LGT4312
Managing Innovation and Technology
Session 1: Introduction
Instructor: Dr. Zepeng Chen
Research Assistant Professor, Department of Logistics and Maritime Studies
Outline
▪ What is innovation
▪ The importance of innovation
▪ Strategic advantage through innovation
▪ A process view of innovation
▪ Innovation scopes and types
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What is innovation?
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What is innovation?– A Story about Edison
▪ One of Americas most successful innovators was Thomas Alva Edison (1847-
1931), who during his life registered over 1000 patents.
▪ Edison appreciated better than most that the real challenge in innovation was not
invention –coming up with good ideas –but in making them work technically
and commercially.
▪ He put to good use an understanding of the interactive nature of innovation,
realizing that both technology push (which he systematized in one of the worlds
first organized R&D laboratories) and demand pull need to be mobilized.
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What is innovation? – A Story about Edison
▪ Edison recognized that although the electric light bulb was a good idea, it had little
practical relevance in a world where there was no power point to plug it into.
▪ Consequently, his team set about building up an entire electricity generation and
distribution infrastructure, including designing lamp stands, switches and wiring.
▪ In 1882, he switched on the power from the first electric power generation plant in
Manhattan and was able to light up 800 bulbs in the area. In the years that followed
he built over 300 plants all over the world.
▪ As Edison realized, innovation is more than simply coming up with good ideas; it is
the process of growing them into practical use
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What is innovation?
▪ Definitions of innovation may vary in their wording, but they all
stress the need to complete the development and exploitation aspect
of new knowledge.
▪ Innovation means “change”
▪ Innovation is “the successful exploitation of new ideas”
▪ Innovation is “creating value from ideas”
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What is innovation?
▪ Innovation vs. Invention:
▪ Invention is only the first step in a long process of bringing a good idea to
widespread and effective use.
▪ For-profit organization:
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Importance of Innovation
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Importance of Innovation
Everybody is talking about Innovation!
“We have the strongest innovation program that “Adi Dassler had a clear, simple, and
I can remember in my 30-year career at P&G, unwavering passion for sport. Which is why
and we are investing behind it to drive growth with the benefit of 50 years of relentless
across our business,” innovation created in his spirit, we continue
to stay at the forefront of technology”.
--Bob McDonald,
Procter & Gamble’s chairman of the board, --Adidas about its Future
president and chief executive officer
“We're measuring GE's top leaders on how
“Innovation is our lifeblood” imaginative they are. Imaginative leaders
are the ones who have the courage to fund
--Siemens about innovation new ideas, lead teams to discover better
ideas, and lead people to take more
“Innovation distinguishes between a leader and educated risks”.
a follower”.
--J. Immelt, Chairman & CEO General
--Steve Jobs, Apple Electric
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Importance of Innovation
▪ The logic is simple – if we don’t change what we offer the world (products and
services) and how we create and deliver them, we risk being overtaken by others
who do.
▪ Those enterprises which survive do so because they are capable of regular and
focused change.
▪ Innovation is strongly associated with growth.
▪ Economists have argued for decades over the exact nature of the relationship, but
they are generally agreed that innovation accounts for a sizeable proportion of
economic growth. In a recent book William Baumol pointed out that:
“virtually all of the economic growth that has occurred since the
eighteenth century is ultimately attributable to innovation”.
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Importance of Innovation
▪ OECD countries spend $1500 billion/yr on R&D.
▪ China has the ambition to spend 2.5% of gross domestic product, or GDP (12.24 trillion), on research
by 2020 with current levels around 2%.
▪ South Korea has superseded Israel as the world’s most R&D intensive country, spending 4.36% of
GDP on research and development. Other high performers in Asia included Japan at 3.35%.
▪ More than 16000 firms in the USA currently operate their own industrial research labs, and there are
at least 20 firms that have annual R&D budgets in excess of $1 billion.
▪ In 2008, 16.8% of all firms’ turnover in Germany was earned with newly introduced products and in
the research-intensive sector this figure was 38%. During the same year the German economy was
able to save costs of 3.9% per piece by means of process innovations.
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Innovation is not just about profits
▪ Not all games are about win/lose outcomes.
▪ Public services like healthcare, education
and social security may not generate profits
but they do affect the quality of life for
millions of people. Bright ideas when
implemented well can lead to valued new
services and the efficient delivery of
existing ones at a time when pressure on
national purse strings is becoming ever
tighter.
▪ There’s plenty of scope for innovation and
entrepreneurship and sometimes this really
is about life and death - for example in the
context of humanitarian aid for disasters.
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Strategic Advantage through Innovation
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Strategic Advantage
▪ Strategic advantage: Those marketplace benefits that exert a decisive
influence on an organization's likelihood of future success. These
advantages frequently are sources of an organization's current and
future competitive success relative to other providers of similar products
▪ 7-11
▪ Apple
▪ Zara
▪ What strategic advantage innovation can lead to?
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Strategic advantages through innovation
Source: Joe Tidd, John Bessant, Managing Innovation: Integrating Technological, Market and Organizational Change (7 th edition), Chapter 1
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Strategic advantages through innovation
Source: Joe Tidd, John Bessant, Managing Innovation: Integrating Technological, Market and Organizational Change (7 th edition), Chapter 1
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A Process View of Innovation
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A process view of innovation
▪ There are four key phases in the innovation process – each of which
requires dealing with particular challenges – and only if we can
manage the whole process is innovation likely to be successful.
The process of turning ideas into reality and capturing value from them
Source: Joe Tidd, John Bessant, Managing Innovation: Integrating
Technological, Market and Organizational Change (7th edition), Chapter 1 18
A process view of innovation
▪ Phase one - Search:
➢ Bringing new ideas to the system. These can come from R&D, ‘Eureka’ moments, copying,
market signals, regulations, competitor behaviour –the list is huge, but the underlying challenge
is the same –how do we organise an effective search process to ensure a steady flow of “genetic
variety” that gives us a better chance of surviving and thriving?
▪ Phase two - Select:
➢ We need to select the options that are most likely to help us grow and develop. Unlike natural
selection where the process is random, we are concerned here with some form of strategic choice
– out of all the things we could do, what are we going to do –and why? This process needs to
take into account competitive differentiation –which choices give us the best chance of standing
out from the crowd? –and previous capabilities –can we build on what we already have or is this
a step into the unknown …?
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A process view of innovation
▪ Phase three - Implement:
➢ Converting ideas into reality. The task is essentially one of managing a growing commitment of
resources –time, energy, money and above all mobilising knowledge of different kinds –against
a background of uncertainty. Unlike conventional project management, the innovation challenge
is about developing something which may never have been done before –and the only way we
know whether or not we will succeed is by trying it out.
▪ Phase four - Capture:
➢ How will we ensure that the efforts have been justified –in commercial terms or in terms of
creating social value? How to price and sell? How will we protect the gains from appropriation
by others? And how might we learn from the experience and capture useful learning about how
to improve the innovation process in the future
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Innovation Scopes and Types
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Four dimensions of innovation space
▪ Essentially, we are talking about change, and this can take several
forms. We will focus on four broad categories (4Ps):
What we offer the world
How we create and deliver that offering
Where we target that offering
How we frame what we do
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Four dimensions of innovation space
▪ The 4Ps of Innovation Space:
Source: Joe Tidd, John Bessant, Managing Innovation:
Integrating Technological, Market and Organizational
Change (7th edition), Chapter 1
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Degree of Novelty
Incremental vs. Radical
▪ Incremental innovation: Do what we do but better
▪ Radical innovation: Do something different
▪ The reality is that although innovation sometimes involves a
discontinuous shift, most of the time it takes place in incremental
fashion.
▪ It is the perceived degree of novelty which matters; novelty is very
much in the eye of the beholder.
Do Better or Do Different
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Examples of the 4Ps model: Product
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Examples of the 4Ps model: Process
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Examples of the 4Ps model: Position
Create new market
Häagen-Dazs launches
adults-only ice-cream
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Examples of the 4Ps model: Paradigm
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Discontinuous innovation – what happens when the game
changes?
▪ Most of the time innovation takes place within a set of rules of the game which are
clearly understood, and involves players trying to innovate by doing what they have
been doing (product, process, position, etc.) but better. Some manage this more
effectively than others, but the ‘rules of the game’ are accepted and do not change.
▪ But occasionally something happens which dislocates this framework and changes
the rules of the game. By definition these are not everyday events, but they have the
capacity to redefine the space and the boundary conditions –they open up new
opportunities but also challenge existing players to reframe what they are doing in
the light of new conditions.
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