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Information Technology and Innovation

Prof. Dr. Ir. Riri Fitri Sari, MM, MSc

Electrical Engineering Dept.University of Indonesia

24 April 2012

Management of Technology: Introduction (Henry C. Co) 2

Technology and Innovation Technology

• “Knowledge of how to do things.” • “The system by which a society satisfies its needs

and desires.” • “Capability that a firm needs to provide its

customers the good and/or services the firm proposes to offer, now and in the future.”

Innovation• “A business process which brought inventions to

commercial use.”• “Commercial Use.”

Managers of technological innovation have to know about the broad and aggregate features of technological innovation itself, as well as the context in which MTI occurs.They need to know about the different types and levels of innovation.

The better-informed managers are about the nature, process, source, and outcomes of technological innovation, the more likely they are to be able to use it to deliver value.

Types and extent of innovation Radical or incremental Continuous or discontinuous Change overlife cycles Modular or Architectural Results in the emergence of adominant design Occurs within open or closed innovation strategies

The changing nature of the innovation process

First-generation innovation process, prevalent during the 1950s and 1960s, was the research-push or first-generation approach. The approach was a legacy of the Second World War, where the power of science was demonstrated in the form of the nuclear bomb, and it was assumed that massive scientific investments would produce dramatic improve-ments in the energy sector, defence industries, and medicine.

Second-generation model. From the early to mid-1960s a second linear model of innovation was adopted by public policy makers and industrial managers in advanced capitalist economies.

Third-generation. Third-generation model, integrating both research-push and demand-pull, was centred on an interactive process where innovation was regarded as a ‘logically sequential, though not necessarily continuous process’

con’d Fourth-generation. The high level of integration between various

elements of the firm in innovation is captured in the fourth-generation, which shows the complex iterations, feedback loops, and interrelationships among marketing, R & D, manufacturing, and distribution in the innovation process.

The fifth-generation innovation process includes the growing strategic and techno-logical integration between di fferent organizations inside and outside the firm, the way these are being enhanced by the ‘automation’ of the innovation process and the use of new organizational techniques, such as concurrent rather than sequential development

First-Generation Innovation Process

(Research Push)

First-Generation Innovation Process

(Demand Pull)

Third-Generation Innovation Process

(Coupling)

Fourth-Generation Innovation Process

(Collaborative)

Sources of innovation consultants, customers, suppliers, and universities

Measuring innovation1. The benefits of an innovation often do not appear until

some time after its introduction.2. There can be disagreement over what is and what is

not an innovation3. it is difficult to separate process from outputs: some

measurement systems measure inputs to the innovation, while others only measure outputs.

4. ascer-taining the source of an innovation may be complex.

Outcomes of innovation Innovation can create many benefits for society,

firms, and individuals.

To help capture consumers’ interest in innovation, firms can compete on branding and appeals to lifestyles.

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Innovation Strategy

Prof. Dr. Ir. Riri Fitri Sari, MM, MSc

Electrical Engineering Dept.University of Indonesia

10 April 2012

What is an innovation strategy? An innovation strategy guides decisions on how

resources are to be used to meet a firm’s objectives for innovation and thereby deliver value and build competitive advantage

An innovation strategy identifies the technologies and markets the firm should best develop and exploit to create and capture value.

Innovation strategy is different to mainstream business strategy because it needs to comprehensively accommodate uncertainty.

4 interrelated elements involved in innovation strategy :

1. The enacted strategy itself,

2. The resources available for innovation

3. The innovative capabilities

4. The innovation processes used to deliver results

Why is innovation strategy important?

Creating and appropriating returns from innovations is a key source of competitive advantage for a firm.

Globalization of technology and markets, with many potential new customers, suppliers, partners, and competitors in di fferent parts of the world, requires companies to take a strategic approach to their innovation activities to provide focus within an ever-expanding set of opportunities and threats.

A firm that identifies innovation as a strategic activity is more likely to attract creative workers in search of exciting opportunities in the ‘war over talent’.

Innovation strategy in practice Managers need to nurture the most meaningful

approaches to strategizing for the specific circumstances within which they conduct their business.

In some firms, strategy is not written down, remaining implicit in the ideas of a few senior managers, and only partially communicated to sta ff, customers, and suppliers.

An innovation strategy usually involves a mix of approaches.

Types of innovation strategyThere are two major categorizations of innovation strategies:

Fast Mover Fast Follower

Con’dCourtney, Kirkland, and Viguerie (1997) offer three basic

positions that firms might adopt in uncertain conditions in the light of analysis of the industries within which they operate and the choices they make about timing :

1. Taking big bets,2. Hedging bets3. Wait and see

(Freeman and Soete 1997; Goodman and Lawless1994)

proactive strategies, involving technological and market leadership with a strong research orientation,

active strategies, which involve defending existing technologies and markets, but with the preparedness to respond quickly once markets and technologies are proven and where bets are hedged.

reactive strategies , which are usually pursued by ‘follower’ and ‘imitative’ firms who respond slowly to innovation and play the cost-cutting game.

passive strategies in which firms only engage in innovation once it is demanded by customers and is risk free

Con’d

Building innovative capabilities SEARCHING

SELECTING

CONFIGURING AND DEPLOYING

LEARNING

The benefits of an innovation strategy

The benefits of an innovation strategy are improved performance in the ways firms create and deliver value and enhance their competitive advantage, which can be assessed in a variety of ways. The extent to which an innovation strategy is driven by profit maximizing or broader objectives depends upon the specific circumstances of the firm and its corporate strategy. Maximizing profits or shareholder returns might ensure continuing investment in the firm, and offer protection from unwelcome takeover bids, but may place pressures on quarterly business performance, which can be inimical to longer-term innovation efforts and spending.

Innovation strategy in SMEsThere are five broad factors that influence innovation

strategy in SMEs:

Accumulated technological competencies. External orientation Organizational specialisms. Internal strategic cohesion . Management skills.

Summary and conclusions Innovation strategy is notoriously difficult both to

practise and analyse. Few companies have consis-tently managed to

develop technological innovation in a strategic manner. Innovation strategy involves decisions about which

technologies and markets provide the best opportunities for delivering value and building competitive advantage/

SMEs face specific issues in strategic MTI. These often relate to issues of managing growth and navigating the various thresholds that can constrain their development.

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