Innovation management
Lecture 1: an introduction to innovation
Importance of innovation
Invention: an idea, a sketch or model for a new or improved device,
product, process or system.
Innovation: the process and outcome of creation and commercialization
of something new. Innovation includes opportunity identification, ideation
or invention to development, prototyping, production, marketing and
sales.
innovation = invention + exploitation.
Entrepreneurship only needs to involve commercialization.
How can innovation benefit us as a society? Eg electric cars, a
technological innovation pushes a change in a specific industry. Eg amount
of deaths from major infectious diseases decreased a lot over time.
The increase of total factor productivity declined over time, why is
innovation so hard work? Explanations for this gap: eg average wait time
on patent applications increased, or federal R&D spending decreased, or
over time the amount of degrees in technology and science research
decreased so less research.
Innovation is about creation (and destruction), change and novelty.
Why so difficult? Innovation funnel: most innovative ideas do not
become successful new products.
Carefully crafted strategies required.
Barriers, competitors, innovation pattern, environment.
Innovation and failure: most new ideas fail in the market (estimated 70-
90%)
Innovation emerging from failure.
Sources of innovation (creativity, R&D, firm linkages, clusters)
Firms, individuals, universities, private non-profit, government funded
research.
R&D by firms: refers to research activities as well as development
activities.
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.
Development refers to activities that apply knowledge to produce useful
devices, materials or processes.
R&D thus refers to a range of activities that extend from early exploration
of a domain to specific commercial implementations.
R&D spread over the world: most in north America, Europe and Asia.
Top R&D spenders: amazon, Volkswagen.
Two models to explain where innovation comes from, both originate from
linear models:
- Technology / science push: scientific discovery > invention >
manufacturing > marketing. Linear model emphasizes supply side.
- Need / Demand pull: customer suggestions > invention >
manufacturing. Linear model emphasizes demand side.
Innovation process likely to be non-linear; before a invention will be
introduced in the market there can be feedback loops, going back to make
modifications until the final product is ready.
Most current research emphasizes that innovation can take a variety of
sources and follow a variety of paths.
Supply determinants of innovation:
- Technological opportunity: state of the relevant scientific and
technological knowledge.
- Cost and availability of inputs: knowledge workers, scientific personnel,
equipment.
- Appropriability: ability to capture profit from innovation.
Demand determinants of innovation:
- Cost reduction potential from innovation (process innovation, new
sources of supply, organizational change).
- Consumer or producer benefit from novel product (product innovation).
- Consumer or producer benefit from improvements (product innovation).
Technology push / demand pull risks
,- Technology push: development for which there is no problem.
- Demand pull: missing ability to invent technology to solve problem.
Development of innovation models
External sources: all sources of innovation that lay outside the boundaries
of the firm.
- Licensing, purchasing.
- Externalities (technological, pecuniary) -> knowledge spillovers
entering organization
Combination of external and internal sources: strategic partnership, cross
licensing, (networks for exchange, joint venture, collective research
associations).
Innovation in collaborative networks:
Technology clusters are regional clusters of firms that have a connection
to a common technology.
Though todays information technology enables fast, cheap and easy
communication across the globe, knowledge does not always
transfer so easily.
Encompass an array of industries that are linked through
relationships between suppliers, buyers and producers of
complements.
Reason for clustering can be technological spillover / knowledge
externalities:
Technological spillovers occur when the benefits from the research
activities of one entity spill over to other entities.
Likelihood of spillovers is a function of:
- Strength of protection mechanisms (eg patents, copyrights, trade
secrets)
- Nature of underlying knowledge base (eg tacit, complex)
, - Mobility of the labour pool.
Types of innovation
Product innovation: embodied in firm output (good or service). A new
product for the firm.
Process innovation: techniques of producing output. More efficient
production. Affects the cost function of the company.
In reality appear often in combination: product innovations can enable
process innovations and vice versa. Eg new machine (process) allows
adjustments to product.
A product innovation for one firm may be a process innovation for another
firm. Eg one firm makes a new machine (product) other firm implements
that machine in process.
Level of newness
Radical vs incremental innovation, a degree of departure from existing
practices.
Radical: high degree of newness / differentness. Incremental: marginal
degree of newness / differentness.
Competence-enhancing vs competence destroying innovation
Always from the perspective of a specific actor (eg firm / organization).
Innovation is competence enhancing if the innovation build on the firms’
existing knowledge base.
Innovation is competence destroying if the innovation renders a firms’
existing competencies obsolete.
Architectural vs component (modular) innovation
A component innovation entails changes to one or more components of
a product systems without significantly affecting the overall design. Eg
adding gel-filled material to a bicycle seat, no change in design of bicycle.
A architectural innovation entails changing the overall design of the
system or the way components interact. Eg transition from a high-wheel
bicycle to safety bicycle as we know now.
Lecture 1: an introduction to innovation
Importance of innovation
Invention: an idea, a sketch or model for a new or improved device,
product, process or system.
Innovation: the process and outcome of creation and commercialization
of something new. Innovation includes opportunity identification, ideation
or invention to development, prototyping, production, marketing and
sales.
innovation = invention + exploitation.
Entrepreneurship only needs to involve commercialization.
How can innovation benefit us as a society? Eg electric cars, a
technological innovation pushes a change in a specific industry. Eg amount
of deaths from major infectious diseases decreased a lot over time.
The increase of total factor productivity declined over time, why is
innovation so hard work? Explanations for this gap: eg average wait time
on patent applications increased, or federal R&D spending decreased, or
over time the amount of degrees in technology and science research
decreased so less research.
Innovation is about creation (and destruction), change and novelty.
Why so difficult? Innovation funnel: most innovative ideas do not
become successful new products.
Carefully crafted strategies required.
Barriers, competitors, innovation pattern, environment.
Innovation and failure: most new ideas fail in the market (estimated 70-
90%)
Innovation emerging from failure.
Sources of innovation (creativity, R&D, firm linkages, clusters)
Firms, individuals, universities, private non-profit, government funded
research.
R&D by firms: refers to research activities as well as development
activities.
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.
Development refers to activities that apply knowledge to produce useful
devices, materials or processes.
R&D thus refers to a range of activities that extend from early exploration
of a domain to specific commercial implementations.
R&D spread over the world: most in north America, Europe and Asia.
Top R&D spenders: amazon, Volkswagen.
Two models to explain where innovation comes from, both originate from
linear models:
- Technology / science push: scientific discovery > invention >
manufacturing > marketing. Linear model emphasizes supply side.
- Need / Demand pull: customer suggestions > invention >
manufacturing. Linear model emphasizes demand side.
Innovation process likely to be non-linear; before a invention will be
introduced in the market there can be feedback loops, going back to make
modifications until the final product is ready.
Most current research emphasizes that innovation can take a variety of
sources and follow a variety of paths.
Supply determinants of innovation:
- Technological opportunity: state of the relevant scientific and
technological knowledge.
- Cost and availability of inputs: knowledge workers, scientific personnel,
equipment.
- Appropriability: ability to capture profit from innovation.
Demand determinants of innovation:
- Cost reduction potential from innovation (process innovation, new
sources of supply, organizational change).
- Consumer or producer benefit from novel product (product innovation).
- Consumer or producer benefit from improvements (product innovation).
Technology push / demand pull risks
,- Technology push: development for which there is no problem.
- Demand pull: missing ability to invent technology to solve problem.
Development of innovation models
External sources: all sources of innovation that lay outside the boundaries
of the firm.
- Licensing, purchasing.
- Externalities (technological, pecuniary) -> knowledge spillovers
entering organization
Combination of external and internal sources: strategic partnership, cross
licensing, (networks for exchange, joint venture, collective research
associations).
Innovation in collaborative networks:
Technology clusters are regional clusters of firms that have a connection
to a common technology.
Though todays information technology enables fast, cheap and easy
communication across the globe, knowledge does not always
transfer so easily.
Encompass an array of industries that are linked through
relationships between suppliers, buyers and producers of
complements.
Reason for clustering can be technological spillover / knowledge
externalities:
Technological spillovers occur when the benefits from the research
activities of one entity spill over to other entities.
Likelihood of spillovers is a function of:
- Strength of protection mechanisms (eg patents, copyrights, trade
secrets)
- Nature of underlying knowledge base (eg tacit, complex)
, - Mobility of the labour pool.
Types of innovation
Product innovation: embodied in firm output (good or service). A new
product for the firm.
Process innovation: techniques of producing output. More efficient
production. Affects the cost function of the company.
In reality appear often in combination: product innovations can enable
process innovations and vice versa. Eg new machine (process) allows
adjustments to product.
A product innovation for one firm may be a process innovation for another
firm. Eg one firm makes a new machine (product) other firm implements
that machine in process.
Level of newness
Radical vs incremental innovation, a degree of departure from existing
practices.
Radical: high degree of newness / differentness. Incremental: marginal
degree of newness / differentness.
Competence-enhancing vs competence destroying innovation
Always from the perspective of a specific actor (eg firm / organization).
Innovation is competence enhancing if the innovation build on the firms’
existing knowledge base.
Innovation is competence destroying if the innovation renders a firms’
existing competencies obsolete.
Architectural vs component (modular) innovation
A component innovation entails changes to one or more components of
a product systems without significantly affecting the overall design. Eg
adding gel-filled material to a bicycle seat, no change in design of bicycle.
A architectural innovation entails changing the overall design of the
system or the way components interact. Eg transition from a high-wheel
bicycle to safety bicycle as we know now.
