Innovation Management

ByDr. Vijay Kr Khurana

Why do innovations fail? • Innovations have high failure rate.

• There are many causes of failure of innovations. Some causes are external to the organisation and outside its influence of control. Others are internal and ultimately within the control of the organisation.

Why do innovations fail? • Internal causes of failure can be divided into causes

associated with the cultural infrastructure and causes associated with the innovation process itself.

• Failure in the cultural infrastructure varies between organisations but the following are common across all organisations at some stage in their life cycle (O'Sullivan, 2002):

• Poor Leadership • Poor Organisation • Poor Communication • Poor Empowerment • Poor Knowledge Management

Why do innovations fail? Common causes of failure within the innovation process in

most organisations are as under:

• Poor goal definition

• Poor alignment of actions to goals

• Poor participation in teams

• Poor monitoring of results

• Poor communication and access to information

Why do innovations fail? Innovation can fail if seen as an organisational process

whose success stems from a mechanistic approach i.e. 'pull lever obtain result'.

Some examples of internal causes are:

• R&D efforts not guided by marketing research or customer requirements & preferences

• R&D efforts not guided by manufacturing capabilities & skills and no change / improvement in mfg capabilities/skills

• No corresponding change in organizational processes

• New product launch not accompanied by change in marketing strategies.

Why do innovations fail? External causes are beyond the control of the organization.

Some examples of external causes are:

• Mismatch between price charged & value benefits perceived by customer

• Mere imitation /copy without any increase in value/utility to customer

• Competitor brings in disruptive technology / innovation

• Govt regulations undergo change adversly affecting innovation.

Why management of innovation is important?

Economics of Innovation • Economics call for study of cost vs benefits involved in the

innovation for making a rational decision about the viability of innovation.

• Total costs of innovation including invisible costs, need to be studied for making a rational decision about the viability of innovation.

• Organisations spend a significant amount of their turnover on innovation. The average investment is estimated to be around four percent.

• This budget is typically spread across various functions including marketing, product design, information systems, manufacturing systems and quality assurance. The investment may vary by industry and by market positioning.  

Economics of InnovationWhy management of innovation

is important?• Innovations have high rate of failure. Thus chances of

huge losses are there due to high investment.• The impact of failure goes beyond the simple loss of

investment. Failure can also lead to loss of morale among employees, an increase in cynicism and even higher resistance to change in the future. Sometimes innovations lead to displacement of existing products or services.

• Sometimes, innovation may lead to price war. Competitor may introduce better product at lower price. Thus benefits of innovation may not be fully realized.

• Such losses also need to be accounted for.

Economics of InnovationWhy management of innovation

is important?• Innovation should drive growth and, consequently,

improve shareholder value. Business measures like balanced scorecards related to finances, processes, employees and customers should be used to find out benefits of innovation (e.g. new product revenue, time to market, customer and employee perception & satisfaction). Organizational capabilities can be evaluated through various evaluation frameworks e.g. EFQM (European Foundation for Quality Management).  

• Innovations are pursued when their estimated benefits outwieigh total estimated costs.

Innovation StrategiesInnovation strategies of an organization depend upon

following factors:

• Government support and policies for technology and innovation

• Risk taking abilities of the organization

• Risk taking attitude of Top Management

• Organizational goals & policies

• Degree of technological changes

• Degre of competition

• Availabilty of funds / budgetory support for innovation process

• Age of organiztion viz new vs old organization

Innovation StrategiesTypes of Innovation Strategies:

• Innovation Leader- Under this strategy, a firm seeks to be the first to introduce innovations and aims at tapping first mover advantages like increased reputation, pre-empting competition, early profits, new sales etc. Such stratgies focus on radical , open, non-linear, flexible innovation process.

• Innovation Follower – A conscious & active strategy, by which a firm chooses not to be first on innovations and aims at learning from the experiences of innovation leader, by low cost imitation, by bringing better products or services through improvement. etc. Such stratgies focus on incremental , closed, linear innovation process.

Innovation StrategiesTypes of Innovation Strategies:

• Competition vs Collaboration Strategies

• Whether to go for competitive development of innovation or to go for collaborative development of innovation??

Innovation StrategiesChange in Innovation Strategies

It is very likely that a firm may like to change its innovation strategies at some point of time. A firm pursuing incremental innovation can shift to / transform to radical innovation by using some of following tools:

• Strategic Framing

• Scouting R&D

• Idea Portfolio

• High Impact Research

• Target Selection

• Rapid Product Development

• Rapid Commercialization

Innovation StrategiesChange in Innovation Strategies …. Contd …..Similarly a firm pusuing pursuing radical innovation can

shift to / transform to incremental innovation by taking some of following steps:

• Installing more gatekeepers at various stages• Spreading budgetory support over longer periods• Carrying out rigorous progress reviews• Using more controls etc.

Innovative Organization• Innovation requires a structure that is capable of

coalescing /motivating individual technological performers & non-technological performers into an effectively functioning team.

• According to Mintzberg - An Innovative organization cannot rely on any form of standardized co-ordination. The enterprise must avoid : bureaucratic structures including structures that result into sharp division of labour, extensive unit differentiation, highly formalized behaviour.

• An innovative organization is one which facilitates creative chaos within a flexible guiding structure

• These are also called adhocracy organizations.

Traits of Innovative OrganizationThe enterprises should emphasize on :• Top mangement’s commitment and support• Capability / need to manage in the light of corporate

restructuring & transient senior management• Planning & control systems with high degree of

flexibility• Effective communication• Absolute integrity between various sub-systems / parts of

an organization - Tight coupling of complimentary skill sets

• Use of multifunctional teams - Higher order teaming

Traits of Innovative Organization• Supporting organiztional culture & environment – like

– Appropriate reward / incentive system

– Respect for individual inititaive & personal growth

– Tolerance for honest mistakes

– Allowing room for failure• Enthusiasm for knowledge

• Drive to stay ahead in knowledge

• Willingness for Alteration to activities

Innovative OrganizationModes of Enterprise Innovation

• Science Based Product Innovation Mode Enterprises - These enterprises spend big amounts on R&D and are Technological leaders & Pace setters.

• The Enterpreneurial Fast Track Experimentation Innovation Mode Enterprises - are characterized by high degree of experimentation to develop a continuous flow of products & services. Viz. 3M

• Global Cost Leadership Innovation Mode Enterprises - are process innovaters, with strength driven from development or acquisition of new processes. These are high quality & low cost driven.

Innovation OrganizationModes of Enterprise Innovation …. Contd …..

• Reliance on Information Technology & Process Adoption Mode Enterprises - are innovators who incorporate new ideas stemming from information technology or other engineering enterprises

• Social Innovation Mode Enterprises –combine busniess methods and social value creation. They plug the gap between the roles that governmental and philonthropic efforts play, often solving societal problems, not in opposition to or even at the charity of the organizations, but rather in collaboration and mutual benefit to the private sector.

Management of Innovation• Innovation management is the process of

managing innovations in organisations.• According to National Research Council (NRC),

Management of Innovation means linking of engineering, science & management disciplines to plan, develop and implement technological capabilities to shape & accomplish the strategic and operational objectives of an organization. 

• Management of Innovation deals with meeting and managing eight primary needs of an organization.

Management of InnovationThese eight primary needs are as under : -

• How to integrate technology into overall strategic objectives of an organization?

• How to get into & out of technologies faster & more efficiently?

• How to assess or evaluate technology more efficiently?

• How to accomplish technology transfer?

• How to reduce new product development time?

• How to manage, large, complex & interdisciplinary or inter-organisational projects & systems?

• How to manage organization’s internal use of technology?

• How to leverage the effectiveness of the technical professionals?

Factors which affect Innovation Management in

Organization• Degree of formalization, formal structures, systems &

procedures • Centralization • Resources available• Openness to external information• Degree of informal communication

Challenges in Management of Innovation

Challenges for small organization as under : -

• Lack of risk taking abilities

• Non availability of adequate resources viz finance, technical manpower etc

• Low linkage with external environment

• Difficulty in testing

• Difficulty in conducting market survey

• Difficulty in commercialization

• Difficulty in marketing

Challenges in Management of Innovation

Challenges for big organization as under : -• Degree of formalization, formal structures, systems &

procedures • Degree of centralization• Degree of formal communication • Corporate Restructuring & Transient senior

management• Integration of many complex projects being executed

simultaneously • Bigger teams & their management• Duplication of efforts• Ensuring right direction

Management of InnovationFor proper management of Innovation, following should be

ensured:

• Likely Failures should be identified and screened out as early in the process as possible.

• Exceptional productivity is concentrated among a few people. There is need to employ, develop and retain exceptionally talented inventors.

• Seeking maximum participation of all the concerened individuals. Individuals are the 'atom' of the organisation close to the minutiae of daily activities.

• Strong integration & orchestration of cross functional activities

• Top management’s commitment and support

Management of InnovationContd…• Capability / need to manage in the light of corporate

restructuring & transient senior management

• The enterprises should emphasis on

– Planning & control systems with high degree of flexibility

– Respect for individual initiative & personal growth

– Tolerance for honest mistakes; allowing room for failure

Management of InnovationContd…• Innovation management education be aimed at upper

level managers & middle level managers comprising both non-technical managers as well as technological managers, for creating a common ground across the organization

• Building a unified and committed multifunctional team

• Supporting organizational culture & environment

Management of Innovation

Contd…• The incharge / manager of technology must be well

trained & sensitive to patterns of technology changes, market needs, vision to see business opportunities & have commitment for protection of firm’s technology .

• Supportive management structures, rationales & actions.

• Avoiding bureaucratic structures including structures that result into sharp division of labour, extensive unit differentiation, highly formalized behaviour

• Effective communication in the organization

Patents vs Copyrights Invention & Patent• Patent gives the inventor exclusive use of that

invention & the right to assign that use. Invention need to be registered with specified government bodies who in turn grant patent. 

Trade Secret  • A Trade Secret is any commercial formula,

device, pattern, process or information that provides an enterprise an competitive edge over others who do not know it.

Patents vs Copyrights Know How • Knowhow is a factual accumulation of knowledge-

usually as a result of trial & error. It cannot be protected or licensed until it is recorded in tangible medium. 

Copy Right • A Copy Right is an exclusive right granted to authors,

composers, artists or their assignees for the life of the individual plus few more years. These rights are granted to individuals when some new work is done / created by them.

Patents vs Copyrights Trade Mark • A Trade Mark is a word, name, symbol, device, letter,

numeral, picture or any combination of these in any form or arrangement that is used to identify the origin of goods or services. Like copy-rights, trade marks can also be registered. 

Innovation Management

ByDr. Vijay Kr Khurana