PROF. V.B.

SHAH INSITUTE OF MANAGEMENT,

AMROLI,SURAT

COURSE: B.B.A
YEAR: [Link] (SEM -VI)
SUBJECT: START UP & INNOVATION
MANAGEMENT
Unit 4: Innovation within firms and Incubation
(20%)
Faculty: Dr. Soyeb Meman & Mr. Aagam Sheth
INTRODUCTION TO INNOVATION MANAGEMENT
Innovation is a broad concept that can be understood in many ways. So, there are many
definitions offered by different scholars. Schumpeter (1939) considered innovation as "the
commercial use of scientific discovery or invention". Naisbita (1996) offers a much broader view
of innovation defining it as something that "involves a new and significantly better way of doing
things" that is "associated with improved productivity or savings in costs, effort or time" or "an
idea, practice or product perceived as being new and better by the innovator or by an external
observer (perception being influenced by the context and world-view of the people involved)".
However, innovation is not just a single action or an event, but a process. Hence, Myers and
Marquis's (1969) definition given below is considered a more comprehensive one: "Innovation is
not a single action but a total process of interrelated sub-processes. It is not just the conception of
a new idea, nor the invention of a new device, nor the development of a new market. The process
is all these things acting in an integrated fashion".
Often misinterpreted, innovation has come to be thought of as being something new that never
existed before when actually it can involve both invention (something new), or an improvement
to something that already exists. People that invent new products, processes, or ideas are
inventors. An innovator is a broader term that includes both inventors and those that make
improvements to existing things.

Meaning and Definition

“Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an
opportunity for a different business or a different service. It is capable of being presented as a
discipline, capable of being learned, capable of being practiced.”
– PETER F. DRUCKER

What is innovation?
So what does innovation really mean? And how does it differ from invention and creativity in a
business? Let's start from a definition of innovation, invention and creativity:
Innovation is the process of turning a new concept into commercial success or widespread use.
Invention is the creation of a new idea or concept.
Creativity is the act of turning new and imaginative ideas into reality. It is the thinking of
novel and appropriate ideas.
Innovation = theoretical conception + technical invention + commercial exploitation
Innovation VS Invention: Differences and Value

To better understand this subtle but important difference please consider the following:
Here are a few examples of inventors and their invention:
 Alexander Graham Bell - the telephone
 Thomas Edison - the light bulb
 Samuel Morse - the telegraph
Here is a list of innovators and their improvements
 IBM – took the telephone and made it mobile
 Nick Holonyak Jr. (GE engineer) – took the light bulb and came up with LED lights
 Guglielmo Marconi – took the telegraph and made it wireless.
DIFFERENT TYPES OF INNOVATION:
1] Organizational Innovation
Organizational innovation refers to the development of a new organizational strategy that will
somehow change a company’s business practices, as well as the way its workplace is organized
and its relationship with external stakeholders, for example a new venture division or a new
internal communication system or introduction of a new accounting procedure.

Example: Toyota Production System (TPS) and Lean Manufacturing The core
organizational innovation here is the Toyota Production System (TPS), which evolved into the
global standard of Lean Manufacturing.

 The Innovation: It involves two major components: Just-in-Time (JIT) production

(making only what is needed, when it is needed) and Jidoka (automation with a human
touch, meaning equipment automatically stops when a problem occurs).

Example: Google's "20% Time" Policy Historically, Google (now part of Alphabet)
encouraged engineers to spend 20% of their working time on projects they were personally
passionate about, even if unrelated to their core responsibilities.

 The Innovation: This formalized a space for creativity and risk-taking, essentially giving
employees the autonomy and slack needed to think outside the box.

2] Process Innovation
Process innovation is about implementing a new or improved production or delivery approach,
including changes in operational methods, the techniques used and the equipment or software,
for example the development of a new manufacturing process.

Example: The banking industry's shift from teller-led transactions to online banking and
mobile apps.

Example:
The Surat-based diamond industry, the world's largest cutting and polishing center, has
undergone a revolutionary process shift from manual craftsmanship to highly precise
technology-driven manufacturing.
Innovation Description Impact on Process

This process innovation replaced the

The adoption of advanced
traditional manual process of
1. Laser laser technology and
cleaving/sawing by eye. It allows for the 3D
Cutting and specialized digital scanning
mapping of every rough stone to determine
Digital software (like Sarine
the optimal cuts (in terms of size and clarity)
Planning machines) for rough diamond
mathematically, maximizing yield and
analysis and cutting.
minimizing material loss.

2. Automated Implementing fully or semi- The process shifted the need for highly
Bruting and automatic machines (like specialized manual skills to controlled
Innovation Description Impact on Process

Polishing automated bruting machines) machinery. It ensures uniformity and

for shaping and polishing precision across batches, dramatically
facets. reducing labor time per carat, and
standardizing the quality of cuts, which is
crucial for exports.

3] Product Innovation
Product innovation is the introduction of a new or improved good or service. These inventions or
changes may have to do with improving technical specifications, the materials or the software
used or even advancing on UX (user experience). However, product innovations don’t need to
improve all functions or performance specifications. An improvement to or addition of a new
function can also be merged with a loss of other functions or the downgrade of some other
specifications. Moreover, a product innovation must add an affable to potential users but doesn’t
necessarily need to generate sales. Because if it did, then innovations with low demand or, for
instance, digital products like apps that are free would be excluded. At the same time, routine
changes or updates aren’t considered product innovations as they are only correcting errors or
making some seasonal changes, example the development of a new or improved product like
sanitizers are now available in spray bottle.

Example,
The LED Light Bulb
Incremental innovation involves small, continuous improvements to existing products, enhancing their
functionality, efficiency, or aesthetic appeal.

 Example: The Transition from Incandescent to LED Light Bulbs

 The Innovation: The LED (Light-Emitting Diode) bulb is an incremental product innovation
relative to the original light bulb. It did not change the core function (providing illumination) but
dramatically improved the product's efficiency, lifespan, and energy consumption.

The Modern Drone

Architectural innovation takes existing components, technologies, or concepts and
reconfigures them in a new way to create a completely new value proposition or enter a new
market.

 Example: Consumer and Commercial Drones (UAVs)

 The Innovation: The modern drone combines existing technologies: GPS (originally
military), Lithium-ion batteries (consumer electronics), miniaturized cameras
(smartphones), and software-controlled gyroscopes (gaming/mobile devices). The
innovation was the architectural reassembly of these standard components into a stable,
remotely controlled aerial platform.
4] Marketing Innovation
Marketing innovation means developing a new marketing strategy that produces changes in, for
instance, the way a product is designed or packed, or even other decisions regarding price or
promotion, for example Patanjali spelling that product by using Patanjali stores.

Example,
Promotion Innovation: The Shift to Influencer Marketing
This is a fundamental change in the promotional channel used to reach target audiences,
moving from mass-media advertisements to personalized, peer-to-peer endorsements.
 Example: Using Social Media Influencers and Content Creators Instead of relying
solely on expensive television commercials or billboards, brands allocate marketing
spend to collaborating with niche social media personalities.
Pricing Innovation: Dynamic, Personalized Pricing
This involves using technology and data to move beyond static pricing structures to a flexible,
data-driven model that maximizes revenue based on real-time variables.
 Example: Airline Ticket Pricing Airlines use sophisticated algorithms to continuously
adjust the price of a seat based on a multitude of factors, a process known as yield
management.
o The Innovation: Pricing is no longer set by simple cost-plus logic but
dynamically shifts based on: demand elasticity, time until departure, day of
the week, competitor pricing, and even the customer's browsing history (in
some cases).

5] Production Innovation
It involves constant monitoring and evaluation of the advances in research and technology
development in the areas of production management systems and, related technologies and
working methods. For example, new constructs for production innovation like quality circles,
just in time approach or different new production planning software like MRP II.
Example: The widespread use of industrial robots for tasks like welding, painting, and
assembly in the automotive industry.
The Innovation: Replacing human labor with programmable, high-precision robotic systems.
These systems can work continuously, handle repetitive tasks with zero fatigue, and maintain
extremely tight tolerances.
Example: The use of automated fabric cutting machines guided by computer programs in the
garment industry.
Example: Large e-commerce and retail firms using centralized, cloud-based Warehouse
Management Systems (WMS) integrated with automated retrieval systems.

6] Service Innovation
The Finnish research agency (FA) is for example a new customer interaction channel, a
distribution system or a technological concept or a combination of them. A service innovation
always includes replicable elements that can be identified and systematically produced in other
cases or environments. The replicable element can be the service outcome or the service process
as such or a part of them. A service innovation benefits both the service producer and customers
and it improves its developed a competitive edge. A service innovation is a service product or
service process that is based on some technology or systematic method. In service, however, the
innovation does not necessarily relate to the novelty of the technology itself but the innovation
often lies on the non-technological areas. Service innovations can for instance be new solutions
in the customer interface, new distribution methods, and novel application of technology in the
service process, new forms of operation with the supply chain or new ways to organize and
manage services. For example different online services or trivago for comparing Hotel online.
Example: Netflix's shift from a DVD rental service to a streaming subscription service with
personalized recommendations.
Example: Telemedicine and Virtual Healthcare Visits.

The Innovation: Medical consultation, diagnosis, and prescription services are delivered via
secure video and audio communication channels . This required innovation in security
protocols, medical devices, and professional regulatory frameworks.

Type of Innovation Example

Product innovation The development of a new or improved product

The development of a new manufacturing process such as

Process innovation
Pilkington's float glass process

A new venture division; a new internal communication system;

Organisational innovation
introduction of a new accounting procedure

TQM (total quality management) systems; BPR (business

Management innovation
process re-engineering); introduction of *SAP R/3

Quality circles; just-in-time (JIT) manufacturing system; new

Production innovation production planning software, e.g. MRP II; new inspection
system

Commercial/marketing New financing arrangements; new sales approach, e.g. direct

innovation marketing

Service innovation Internet-based financial services

SOURCES OF INNOVATION
Innovation has become the buzzword of the industry in the 21st century. From business to other
areas everywhere, innovation is being talked of. Several emerging businesses have proved that
innovation can be the way to the top. From Amazon to Google and Facebook, all have proved it.
Innovation includes differentiation. Innovation emerges from various sources.

According to Peter F Drucker, there are seven sources of innovation.

1. The unexpected: Innovations can take place unexpectedly. They can happen by chance.
Someone might just stumble upon a new idea or product. The very long list of unexpected
innovations in human history. Fire is considered as an unexpected innovation that humans
stumbled upon. Another example is the dynamite. Many times this happens by accident or
mistake but they capitalize upon something new.
2. Incongruities (Indifferent): When the need is incongruent with the supply, innovation might
be born. In an attempt to resolve the existing incongruities people might innovate. For example
as the population of cars grew larger and it became a challenge to park, an attempt to solve the
incongruity between the growing parking space shortage, the smart car was born. Smart car is a
small car that can fit in small spaces. Incongruities can be a permanent source of innovation. It is
one way to make money but the one who has managed to get around him.

3. Market structure: An existing market structure can also give rise to chances for innovation.
This is how Google was born. Google shaped the search engine market. Before Google the
search engines were not as perfect and Google made them more relevant. Also, before Google,
no single company owned the whole of the World Wide Web. Google made this information
searchable. Thus, the World Wide Web gave rise to a market structure where a search engine
was needed to organize the World Wide Web paved way for interconnection. Google created a
search engine that was linked to all the searchable data.

4. Necessity: Necessity is the mother of invention but it is also the mother of innovation. Let us
say Microscope. Micro aero space. There are different dimensions of human mind. Necessity is
about thinking about needs based upon bright ideas. The human mind thinks of new things that
can better fulfil an existing need. It is a process of need-fulfilling that leads to new invention by
focusing the products or methodologies.

5. Demographics: Our lifestyles can also be a source of innovation. We all have our lifestyle
needs. If we feel the need to smoke. However, since smoking is dangerous, we made e-cigarettes
to satisfy this lifestyle need for a small time. Needs for fulfillment and important requirement for
us. This is where innovators find major opportunities.

6. Changing perception: Changing perception regarding things can also give birth to
innovation. Earlier, the ones who eat healthier are leaner ones. However, the social perception of
healthy has undergone a big change where the people are eating low sugar and low calorie foods
to feel more active and healthier. Based upon this changed perception, a flood of healthy and low
calorie foods came to the market.

7. New knowledge: New knowledge can also be a source of innovation. Whether it is nano-
technology, bio-technology or even artificial intelligence, new knowledge in all areas is a source
of innovation as the pace keeps progressing. Every year new areas are discovered and much gets
added to the existing base of human knowledge. New knowledge is one way for innovation into
the economic or life changing. However, it is an area that has overtime been heavily affected by
such innovations whether they emerge from the fields of biotechnology or nano-technology.

MODELS OF INNOVATION
1] Serendipity:
Many studies of historical cases of innovation have highlighted the importance of the unexpected
discovery/Luck. The role of serendipity or luck is offered as an explanation. Everyone's dream
discovery, or that they will accidentally discover a major new invention and enjoy Fame and
popularity for the same Serendipity concept is based on.
India Liberty, serendipity is rare indeed. Because with love, for innovation one should have some
prior knowledge in that area most discoveries are the result of people who have had intense
knowledge with a particular area of science of Technology why creating something new for
example pharmaceutical industries are based on the Serendipity model. According to Louis
Pasteur says, "chance favours the prepared mind".

2] Linear models of innovation

US economists after the 2nd world war championed the liner models of innovation.
The model focuses that innovation occurs through the interaction of the science base,
technological development and needs of the market was a significant step forward. Nation of
the interaction of these activities form the basis of models of innovation today.

This diagram reveals that the close interlinkages between three key components that is science
and technology, technological development and the needs of the market, there are two basic
variations of this model for product innovation as the innovation process has traditionally been
viewed as a sequence of separable stages or activities the interconnectivity with each other as the
first part of model space the technology driven model which often referred as Technology push
model. The first generation model was developed by NASA in 1960 as a management tool.
NASA referred to the process as the Phase-review-processes or the technology push. The process
was broken down to help in systematizing the work and for controlling contractors and suppliers
who were working on space projects.
Advantages of the model
 First, all the tasks were completed as one process had to be completed before moving on
to the next one.
 Secondly, the model reduced technical uncertainties.
Disadvantages of the model
 The fact that all activities within a given phase had to be completed before progressing
created delays. This is because all other activities were put on hold until the management
review for the particular stage was completed.
 Another disadvantage is that the marketing phase was left out; the model mainly dealt
with the development stage of an idea.
Technology driven model assume that scientists make unexpected Discoveries, technologists
apply them to develop product ideas and engineers and designers turn these ideas into prototypes
for testing. It is left to manufacturing device ways of producing the product efficiently. Finally,
marketing and sales will promote the product to the potential consumer and make it
commercialised marketing spaces and Research and Development inactive function. For example
pharmaceutical industry using this model.
On the other hand the second part of the model is called a market driven model which is often
referred as market pull model of innovation. This model was invented in 1970. Here this model
is a consumer need driven model. The model emphasis the role of marketing as an initiator of
new ideas resulting from close interaction with customer, those in turn, conveyed to the research
and development for design and Engineering and then to manufacturing for production for
example fast moving consumer goods industry are using this model.

3] Simultaneous Coupling Model

This model was invented in 1980. This model focuses on where the initial source of innovation
was born. It suggests that the trigger for the idea on End was initiated and this model is not
focusing on how part of innovation. So the modern move concentrate on what is driving the
innovation and in this model there is no starting point of the innovation. Innovation starting point
may be anyone out of three functions Pair with knowledge that is science and technology,
technological development or need the market.

This diagram shows a triangular relationship between three elements, suggesting simultaneous
interaction rather than a linear sequence:
 Manufacturing (at the top point of the triangle)
 Research and development (at the bottom left point)
 Marketing (at the bottom right point)
 All three elements are connected to each other by lines
Advantages of the model
 The stage gate model is very efficient and it offers a standardized way of achieving an
innovation.
  Consequently, the model relies on loops of feedback which make it more interactive and
efficient.
 The processes involved are transparent and the teams involved share a common
understanding. Therefore, there is communication within the team and with the top
management. IBM, General Motors, Northern Telecom, and 3M all use this model in all
their innovations. The companies say that the model enables them to achieve success in
their innovation processes.
Disadvantages of the model
 On the contrary, the gates are rigorous in the first stages of concept and idea generation.
 Although the model is effective, it might be inappropriate when you anticipate radical
innovations. Thus, in such a case, then a more flexible, learning-based approach is
sufficient.
 The model leaves out post launch refinement, exploitation and optimization.

4] Interactive Model:
This model was invented between 1980-90. The interactive model used both technology push
and market pull models of linear models of innovation. It emphasizes that innovation occurs
as the result of the interaction of the Marketplace, the science waste and the organisation
capabilities. The model does not explicitly state a starting point. The use of information flows is
used to explain how innovation links and that they can arise from a wide variety of points. This
model is a comprehensive representation of the innovation process which focuses on innovation
at the logical sequential steps where all the steps are distinct but interrelated and interdependent
on each other. At the centre of this model there are 3 major functions of organisation that is
research and development or engineering and design, manufacturing and marketing and sales.

This diagram illustrates the Interactive model which combines the Technology Push and
Market Pull concepts. It shows a central process involving R&D, Manufacturing, and
Marketing, with arrows indicating feedback loops and non-linear interactions between them.
 Technology Push is shown moving from "Idea" to "R&D" to "Manufacturing" to
"Marketing" to "Commercial product" and is driven by "Latest sciences and technology
advances in society."
 Market Pull is shown moving from "Needs in society and the marketplace" into the
central R&D/Marketing/Manufacturing process.
5] Network model:
 The fifth generation model is also known as the network model or a closed innovation
model. The model was developed in the 1990's.
 Closed innovation models explain the intricacy (complexity) in the innovation process.
 The model focus is the involvement of the external environment. Besides, the model
also focuses on effective communication with the external environment.
 Since innovation relies on both external and internal networks, the model emphasizes the
need for establishing links between the two networks.
 Galanakis developed an innovation model which borrows a lot from the fifth generation
model. His model uses the thinking approach which he refers to as the creative factors
concept.
 The firm is at the centre of the model. Its position signifies its role in generating and
promoting innovations in the nation, industrial sector and the market.
 The model relies on three main innovation processes:
o Firstly, the process involves creating knowledge from industrial or public
research.
o Secondly, the product development process where the knowledge is transformed
into a product.
o Thirdly, product success in the market.
 The success of the product is dependent upon the product's functional competencies.
Further, it also depends on the firm's competency to produce high quality products at a
reasonable price and to place it in the market adequately.
 Internal factors such as organizational structure and corporate strategy amongst others
affect the process.
 Additionally, external factors like national infrastructure and regulations amongst others
also affect the process.

6] Open innovation model

 The open innovation model is also known as the sixth generation model. The model is
a network model.
 It focuses on:
o Internal and external ideas.
o External and internal paths to markets.
 Open innovation model looks at how a combination of the two concepts can lead to
technological advancements.
 Chesbrough came up with the team's open innovation.
 Besides, the model presents less risk when innovation.
 Companies who use this model enjoy a large pool of ideas to start with. They then narrow
down to the most ideal idea.
Date Model Characteristics

Technology- Simple linear sequential process; emphasis on R&D; the

1950/60s
push market is a recipient of the fruits of R&D

Simple linear sequential process; emphasis on marketing; the

1970s Market-pull
market is the source for directing R&D; R&D has a reactive
Date Model Characteristics

role

Abernathy and Utterback (1978) illustrate that an innovation

Dominant
1970s system goes through three stages before a dominant design
design
emerges

1980s Coupling model Emphasis on integrating R&D and marketing

Interactive
1980/90s Combination of push and pull
model

Architectural Recognition of the role of firm embedded knowledge in

1990
innovation innovation processes

1990s Network model Emphasis on knowledge accumulation and external linkages

Chesbrough’s (2003) emphasis on further externalisation of

2000s Open innovation the innovation process in terms of linkages with knowledge
inputs and collaboration to exploit knowledge outputs

INNOVATION AS A MANAGEMENT PROCESS:

Innovation is not a singular event, but a series of activities that are linked in some way to the
other. This may be described as the process involves three major features which are also
suggested by Kelly and Kransberg in 1978:
1. A response to either need or an opportunity that is context-dependent.
2. A creative effort that is successful whether in the introduction of novelty.
3. The need for further changes.
Due to the complexity of innovation, managers are working hard to manage this complex
process. The framework of innovation as a management process can be understood with the help
of the following diagram:
This diagram shows innovation as a management process using a large triangle that encloses
three concentric circles, with various external and internal factors interacting with them.
 The outer triangle is labeled with various External Inputs on the left (e.g., External
R&D, Customers, Competitors) and External Outputs on the right (e.g., Dissemination,
Strategic partnerships, Development, Alliances).
 The innermost circle represents the Core Firm Competency.
 The layers between the core and the triangle include various management and process
factors (e.g., Acculturation, Learning process, Growth, Internal integration, Financial
system, Power influences, Human resource), demonstrating a complex, multi-layered
process.
This figure does not pretend to have any analytical status, it is simply a model which describes
the main functions which need to be considered in successfully managed innovation. It has to
show that the interactions of the function inside the organisation are important, so too are
the interaction of these functions with the external environment, scientists and competitors.
The functions within the firm will be continually interacting with fellow scientists in the
university and other forms about scientific and technological developments. Similarly, the
marketing function will lead to interaction with suppliers, distributors, customers, and
competitors to collect the data regarding day to day activities and understand customer needs and
getting products to customers are achieved. On the other hand business planners and senior
management will likewise communicate with a wide variety of persons and other external
institutions, such as government departments, suppliers and customers.
Within any organisation there are likely to be many different functions, depending on the nature
of the business, some functions will be more influential than others. The Framework shown in
the above diagram identifies only three main functions: marketing, research and development
and business planning. The Framework also reveals that that is effective communication with
the external environment for encouragement and support.
Example,
Innovative firm Explanation for innovative capability

Apple Innovative chief executive

Google Scientific freedom for employees

Samsung Speed of product development

Procter & Gamble Utilisation of external sources of technology

IBM Share patents with collaborators

BMW Design

Starbucks In-depth understanding of customers and their cultures

Toyota Close cooperation with suppliers

Steps in Innovation as a management process
Stage #1: Evaluating ideas. In this stage, ideas are evaluated for their contribution to the
planned business model/product. A wide array of ideas may be considered. However, it is
essential to maintain balance in the ideation process so that too many stray ideas do not
overpower the core objective.
Stage #2: Conceptualizing the product. In this stage, concepts are developed based on the
accepted ideas. Other important criteria like investment required, break-even time and returns
are evaluated.
Stage #3: Demonstrating the plan. Once a concept is formulated, an all-encompassing plan is
developed and demonstrated to the customer/end-user.
Stage #4: Validating value to the customer/end-user. Once the customers or end-users interact
with the demonstrated plan, it becomes possible to ascertain how much value the product will
deliver to the customer. This validation is vital for continuous improvement of the planned
product.
Stage #5: Developing the product. In this stage, the actual development of the product takes
place. The earmarked investment is utilized on planned lines in order to build the product or to
commercialize the already developed product.

Managing innovation within firms:

 Innovation is often a technological change that outperforms a previous practice.
 To lead or sustain with innovations, managers need to concentrate heavily on the
innovation network, which requires a deep understanding of the complexity of
innovation.
 Collaboration is an important source of innovation. Innovations are increasingly
brought to the market by a variety of organizations, selected according to their
comparative advantages and operating in a coordinated manner.
  When a technology goes through a major transformation phase and yields a successful
innovation, it becomes a great learning experience, not only for the parent industry but
other industries as well.
 Big innovations are generally the outcome of intra- and interdisciplinary networking
among technological sectors, along with a combination of implicit and explicit
knowledge.
 Networking is required, but network integration is the key to success for complex
innovation.
 Social economic zones, technology corridors, free trade agreements and
technological clusters are some of the ways to encourage organizational networking and
cross-functional innovations.

Innovation management tools

 Antonio Hidalgo and Jose Albor proposed the use of typologies as an innovation
management tool.
 The study conducted at a European level used 10 typologies for Knowledge-driven
Innovation Management Tools. These typologies were formed by looking at 42
characteristics that classify Innovation Management Tools.
 Hidalgo and Albors were able to narrow the list down to 8 criteria (knowledge-driven
focus, strategic impact, ease of availability, level of documentation, practical usefulness,
age of the IMT, required resources for implementation, measurability), that are especially
relevant for IMTs in the knowledge-driven economy (knowledge economy).
 The advantage of using typologies is the easy integration of new methods and the
availability of a broader scope of tools.

ORGANISATIONAL CHARACTERISTICS THAT FACILITATE THE

INNOVATION PROCESS
The innovation process, outlined at the end of Chapter 1, identified the complex nature of
innovation. It also emphasized the need to view innovation within the context of the
organization. In a recent study examining the relationship between innovation stimulus,
innovation capacity and innovation performance, Prajogo and Ahmed (2006) found that there
was a strong relationship between innovation stimulus and innovation capacity, and a strong
relationship between innovation capacity and innovation performance. Figure 3.3 illustrates this
diagrammatically. The findings did not find any direct relationship between innovation stimulus
and innovation performance. The implications of this for firms are clear: if firms wish to improve
innovation performance they first need to put in place and then develop factors that stimulate
innovation, such as appropriate leadership, R&D and creativity. Within such an environment the
nurturing and building of innovation capacity can then occur. Prajogo and Ahmed (2006) argue
that innovation capacity is the city can then occur. Prajogo and Ahmed (2006) argue that
innovation capacity is the
Organisational requirement Characterised by

A commitment to long-term growth rather than

1 Growth orientation
short-term profit

2 Organisational heritage and

Widespread recognition of the value of innovation
innovation experience

The ability of the organisation to be aware of its

3 Vigilance and external links
threats and opportunities

4 Commitment to technology and R&D The willingness to invest in the long-term

intensity development of technology

The willingness to include risky opportunities in a

5 Acceptance of risks
balanced portfolio

6 Cross-functional cooperation and

Mutual respect among individuals and a
coordination across organisational
willingness to work together across functions
structure
Organisational requirement Characterised by

The ability to be aware of, to identify and to take

7 Receptivity effective advantage of externally developed
technology

An ability to manage the innovation dilemma and

8 Space for creativity
provide room for creativity

Strategic planning and selection of technologies

9 Strategy towards innovation
and markets

10 Coordination of a diverse range of Developing a marketable product requires

skills combining a wide range of specialised knowledge

[Link] orientation
It is sometimes surprising to learn that not all companies’ first and foremost objective is growth.
Some companies are established merely to exploit a short-term opportunity. Other companies,
particularly family-run ones, would like to maintain the company at its existing size. At that size
the family can manage the operation without having to employ outside help. Companies that
are seeking growth are more likely to be interested in innovation than those that are not. For
those companies whose objective is to grow the business, innovation provides a means of
achieving growth. This does not imply that they make large profits one year then huge losses
the next, but that actively plan for the long term. There are many companies that make this
explicit in their annual reports, companies such as Nokia, Siemens, Google and Microsoft.
[Link] heritage and innovation experience
A firm’s heritage and culture is undisputedly considered crucial to the firm’s technological
capabilities as it fosters and encourages widespread recognition of the need to innovate. This is
clearly illustrated in the extent to which groups and departments are willing to cooperate.
Numerous problems arise when individuals and groups are either unwilling or reluctant to
work together and share ideas. At the very least it slows down communication and decision
making and at worst, it is a tremendous disincentive in lack of progress. Frequently the
difference between a firm succeeding or not lies not in their scientific ability or commercial
knowledge but simply in the firm’s internal ability to share information and knowledge. The
pharmaceutical firm Pfizer is frequently cited as delivering exceptional new products yet its
R&D is not more highly regarded than other firms: in other words, it is the ability of the firm to
convert technology into products that sets it apart from its competitors.
Previous experience with innovative projects is clearly conducive to the firm’s technology
and R&D management capabilities as these enhance the skills that are necessary to turn
innovation into marketable products. Numerous advantages also flow from learning by doing
and learning from failure effects.

[Link] and external links

Vigilance requires continual external scanning, not just by senior management but also by all
other members of the organization. Part of this activity may be formalized. For example, within
the marketing function the activity would form part of market research and competitor analysis.
Within the research and development department scientists and engineers may spend a large
amount of their time reading the scientific literature in order to keep up to date with the latest
developments in their field. In other functions it may not be as formalized but it will need to
occur. Receiving reliable information is one thing but relaying it to the necessary
individuals and acting on it are two necessary associated requirements. An open
communication system will help to facilitate this. Extensive external linkages with the market,
competitors, customers, suppliers and others will all contribute to the flow of information into
the firm

[Link] to technology and R&D intensity

Most innovative firms exhibit patience in permitting ideas to germinate and develop over time.
This also needs to be accompanied by a commitment to resources in terms of intellectual
input from science, technology and engineering. Thus, ideas that look most promising will
require further investment. Without this long-term approach it would be extremely difficult for
the company to attract good scientists. Similarly, a climate that invests in technology
development one year, then decides to cut investment the next will alienate the same people in
which the company encourages creativity. Such a disruptive environment does not foster
creativity and will probably cause many creative people to search for a more suitable company
with a stronger commitment to technology.
In addition, it seems almost obvious to state that a firm that invests more in R&D will increase
its total innovative output. But the relationship between R&D expenditure as a percentage of
sales and commercial success is less clear-cut.

[Link] of risks
Accepting risks does not mean a willingness to gamble. It means the willingness to consider
carefully risky opportunities. It also includes the ability to make risk assessment decisions, to
take calculated risks and to include them in a balanced portfolio of projects, some of which
will have a low element of risk and some a high degree of risk.

[Link]-functional cooperation and coordination within organisational structure

Interdepartmental conflict is a well-documented barrier to innovation. The relationship
between the marketing and R&D functions has received a great deal of attention in the research
literature. This will be explored further in Chapter 16, but generally this is because the two
groups often have very different interests. Scientists and technologists can be fascinated by new
technology and may sometimes lose sight of the business objective. Similarly, the marketing
function often fails to understand the technology involved in the development of a new product.
Research has shown that the presence of some conflict is desirable, probably acting as a
motivational force (Souder, 1987). It is the ability to confront and resolve frustration and
conflict that is required. In addition, a supportive organisational structure underpinned by a
robust information and communication technology system all contribute to facilitating
cooperation and to coordinate cross-functional cooperation

[Link]
The capability of the organisation to be aware of, identify and take effective advantage of
externally developed technology is key. Most technology-based innovators involve a
combination of several different technologies. It would be unusual for all the technology to be
developed in-house. Indeed, businesses are witnessing an increasing number of joint ventures
and alliances (Hitt, Ireland and Weeks, 1999), often with former competitors. For example,
Sony and Ericsson have formed a joint venture to work on the development of cell phone
handsets (see the case study on Sony Ericsson in Chapter 10 for more details). Previously these
two companies fought ferociously in the battle for market share in the cell phone handset market.

[Link] for creativity

While organizations place great emphasis on the need for efficiency, there is also a need for a
certain amount of slack to allow individuals room to think, experiment, discuss ideas and be
creative. This issue is directly addressed by allowing scientists to spend 10-15 per cent of
their time on the projects they choose. This is not always supported in other functional areas.

[Link] towards innovation

An explicit strategic approach towards innovation can come in many forms, as is shown in
Chapter 6. For the firm and those within it, however, it means that the firm has developed plans
for the future regarding selection of markets to enter and which technologies may be
appropriate for the firm. Recognition that the organisation possesses skills, technology and
knowledge and that there are appropriate markets that suit these requires careful planning,
probably utilising a project portfolio approach. This will involve further, longer-term planning,
establishing a range of projects some of which will subsequently provide opportunities that the
firm will be able to exploit. This long-term planning and investment with regard to technology
and markets distinguishes such firms from their 'short-termism' counterparts.

[Link] range of skills

Organisations require a combination of specialist skills and knowledge in the form of experts
in, say, science, advertising or accountancy and generalist skills that facilitate cross-
fertilisation of the specialist knowledge. In addition they require individuals of a hybrid
nature who are able to understand a variety of contexts, possess and facilitate the transfer of
knowledge within the company. Similarly, hybrid managers who have technical and
commercial training are particularly useful in the area of product development (Wheelwright and
Clark, 1992). It is the ability to manage the diversity of knowledge and skills effectively that
lies at the heart of the innovation process. This is wonderfully illustrated below in the analysis of
conducting or managing an orchestra. On the one hand, great individual musical talent is
required and yet, at the same time, individuals must play as part of the team.

ORGANISATIONAL STRUCTURES AND INNOVATION

The structure of an organisation is defined by Mintzberg (1978) as the sum total of the ways in
which it divides its labour into distinct tasks and then achieves coordinating among them. One of
the problems when analysing organisational structures is recognizing that different groups
within an organisation behave differently to internally and to different parts of the wider
external environment. Hence, there is a tendency to label structure at the level of the
organisation with little recognition of differences at group or department level. Nevertheless,
there have been numerous useful studies exploring the link between organisational structure and
innovative performance.
The seminal work by Burns and Stalker (1961) on Scottish electronic organisations looked at the
impact of technical change on organisational structures and on systems of social relationships. It
suggests that organisations flexible in character, typified by the absence of formality and
hierarchy, support innovation more effectively than do 'mechanistic' structures. The latter
are characterised by strict definitions of employment, narrow work roles, strict task
differentiation, extensive procedures and a well-defined hierarchy. Many objections have been
raised against this view, most notably the belief that 'mechanistic' structures are still seen,
especially within the business management literature, as necessary for successful industrial
innovation. In general, an organic organisation is more adaptable, more openly
communicating, more consensual and more loosely controlled. Table 3.3 indicates the
mechanistic organisation tends to offer a less suitable environment for managing creativity and
for innovation projects. The subject of organisation structures is also discussed in Chapter 15 in
the context of managing new product development teams.

[Link]
Following Burns and Stalker, there have been a variety of studies examining the relationship
between formalisation and innovation. There is some evidence of an inverse relationship
between formalisation and innovation. That is, an increase in formalisation of procedures will
result in a decrease in innovative activity. It is unclear, however, whether a decrease in
procedures and rules would lead to an increase in innovation. Moreover, as was argued above,
organisational planning and routines are necessary for achieving efficiencies.

[Link]
The term complexity here refers to the complexity of the organisation. In particular, it refers to
the number of professional groups or diversity of specialists within the organisation. For
example, a university, hospital or science-based manufacturing company would represent a
complex organisation. This is because within those organisations there would be several
professional groups. In the case of a hospital, nurses, doctors and a wide range of specialists
represent the different areas of medicine. This contrasts sharply with an equally large
organisation, that is, for example in the distribution industry. The management of supplying
goods all over the country will be complex indeed, but it will not involve the management of a
wide range of highly qualified professional groups.

[Link]
Centralisation refers to the decision-making activity and the location of power within an
organisation. The more decentralised an organisation, the fewer levels of hierarchy are usually
required. This tends to lead to more responsive decision making closer to the action.

[Link] size
Size is a proxy variable for more meaningful dimensions such as economic and organisational
resources, including number of employees and scale of operation. Below a certain size,
however, there is a major qualitative difference. A small busi-ness with fewer than 20
employees differs significantly in terms of resources from and organization with 200 or 2000
employees.
Organic (Decentralised) Mechanistic (Centralised)

1 Channels of communication 1 Channels of communication

Open with free information flow throughout

Highly structured, restricted information flow.
the organisation.

2 Operating styles 2 Operating styles

Flexible and free-flowing. Must be uniform and restricted.

3 Authority for decisions 3 Authority for decisions

Based on the knowledge of the individual. Based on formal managerial position.

4 Free adaptation 4 Reluctant adaptation

Not recognised or resisting fast to tried and true

Ready adaptation to changing circumstances. management principles despite changes in
operating conditions.

5 Emphasis on formally laid down

5 Emphasis on getting things done
procedures

Encouraged partly by freely laid out Reliance on tried and true management
procedures. principles.

6 Loose, informal control 6 Tight control

With emphasis on norms of cooperation. Through sophisticated control systems.

7 Flexible on job behaviour 7 Constrained on job behaviour

Permitted to be shaped by the requirements

of the situation and personality of the Required to conform to job descriptions.
individual doing the job.

8 Decision making 8 Decision making

Participation and group consensus used Restricted to decisions with minimum

frequently. consultation and involvement of subordinates.

THE ROLE OF THE INDIVIDUAL IN THE INNOVATION PROCESS

The innovation literature has consistently acknowledged the importance of the role of the
individual within the industrial technological innovation process (Boh et al. 2014; Langrish
et al., 1972; Martins and Terblanche, 2003; van de Ven, 1986; Wolfe, 1994). Furthermore, a
variety of key roles have developed from the literature stressing particular qualities (see Table
4.4).
Some have gone further, arguing that the innovation process is, essentially, a people process and
that organisational structure, formal decision-making processes, delegation of authority and other
formal aspects of a so-called well-run company are not necessary conditions for successful
technological innovation. Studies have revealed that certain individuals had fulfilled a variety of
roles (often informal) that had contributed to successful technological innovation.
In a study of biotechnology firms, Sheene (1991) explains that it is part of a scientist's
professional obligation to keep up to date with the literature. This is achieved by extensive
scanning of the literature. However, she identified feelings of guilt associated with browsing in
the library by some scientists. This was, apparently, due to a fear that some senior managers
might not see this as a constructive use of their time. Many other studies have also shown that
the role of the individual is critical in the innovation process (Allen and Cohen, 1969; Allen,
1977; Hauschildt, 2003; Wheelwright and Clark, 1992).

Key individual Role

Expert in one or two fields. Generates new ideas and sees new and
Technical innovator
different ways of doing things. Also referred to as the 'inventor'.

Requires vast amounts of information from outside the

Technical/commercial
organisation, often through networking. This may include market
scanner
and technical information.

Keeps informed of related developments that occur outside the

organisation through journals, conferences, colleagues and other
Gatekeeper companies. Passes information on to others, finds it easy to talk to
colleagues. Serves as an information resource for others in the
organisation.

Sells new ideas to others in the organisation. Acquires resources.

Product champion
Aggressive in championing his or her cause. Career risks.

Provides the team with leadership and motivation. Plans and

organises the project. Ensures that communication mechanisms are
Project leader right. Provides necessary coordination among team members. Sees
that the project moves forward effectively. Balances project goals
with organisational needs.

Provides access to a power base within the organisation, a senior

person. Buffers the project team from unnecessary organisational
Sponsor constraints. Helps the project team to get what it needs from other
parts of the organisation. Provides legitimacy and organisational
confidence in the project.
BUSINESS INCUBATORS
Idea is the genesis of Entrepreneurship. Ideas may be rational or wild. In either case, they need
to be filtered and those which have probability to generate a business need to be nurtured. As a
child is carefully nurtured by the mother in her womb, so the ideas need to be nurtured in
incubation centres which provide them safety and support with nutrients needed; in this case the
advice from the mentors, domain experts and angel investors.
Business incubator (BI) is an entity, which helps start-up businesses with all the necessary
resources / support that the start-up needs to evolve and grow as a mature business.
Typically, BIs provide incubatees, the start-up businesses supported by incubation, with
necessary infrastructure support, technology/prototype development support, research assistance,
help in getting funding, business consulting assistance and do whatever is necessary to make the
start-up a success.
Business incubators are organisations that support the entrepreneurial process, helping to
increase survival rates for innovative startup companies. Entrepreneurs with feasible projects
are selected and admitted into the incubators, where they are offered a specialised menu of
support resources and services. Resources and services open to an entrepreneur might
include such diverse elements as:
The Incubator Support System/ list of services/support elements
 Provision of physical space (offices, labs)
 Management coaching
 Help in preparing an effective business plan
 Administrative services
 Technical support
 Business networking
 Advice on intellectual property and
 Help in finding sources of financing.

Public and Private Incubators

Business incubators can be private or public. Private incubators are for-profit firms that may
require or receive a fee for the business services they provide to their clients. In essence,
they are a consulting firm that is specialized in new firm creation. Since 1990s, many developed
and developing countries have set up systems of public business incubators to encourage and
assist entrepreneurship. In many cases, public incubators are focused on high-tech industries.
For science-based business incubators, an effective collaboration with universities and
research institutes can motivate researchers into taking the risk of initiating a company.

Incubators can have many partners in addition to universities. Since new firms require finance to
grow, incubators have close relationships with many kinds of investors: seed capital and
venture capital funds, business angels, and banks generally provide most of the seed and
start-up capital for incubatee companies. Since business incubators are powerful economic
development tools, they collaborate actively with regional and national government agencies
from which they often receive financial grants. In many countries, business incubators have
national associations to represent their interests and organize meetings where best practices are
disseminated.
HISTORY OF BUSINESS INCUBATORS
The history of business incubators in India is a story of strategic government intervention,
largely focused on promoting technology-based entrepreneurship and scaling up the startup
ecosystem, especially since the 1980s.
Key Phases in Indian Incubation History
The evolution of the Indian incubation ecosystem can be categorized into distinct phases, moving
from basic government-led technology promotion to a widespread, diversified, and investor-
driven startup culture.
1. The Genesis: Technology-Focused (1980s - 1990s)
The earliest models of incubation in India were often government-backed centers focused on
promoting Science and Technology (S&T)-based ventures.
 Pioneering Centers: The concept was formalized with the establishment of centers like
TREC-STEP (Tiruchirappalli Regional Engineering College - Science and
Technology Entrepreneurs Park). TREC-STEP, established in 1986, is widely
recognized as one of India's first technology business incubators. It was a joint initiative
of the Central and State Governments and financial institutions.
 Early Focus: These initial centers, often called Science and Technology Entrepreneurs
Parks (STEPs) or Technology Business Incubators (TBIs), aimed to:
o Nurture the "Spirit of Enterprise" among technical graduates.
o Bridge the gap between academic research and commercial ventures.
2. Expansion and Academic Linkage (2000s - Early 2010s)
Following the liberalization of the Indian economy in the 1990s and the subsequent boom in the
IT sector, academic institutions, particularly the prestigious IITs and IIMs, began establishing
their own incubators.
 IIT and IIM Involvement: The country saw the rise of highly influential academic
incubators, leveraging the immense talent and research base of these institutions:
o SINE (Society for Innovation and Entrepreneurship) at IIT Bombay: A
prominent tech-focused incubator, ideal for deep-tech and hardware startups.
o [Link] (Centre for Innovation, Incubation and Entrepreneurship) at IIM
Ahmedabad: Known for its strong focus on mentoring, funding access, and
building a wide-ranging portfolio of ventures.
o NSRCEL (Nadathur S. Raghavan Centre for Entrepreneurial Learning) at
IIM Bangalore: Known for academic depth and running specialized programs.
 Government Schemes: Central government departments, notably the Department of
Science & Technology (DST), started providing financial grants and establishing a
structured network of NIDHI-TBIs (National Initiative for Developing and
Harnessing Innovations - Technology Business Incubators) across various institutions
to accelerate the process of technology commercialization.
3. The Startup Revolution (Mid-2010s - Present)
The landscape was dramatically transformed by major government policy initiatives and the
simultaneous increase in private and foreign investment, leading to an ecosystem of
unprecedented scale.
 The 'Startup India' Initiative (Launched 2016): This marked a shift from isolated TBI
efforts to a national movement. Key goals included:
o Providing funding and tax incentives for eligible startups.
o Simplifying regulatory compliance ("License Raj" elimination).
 o Creating a Fund of Funds for Startups (FFS) to infuse capital into the
ecosystem via Alternative Investment Funds (AIFs).
 Atal Innovation Mission (AIM): This NITI Aayog initiative played a pivotal role in
democratizing the ecosystem by setting up:
o Atal Incubation Centers (AICs): A network of government-backed incubators
across India, particularly pushing into Tier-2 and Tier-3 cities.
o Atal Tinkering Labs (ATLs): Fostering a culture of innovation at the school
level.
 Rise of Accelerators and Private Hubs: This period saw the rise of state-of-the-art,
large-scale incubation and acceleration centers, often backed by state governments or
large corporate bodies.
Incubator/Center Affiliation/Type Key Focus/Noteworthy Feature

Public/Academic One of the earliest Technology Business

TREC-STEP
(Original) Incubators (TBI) in India, established in 1986.

Strong focus on Deep-Tech, Hardware, and

SINE IIT Bombay Engineering startups, leveraging IIT's R&D
base.

Highly reputed University Incubator known

[Link] IIM Ahmedabad for its wide-ranging support, funding access,
and institutional credibility.

One of India's largest innovation campuses,

Government-backed
T-Hub housing hundreds of startups and facilitating
(Telangana)
large corporate partnerships.

Noteworthy as one of India's earliest and most

Startup Village, Private-Public
successful private-public startup incubators,
Kochi (Kerala)
focusing heavily on student startups.

A leading social impact incubator, specializing

Villgro Non-profit/Social in ventures focused on rural, health, and
agriculture innovations for the underserved.
Example,
ASHINE is the acronym for the Technology Business Incubator (TBI) at Sardar Vallabhbhai
National Institute of Technology (SVNIT), Surat.
ASHINE stands for the Association for Harnessing Innovation and Entrepreneurship.
Here are the key details about it:
 Type of Entity: It is a not-for-profit Section 8 Company established by SVNIT, Surat,
to promote entrepreneurial activity and commercialize R&D efforts.
 Official Recognition: It is recognized as a NIDHI-TBI (National Initiative for
Developing & Harnessing Innovations - Technology Business Incubator), supported
by the Department of Science and Technology (DST), Government of India.
 Role: ASHINE's primary mission is to nurture and support technology-based start-
ups by providing:
o Incubation Support: Dedicated space, mentoring, and networking.
o Pre-Incubation Support: Early-stage help, particularly for students under the
Gujarat government's SSIP (Student Startup & Innovation Policy).
o Infrastructure: Co-working space, meeting rooms, a FabLab for prototyping ,
and access to SVNIT's state-of-the-art laboratories.
o Funding: Access to pre-seed funds (like SSIP) and seed funds (like SAS).
 Focus Areas: It focuses on promoting innovation across all disciplines of Engineering
and Technology, including Manufacturing, Diamond & Textile, Energy, and
Environment.