Strategic and innovation management
Chapter 1: What is innovation and why does it matter?
Inleiding
What is innovation?
Innovation is everywhere! On advertising boards, company websites, tv…
But what is it? What does it mean?
➔ My first thought was: creating something new
➔ What is you first thought?
What value have those innovations created?
What kind of value do those innovations create?
-> my first thought: to create progress
-> what is your thought?
Think of an innovation and what value it has brought the customer/world.
In the next slides you see my thoughts.
What are yours?
- Maybe you thought about Spotify replacing the CDplayer?
- Good thinking!
- And then you can go on and say: the value of this innovation is bringing more different kind
of music in the live of the customer, easier accessible, cheaper, no need of a CDplayer,….
- Good thinking as well!
- Look if your innovation thought and see if it resembles.
Now let’s think of innovation inside a firm.
- You have the department R&D, marketing, production, supply chain,finance,…
- Think again about the question: What is innovation?
o Here you have a more functional perspective. Each department have to work
together to deliver a new innovation (product of process inside the firm to do
something better).
For example: the supply chain of the firm has to be shorter in time.
Eg:
-> R&D must go faster + explain it to the marketeers more efficiently
-> marketing must be more focused on the specific target
-> production have to communicate better and faster
Why does innovation matters?
- Next question: why does innovation matters?
- What are your Thoughts?
- Possible answers:
o Future success of the business
o Be relevant in de competitive market
o Economic growth
o Ability to resolve problems
o Increasing well-being
o Creating sustainability
-> it makes a difference economically (more jobs e.g.), socially (beter well-being e.g.),
humanitarian,…
1
,Who innovation matters to?
- Last question: who innovation matters to?
- Possible answers:
o Entrepreneurs starting up a venture
o Established enterprises trying to grow
o Governments (local and national) -> more wealth in the country, more job creation
What is innovation?
Definition: ’Innovation is the process of creating value from ideas’
There a plenty of directions in which we change and implement innovation.
The changes can be in
- Products of services
- The process (the way we create and deliver those products and services)
- The markets (where we offer them to)
- The models (about how we do what we do)
Let’s move on tho the first headline of chapter 1: ‘what is innovation?’
Changes can be common or radical:
- Sometimes the changes are common
eg update the styling of a car
- Sometimes the changes are radical groundbreaking
eg the steam engine in the Industrial Revolution
‘Innovation is the process of creating value from ideas’
It is not about the change itself, but what value it can create!
Value can be commercial or social:
- Think about commercial value: entrepreneurs hope people will value there innovation
enough to make a purchase
- But think as well about social value: study the case of ‘aravind eye care’ (you can find the
casestudy on Toledo)
We use these changes to create competitive advantage in
- Rivalry between firms
- The public sector
- Humanitarians ways
Innovation is a constant search for opportunities and answers to threat.
It involves conscious experimentation.
Rivalry between firms: innovation helps provide the difference, marketing something faster, make
something cheaper, make something with more features,… then your
competitors
Public sector: innovation helps competing against the challenge of limited resources (energy
resources, better health care, better education,…)
Humanitarian: innovation helps fixing problems after an earthquake as soon as possible in the best
way possible (replace communication, access to shelter, food, water
restore,… )
Innovation
2
It can be a radical change It can be an incremental change
,Innovation can be radical or incremental:
Radical: doing something completely different / making a complete new product or service
Incremental: doing what we do but better (eg faster, cheaper,…). A change in the process.
Why does innovation matter?
- Innovation is about survival and growth.
- If we don’t change, competitive forces may threaten our future.
- BUT there is also a risk: see case study Fijufilm (you can find the casestudy on
- Toledo)
Now look at the next headline in the textbook: why does innovation matters:
- It is surveyed that if you outpace your competitors on a year-by-year basis (because you do
more innovative things then your competitors), you also grow more as a company then the
other competitors (your share prices)!
- Change is important!
Innovation isn’t easy
Innovation doesn’t just happen. It is driven by entrepreneurship.
Innovation isn’t an event but a process.
What is needed:
Step 1: coming up with good ideas
Step 2: develop this new idea, experiment
Step 3: keep up the spirit and energy if the first experiments fails that the next
might work.
Step 4: but also know when to stop and move on to something else (don’t keep banging
against a brick wall)
For innovation, there is required a lot of effort, energy and determination to develop an new idea to
a good innovation
Many small and medium-sized enterprises fail because they don’t see or recognize the need for
change. They are inward looking, too busy fighting fires and dealing with today’s crises to worry
about storm clouds on the horizon.
-> the trouble is that by the time they realize there is a need to change it may be too late.
A common problem for successful companies occurs when the very things which helped them
achieve succes - their ‘core cempentence’ - become the thing which make it hard to see or accept the
need for change. They also often don’t want to accept that others outside there company
have a good/better idea.
➔ IBM dominated in the beginning the market of the IT industry. But such core strength
became an obstacle for seeing the need for change. They where behind everyone else when
new technologies emerge. And needed to to a big jump to catch in.
➔ Graham Bell (the inventor of the telephone) knocked at the door of Western Union (then the
biggest communication company) but was rejected. ‘it was not invented inside the company
and that was a good enough reason to reject is ‘it will be no good’. A pity for Western Union,
because it appeared to be a fantastic innovation.
Sometimes a new innovation comes from outside the industry. And by the time the main players in
the industry have reacted, it is often too late.
➔ In late 19th century there was big business in ice harvesting. Is was transported all over the
world in ships where the ice could last for up to six month cold. But the industry was
completely overthrown by the new developments which followed from the invention of
refrigeration. The existing players (the ships, ice picking,..) were completely overthrow and
failed to respond fast enough to the new signals coming from outside their industry.
3
, Conclusion:
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.
Can we manage innovation?
Innovation is not simply a random process but rather a sequence of planned
experiments.
What do we have to do?
1) search for possible opportunities
2) Select a particular one
3) Implement it
-> this is a pattern of behaviour that shapes the way innovation is managed
We learn by experience and from failure
We learn how to manage this process and repeat it without the previous failures
-> we manage it (it does’t simply come like a lightbulb in cartoons)
There is a difference it the management and process of innovation between small and big
businesses:
- Small businesses with limited sources and structures will often related on innovation that is
informal (=‘go with the flow’ and we see what will come out)
- Big businesses (like pharma) which has a whole bunch of structures and procedures to
comply when starting to experiment.
Assignment
1. Read the case study of Aravid Eye Care and answer the 3 questions
below.
A) What value was created through this innovative case. Explain.
B) Make map of radical, incremental, product, and service innovations and the
value these innovations create. -> use figure 1.1 in your textbook pg 6.
C) List experiences that Aravind Eye Care used from outside their field to create
value.
2. Fill in the column ‘example’ in the table below with a real example of a
company who is performing this mechanism in his innovation strategy.
4
Chapter 1: What is innovation and why does it matter?
Inleiding
What is innovation?
Innovation is everywhere! On advertising boards, company websites, tv…
But what is it? What does it mean?
➔ My first thought was: creating something new
➔ What is you first thought?
What value have those innovations created?
What kind of value do those innovations create?
-> my first thought: to create progress
-> what is your thought?
Think of an innovation and what value it has brought the customer/world.
In the next slides you see my thoughts.
What are yours?
- Maybe you thought about Spotify replacing the CDplayer?
- Good thinking!
- And then you can go on and say: the value of this innovation is bringing more different kind
of music in the live of the customer, easier accessible, cheaper, no need of a CDplayer,….
- Good thinking as well!
- Look if your innovation thought and see if it resembles.
Now let’s think of innovation inside a firm.
- You have the department R&D, marketing, production, supply chain,finance,…
- Think again about the question: What is innovation?
o Here you have a more functional perspective. Each department have to work
together to deliver a new innovation (product of process inside the firm to do
something better).
For example: the supply chain of the firm has to be shorter in time.
Eg:
-> R&D must go faster + explain it to the marketeers more efficiently
-> marketing must be more focused on the specific target
-> production have to communicate better and faster
Why does innovation matters?
- Next question: why does innovation matters?
- What are your Thoughts?
- Possible answers:
o Future success of the business
o Be relevant in de competitive market
o Economic growth
o Ability to resolve problems
o Increasing well-being
o Creating sustainability
-> it makes a difference economically (more jobs e.g.), socially (beter well-being e.g.),
humanitarian,…
1
,Who innovation matters to?
- Last question: who innovation matters to?
- Possible answers:
o Entrepreneurs starting up a venture
o Established enterprises trying to grow
o Governments (local and national) -> more wealth in the country, more job creation
What is innovation?
Definition: ’Innovation is the process of creating value from ideas’
There a plenty of directions in which we change and implement innovation.
The changes can be in
- Products of services
- The process (the way we create and deliver those products and services)
- The markets (where we offer them to)
- The models (about how we do what we do)
Let’s move on tho the first headline of chapter 1: ‘what is innovation?’
Changes can be common or radical:
- Sometimes the changes are common
eg update the styling of a car
- Sometimes the changes are radical groundbreaking
eg the steam engine in the Industrial Revolution
‘Innovation is the process of creating value from ideas’
It is not about the change itself, but what value it can create!
Value can be commercial or social:
- Think about commercial value: entrepreneurs hope people will value there innovation
enough to make a purchase
- But think as well about social value: study the case of ‘aravind eye care’ (you can find the
casestudy on Toledo)
We use these changes to create competitive advantage in
- Rivalry between firms
- The public sector
- Humanitarians ways
Innovation is a constant search for opportunities and answers to threat.
It involves conscious experimentation.
Rivalry between firms: innovation helps provide the difference, marketing something faster, make
something cheaper, make something with more features,… then your
competitors
Public sector: innovation helps competing against the challenge of limited resources (energy
resources, better health care, better education,…)
Humanitarian: innovation helps fixing problems after an earthquake as soon as possible in the best
way possible (replace communication, access to shelter, food, water
restore,… )
Innovation
2
It can be a radical change It can be an incremental change
,Innovation can be radical or incremental:
Radical: doing something completely different / making a complete new product or service
Incremental: doing what we do but better (eg faster, cheaper,…). A change in the process.
Why does innovation matter?
- Innovation is about survival and growth.
- If we don’t change, competitive forces may threaten our future.
- BUT there is also a risk: see case study Fijufilm (you can find the casestudy on
- Toledo)
Now look at the next headline in the textbook: why does innovation matters:
- It is surveyed that if you outpace your competitors on a year-by-year basis (because you do
more innovative things then your competitors), you also grow more as a company then the
other competitors (your share prices)!
- Change is important!
Innovation isn’t easy
Innovation doesn’t just happen. It is driven by entrepreneurship.
Innovation isn’t an event but a process.
What is needed:
Step 1: coming up with good ideas
Step 2: develop this new idea, experiment
Step 3: keep up the spirit and energy if the first experiments fails that the next
might work.
Step 4: but also know when to stop and move on to something else (don’t keep banging
against a brick wall)
For innovation, there is required a lot of effort, energy and determination to develop an new idea to
a good innovation
Many small and medium-sized enterprises fail because they don’t see or recognize the need for
change. They are inward looking, too busy fighting fires and dealing with today’s crises to worry
about storm clouds on the horizon.
-> the trouble is that by the time they realize there is a need to change it may be too late.
A common problem for successful companies occurs when the very things which helped them
achieve succes - their ‘core cempentence’ - become the thing which make it hard to see or accept the
need for change. They also often don’t want to accept that others outside there company
have a good/better idea.
➔ IBM dominated in the beginning the market of the IT industry. But such core strength
became an obstacle for seeing the need for change. They where behind everyone else when
new technologies emerge. And needed to to a big jump to catch in.
➔ Graham Bell (the inventor of the telephone) knocked at the door of Western Union (then the
biggest communication company) but was rejected. ‘it was not invented inside the company
and that was a good enough reason to reject is ‘it will be no good’. A pity for Western Union,
because it appeared to be a fantastic innovation.
Sometimes a new innovation comes from outside the industry. And by the time the main players in
the industry have reacted, it is often too late.
➔ In late 19th century there was big business in ice harvesting. Is was transported all over the
world in ships where the ice could last for up to six month cold. But the industry was
completely overthrown by the new developments which followed from the invention of
refrigeration. The existing players (the ships, ice picking,..) were completely overthrow and
failed to respond fast enough to the new signals coming from outside their industry.
3
, Conclusion:
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.
Can we manage innovation?
Innovation is not simply a random process but rather a sequence of planned
experiments.
What do we have to do?
1) search for possible opportunities
2) Select a particular one
3) Implement it
-> this is a pattern of behaviour that shapes the way innovation is managed
We learn by experience and from failure
We learn how to manage this process and repeat it without the previous failures
-> we manage it (it does’t simply come like a lightbulb in cartoons)
There is a difference it the management and process of innovation between small and big
businesses:
- Small businesses with limited sources and structures will often related on innovation that is
informal (=‘go with the flow’ and we see what will come out)
- Big businesses (like pharma) which has a whole bunch of structures and procedures to
comply when starting to experiment.
Assignment
1. Read the case study of Aravid Eye Care and answer the 3 questions
below.
A) What value was created through this innovative case. Explain.
B) Make map of radical, incremental, product, and service innovations and the
value these innovations create. -> use figure 1.1 in your textbook pg 6.
C) List experiences that Aravind Eye Care used from outside their field to create
value.
2. Fill in the column ‘example’ in the table below with a real example of a
company who is performing this mechanism in his innovation strategy.
4
