Week 4
The Concept of Innovation
and Innovation Management
Managing Innovation
Outline
1. Innovation – what it is and why does it
matters
2. Models of innovation
3. Innovation as a management process
Innovation – what is and why does it matters
innovation is …
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•
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new stuff
that adds value
for various stakeholders
can be monetized
creates a competitive advantage
and is sustainable
until the advantage erodes
Innovation – what is and why does it matters
 Innovation
is…
 “the process of turning opportunity into new ideas and
of putting these into widely used practice” (Tidd &
Bessant, 2009)
 “the management of all the activities involved in the
process of idea generation, technology development,
manufacturing and marketing of a new (or improved)
product[/service]” (Trott, 2008)
 “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” (Myers & Marquis, 1969)
Innovation – what is and why does it matters
 Innovative
Thinking
 Innovative thinking goes beyond the mere
creation of business.
 “Ideas come from people. Innovation is a
capability of the many.”
 Innovative thinking is an integrated mindset
that permeates individuals and organizations.
Innovation – what is and why does it matters
 Who
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does it matter to?
Entrepreneurs starting up a venture
Established enterprises trying to grow
Governments (local and national)
Trade and sector bodies
Supply chain ‘owners’
Innovation – what is and why does it matters
innovation is …
 Innovation is driven by the ability to see connections,
to spot opportunities and to take advantage of them.
 But innovation is not just about opening up new
markets – it can also offer new ways of serving
established and mature ones.
 Of course, technology often plays a key role in
enabling radical new options.
 At the other end of the technological scale there is
scope for improvement on an old product, often
using old technologies in new ways.
Innovation – what is and why does it matters
innovation is …
 Innovation is of course not confined to
manufactured products; plenty of examples of
growth through innovation can be found in
services.
 Public services such as healthcare, education
and social security may not generate profits but
they do affect the quality of life for millions of
people.
Innovation – what is and why does it matters
 Innovation
matters…
 not only at the level of the individual enterprise but also
increasingly as the wellspring for national economic
growth.
 Importantly innovation and competitive success are not
simply about high-technology companies.
 According to Statistics Canada,16 the following factors
characterize successful small- and medium-sized
enterprises:
 Innovation is consistently found to be the most important characteristic
associated with success.
 Innovative enterprises typically achieve stronger growth or are more successful
than those that do not innovate.
 Enterprises that gain market share and increasing profitability are those that are
innovative.
Innovation – what is and why does it matters
Innovation, Creativity, and Entrepreneurship
 Creativity is typically described as the process of
generating new ideas.
 Innovation takes creativity a step further by
being a process that turns those ideas into reality.
 Innovation is the process by which
entrepreneurs convert opportunities (ideas) into
marketable solutions.
Innovation – what is and why does it matters
 Innovation
& Entrepreneurship
 The nature of innovation is that it is fundamentally about
entrepreneurship.
 The skill to spot opportunities and create new ways to
exploit them is at the heart of the innovation process.
 Entrepreneurs are risk-takers, but they calculate the
costs of taking forward a bright idea against the potential
gains if they succeed in doing something different –
especially if that involves upstaging the players already
in the game.
Innovation – what is and why does it matters
 Innovation
& Entrepreneurship
Stage in life
cycle
Creating wealth
Start-up
Growth
Sustain/scale
Renew
Individual
entrepreneur
exploiting new
technology or
market opportunity
Growing the business
through adding new
products/services or
moving into new
markets
Building a portfolio
of incremental and
radical innovation
to sustain the
business and/or
spread its influence
into new markets
Creating social
value
Social
entrepreneur,
passionately
concerned to
improve or change
something in their
immediate
environment
Developing the ideas
and engaging others in
a network for change –
perhaps in a region or
around a key issue
Spreading the idea
widely, diffusing it
to other
communities of
social
entrepreneurs,
engaging links with
mainstream players
like public sector
agencies
Returning to the
radical framebreaking kind of
innovation which
began the business
and enables it to
move forward as
something very
different
Changing the
system - and then
acting as agent for
next wave of
change
Innovation – what is and why
does it matters
Innovation & Entrepreneurship
Innovation doesn’t just happen – it is driven by
entrepreneurship. This powerful mixture of
energy, vision, passion, commitment, judgement
and risk-taking – provides the engine behind the
innovation process. It’s the same whether we are
talking about a solo start-up venture or a key
group within an established organization trying to
renew its products or services.
Innovation – what is and why does it matters
 Successful
Innovators …..
 explore and understand different dimensions of
innovation (ways in which we can change things)
 manage innovation as a process
 create conditions to enable them to repeat the innovation
trick (building capability)
 focus this capability to move their organizations forward
(innovation strategy)
 build dynamic capability (the ability to rest and adapt
their approaches in the face of a changing environment)
Innovation – what is and why does it matters

Innovative companies are more…
 …Adaptable
• Flexible strategy, structure, culture
 …Competitive
• Better processes, services,
business models
Innovation – what is and why does it matters
Innovation – what is and why does it matters
 Barriers
to innovation include:
• Seeing innovation as ideas, not managing the
whole journey;
• Not recognizing the need for change;
• Mindset and complacency – core competence
becomes core rigidity;
• Closed information network, insulated from new
ideas.
➤ Innovation Is Planned and Predictable
➤ Technical Specifications Must Be Thoroughly Prepared
➤ Big Projects Will Develop Better Innovations than
Smaller Ones
➤ Technology Is the Driving Force of Innovation Success.
© 2012 Pearson Education, Inc. publishing as Prentice Hall
1-18
Innovation – what is and why does it matters
Nikolai Kondratieff / Joseph Schumpeter
• “virtually all of the economic growth that has
occurred since the eighteenth century is
ultimately attributable to innovation”
• Schumpeter’s “Creative Destruction”