practices a core value at workplace. Since the foundation of this institute, Haier Group has been investing 5% of its annual profit for research and development. The company has set up more than 48 research entities across the globe and has strategic alliance with around 28 foreign firms (Hawes 2012). The company has shown a constant openness to new ideas, as they believe that new ideas are not only limited to new product development but are equally significant for improvement of business processes. The firm believe in this principle has produced highly satisfactory results for the company and by the end of year 2010; the company has already applied for more than 10,000 patents, including 3,057 invention patents. The number of patents and innovation are highest for this company among the Chinese manufactures (Yuanyuan 2011). A series of initiatives has been taken by the company to promote the innovation and creativity at workplace. All these initiatives of the company revolve around quality and customer satisfaction. An example shows that how the company has emphasised upon providing high quality to consumers when it decided to set quality benchmark even above the Japanese Industrial Standard (JIS). As per the guidelines of JIS, the return-repair ratio for refrigerator should be less than 0.6%, as against this stringent benchmark of JIS, the company decided to set the same ratio at level of 0.4%. As a result of this decision the company in the year 1988, Haier was awarded China’s National Quality Gold Medal. In a subsequent progress only after two years of this award, in 1990 Haier’s refrigerators passed the American UL certification (Duysters et. al. 2008). Haier Group makes every possible attempt in order to promote creativity and innovation at workplace. To serve this purpose, the company developed a series of policies and practices and combined them with the help of management philosophy. Haier has followed two management philosophies for reinforcing the culture of innovation management and they are known as OEC (Overall Every Control and Clear) and SBU (Strategic Business Unit). The management philosophy of OEC was introduced in the year 1986 and became famous with the name of ‘All around Optimized Management Approach’ (TU and YUAN 2010). The OEC plan was driven by the purpose of effective management of everyday business processes and enabled Haier in evaluating the appropriateness of the plan in terms of produced outcomes. It introduced a practice of making an improvement of 1% on daily basis with regard to identified issues and problems. The firm’s OEC management-control system encompasses following characteristics: It helps the company in keeping a constant focus on quality and customer value. In addition to this, the control system also helps in improving quality of products, efficiency of business operation and quickly responding to the emerging needs of target consumers. Seeking a high level of commitment from top management in order to develop a ‘performance culture’ at workplace. The OEC control-system aims at ensuring a high degree of employee involvement in generation and exchange of new ideas. This helps the company in increasing its competitive position in the marketplace at the same time incorporating a sense of belongings among the employees at workplace (Lin 2005). Haier Group: Corporate Culture It has been enunciated by many of researchers and scholars that organisational culture has tremendous impact upon the innovation management practices at workplace, and the same holds true for Haier Group. Yidan (2009) has argued that Chinese corporate culture differs from rest of the world and to support his argument, he has given two reasons. The first can be noticed as their conservative values, which make them very possessive about their culture. It has been observed that it is difficult to motivate Chinese employees until and unless they are the touch and experience of their specific corporate culture (Yidan 2009). Meanwhile, the second reason is closely associated with the superiority and practical effectiveness of Chinese corporate culture with respect to the western counterpart. Traditionally, Chinese culture is driven by focus on long term success and survival, which are being practices by the originations across the globe. The superiority of Chinese culture can be observed through the words of Confucius when he states that “Those who are virtuous will not be lonely: they will certainly attract followers”. At present the reflection of these great words can be found through a quote of Peter Drucker, when he states that “Only those with ability to manage themselves can become good managers” (Hawes 2012, pp.26). The corporate culture of Haier Group is focused towards creating an environment in which employees and employers can integrated their KSAOs (Knowlege, Skills, Attitude and Other chracterisitics) and can promote trust between them. In addition to this, the innovation based culture of this company focuses at ensuring that employees are open to new ideas and share and exchange their knowledge with each other (Lopez et.al. 2004). To attain the purpose of innovation management, the company has embraced the concept of SBU (Strategic Business Unit). This management system believes that every employee of Haier is an independent and innovative business entity, so it is reasonable to refer them as SBU. This unique management philosophy of the firm has transformed every employee as a ‘boss’ and an operator of his/her own target at workplace (Hawes 2012). The introduction of SBU management philosophy in Haier as a part of organisational culture has not only helped the company in enhancing the performance of each employee but has also assisted into delivering the best quality. The company has inculcated quality through innovation, in the blood of organisational culture and there are several examples which complement the same. An equally famous example of innovative practices of this company can be observed with respect to modification of washing machine. In the year 1990, the market research of Haier suggested that the rural consumers of this company were not ready to buy a washing machine only for laundry purpose; rather they were looking for a machine which can also be used for dairy and frames products. This need of rural consumers was appropriately addressed by the technical team of Haier and a washing machine was developed that was capable of washing the cloths, along with frame and dairy products such as like, yams, potatoes, lobsters, buckwheat, etc (Gnosa 2011). Haier Group: Human Resource Policies It is evident from above discussion that the company has a very fair idea that human resource is the most productive asset of any organisation and this is the reason that every employee of Haier is perceived as a SBU (Strategic Business Unit). The company has designed and implemented a human resource management system which aims at providing continuous feedback to each employee on their performance. Haier has made it mandatory for each employee to keep performance records on day- to- day basis. It is the responsibility of immediate supervisors to check these performance records and make a monthly evaluation sheet for each employee. The company has developed a practice of publishing the performance record of 10 top and 10 bottom performers in every month on firm’s bulletin board (Hawes 2012). The firm arranges a meeting between top ten performers and bottom ten performers, so that the least performers can get some tips and insight by their colleagues and can increase their productivity and efficiency. In addition to this, adequate time and resources are given to bottom 10 performers in order to enhance their performances and efficiency and if they fail to do so, it may cost to their jobs. Haier has been able to successfully develop a human resource management system, which directly establishes interlink between human capital and innovation practices (Hawes 2012). It is the policy of Haier Group to share the fruits or consequence of a product performance at market place. It means that if a product becomes successful in market, the R&D team along with all the associated members, associated with development of that particular product are given incentives, and get bonus as a part of profit. On the other hand the company go for salary cut or reduces the benefits of the employees, if a product completely fails in the market (Zhang and Alon 2011). In order to motivate the employees and recognise their contribution to the success of the firm, it publishes a magazine ‘Haier People’. The company owned magazine is cantered towards customer-oriented innovation. The articles published through this magazine provide adequate and authentic information regarding creativity and innovative skills of employees and shows that how an employee has aptly addressed the need and wants of the consumers through conventional and non-conventional sources. Through this policy company serves manifold purposes including offering non-monetary motivation and recognition to the employees, proving learning to others, etc. These practices of Haier Group have evolved over the period of time and have ensured that the company is continued to be known for its innovation and quality standards (Gnosa 2011). Summary On the basis of above analysis and discussion regarding the innovation management practices in Apple Inc. and Haier Group, it would be reasonable to say that both of the companies have been successful in development of a culture which values creativity and innovation at workplace. It is evident from the above discussion that the core of both the companies is based upon innovative practices which can bring tangible differences in the lives of consumers and can make this world a better place to live. It is worth emphasising here that although Apple and Haier have different organisational culture and belong to different geographical location but still they share something in common, which can be identified and analysed as their ‘customer-centric’ innovative approaches. Their innovative approaches imply that an innovation can only be successful when it gets a right place at the intersection of society and economy. References About Haier. 2012. Consumers Products and Commercial Products. [Online]. Available at http://www.haier.com/in/ [Accessed on: 19 August 2012]. Brenton, A. L. and Driskill, G. W. 2010. Organizational Culture in Action: A Cultural Analysis Workbook. California: SAGE Publications, Inc. Duysters, G. et. al. 2008. Internationalization and Technological Catching Up of EmergingMultinationals: A Case Study of China’s Haier Group. [Online]. Available at http://arno.unimaas.nl/show.cgi?fid=12736. . [Accessed on: 19 August 2012]. Etherington, D. 2011. Apple’s R& D spend up 33 percent for 2011. [online].available at http://gigaom.com/apple/apples-rd-spend-up-33-percent-for-2011/ [Accessed on:18 August 2012]. Gillam, S. 2012. Steve Jobs: Apple Icon. Minnesota: ABDO Publishing Company. Gnosa, S. M. 2011. Global Business Strategy: Strategy for the Base of the Pyramid (BoP). Germany: GRIN Verlag. Hawes, C. 2012. The Chinese Transformation of Corporate Culture. New York: Routledge. Pp. 114-116. Lin, T.W. 2005. OEC Management- Control System Helps China Haier Group Achieve Competitive Advantage. Management Accounting Quarterly 6, 3, PP: 1-11. Lopez, S.P., et.al. 2004. Managing knowledge: the link between culture and organizational learning. Journal of Knowledge Management 8, 6, PP: 93-104. Lu, Y.et. al. 2008. Knowledge management and innovation strategy in the Asia Pacific: Toward an institution-based view. Asia Pacific J Manage 25, PP: 361-374. Nelson, D. L. and Quick, J. C. 2007. Understanding Organizational Behavior. Maso: Cengage Learning. Ogg, E. 2012. How Apple gets away with lower R & D spending. [online].available at http://gigaom.com/apple/how-apple-gets-away-with-lower-rd-spending/ [Accessed on:18 August 2012]. OGRADY, J.D. 2009. Apple Inc. Westport: Greenwood Press. Schuler, R.S. And Jackson, S.E. 2008. Strategic Human Resource Management, 2nd Ed. UK: John Wiley & Sons. Willcoxson, L. and Millett, B. 2000.THE MANAGEMENT OF ORGANISATIONAL CULTURE: Australian Journal of Management & Organisational Behaviour 3(2), 91-99. Yidan, L. 2009. Strategic Plan for Haier’s Global Brand Building. [Online]. Available at http://publications.theseus.fi/bitstream/handle/10024/5764/luyidan.pdf. [Accessed on: 16 July 2012]. Yuanyuan, W. 2011. Introduction to Haier. [Online]. Available at http://www.szdaily.com/content/2011-03/08/content_5407186.htm.[Accessed on: 16 July 2012]. Zhang, W. and Alon, I.2011. A Guide to the Top 100 Companies in China. Singapore: World Scientific. Pp.159-160. Read More