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What is Innovation

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What is Innovation?

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What is Innovation

  1. 1. WHAT  IS   INNOVATION?   NOVEMBER  2010   Everyone  has  his  or  her  own  view  as  to   what  constitutes  innovation.    Is   innovation  only  about  new  to  the  world   products  or  services?  Is  invention   innovation?  ©2010  INNOVATION  FOR  GROWTH   Austrian   economist,   Joseph   Schumpeter1,   defined   innovation   over     70  years  ago  as:  C  W  MOBBS   1. The   introduction   of   a   good   (product),   which   is   new   to   consumers,   or   one   of   higher   quality   than   was   available   in   the  past.   2. Methods   of   production,   which   are   new   to   a   particular  Email:   branch   of   industry.     These   are   not   necessarily   based   on   new  cwmobbs@innovationforgrowth.co.uk   scientific   discoveries   and   may   have,   for   example,   already   been  used  in  other  industrial  sectors.  www.innovationforgrowth.co.uk   3. The  opening  of  new  markets.   4. The  use  of  new  sources  of  supply.   5. New  forms  of  competition,  that  leads  to  the  restructuring  of   an  industry.   The   OECD2   defined   innovation   in   1981   as   consisting   “of   all   those   scientific,   technical,   commercial   and   financial   steps   necessary   for   the   successful   development   and   marketing   of   new   or   improved   manufactured   products,   the   commercial   use   of   new   or   improved   processes   or   equipment   or   the   introduction   of   a   new   approach   to   a   social  service.    R&D  is  only  one  of  these  steps.”   Both   these   definitions,   and   the   descriptions   set   out   in   Box   1,   include   some   common   words,   such   as   ‘new’,   ‘introduction’,   ‘products’,   ‘markets’   and   ‘processes’,   although   none   in   its   entirety   fully  describes  truly  the  essence  of  innovation.    Why?    I  believe  that   innovation   is   more   than   mere   words.     Innovation   is   a   mind-­‐set,   a   culture,  a  desire  to  do  better,  a  willingness  to  take  risks  and  yes,  the   celebration  of  failure!    Think  of  Apple  and  Google,  both  companies   which  are  considered  to  be  truly  innovative.    
  2. 2. Box  1     Having   considered   different   There   are   a   number   of   differing   views   as   to   what   constitutes   innovation,   definitions   of   innovation,   it   is   now   including  the  following:   worthwhile  looking  at  the  realities.   • “Innovation   is   the   successful   exploitation   of   new   ideas”   –   For   business   innovation,   the   “4Ps   Innovation  Unit  (2004)  UK  Department  of  Trade  and  Industry.   approach   can   be   used   to   explore   • “Industrial   innovation   includes   the   technical,   design,   opportunities   for   innovation.”5       manufacturing,   management   and   commercial   activities   involved   Essentially,   the   “4Ps”   relate   to   in   the   marketing   of   a   new   (or   improved)   product   or   the   first   innovation   focusing   on   the   product,   commercial  use  of  a  new  (or  improved)  process  or  equipment”  –   Chris   Freeman   (1982)   The  Economics  of  Industrial  Innovation,   2nd   process,   position   or   paradigm.   The   edition,  Pinter,  London.   first   two   are   obvious,   with   • “Innovation   is   the   specific   tool   of   entrepreneurs,   the   means   by   numerous   examples,   including   which   they   exploit   change   as   an   opportunity   for   a   different   revised  or  new  computer  operating   business   or   service.     It   is   capable   of   being   presented   as   a   systems,   new   car   models,   discipline,  capable  of  being  learned,  capable  of  being  practised”  –   Peter   Drucker   (1985)   Innovation  and  Entrepreneurship,   Harper   &   (product),  or  extensions  of  product   Row,  New  York.   ranges,   improved   operations   • “Companies   achieve   competitive   advantage   through   acts   of   (process).   Position   considers   the   innovation.     They   approach   innovation   in   its   broadest   sense,   target   consumer   and   the   purchase   including  both  new  technologies  and  new  ways  of  doing  things”  –   decision   rationale.     Examples   Michael   Porter   (1990)   The   Competitive   Advantage   of   Nations,   include   low-­‐cost   airlines   and   on-­‐ “Vivamus  porta   Macmillan,  London.   line   customisation   of   products.     • “An  innovative  business  is  one  which  lives  and  breathes  “outside   est  sed  est.”   the  box”.    It  is  not  just  good  ideas,  it  is  a  combination  of  good  ideas,   Paradigm   is   a   more   difficult   motivated   staff   and   an   instinctive   understanding   of   what   your   concept.   It   is   defined   as   “how   we   customer   wants”   –   Richard   Branson   (1998)   DTI   Innovation   frame   what   we   do.”5   Examples   Lecture.   include  new  platforms,  such  as  IBM,     reinventing   itself   as   a   consultancy   business,  or  i  Tunes.       Innovation  can  be  further  split  into   The   European   Innovation   Progress   Report,   20063   defines   incremental,   radical   and   innovation   as   being   “about   change   and   the   ability   to   manage   discontinuous.   The   former,   change   over   time.     Innovation   can   be   about   the   successful   generally   more   prevalent   is   ‘doing   exploitation   of   new   ideas   in   the   form   of   a   new   or   improved   something  better’.     product  or  service  but  it  can  also  be  about  the  way  in  which  a     product   or   service   is   delivered.     Equally,   innovation   can   be   Radical   innovation,   which   is   more   about   creatively   positioning   (or   marketing)   an   existing   elusive,   is   doing   something   product,   or   about   changing   the   business   model   (a   new   different.     paradigm).”         Ahmed   and   Shepherd4   “discern   a   number   of   characteristics”,   The   most   elusive,   and   potentially   and   these   are   set   out   in   Box   2.     These,   it   will   be   noted,   go   even   threatening   is   discontinuous   further   and   look   outside   the   firm   as   well.   Indeed,   innovation   innovation.   This   results   in   can   also   be   considered   as   a   non-­‐business   activity,   think   of   significant   change,   often   from   the   legislation,   the   changes   in   fashion,   the   advancement   of   emergence   of   completely   new,   knowledge,  for  example.   unpredictable   markets   or   as   a     result   of   a   new   technological   In   answer   to   the   two   questions   posed   above,   innovation   is   breakthrough.     It   might   come   from   more   than   the   introduction   of   new   to   the   world   products   or   a   change   in   market   behaviour   services  and  invention  is  only  one  element  of  innovation.   (think   of   real   fur   coats!),   or   be   a   result   of   a   terrorist   event   (World   Trade  Centre,  9/11).    Alternatively,    
  3. 3. Box  2   it   could   be   business   model   innovation   –   Amazon   springs   to   Ahmed  and  Shepherd’s  characteristics  are:   mind.   But   the   essence   of   • “Innovation   as   creation   (invention):   The   focus   is   on   use   of   discontinuous   innovation   is   that   it   resources   (people,   time   and   money)   to   invent   or   develop   a   new   tends  to  be  unpredictable.     product,   service,   new   way   of   doing   things,   new   way   of   thinking     about  things.   • Innovation   as   diffusion   and   learning:   The   focus   is   on   acquiring,   This   form   of   innovation   will   supporting  or  using  a  product,  service  or  ideas.   change   the   organisation   in   many   • Innovation  as  an  event:  The  focus  of  attention  here  is  on  a  discrete   ways.   New   technology   may   be   event,  such  as  the  development  of  a  single  product,  service,  idea  or   needed   as   well   as,   new   processes,   decision.   new   customers,   new   knowledge,   • Innovation   as   a   (stream   of   innovations)   trajectory:   This   is   recognition   that   a   single   act   of   innovation   (as   that   in   a   discrete   and   possibly   a   new   business   event)   can   facilitate   a   family   of   innovations   to   be   derived   from   the   model.   Incremental   innovation   fit   original  source.   into   existing   core   competencies   • Innovation   as   change   (incremental   or   radical):   Innovation   enacts   and  the  core  business.     change.     Some   innovations   are   minor   adjustments   whilst   other     innovations  are  radical  or  discontinuous  in  nature.   There   is   an   unresolved   debate   as   • Innovation   as   a   (firm-­‐level)   process:   In   this   view   innovation   is   not   a  single  act,  but  a  series  of  activities  that  are  carried  out  by  a  firm   to   whether   companies   need   both   to  lead  to  the  production  of  an  outcome  (namely,  the  innovation).   sorts   to   compete   in   the   long-­‐term,   • Innovation   as   a   context   (region,   nature,   etc.)   level   process.   This   but   certainly,   incremental   “Vivamus  porta   view   sees   innovation   as   an   act   beyond   the   confines   of   an   innovation   is   required   as   a   est  sed  est.”   individual   or   firm.   The   view   captures   institutional   frameworks,   socio-­‐political   networks,   and   proximal   factor   endowments   as   minimum.   important   factors   in   the   act   of   innovation.   The   focus   is   switched     from  the  firm  to  the  peculiar  endowments  and  characteristics  of  a   Research   undertaken   in   2009   (see   specific  context  (region,  nation,  etc.)”   Chart   1)   shows   the   percentage   of   respondents  who  have  undertaken   the   identified   forms   of   innovation,   with   new   or   significantly   improved   Chart  1   Has  your  company  introduced  any  of  the  following   services  being  undertaken  by  50%   innovations  since  2006?   of   the   5,238   enterprises   New  or  signikicantly  improved   interviewed   across   Europe.   marketing  strategies   Responses   from   UK   organisations   are  also  shown  for  comparison.       New  or  signikicantly  improved     products   Having   regard   to   the   above   comments,   when   considering   New  or  signikicantly  improved   innovation,   we   look   at   five   main   processes   UK   areas:   New  or  signikicantly  improved     organisational  structures   EU27   • Innovation  strategy;   • Ideas;   New  or  signikicantly  improved   • Prioritisation;   services   • Implementation;  and   0   20   40   60   • People  and  organisation.   %  of  Yes     It   is   only   by   linking   and   analysing   Source:  Innobarometer  2009:  Analytical  Report6   these   five   elements   (three   of   which,   ideas,   prioritisation   and   implementation  form  the  phases  of      
  4. 4.   Aliquam  dolor.   the   traditional   development   funnel)   that   a   fuller   understanding   of   innovation  can  be  reached.     To   conclude,   innovation   is   more   than   just   simple   invention,   or   indeed,   ‘new   product   development’.   It   needs   to   be   commercialised   and   exploited.     It   involves   the   whole   business,   and   particularly  its  ethos  or  culture.  It  can   be  relatively  simple,  and  low  key,  or  it       can   be   more   radical   and   possibly,   byline   threatening   to   existing   players.   It     encompasses  Imore   than   just   goods,   it   Lorem   psum     includes   services,   markets,   processes,   paradigms,   and   positions   as   well.   We     Incremental,  radical,  or   all   innovate,   we   do   not   always   realise   discontinuous?   that  we  are  doing  so.           1. Schumpeter  (1934)  The  Theory  of  Economic  Development  Harvard  University  Press,       Boston   2. OECD  (1981)  The  Measurement  of  Scientific  and  Technical  Activities  OECD,  Paris   3. EIPR  (2006)  European  Innovation  Progress  Report  Office  for  Official  Publications  of     the  European  Communities,  Luxembourg   4. Ahmed  and  Shepherd  (2010)  Innovation  Management  Context,  strategies,  systems   and  processes  FT  Prentice  Hall,  Harlow   5. Tidd  and  Bessant  (2009)  Managing  Innovation  Integrating  Technological,  Market   and  Organisational  Change  4th  edition.  Wiley,  Chichester   6. Flash  Eurobarometer  267  –  The  Gallup  Organisation  (2009)  Innobarometer  2009   Analytical  Report  European  Commission   Founded   in   2010,   Innovation   for   Growth   is   a   business   consultancy   firm   that   specialises   in   the   provision   of   advice   to   small  and  medium  sized  enterprises.  We  work  with  companies  from  all  sectors  undertaking  innovation  audits,  and   providing   innovation   advice   so   our   clients   can   achieve   their   growth   aspirations.   We   also   undertake   desktop,   business  research,  enabling  our  clients  to  concentrate  on  running  their  business.   Innovation  for  Growth  Limited   For  more  information,  contact     Weir  Farm     Lower  Road   Chris  Mobbs  at     Blackthorn   Innovation  for  Growth   Nr  Bicester   Oxfordshire       OX25  1TG   Email:     enquiries@innovationforgrowth.co.uk   +44  (0)1869  243  394   or   www.innovationforgrowth.co.uk   Via  the  website:   enquiries@innovationforgrowth.co.uk     www.innovationforgrowth.co.uk   Registered  in  England  and  Wales   or   Registered  number:  7387935   Telephone:  +44  (0)1869  243  394    

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