Innovation & Entrepreneurship

Week 2 Creativity and Innovation

What is Innovation>

• Innovation = Creativity + Commercialization

• Innovation is the introduction of new ideas, goods, services, and practices which are intended to be useful (though a number of unsuccessful innovations can be found throughout history).

• The main driver for innovation is often the courage and energy to better the world.

• An essential element for innovation is its application in a commercially successful way. Innovation has punctuated and changed human history (consider the development of electricity, steam engines, motor vehicles, et al). – en.wikipedia.org/wiki/Innovation

• “Innovation is going to be the compass by which this company sets its direction.” Bill Ford, Remarks On Innovation, Dearborn, Michigan, September 21, 2005

• “..if we want to succeed as a company – and as an

industry – we must drive innovation into everything we do: into technology, into safety, into design and into real-world solutions for environmental issues, like the impact of energy usage on our world.” – Chairman Bill Ford's speech, NATIONAL PRESS CLUB

WASHINGTON, DC November 22, 2005

Bill Ford, Remarks On Innovation

www.csus.edu/indiv/v/velianitis/101/Innovation.ppt

• What is creativity? – Creativity is the generation of ideas that are

both novel and valuable. (Boden) – A creative idea is one that is both original and

appropriate for the situation in which it occurs.(Martindale)

– Creativity from a Western perspective can be defined as the ability to produce work that is novel and appropriate. (Lubart)

Conception of creativity

• Creativity is a manifestation of one's intellectual activity. It is the ability of an individual to re-construct and combine the components of existing knowledge and experience in a special way to develop a new production.

• Creativity is combined with creative attitude, creative behavior, and creative production. The core is creative behavior which includes creative thinking, creative habits, and creative activities.

• Creativity can be influenced by the environment in which one lives. The degree of the influence mainly depends on one’s personality.

Six Tips To Help You Enhance Your Creativity

1. Open Your Mind - Have one new experience every day; no matter how small. New experiences stimulate the brain and help you make new and original connections; critical for boosting breakthroughs.

2. Diversify - Involve others in your problem-solving efforts who bring a different perspective or cultural experience than yours.

3. Mental Floss – Relax; Stress, exhaustion, boredom and even pain can block our pathways to creativity. 4. Stop Looking For the Right Answer - Look for many right answers. 5. Discover Your Creative Rhythm - Start

paying attention to when you get your best ideas.

6. Health Makes Wealth - Regular exercise not only benefits your body, it boosts brain performance as well.

– Innovative Thinking: Six Simple Secrets by Padi Selwyn, M.A.

… and another one: Find what you love to do

• “We know that people do their most creative work when they love doing what they’re doing. There’s no substitute for intrinsic motivation, that is, motivation that comes from within. Although such motivation doesn’t guarantee creativity, dislike or lack of interest in work practically guarantees non-creativity.”

– Ten Keys to Creative Innovation by Robert J. Sternberg, Ph.D. and Todd I. Lubart, Ph.D.

Type of Innovation In business and economics, innovation is often

divided into five types: 1. Product innovation, which involves the

introduction of a new good or service that is substantially improved. This might include improvements in functional characteristics, technical abilities, ease of use, or any other dimension.

2. Process innovation involves the implementation of a new or significantly improved production or delivery method. is done in terms of capturing value e.g. Compaq vs. Dell.

3. Marketing innovation is the development of new marketing methods with improvement in product design or packaging, product promotion or pricing. 4. Organizational innovation (also referred to as social innovation) involves the creation of new organizations, business practices, ways of running organizations or new organizational behavior. 5. Business Model innovation involves changing the way business is done in terms of capturing value e.g. Compaq vs. Dell.

– Innovative Thinking: Six Simple Secrets by Padi Selwyn, M.A

Types of innovation - Product (1) • Product Innovation:

– Introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses;

– New products: different characteristics or intended uses from previous products;

– Significantly improvements: changes in materials, components, and other characteristics that enhance performance.

Types of innovation - Product (2) • Product Innovation - examples:

– New products: • The first microprocessors; • The first digital cameras; • The first portable MP3 player;

– Significantly improvements: • Introduction of ABS braking, GPS navigational systems,

or other subsystem improvements in cars; • The use of breathable fabrics in clothing; • Improvements in internet banking services, such as

greatly improved speed and ease of use.

Types of innovation - Process (1) • Process Innovation:

– Implementation of a new or significantly improved production or delivery method (changes in techniques, equipment and/or software);

– Intended to: decrease unit costs of production or delivery, increase quality, or produce or deliver new or significantly improved products.

Types of innovation - Process (2) • Process Innovation - examples:

• Introduction of a bar-coded goods-tracking system;

• Introduction of GPS tracking devices for transport services;

• Implementation of computer-assisted design for product development;

• Implementation of a new reservation system in a travel agency.

Types of innovation - Marketing (1) • Marketing Innovation:

– Implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing;

– Better addressing customer needs, opening up new markets, or newly positioning a firm’s product on the market increasing firm’s sales;

– Marketing method NOT previously used - part of a new marketing concept or strategy;

– For both new and existing products.

Types of innovation - Marketing (2) • Marketing Innovation:

– Product design or packaging: changes in form and appearance that do not alter products’ functional or user characteristics + changes in the packaging;

– Product placement: new sales channels;

– Product promotion: new concepts for promoting a firm’s goods and services;

– Pricing: new pricing strategies to market the firm’s goods or services.

Types of innovation - Marketing (3) • Marketing Innovation - examples:

• Development and introduction of a fundamentally new brand symbol;

• First use of a significantly different media - product placement in a television programme;

• Introduction for the first time of a franchising system.

Types of innovation - Organisational (1)

• Organisational Innovation:

– Implementation of a new organisational method in the firm’s business practices, workplace organisation or external relations;

– Increase firm’s performance by reducing administrative/transaction costs, improving workplace satisfaction, accessing non-tradable assets, or reducing costs of supplies;

– Organisational method NOT used before - result of strategic decisions taken by management.

• Organisational Innovation:

– Business practices: implementation of new methods for organising routines and procedures for the conduct of work;

– Workplace organisation: new methods for distributing responsibilities and decision making among employees for the division of work within and between firm activities + new concepts for the structuring of activities;

– External relations: new ways of organising relations with other firms or public institutions.

Types of innovation - Organisational (2)

• Organisational Innovation - examples:

• First implementation of a database of best practices; • Establishment of new types of collaborations with

research organisations; • First implementation of an organisational model that

gives the firm’s employees greater autonomy in decision making and encourages them to contribute their ideas.

Types of innovation - Organisational (2)

• Innovation in a restaurant:

– Product innovation: delivery (new service);

– Process innovation: new type of oven (new equipment used in the production process);

– Organisational innovation: new delivery unit (new organisational unit/model);

– Marketing innovation: billposting (new media for promoting the delivery service).

Note. Source: Adapted from Heinlo, A. (2011). Measuring R&D&I in Estonia. Almaty, Kazakhstan S&T Indicators Workshop. (PowerPoint Presentation)

Innovation activities

Innovation activities: all scientific, technological, organisational, financial and commercial steps which (intended to) lead to the implementation of innovations;

Some innovation activities are themselves innovative, others are not novel but necessary;

R&D not directly related to the development of a specific innovation.

Innovation activities For product and process innovations:

• Intramural (in-house) R&D;

• Acquisition of (extramural) R&D;

• Acquisition of other external knowledge;

• Acquisition of machinery, equipment and other capital goods;

• Other preparations for product and process innovations;

• Market preparations for product innovations;

• Training.

Innovation activities

Preparations for marketing innovations:

• Activities related to the development and implementation of new marketing methods;

• It includes acquisition of other external knowledge and of machinery, equipment, and other capital goods and training;

• Expenditures for using these methods in daily business are NOT included.

Innovation activities Preparations for organisational innovations:

• Activities undertaken for the planning and implementation of new organisation methods;

• It includes acquisition of other external knowledge and of machinery, equipment, and other capital goods and training.

Kinds of innovation activities Successful - resulted in the implementation of a new

innovation (not necessarily commercially successful);

Ongoing - work in progress, which has not yet resulted in the implementation of an innovation;

Abandoned - before the implementation of an innovation.

Classifying firms by degree of innovativeness

Innovative firm: • Implemented an innovation; • Not necessarily a commercial success;

Innovation-active firm: • Had innovation activities - ongoing and/or abandoned; • Regardless of implementation;

Potentially innovative firm: • Innovation efforts but no achieved results; • Key element for innovation policy; • (Annex).

Case Study: 3M – How do they manage innovation?

• The company presents a consistent picture in interviews and in publications – innovation success is a consequence of creating the culture in which it can take place – it becomes ‘the way we do things around here’ in a very real sense. This philosophy is born out in many anecdotes and case histories – the key to their success has been to create the conditions in which innovation can arise from any one of a number of directions, including lucky accidents, and there is a deliberate attempt to avoid putting too much structure in place since this would constrain innovation. – The 3M way to innovation: Balancing people and profit.

New York, Kodansha International.

3M Innovation Strategy and Leadership • Setting stretch targets – such as ‘x% of sales from products

introduced during the past y years’ – provides a clear and consistent message and a focus for the whole organization.

• Allocating resources as ‘slack’ – space and time in which staff can explore and play with ideas, build on chance events or combinations, etc.

• Encouragement of ‘bootlegging’ employees working on innovation projects in their own time and often accessing resources in a non-formal way – the ‘benevolent blind eye’ effect.

• Provision of staged resource support for innovators who want to take an idea forward – effectively different levels of internal venture capital for which people can bid (against increasingly high hurdles) – this encourages ‘intrapreneurship’ (internal entrepreneurial behavior) rather than people feeling they have to leave the firm to take their good ideas forward.

Invention A new manmade device or

process

Early civilizations were based on just a few inventions:

• The plow • Handwriting • Metallurgy • Pottery • Brick making

• Stonecutting • Spinning • Weaving • Surveying

instruments • And more…

Innovation • A better way of doing things • An improvement

1st Cell Phone March 6, 1983

Razr 2006

Alexander Graham Bell’s

Phone 1876

Old Phone

Telephone iPhone 2007

Old Computers

Dell Computers

2006

McBook Air 2015

7 Mechanisms that affect Invention and Innovation

1. Deliberate search 2. Deliberate search for 1 thing

that leads to something else 3. Totally unrelated developments

have an effect on the main event

4. Military needs or military inventions give rise to intense development efforts and equally significant social change.

5. Result of religion 6. Weather & other natural forces 7. Pure accident

History of Invention, Innovation and Discovery

The greatest difference between science and technology is

purpose.

• The main purpose of science was curiosity, where the main purpose of technology was a matter of survival.

• Science and technology need and serve each other while serving mankind.

Invention, Innovation and Discovery Today

A few of the most influential factors which are of a different origin than the previous 7

mechanisms…

1. Information and Communication Technology

– The faster we can communicate, the faster we can influence others with new inspiration and new inventions.

2. Specialization of knowledge and teamwork

3. The rise of organized science – In the past, discoveries often followed the

practical application. – Technology preceded science – Today, technology rarely precedes science

4. The influence of government – The need for rapid wartime development of

technology tends to push the envelope of efficiency.

– The funding of research which is often available for the asking.

– Government can also influence invention and innovation by legislation that creates the rules others must play by

Inventors • Thomas Edison • Benjamin Franklin • Alexander Graham Bell • Henry Ford • Elon Musk

Exercise

Q & A