Innovation and Technology Management - Literature review Example

Innovation and technology management Table of Contents Introduction 2 Types of innovation 3 Literature Review and Critical Analysis 5 Innovation and technological development in companies 5 Innovation and technological development globally 9 Role of government in fostering innovation 9 Success or failure of companies adopting innovation 10 Barrier to innovation 12 Conclusion/ Recommendation 13 Reference List 14 Bibliography 17 Introduction Presently, in the competitive world of management, it is very difficult for companies to sustain in the long run as number of competitors is increasing rapidly. Hence, in the global scenario, the companies need a driving force to continue their business in the long run uninterruptedly. The main driving force for the company is innovation; innovation of new products and services helps the companies to differentiate from each other. The innovation needs to take place rapidly and in a very cost effective way. This can be stated as the need of the companies operating worldwide for the last few decades. During the recession in 2008, the owners of different companies worldwide were focused towards growth and they predicted that technological innovation would be the main source of success for the companies. In such a situation, The CEOs of the companies employed technology to gain success and differentiation simultaneously (Orcale, 2012, p. 1-10; Jaruzelski, Loeher and Holman, 2012, pp. 16-24). According to the survey conducted by PricewaterhouseCoopers (PwC) in 2011, about 80% of the CEOs of the companies operating globally believed that innovation is main driver for organisational efficiency and aims at building competitive advantage. From the survey results, it was observed that about 70% of CEOs had invested in undertaking technological up gradation to reduce the cost of the companies and in return became more efficient (Orcale, 2012, p. 1-10; Jaruzelski, Loeher and Holman, 2012, pp. 16-24). However, it is also evident that even technological advancement cannot deliver success until and unless business goals and strategies are developed and focused. Thus, it is pivotal to understand the condition of the company before undertaking any innovation process. The role of innovation is evaluated so as to ensure that it will lead to profitable growth. The changes in the company operation are evident when technological innovation is required (Orcale, 2012, p. 1-10). Innovation can take place in a number of ways; in a technological change highlights the types of products and services that can be produced by the company or change in business model that aims at delivering the initial value of the company (Jaruzelski, Loeher and Holman, 2012, pp. 16-24). Hence, it is quite evident that the companies should recognise the type of innovation that is required for the development of their business so as to sustain in the long run. The types of innovation are incremental, radical and breakthrough innovations. These innovations are explained briefly in order to highlight its purpose on the organisational performance. Incremental innovations bring in changes to the existing technologies of the company and business models (Infosys, 2010). These are small changes, which are needed in the companies in order to survive in the long run. These technological changes do not require larger amount of capital investment. These innovations do not make any significant impact on the process of business. Breakthrough innovations have the power to make important changes pertaining to either business model or technology, which underlines significant growth in a company. Radical innovation takes place rarely and combines both changes in business model and technology. These changes are brought to develop major changes in an industry and while developing a new industry, which is expected to encounter exponential growth (Orcale, 2012, p. 1-10; Jaruzelski, Loeher and Holman, 2012, pp. 16-24). Types of innovation There are three types of innovation as follows: 1) Transformational: It is the most critical change that is brought through innovation as it hampers the livelihood of normal people. These changes are abruptly taken by the companies, which have the ability to affect the mass and economy as a whole. Theses changes are brought to the companies so that they can survive in the long run. Some products in certain industries become obsolete due to the change in taste and preferences of the customers as a result the company has to react immediately so as to grab the position in the market. The changes and innovation they bring affects the general people or even the stakeholders of the company to great extent (Jaruzelski, Loeher and Holman, 2012). 2) Incremental: This kind of innovation is mostly used in various industries as it is simple and favoured by all. It concentrates on changing few features of products and improve so that it can satisfy the needs of the customers. This type of innovation takes into consideration multi-disciplined and cross functional collaboration of companies. It takes into account strong decision making at every stages of modification. 3) Breakthrough: This type of innovation falls in between the other two innovation. It takes into account significant modifications that form part of the organization in terms of system and cultural support. It helps the companies to build competitive advantage and involves risk taking which gives breakthrough in decision-making (Jaruzelski, Loeher and Holman, 2012). Literature Review and Critical Analysis The literature review highlights the importance of technological innovation in assessing organisational performances. The success or failure of different company’s undertaking technological innovation is highlighted. The literature also depicts the barriers to innovation and the manner it can be solved for the development of the companies. Innovation and technological development in companies Process and product innovations are the main manifestations of innovativeness that is undertaken by a company. According to Achilladelis and Antonakis (2001, pp. 535-558), process innovativeness is defined as new devices, tools, knowledge and procedures in throughput technology, which are observed to mediate between outputs and inputs of certain processes that are engaged in a company. However, product innovativeness takes into consideration outputs that are introduced in the market by companies to satisfy the needs of the customers. The prime motive of a company is to focus on product innovativeness and increase it drastically so as to sustain in the highly competitive world. According to Whitley (2000, p. 856), the national level characteristics of companies can be linked with innovation (Quora, 2010). He had grouped the national system of economic activity under 6 groups: highly coordinated, state organized, collaborative, industry coordinated, compartmentalized and fragmented. However, the difference in market economies worldwide has to lead to formation of separate innovative strategies and as a result the product innovation vary in technical terms, differentiation of the products and its quality, novelty of customers, familiar with the competencies of companies and present knowledge (Achilladelis and Antonakis, 2001, pp. 535-558). According to Christensen, Olesen and Kjaer (2005), the increase in uncertainties in the external environment has encouraged incremental and radical innovation in a company. He stated that an agreement is developed, which highlights that rapid changes in environment and uncertainty encourages the decision makers to stimulate different innovative strategies in their companies. He also depicted that product innovation is possible in uncertainty situations, where the tastes and preferences of the customers or products changes significantly. It is surprising that product innovation is less prominent in a stable environment than in a turbulent one. In a stable environment customers demand for low prices and thus the companies does not get the chance to recover the cost of innovation (Achilladelis and Antonakis, 2001, pp. 535-558). According to Yang, et al. (2011) there is increased heterogeneity in the external environment has lead to incremental and radical innovations. They pointed out that successful companies that operate in increased heterogeneity sectors have undertaken product innovation rapidly for the success of the company. However, Ariffin and Figueiredo (2004) have argued regarding the fact higher heterogeneity in the industry may become an obstacle for innovation in a company. The common focus of the company is on heterogeneity as a result the communication between the operations breaks down, which leads to poor innovation. According to Borrus, Ernst and Haggard (2004), the rise in dynamism in external environment have no effect on innovation. It is observed that companies in higher dynamism sector takes into consideration greater production innovation. However, Castellani and Zanfei (2004) have claimed that innovation is higher in unstable external environment than in stable one. The technological elements in the external environment also encourage innovation in a company. The managers of small to medium sized companies believed that external environment offers the technological opportunities which actually lead to product innovations. According to Castellani and Zanfei (2004), the present technological paradigm has influenced innovation to take place in the technological environment of a company. Shankar (1999 cited in ) have pointed out that strategies pertaining to product introduction is influenced by the incumbents and entrants of the competitive markets. The perceived hostility of the competitive environment have added pressure to the companies for initiating changes and aim at improving the capability of the companies to use the resources in the best way. The demographic characteristics of a company are associated with the radical and incremental product innovation in a number of ways. The manner in which innovation takes place is elaborated henceforth. According to OECD (2003) size of the stakeholders’ influences product innovation in a company. If a company increases its size their control system gets weakened due to the number of employees and limited management authority to control them. This gradually hinders the ability of the company to innovate and does not permit any improvement in the process innovations other than product innovation. The attributes of the stakeholders and their expectations becomes the more pronounced in case of action of Chief Executive Officers (CEO) and the search for innovating a new product in a complex and unpredictable way. However, larger companies may enhance its resources and also provide efforts in increasing its product innovations (Sage Publications, 2004; UNCTAD, 2012). With the increase of age of the company it is difficult to generate product and process innovation as the employees and management personnel have different perceptions, blunted motivation, political deadlocks and disconnected actions. The type of company and product innovation has deep association. The companies try to experiment new market through a number of new products as a result considerable amount of innovation is required. Bennett and Cooper (1981 cited in Martin and Scott, 2000) suggested that when different marketing concepts are adopted by the companies, it aims at improving its ability to encourage development of incremental product innovation. The reason behind this decision is that customers are unable to express their needs and wants for future apart from the present consumption patterns. Atuahene-Gima (1996 cited in Martin and Scott, 2000) has cited that market orientation has negative association with product innovation. The organisational structure has great impact on product and process innovations, which is discussed henceforth. The formal organisational structure does not favour innovation in the company. It is observed that highly political empowered, unspecialized, centralized and highly rigid bureaucratic structures do not encourage innovation projects. Such formal structure provides overburden to the CEOs of the companies. This structure does not permit them ample time to take any decision after detailed discussion and information regarding any issue or project innovations. Zaltman et al. (1973 cited in Pecht, Fukuda and Rajagopal, 2004) depicted that product innovation is favoured in low formalised organisational structure and in those organisations where there is low centralization during the innovation phase. During implementation of the innovation plan, higher level of formalization and centralization are required as compared to the initiation phase. Centralization is allowed to take place in this phase as ambiguity in the project innovation is reduced. Informal organisational structure reduces the one-to-one collaboration across the department in a company. It increase the clashes between the employees and management that arises from the poor coordination of orders for product or process innovation (BIS, 2010). In companies where innovation is not encouraged and the influence of the formal structure is tight then the lateral workings and flow of information are necessary for supporting innovation (process or product). Innovation and technological development globally Presently, it is observed that performance of innovation has become a vital determinant of national progress and competitiveness among companies. Innovation also helps in meeting and addressing global challenges like sustainable development and changes in climate. However, in spite of the significance of innovation many companies in OECD countries encounter difficulties to strengthen their performance through innovation. In the past few years, the companies have experienced little improvement in productivity despite of encouraging innovative technologies and advancement in information and communication technologies (ICT) (Mohr, Sengupta, and Slater, 2010, pp. 120-189). Role of government in fostering innovation According to Martin and Scott (2000), the governmental policies, innovation is subject to constant regulatory reformation and up gradation. It has to follow the institutional framework, which helps the companies to encourage innovative activity. Highlighting this context, it can be stated that reforms are required for the regulatory framework and public policy so that innovation is encouraged by the companies (Euromonitor International, 2013; Li, Moon and Wong, 2005, pp. 1419-1420). In order to limit innovations in companies government takes various initiatives and regulations. This is done in order to ensure that the innovations are not affecting the environment negatively. However, government is also seen to foster innovation. It is observed that government helps the companies to encourage innovation by providing them with public funds. The public investments in basic research and science play a pivotal role in developing information communication and technology and other technologies, which enables further innovation. This activity lays emphasis on the significance of reform management and public investments, which encourages innovation activities (Martin and Scott, 2000, pp. 8-18). Success or failure of companies adopting innovation Samsung, the leading South Korean company has experienced success for the last few years due to technological innovation. The company has leaded the global market by producing television, which is based on cellular technology. Samsung like many other companies does not only depend on electronic products wholly in fact they have concentrated on producing other products too (Infoworld, 2014; King, 2013). In 1969, Samsung Electronics began its operation and since then it had penetrated the world market with various inventions (Lee, 2005). Samsung has continued to build its reputation through synonymous innovations in the television and cellular industry. The company has brought changes to the company operation through technological advancement, which suits the demand of the customers (Archibugi and Iammarino, 2002; IBIS World, 2014). With the help of technological innovation, the company has grown faster in the electronic device industry. In 1993, Samsung had developed such a mobile phone which is very light in weight, SCH-800 and the phone can be accessed through CDMA networks. However, the company changed its direction in manufacturing mobile phones. It started producing smart phones at the end of the 20th century in alliance with MP3 players. Samsung have captured 41.6% market share in India and globally it has acquired about 29% of the cellular market (Lee, 2005). The invention of smart phones has helped the company to stay in the top position in the cellular market globally along with the use of android technology. Thus, it can be stated that the growing business of Samsung has been supported by technological innovation along with high marketing budget and appropriate identification of customer wants and needs. The company presented surprising collection of devices, which are of myriad shapes and sizes and have minimal prices (Michell, 2010, pp. 263-270; Mohr, Sengupta and Slater, 2010, pp. 123-158). There has been constant innovation in the television industry; this has encouraged Samsung Group to undertake new innovation process in order to stay competitive in the market (Kotabe, Mol and Ketkar, 2008, pp. 65-87). Even before, Samsung penetrated the global market with smart phones, Apple, the American multinational giant have reigned with its innovative product. The applications and software are more advanced than Samsung smart phones. The price is also high because of the costly innovation techniques. The software used by Apple is developed and technological advancement is faster than Samsung. It is true that Samsung has penetrated the global market with low priced smart phones but it has copied the features and applications of Apple. However, the result for both the companies is success. Presently, they are ruling the global market by undertaking huge technological innovation. The features provided by Apple smart phones are unique and it has provided with the best operating system. The company has continuously modified the versions of software in order to give the best experience to its customers. Apart from the success of these two companies adopting technological innovations there are two other companies in the same industry who have encountered failure by undertaking technological innovation. These two companies are Blackberry and Motorola. Motorola, the American multinational giant have penetrated the world market with smart phones however, it could not succeed in India as technological innovation did not work good. The same is with Blackberry as the technological innovation did not succeed to a great extent. Barrier to innovation External Barriers: The external barriers to innovation are as follows: Barriers in the market: The competitors protect monopoly powers and manage profit in long run by emphasising on their mode of operation. However, when Samsung started its business, it has to encounter various obstacles that defined market entry. Tough competition existed between the companies which ruled the global market such as Nokia, Apple and Motorola (Gorg and Hanley, 2005, pp. 255- 257). Government policies: The governmental policies are framed in order to hinder innovation in a company. The innovation pertaining to technology becomes a huge obstacle for the company as it is the only way that it may achieve competitive advantage. The government worldwide restricts those innovations, which harms the stability of the environment. The government always encourages the companies to use the resources adequately and do not exploit those resources which are in the verge of extinction (Oliver, Dostaler and Dewberry, 2004, pp. 249-251) Internal Barriers: The internal barriers to innovation are as follows: Structure: Organisational structure should be appropriate in order to support the process of innovation. A stable and formal organisational structure permits easy flow of information and thus it can foster innovation to a great extent. Conclusion/ Recommendation From the above discussion it can be stated that innovation is the best initiative for retaining in a competitive market. Companies have concentrated in increasing innovation cost effectively. The need for innovation has considerably increased over the past few decades as the companies felt the need to differentiate its products or services from that of their competitors. The managers and top officials of the companies worldwide have concentrated in increasing their efficiencies and build competitive advantage for sustaining in the long run. The technological innovation has supported the companies to grow drastically by considering the basic needs and wants of the population. From the example provided above it is clear that innovation have helped Samsung to gain the top moist position in the cellular market globally. Samsung has constantly introduced new series of smart phones with advanced technologies so as to sustain in the competitive market where its competitors such as Apple and Lenovo are offering the same smart phones to the customers. It is desired that the companies who have encountered barriers in initiating innovation process in their companies should try to eliminate it through proper planning and decision making so that it can foster their business growth. Reference List Achilladelis, B. and Antonakis, N., 2001. The dynamics of technological innovation: the case of the pharmaceutical industry. Research Policy, 30, pp. 535-58. Archibugi, D. And Iammarino, S., 2002. The globalization of technological Innovation. [pdf] Routledge. Available at: < http://www.geography.ryerson.ca/michalak/geo910/Technological%20change.pdf > [Accessed 26 August 2014]. Ariffin, N. and Figueiredo, P. N., 2004. Internationalization of innovative capabilities: counter‐evidence from the electronics industry in Malaysia and Brazil. Oxford development studies, 32(4), pp. 559-583. BIS, 2010. Manufacturing in the UK: An economic analysis of the sector. [pdf] Gov.UK. Available at: [Accessed 28 April 2014]. 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