Innovation and Risk Management, Creative and Innovative Process Used by Infinis - Case Study Example

Innovation and Risk Management Name Institution Lecturer Course Date Innovation and Risk Management Introduction The modern business world is characterised by intensified competition, at the local or international level, by firms operating within a given industry or market. This calls for various competition strategies that enable firms to gain competitive advantages compared to their competitors. Among the competitive strategies being used, and in fact the best competitive strategy, is innovation, which leads to the establishment of new and more efficient and effective products, services and business processes (Bindroo, Mariadoss and Pillai, 2012). The high knowledge base, which is another characteristic of the modern business world, and particularly the modern labor market, is another crucial factor behind innovation because it provides firms with the required human capital to initiate and drive innovation (Bindroo, Mariadoss and Pillai, 2012). Arguably, there are two key factors that initiate innovation or create the need for firms to be innovative. Firstly, increased market competition forces organisations to look for better and more efficient products, services and business operations, which aid them to secure a bigger market base than their competitors. Such products, services and business operations may help them to compete better by attracting more customers thereby increasing sales and hence profit. Alternatively, the products, services and/ business operations may serve to reduce production costs, which allows firms to engage in price competition by reducing the price of the products or services, or better still stick to the original price as competitors are forced to increase selling price due to increased cost of production. The need to innovate may also come from nature, particularly in response to forces of nature. Global warming is a modern menace facing our planet, which has forced organisations to rethink and redesign their way of doing things. Currently, this is a major driving force towards innovation particularly as organisations strive to come up with environmentally sustainable products, services and/or business operations. For example, innovation in the field of energy has resulted to facilities that produce clean (green) energy, such as solar cells and solar panels. Additional innovation has resulted to the production of even more efficient such facilities that are fit for low income earning households, such as solar lanterns. Initiating and implementing innovation in an organisation is essentially causing change in an organisation, which associated with various risks and of different degree. Such risks could involve political risks, economic risks, social and cultural risks, technological risks, environmental risks and legal risks among others (Merton, 2013). This calls for an effective risk management processes geared towards ensuring successful innovation implementation for the benefit of the organisation and the society. Risk management also ensures that only viable innovation projects are pursued. Such a risk management process should, therefore, comprise of risk identification, risk assessment, decision making (whether or not to pursue the innovation idea), strategy establishment, responsibility assignment and strategy implementation and, finally, monitoring of the implementation strategy to ensure successful implementation of the innovation. Such a model of risk management process for an innovation is presented in figure 1. Figure 1: risk management for innovation management This paper uses theories of innovation and risk management to explicate the innovative process used by Infinis, which operates in the United Kingdom (UK) energy industry particularly renewable energy. Particularly, the paper explores how the innovation strategies, problem solving style new product development and management systems were initiated by the challenges facing the organisation and how these issues assisted the organisation in developing the new and innovative product. The paper also analyses the impacts of the innovation on the organisation, corporate culture and business development of the organisation. The paper finalises with the analysis of how financial, economic and political risks that accompany the development of new environmentally sensitive or renewable energy products or services in the global energy environment of 2013. Key Terms: Innovation, innovation management, acquisitions, renewable energy Infinis Infinis is a prominent renewable energy company in the UK, which was started in 2006 as a private company (Infinis, 2013). The company has since its inception focused on strategic acquisitions as the mode of growth while still growing organically. The strategic acquisitions model employed by the company involves acquiring other renewable companies, as well as acquiring renewable energy projects from other companies. For example, Infinis acquired Re-Gen biogas power and obtained rights to operate wind and biogas power development projects from Scottish Resources Group in 2007, just one year after it was started (Infinis, 2013). In 2009, Infinis acquired Novera Energy Limited (Infinis, 2013). In 2012, Infinis acquired three renewable projects from Broadview Energy Limited, which include Seamer wind farm (under construction then), Low Spinney and Hill of Fiddes (operating then) (Infinis, 2013). It is this model of growth that has resulted to Infinis being considered, by the Sunday Times, as the “fastest large buyout in the UK” (Infinis, 2013). Additionally, the strategic acquisition has led to Infinis being considered as one of the leading generators of renewable energy in the UK, producing 556MW of energy from renewable sources (green energy) and sending it to the national grid for distribution. This amount has grown rapidly from less than 57MW being produced in 2006 when the company was started to 556 in 6 years making the company the fastest growing in the industry (Infinis, 2012). Infinis also grows organically by working on its own innovative projects aimed at enhancing the production of renewable energy (green energy). The company, in its objectives, is aimed at increasing the production of renewable energy, which will help the UK to meet the obligation, to increase renewable energy generation to at least 15% of its energy demand (Infinis, 2013). Infinis has sought to realize this goal by initiating and working on innovative projects that are environmentally, economically and socially sustainable. It is this effort that has seen Infinis being recognised and rewarded; in 2011, the company received an award, from CEEQUAL, for its Glenkerie Wind Farm that was designed to produce 22MW of green energy (Infinis, 2011). According to Infinis (2011) this was the first project of its kind in the industry to receive such an award (whole project basis), which signifies the innovation effort employed by the company. In 2012, Infinis was awarded the Corporate Social Responsibility Award for its undeniable efforts in environmental and social responsibility (Infinis, 2012). Therefore, two issues stand out in the case of Infinis: its innovative strategic growth and its innovative projects, both of which will form the basis of discussion for this paper. Indeed, the combination of the two issues has resulted to the company becoming the largest independent company that generates the largest share of UK’s renewable energy. Currently, the company produces 10 percent of UK’s renewable energy by operating a number of renewable energy generation facilities including 10 hydro sites, 123 landfill gas sites and 10 onshore wind farms (Infinis, 2012). Analysing the creative and innovative process used by Infinis Innovation strategies As aforementioned, two issues are considered to make up the creative and innovative process used by Infinis. The first issue is the strategic growth model employed by infinis, which involves the acquisition of other firms and more so, the acquisition of projects under construction or operating projects, as well as strategic growth involving working on innovative projects. In fact, the company’s operations are based on a number of key principles, one of which is to establish a track record on acquisitions (Infinis, 2013). This is arguably a creative business growth strategy that has helped the company from its humble beginnings to become one of the leading renewable energy generators in the UK within a short time. It is worth recalling the purpose of innovation and creativeness, which are essentially aimed at enhancing the competitive advantage of an organisation in one or a combination of the several ways, larger customer base, better products, better services, better business process and/or lower cost (Bindroo, Mariadoss and Pillai, 2012). The business growth strategy employed by Infinis seeks to help the organisation enhance its market competitiveness by establishing a larger customer base and coming up with better products (renewable energy). Acquisitions widens the customer base by enabling the company to generate more of the renewable energy while innovative projects enable the company to come up with better ways (sustainable) of generating renewable energy. Source of the innovation culture of the company The source of the company’s innovativeness and creativeness, particularly in establishing sustainable renewable energy generating projects, is well indicated in the company’s objectives. The company’s main objective is aligned with the strategic goal of UK, to increase renewable energy generation to meet at least 15% of UK’s energy demand as required by the European Union (EU) (Infinis, 2013). Moreover, Infinis was well aware of the energy problem facing our planet particularly global warming resulting from the use of fossil fuels. The new ideas developed by the business, especially making use of landfill gases, have served to respond to the aforementioned environmental and energy issues. More so, according to the company, greenhouse gases contain methane as the main component. Methane is one of the most notorious gases contributing to the greenhouse effect and thus global warming (Infinis, 2012). Therefore, ways of tapping this gas and utilizing it to prevent its release to the atmosphere is a great gift to our planet. Infinis has offered this gift through its creative and innovative projects that tap the methane gas and use it to generate renewable electricity. Essentially, it is making use of waste to generate electricity. Management system and problem solving styles Management plays a crucial role in the innovation effort of a company. By definition, innovation is a process in which creative ideas are turned to innovative products, services or business process via a well structured innovation management system. The innovation management system comprises of various issues including human resource management, time management, talent management and project management. Appropriate problem solving styles should be adopted to prevent innovation projects from stalling. The management system and problem solving style employed by the management can act as a bottleneck that prevents creative ideas from being developed to innovations or innovative projects from being implemented successfully. Although Infinis has not explicitly stated the management aspect of its innovation effort, it can be deduced, from the information available on the company’s website, that the company has a well established management system that should be accredited for the company’s innovation efforts and progress. The management system employs a conducive problem solving and decision making approach that has seen the company climb up the ladder of development and growth. The company has a well established and managed workforce of 400 employees. Three quarter of the workforce make up the technical team, which carries the biggest load in the innovation and development path of Infinis. To ensure that its innovation projects succeed, the company invests in its technical team by providing rigorous training (Infinis, 2013). This goes well along the company’s principle of ensuring excellence in its activities. Risk management is a crucial aspect of innovation, which focuses on ensuring the safety of the workforce and the success of the projects. Safety wise, Infinis has a well established safety plan and goal that is aimed at reducing injuries, diseases and deaths to zero (Infinis, 2013). The importance of enhancing safety for the workers is based on the fact that engineering projects are often associated with high levels of high magnitude risks that should be well managed to safeguard employees. Landfills are health hazards and taping landfill gases is associated with risks, which form part of the innovation risks. Therefore, managing such risks to ensure that renewable energy is generated from the landfills is paramount to the success of the innovative projects. The impact of the innovation process on the company, the corporate culture and business development of Infinis Infinis believes in innovation, which forms its corporate culture. The company believes that a dynamic and winning team is comprised of team members who have a positive mindset (Infinis, 2013). Therefore, the company’s innovation portfolio is a perfect indication of the company’s work along its corporate culture. In fact, the innovation results of the company can be considered as the results of the company’s corporate culture. The corporate culture largely determines the company’s dynamism and growth because the corporate culture sets out the general path to be followed in the process of executing the day-to-day activities of the company. The company is also focused towards creating a better environment and society through the development of environmentally and socially sustainable green energy generation projects. The fact that the company has been awarded for its sustainability effort is a clear indication that the creativeness and innovativeness of the company has worked alongside the corporate culture of the company. The innovativeness has also worked well towards financial and economic development of the company because when combined, the creativity has enabled the company secure high positions in the UK renewable energy industry. The creative and combined growth strategy employed by the company is to be accredited for the company’s economic growth and development. Financial, economic and political risks accompanying renewable energy products Although renewable energy projects have a great potential of saving our planet from the environment menace facing it, global warming, these projects and products are often associated with various risks and challenges. These risks can be categorized as financial, economic and political risks. The political risks facing renewable energy products can be analysed from the change to resistance perspective considering that renewable energy products are changes to the energy industry because they provide new ways of energy generation and thus prompting changes. Consequently, they are faced with resistance to change, political risks, which act to prevent their successful implementation. According to Komendantova et al. (2009), renewable energy products pose a threat to non-renewable energy generating products, which are usually operated by cartels and whose aim is to control the world. For example, oil is the main source of energy, which is also the main source of income for several nations. Therefore, the growth of renewable energy products, such as solar lanterns, is a major threat to these nations, some of which are politically and economically powerful. In order to protect their interests, these nations can use their political power, such as threatening to withdraw their support for less powerful nations who decide to go the green way. This is, therefore, a political risk facing renewable energy projects on the global arena. Financial risks comprise of the risks associated with the loss of money involved in the entire process of developing renewable energy products. This involves production costs, which might not be recovered if the sale of renewable energy products does not lead to breakeven which would be the case if the producer does not impress the market enough to abandon conventional energy generation methods. More so, such a scenario may happen if the renewable energy products do not impress consumers or if marketers of conventional energy outdo marketers of renewable energy products. Economic risks, especially when viewed from a broad perspective, have the potential of preventing the success of the production of renewable energy products in the global energy environment. The production of renewable energy products, as aforementioned, can be viewed as changes to the society, which means that some or the entire system of conventional energy sources must be abandoned in favor of renewable energy products. The economic impact of such a change is significant considering that large and expensive infrastructures will have to be abandoned and new infrastructures built. For instance, abandoning oil drilling in favor of solar energy would imply doing away with expensive infrastructure previously used in the drilling, purification and delivery of oil, as well as generators used to generate electricity from oil. The economic risk associated with such a change is even more intensified if renewable energy products do not have energy generation capacity at least equal to that of conventional means of energy generation. Additionally, such a move would be associated with either increase in employment opportunities or increase in unemployment depending on the difference in labor intensity for the two means of energy generation. Whichever the case is associated with economic risks. Conclusions Innovation is a modern strategy being used to enhance the competitive advantage of firms in their respective markets. Innovation is a process that culminates with the development of new products, services and/or business processes. Global warming is an environmental challenge that has compelled nations to develop strategic ways of dealing with the problem. The UK has decided to work towards increasing renewable energy generation and utilisation at the expense of conventional energy generation, which is largely accused for the global warming issue. This has resulted to firms operating in the energy industry coming up with innovative ways of generating renewable energy. Infinis has broken the odds to come up with an innovative way of tapping landfill gases and generate electricity from the gases, which not only helps UK to realize its strategic goal, but also helps in reducing the release of methane to the atmosphere. Infinis has also come up with an innovative business growth process, acquisitions, which has helped the company to move up the ladder very first to become a leading renewable energy producer in the UK. Recommendations The production of renewable energy products on the global arena is faced with various risks including political, financial and economic risks. However, Infinis has managed to come up with new renewable energy products. Therefore, it is the highest time that nations all over the world come together to address the avoidable risks, especially political risks, so that they can collectively respond to the global warming problem. Bibliography Bindroo, V., Mariadoss, B. J. & Pillai, R. G. 2012. ‘Customer Clusters as Sources of Innovation-Based Competitive Advantage.’ Journal of International Marketing, vol. 20, no. 3, pp. 17-33. Infinis. 2 November 2011. Infinis Receives CEEQUAL Whole Project Award for Glenkerie Wind Farm. Infinis. Infinis. 8 February 2012. Infinis Ranked First in Sunday Times 2012 Buyout Growth League. Infinis Infinis. 29 June 2012. Infinis Wins Award for Outstanding Leadership in Environmental and Social Responsibility. Infinis. Infinis. 2013. About Us. Accessed April 23, 2013 from http://www.infinis.com/about-us/the-infinis-group/ Komendantova, N., Patt, A., Barras, L. & Battaglini, A. 2009. Perception of Risks in Renewable Energy Projects: The Case of Concentrated Solar Power in North Africa. International Institute for Applied Systems Analysis (IIASA). Merton, R. C. 2013. ‘Innovation Risk.’ Harvard Business Review, vol. 91, no. 4, pp. 48-56. Read More