OBAFEMI AWOLOWO UNIVERSITY, ILE IFE, NIGERIA
Institute for Entrepreneurship and Development Studies
MODULE 6: INNOVATIONS AND APPROPRIATE TECHNOLOGY
6.1. Introduction
In this module, you are going to learn about the importance of innovation to entrepreneurship, as we
ll as the definition, sources, and channels of innovation. The module also discusses the concept of
appropriate technology.
6.2. Learning Objectives
At the end of this module, you should be able to:
(i) Define innovation and differentiate between innovation and invention.
(ii) Explain why and how innovation is important.
(iii) Explain different forms, sources, and channels of innovation.
(iv) Define appropriate technology.
6.3. Channels Of Innovation And Phases in Successful Innovation
The importance of innovation, especially in a business enterprise, has been established a long
time ago. For example, Joseph Schumpeter (1911), in his publication on “The Theory of
Economic Development”, described the vehicle of development as the innovation itself. Peter
Drucker also wrote that, from the business management point of view, there are only two main
tasks, that is, marketing and innovation. While the marketing function is to satisfy the current
needs of the consumers, innovation goes further to satisfy consumers' future needs. Therefore, it
can be concluded that without the ability for constant innovation, enterprise disappears once the
consumers’ needs, technology, or competition changes.
However, the factor which is responsible for establishing these new combinations is
entrepreneurs. Innovation is therefore the centrepiece of entrepreneurship. This is because an
entrepreneur is somebody who establishes new combinations, and thus fulfills the
entrepreneurial function. The essence of innovation is to fulfill the entrepreneurial function of
making new combinations.
6.3.1. Invention, Creativity and Innovation
For clarity, it is important to make a distinction between invention, creativity, and innovation.
While invention is the first occurrence of an idea for a new product or process, creativity is the
ability to bring something new into existence, and innovation is the process of doing new
things.
For this lecture, innovation is defined as the renewal and enlargement of the range of products
and services and associated markets; the establishment of new methods of production, supply,
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and distribution; the introduction of changes in management, work organisation, and the
working conditions and skills of the workforce (Korres, 2012).
Inherent in this definition are the various types of innovation, which include the introduction of:
a) New product or service (product innovation), which refers to any new or improved
product, equipment, or service that is introduced in the market.
b) New methods of production (process innovation). This is the introduction of a new
procedure or technique of producing a product or offering a service, which reduces the
cost of producing the product or service or enables the production of new products.
c) New ways of organising business (organisational innovation). This refers to
the introduction of new approaches to managing or organising the firm. It is, therefore,
the creation or alteration of business structures, practices, and models, and may therefore
include process, marketing, and business model innovation.
d) Other areas where innovation can be created are the discovery of new sources of
supply and the exploration of new markets.
6.3.2. Forms and Classification of Innovation
[Link]. Form of innovation
According to Hamel (1997) in Dess and Lumpkin (2005), innovations come in different forms:
a) Technological innovativeness primarily comprises research and engineering efforts
aimed at developing new products and processes.
b) Products-market innovativeness consists of market research, product design,
and innovations in advertising and promotion.
c) Administrative innovativeness is concerned with novelty in management systems,
control techniques, and organisational structure.
[Link]. Classification of innovation
There are also various classifications of innovations according to degrees of innovativeness.
Hence, innovation can be classified in terms of whether it is radical, incremental, modular, or arc
hitectural in nature.
a) Radical (or revolutionary) innovation, which is a newly marketed product whose
functionality, technical construction, performance characteristics, design, and use of
materials and components are new or substantially changed. For example:
The introduction of a compact disc (CD) was a radical innovation in the music and
film industry, as well as a memory stick in replacement of the old 5¼ and 3½
inches floppy diskettes.
Introduction of the photocopier in replacement of the carbon paper, and digital
camera in replacement of analog camera.
Flat-screen technology television and computer monitor in replacement of bulk
cathode ray tube.
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iPhone and smartphone that replaced the old phone.
b) Incremental (or evolutionary) innovation, which is an existing product whose
technical characteristics have been enhanced or upgraded. For examples:
Introduction of 32-bit chips to replace 16-bit chips
Upgrade from Pentium I through to IV processor.
Gillette razors
Introduction of Cherry Coke and Coke with lime.
c) Modular Innovation: This kind of innovation changes the core design of one or more
components but does not change the entire product architecture. This type of innovation
requires new knowledge for one or more components, but the architectural knowledge
remains the same. Examples are:
Digital phone which replaced the analog phone.
360-degree smartphone camera.
Touchscreen laptop computer.
Miniature modular drones.
d) Architectural Innovation: The essence of this type of innovation is the reconfiguration
of an established system to link together components and parts in a new way (Henderson
and Clark, 1990 in Hager, 2006). Architectural innovation does not mean that the
components remain unchanged but they are changed in a manner that there are new ways
of linkage between the components. The change is so small that the core concept behind
the changed component is the same, and the associated scientific and engineering
knowledge remains the same. Examples are:
Reduction of the size of the hard drives from 14-inches diameter disks to diameter
of 3.5-inches, and from 2.5-inches to 1.8-inches, and
Desktop photocopiers.
6.3.3. Development of Innovation
There are several ways through which innovation can be created or developed. These are:
a) In the form of invention. Research and Development (R&D) is a major contributor to
innovation, generating a flow of technical ideas and continually renewing the pool of
technical skills.
b) An enterprise may be innovative by taking an idea from another business sector and adapting
it for use in its production processes or market (adaptation). c) The search for new, untapped,
market space is another driving force. This may rely on technological innovation or on
reconfiguring existing products and services to present a radical change that will be
perceived by customers as offering more or better value (value innovation).
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c) It may be through the introduction of a comprehensively new approach to a business, such as
new business models of online retailers, to create new market space or increase profitability
in an existing market.
6.3.4. Channels of Innovation
a) Internal Innovation: By using the firm’s resources and capabilities to innovate.
b) Cooperating to Innovate: When two or more firms form an agreement to combine their
resources and capabilities to innovate.
c) Acquiring Innovation: Through buying ownership of another firm’s innovations and
innovation capabilities.
d) Spillover: This occurs when there are changes in the technological capabilities of the
domestic firm due to the presence of foreign firms. This could arise as a result of competition
, labour mobility, backward or forward linkages, and demonstration effect.
6.3.5. Phases in Successful Innovation
The following five essential phases of successful innovation have been identified:
(i) Idea generation and mobilisation: This phase is the starting point for new ideas. Successful ide
a generation should be stimulated by the pressure to compete and by the freedom to explore. Once a
new idea is generated, it is conveyed to the mobilisation phase, wherein the idea travels to a
different physical or logical location.
(ii) Advocacy and screening: According to Desouza et al. (2007), this phase is the period for
weighing the costs and benefits of the idea (cost-benefit analysis). Advocacy and screening have to
take place simultaneously to weed out ideas that lack potential without allowing stakeholders to
reject ideas impulsively solely based on their novelty.
(iii) Experimentation: The experimentation phase assesses the sustainability of ideas for a
particular firm at a particular time – and in a particular environment. In this phase, it is essential to
determine who the customer will be and what he or she will use the innovation for. With that in
mind, the firm might discover that although someone has a great idea, it is ahead of its time or just
not right for a particular market (Desouza et al., 2007).
(iv) Commercialisation: At this phase, the firm presents the product or service to its customers to
verify that the innovation solves their problems and then analyses the costs and benefits of rolling
out the innovation. According to Desouza et al, 2007), an invention is only considered an
innovation once it has been commercialised. Therefore, the commercialisation phase is a significant
one similar to advocacy in that it takes the right people to progress the idea to the next
developmental phase.
(v) Diffusion and implementation: Diffusion is the process of gaining the company’s overall
acceptance of an innovation, ultimately leading to the setting up of the structures, maintenance, and
resources needed to produce it.
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6.4. Appropriate Technology
(a) Introduction and Definition
Appropriate technology is seen as a way of thinking (or ideology) that canvases small-scale, labour-
intensive, energy-efficient, environmentally friendly, people-centered, and locally controlled
projects. Therefore, in designing an appropriate technology the following are the focus:
(i) Belief that human communities can have a hand in deciding what their future will be like, and
that the choice of tools and techniques is an important part of this.
(ii) Recognising that technologies can embody cultural biases and sometimes have political and
distributional effects that go far beyond a strictly economic evaluation.
Hence, appropriate technology involves a search for technologies that have, for example, beneficial
effects on income distribution, human development, environmental quality, and the distribution of
political power, as well as productivity, in the context of particular communities and nations.
Appropriate technology involves attempting to ensure that technologies are fitted to the context
of their use, that is, the:
(i) Biophysical context which takes account of health, climate, biodiversity, and ecology.
(ii) Psycho-social context which takes into consideration social institutions, politics, culture,
economics, ethics, and the personal/spiritual needs of individuals.
(b) Characteristics of appropriate technology
(i) Low investment cost per workplace.
(ii) Low capital investment per unit of output.
(iii) Organisational simplicity.
(iv) High adaptability to a particular social-cultural environment.
(v) Sparing use of natural resources.
(vi) Low cost of the final product
(vii) High potential for employment.
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(c) Examples of Appropriate Technology
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7.5. Summary
In this lecture, you have learned about innovation, which is the process of doing new things. The in
novation initiative provides a chance for the organisation to think more holistically about
innovation from a business model perspective whether accountants, plant managers, and business
owners work alongside salespeople, engineers, and chemists.
As a dimension of corporate entrepreneurship, innovation is a firm’s commitment to creating and i
ntroducing products, production processes, and organisational systems. Hence, if your firm wants
to remain competitive and prosper, it has no choice but to improve its innovation effectiveness
proactively.