Innovation management lecture 1
Management of innovation is multi-disciplinary and multi-level research
Importance of innovation:
Factors that influence the competitive battle between companies:
60s-70s = productivity
70s-80s = quality
80s-90s = innovation
00s-now = digital innovation: networks, platforms, AI, blockchain etc.
Advantages of innovation:
- Necessary condition to survive in turbulent market conditions
- Source of sustainable competitive advantage
Impact on society: innovation enables a wider range of goods and services to be delivered
worldwide
1. GDP (gross domestic product) growth explained by increase in labour and capital
input and innovation by making labour and capital more effective and efficient
2. Solving societal grand challenges such as:
- Energy transition
- Efficient food production, improved medical technologies, better transportation, etc.
However, this may result in negative externalities: pollution, erosion, emptying natural
resources, antibiotic-resistant bacteria
Historic rate of growth in GDP could not be accounted for entirely by growth in labour and
capital inputs. Robert Merton Solow the explanation for this is technological change.
technological innovation increased the amount of achievable output. Residual is known as
the Solow Residual
Technological innovation = the act of introducing a new device, method or material for
application to commercial or practical objectives
- Now often the single most important competitive driver in many industries. Many
firms receive more than 1/3 of their sales and profits from products developed in
past 5 years.
- Impact of it can be observed by looking at GDP -> technological innovation increased
the amount of output achievable from a given quantity of labour and capital
- May result in negative externalities
- Increasing importance of innovation has been driven by the globalisation of markets
and the advent of advanced technologies that enable more rapid product design and
shorter production runs
,Importance of innovation for firms:
- In competitive markets innovation is the only way to survive
- Many firms earn over one-third of sales on products developed within last five
years.
- Also traditional industries – that have been stable for many years – can be disrupted!
Defining innovation:
- “Innovation is the successful exploitation of new ideas” (Innovation unit, UK
department of Trade and industry, 2004)
- “Innovation is the implementation of creative ideas into some new device or process.
Requires combining creativity with resources and expertise (Schilling, 2013)
- Only innovation when something is brought to the market
Firms are the primary engine of innovation
- Well suited to innovation activities because of greater resources and management
system to direct those resources towards a collective purpose
- Also face strong incentives to innovate, might give them a competitive advantage
The innovation funnel
Inventors may develop many new devices or processes but commercialise few. Also for
companies, most innovative ideas do not become successful new products. 1/9 ideas are
successful. Half those are profitable.
, - A firm’s innovation projects should align with its resources and objectives, leveraging
its core competencies and helping it achieve its strategic intent
- A firm’s organisational structure and control systems should encourage the
generation of innovative ideas while ensuring efficient implementation
- A firm’s new product development process should maximise the likelihood of
projects being both technically and commercially successful
To achieve this a firm needs:
- An in-depth understanding of the dynamics of innovation
- A well-crafted innovation strategy
- Well-designed processes for implementing the innovation strategy
Innovation = practical implementation of new/creative ideas into a new device or process
requires combining creativity with resources and expertise.
Innovation management = the creation of conditions within an organisation under which a
successful resolution of multiple challenges in the innovation process are made more likely.
Transforming research and creativity into innovation
R&D by firms
Technology push: approaches suggest that innovation proceeds linearly
- Scientific discovery innovation manufacturing marketing
Demand pull: approaches argues that innovation originates with unmet customer
need:
- Customer suggestions inventions manufacturing
, Levels of analysis:
- System of innovation
- Cluster or ecosystems
- Network of firms (including multisided platforms)
- Alliances
- Firm
- Team
- Individual
High level: innovation system level
Innovation system: the range of actors which represent the context within which
organisations operate their innovation process:
- Government
- Financial
- Educational
- Labour market
- Science and technology infrastructure
Factors influencing the performance of innovation systems:
1. R&D expenditures
2. Extent of interaction between important actors (companies, research
institutes/universities and the government)
Collaboration for innovation:
- Increasing collaboration leads to a better competitive position
- Many initiatives, largest share of investment come from companies (2/3 private, 1/3
government)
Firm level: transforming creativity into innovation:
Research and Development:
Research refers to both basic and applied research
- Basic research: aims at increasing understanding of a topic or field without an
immediate commercial application in mind
- Applied research: aims at increasing understanding of a topic or field to meet a
specific need
Most firms consider in-house R&D to be their most important source of innovation
Development refers to activities that apply knowledge to produce useful devices, materials
or processes
Universities and government-funded research:
Management of innovation is multi-disciplinary and multi-level research
Importance of innovation:
Factors that influence the competitive battle between companies:
60s-70s = productivity
70s-80s = quality
80s-90s = innovation
00s-now = digital innovation: networks, platforms, AI, blockchain etc.
Advantages of innovation:
- Necessary condition to survive in turbulent market conditions
- Source of sustainable competitive advantage
Impact on society: innovation enables a wider range of goods and services to be delivered
worldwide
1. GDP (gross domestic product) growth explained by increase in labour and capital
input and innovation by making labour and capital more effective and efficient
2. Solving societal grand challenges such as:
- Energy transition
- Efficient food production, improved medical technologies, better transportation, etc.
However, this may result in negative externalities: pollution, erosion, emptying natural
resources, antibiotic-resistant bacteria
Historic rate of growth in GDP could not be accounted for entirely by growth in labour and
capital inputs. Robert Merton Solow the explanation for this is technological change.
technological innovation increased the amount of achievable output. Residual is known as
the Solow Residual
Technological innovation = the act of introducing a new device, method or material for
application to commercial or practical objectives
- Now often the single most important competitive driver in many industries. Many
firms receive more than 1/3 of their sales and profits from products developed in
past 5 years.
- Impact of it can be observed by looking at GDP -> technological innovation increased
the amount of output achievable from a given quantity of labour and capital
- May result in negative externalities
- Increasing importance of innovation has been driven by the globalisation of markets
and the advent of advanced technologies that enable more rapid product design and
shorter production runs
,Importance of innovation for firms:
- In competitive markets innovation is the only way to survive
- Many firms earn over one-third of sales on products developed within last five
years.
- Also traditional industries – that have been stable for many years – can be disrupted!
Defining innovation:
- “Innovation is the successful exploitation of new ideas” (Innovation unit, UK
department of Trade and industry, 2004)
- “Innovation is the implementation of creative ideas into some new device or process.
Requires combining creativity with resources and expertise (Schilling, 2013)
- Only innovation when something is brought to the market
Firms are the primary engine of innovation
- Well suited to innovation activities because of greater resources and management
system to direct those resources towards a collective purpose
- Also face strong incentives to innovate, might give them a competitive advantage
The innovation funnel
Inventors may develop many new devices or processes but commercialise few. Also for
companies, most innovative ideas do not become successful new products. 1/9 ideas are
successful. Half those are profitable.
, - A firm’s innovation projects should align with its resources and objectives, leveraging
its core competencies and helping it achieve its strategic intent
- A firm’s organisational structure and control systems should encourage the
generation of innovative ideas while ensuring efficient implementation
- A firm’s new product development process should maximise the likelihood of
projects being both technically and commercially successful
To achieve this a firm needs:
- An in-depth understanding of the dynamics of innovation
- A well-crafted innovation strategy
- Well-designed processes for implementing the innovation strategy
Innovation = practical implementation of new/creative ideas into a new device or process
requires combining creativity with resources and expertise.
Innovation management = the creation of conditions within an organisation under which a
successful resolution of multiple challenges in the innovation process are made more likely.
Transforming research and creativity into innovation
R&D by firms
Technology push: approaches suggest that innovation proceeds linearly
- Scientific discovery innovation manufacturing marketing
Demand pull: approaches argues that innovation originates with unmet customer
need:
- Customer suggestions inventions manufacturing
, Levels of analysis:
- System of innovation
- Cluster or ecosystems
- Network of firms (including multisided platforms)
- Alliances
- Firm
- Team
- Individual
High level: innovation system level
Innovation system: the range of actors which represent the context within which
organisations operate their innovation process:
- Government
- Financial
- Educational
- Labour market
- Science and technology infrastructure
Factors influencing the performance of innovation systems:
1. R&D expenditures
2. Extent of interaction between important actors (companies, research
institutes/universities and the government)
Collaboration for innovation:
- Increasing collaboration leads to a better competitive position
- Many initiatives, largest share of investment come from companies (2/3 private, 1/3
government)
Firm level: transforming creativity into innovation:
Research and Development:
Research refers to both basic and applied research
- Basic research: aims at increasing understanding of a topic or field without an
immediate commercial application in mind
- Applied research: aims at increasing understanding of a topic or field to meet a
specific need
Most firms consider in-house R&D to be their most important source of innovation
Development refers to activities that apply knowledge to produce useful devices, materials
or processes
Universities and government-funded research:
