Session 1

INTRODUCTION TO INNOVATION MANAGEMENT

(INN001, 5 p.)

INTRODUCTORY LECTURE

August 27-28th 2007

Emelie Stenborg

Today’s contents

• Course outline

• The role of innovation

• What is innovation (definitions, typologies of innovation)

• What is innovation management?

• Models of the innovative process

PEOPLE

• Main teacher and course responsible: – Emelie Stenborg, 046-2223892,

[email protected]• Teachers in week 2 and 3:

– Lars Coenen, 046-2227744, [email protected]

– Olof Ejermo, 046-2229650, [email protected]

• Course secretary, matters of registration & administrative character: – Elna Jönsson, 046-2220576,

[email protected]

mailto:[email protected]




LOCATIONS

Teaching the first three weeks mainly in the Math’s house Sölvegatan 18

The following 4 weeks in CIRCLE’s new location at Sölvegatan 16 (MNO-house)– Mondays 10-12: Lecture– Tuesdays 13-15: Lecture– Wednesdays/Thursdays 10-15: Seminar

LOCATIONS

CIRCLE

MNO-house

COURSE AIMS...

(1) to provide students with fundamental knowledge of the phenomenon of innovation and innovation processes in capitalist economies from the perspective of firms and industries;

(2) to enable students to use basic theoretical tools that help analyse and manage real-world processes of innovation;

(3) to enhance students’ appreciation of the importance of understanding innovation-related issues for the development of businesses, industries, countries and citizens.

WEEKLY THEMES

1. Overview of the study field, with basic definitions, concepts and typologies, Chapter 1-2

2. Strategy analysis: I - building the framework and the environment, II - technology and learning, Chapter 3-6

3. The external dimension: markets, networks, institutions, systems, Chapter 7-8

4. Resource mobilization and strategy implementation, Chapter 9-10

5. Creating an innovative organisation, Chapter 11-12

6. Assessing and improving, Chapter 13

WEEK 1-5

• Mondays and Tuesdays: Lecture

• Thursdays (one Wednesday): intensive seminar– The seminar is strongly compulsory– Active participation expected– Assignments to be handed in before the

seminar– Seminar may include presentations etc.

LAST 2 WEEKS

• Sixth week:– Mainly reserved for writing the home exam.– One lecture on the Monday (and Tuesday if

you need it) with room for questions.

• Seventh week:– Examination – presentation and discussion in

small groups (5-6 people) of the final essay (which is a part of the home exam).

EXAMINATION

Your progress and learning is assessed not only at the end of the course but throughout the entire course. Different forms of examination are used to gauge students’ progress:

1. Weekly written assignments in preparation for seminars

2. Formal presentations at seminars

3. Home exam, including final discussion seminar

The home exam is the more important of the three.

About the grading

• The seminar assignments are not graded, but you have to hand them in – otherwise you will not get a grade on the course

• The first part of the home exam determines half of your grade

• The second half of the home exam determines the second half of the grade

Home exam

• The first part is a number of short questions relating to the course literature. These questions will be handed out on Monday of the sixth course week (October 1st)

• The second part is a more open essay: students are asked to select a specific firm (or other organization) of their own choice and then relate the firm and its innovation activities to a number of more specific issues that have been taken up in the course literature and in teaching.

Questions for the second part of the home exam

• What types of innovation does the firm (not) concentrate on?• Does it seem to be successful in its innovative activities? Why (not)?• To which technological trajectory does the firm belong?• How would you characterise the firm’s innovation strategy?• What parts of the firm seem most important for innovation to be

successful in the firm?• Does the firm use external collaboration to enhance its innovations? If

so, what types of collaboration, and why exactly those forms? And what types of partners?

• What type of competition is threatening the survival of the firm on the short and the long term?

• Does the firm use corporate ventures, and if so, of what type are they? • In what stage of development is the industry in which the firm is active?• What type of market (international?, local?, mass market?, niche

market?) is at focus?• Are there any institutional regulations or other political developments

that are particularly important influencing the innovation activities of the firm? And how does the firm itself try to influence political developments?

What is expected from you?

You can choose between width and depth – answer several questions or just a few

You are not expected to answer all questions – neither to do so in detail

Specify the questions you are addressing 2 000 words per part – in sum 4 000 words

(approximately 8 pages) A LTH grade is given U, 3, 4, 5

Note the following about plagiarism

• Copying text from someone else without using quotation marks and citing the source is considered plagiarism.

• For the home exam, there are no requirements of listing your references (however, this may show that you have found adequate resources), but you MUST USE quotation marks and list the source if you quote (you are not allowed to just copy text)!

• If you violate this rule you may be reported! I will check for plagiarism.

• If there is anything unclear about this, don’t hesitate to contact me

Week Mon Tues Wed Thu Fri

1 27/8-31/8

Lecture 10-12MH362D

Lecture 13-15 MH362D

Seminar 10-12MH143Seminar 13-15MH229

23/9-7/9

Lecture 10-12M:D

Lecture 13-15MH362DLars Coenen

Seminar 10-12MH362ASeminar 13-15MH362A

310/9-14/9

Lecture 10-12MH362DOlof Ejermo

Lecture 13-15MH362D

Seminar 10-12MH362ASeminar 13-15MH362A

417/9-22/9

Lecture 10-12 Lecture 13-15 Seminar 10-12Seminar 13-15

525/9-29/9

Lecture 10-12 Lecture 13-15 Seminar 10-12Seminar 13-15

61/10-5/10

Lecture 13-15

78/10-12/10

Examination 10-12

Examination 10-12

Examination 10-12

Examination 10-12

Examination 10-12

Course literature

Managing InnovationIntegrating Technological Market and

Organizational Change 3ed Joe Tidd

John Bessant

Keith Pavitt

ISBN 0470093269

Today’s contents

• Course outline

• The role of innovation

• What is innovation?

• What is innovation management?

• Models of the innovative process

Chapter 1: Key Concepts in Innovation Management

The aim of innovation...• Depends on the type of firm• Goal is mostly to survive, to grow, to make profit• R&D departments generally strive for the best

technical solution...• ... but what matters for innovation is how it

influences survival chances, profit and growth opportunities!

Innovation and the corporate strategy

Innovation management.....

• has to be understood as a core process of the

organisation -> It is related to what is being produced

• Is a long term race

• Is about continuity

• Has to deal with complexity!!

• Is about being systematic developing routines around

innovation

WHAT IS INNOVATION?

• Invention

• Technology

• Innovation

• Creating new or improved products, processes and services

• Knowledge and learning

• Uncertainty

Schumpeter’s distinction between ”Invention” and ”innovation”

• An ’invention’ is an idea, a sketch or model for a new or improved device, product, process or system. It has not yet entered to economic system, and most inventions never do so.

• An ’innovation’ is accomplished only with the first commercial transaction involving the new product, process, system or device. It is part of the economic system.

Dimensions of Innovation

– Product innovation: changes in the things (products or services) which an organization offers

– Process innovation: changes in the ways in which they are created an delivered

– Position innovation: changes in the context in which the product or services are introduced

– Paradigm innovation: changes in the underlying mental modes which frame what an organization does

the ‘4Ps’ of innovation

According to the degree of codification: Information to tacit knowledge

Wisdom

Tacit knowledge

Explicit Knowledge

Information

Data

Tacit

Codified

Figure 1.1 Dimensions of innovation

©2005 Joe Tidd, John Bessant and Keith Pavitt

Figure 1.4 Component and architectural innovation


Patents &copyrights

ScientificpapersScientificpapers

Trade secretsTrade secrets

Shared expertise

Codification

Property

Completelytacit

Fully codifiable

Restricted access

Fully disclosed

Knowledge product space

Source: David y Foray (1994)

The knowledge of innovation

Triggers of discontinuity

• New market emerges• New technology emerges• New political rules emerge• Running out of road• Change in market sentiment or behaviour• Deregulation or reregulation• Fractures along ’fault lines’• Unthinkable events• Business model innovation• Shifts in techno-economic paradigm• Architectural innovation

Important contextual factors

• Type of sector

• Size of firm

• The country and region

• The stage in the industry life cycle

• Political regulations

Abernathy & Utterback – industry life cycles

• The fluid phase – co-existence of old and new technologies – rapid improvement of both →’the sailing ship

effect’– Target: What product and what market?– Technical: What product who will produce it ?– Experimentation

Important contextual factors

• Globalisation

• Sustainability

• Networking organisation

• The transitional phase– A dominant design

• Convergence around one design • Rolling bandwagon → innovation channeled around a core

set of possibilities → a technological trajectory

– Imitation and development• Reliability, cheaply, higher functionality, quality

• The specific phase– Rationalization & scale economies– Differentiation through customization– Scope for innovation becomes smaller

Table 1.2 Stages in innovation life cycle


Three key questions

1. How do we structure the innovation process?

2. How do we develop effective routines?

3. How do we adapt or develop parallell routines to deal with incremental vs. discontinuous innovation?

Conclusions

• Different kind of innovations

• Context specific

• Innovation has different stages

• Knowledge is the key

Repetition Chapter 1

Four dimensions of innovation

1. Product, process, position, paradigm

2. System-Component

3. Incremental-New to the firm-Radical

4. Codified-Tacit

Figure 1.4 Component and architectural innovation


Repetition Chapter 1

Innovation:• Depends on the type of firm, sector, industry life

cycle, country and so on• Depends on the ”environment”• Goal is mostly to survive, to grow, to make profit• Technical solutions vs. societal and

organisational aspects• Different from invention

Innovation management

• Core process

• Production

• Commercialisation – design, marketing, resources,

competence

• Long term

• Continuity

• Complexity

• Systematic, routines

New factors affecting innovation

• Globalisation

• Sustainability

• Networking organisation

Chapter 2: The innovation management process

– Evolving models of the innovation process– Can we manage innovation? Introducing the

concepts of Organizational Routines or Capabilities

– Specify the different phases of the innovation process

– How context affects innovation

First and second generation models

R&DDESIGN &

ENGINEERINGMANU-

FACTURINGMARKETING SALES

First generation (50’s-60’s): Technology push “Linear model”

MARKETNEEDS

MARKETINGDEPT.

R&DMANU-

FACTURINGSALES

Second generation (mid 60’s-70’s): Demand pull

3rd generation model

Research

Knowledge

Potentialmarket

Invent and/ orproduceanalyticdesign

Detaileddesign andtest

Redesignandproduct

Distributeandmarket

D I S

D: Direct link to and from research from problems in invention and design

I: Support of scientific research by instruments, machines, tools

S: Support of research in sciences underlying the product areas

K K K

4th generation model

marketing

R&D

Product development

Componentsmanufacture

Product manufacture

4th generation model

marketing

R&D

Product development

Componentsmanufacture

Product manufacture Reduced time to market

5TH generation model

INDUSTRY

University

R&TCentres

Suppliers Users

Government

IPIP

IP

FinancialSystem

Innovation processes – 5th generation model

• Relevance of external sources of knowledge

“firms do not innovate in isolation”

• Related to Innovation System concept

• Focus on networking

• Still strong emphasis on R&D and formal knowledge (ICT)

6th generation of innovation processes

“Revolve around knowledge and learning”

• Networks embrace all knowledge types, not only R&D.

• Most innovative firm is the one that learns fastest

• It is the use of knowledge that makes the competitive difference, and creates the advantage

Managing complexity

Radical

NetworksR&D

Market

product

processes

Intellectual

Capital

Incremental

Innovation can come:– From the market (demand pull - 2nd)– From the “R&D department” (tech push - 1st )– From any department (interactive – 3rd)– From process reinvention (integrated – 4th)– From external sources of information

(networks - 5th)– From intangible assets (6th)

Table 2.2 Rothwell’s five generations of innovation models


Innovation models

SO, WHICH ONE IS RIGHT?

• A fast food restaurant chain?

• An electronic test equipment maker?

• A hospital?

• An insurance company?

• A new entrant biotechnology firm?

Can we manage innovation?

• The majority of failures are due to some weakness in the way the innovation process is managed.

• Technical resources (people, equipment, knowledge, money, etc.)

• Capabilities in the organization to manage them

• Organizational routines or capabilities are “the way we do things around here (in this organization)” as a result of repetition and reinforcement

• Routines are firm-specific and must be learned. • “To manage” innovation means to create an

organisation where routines can be learned as to cope with the complexity and uncertainty of the innovation process

• Unlearning is important

The innovation management process

• Searching –looking for threats and opportunities for change within and outside of the organisation.– Technological opportunity– Changing requirements on the part of the market

• Selecting – deciding (strategically from how the enterprise can develop and taking into account risk) what to respond to.– Flow of opportunities– Current technological competence– Fit with the current organizational competence

• Implement – turn potential ideas into a new product or service, a change in process.– Acquiring – to combine new and existing knowledge

(available within and outside the organization) to offer a solution to the problem

– Executing – to turn knowledge into a developed innovation and a prepared market ready for final launch

– Launching – to manage the initial adoption – Sustaining – to manage the long term use

In the implementation phase

• Cope with uncertainty about:– Technological feasibility– Market demand– Competitor behaviour– Regulatory and other influences

• Replaced by knowledge accumulated → technology & market research

• Learning – to learn from progressing through this cycle so that they can build their knowledge base and can improve the ways in which the process is managed.– Restart the cycle– Failure – why?– Refine, improvement → next generation– Learning about technology, routines & organization

Figure 2.1 Simple representation of the innovation process


Almost the same - again


SCAN• Definition:

– Detecting signals in the environment about potential change (market niches, technology development, etc)

• Activities– Scanning environment for technological, market,

regulatory and other signals– Collect and filter signal from background noise– Scan forward in time– Process signals into relevant information for

decision making


FOCUS• Definition:

– Selection of the various market and technological opportunities.

• Inputs: – (1) the flow of signals coming from the previous

phase– (2) the current technological base of the firm– (3) the fit with the overall business strategy.


RESOURCE• Definition:

– Combining new and existing knowledge to offer a solution to the problem.

• Activities: – Invent in-house through R&D activities– Create the conditions for creativity– Use existing knowledge in-house– Technology transfer and knowledge transfer– Licensing..etc


IMPLEMENT• Definition:

– Close interaction between marketing related activities and technical activities to develop the idea into a marketable product or service.

• Activities: – Develop to maturity– Technical development – Development of the market– Launch – After-sales support


LEARN• Definition

– Analysing the failures and success to input the innovation process

• Activities: – Continuous improvement

– Knowledge and IC management

“Innovation is a risky process....but also a mandatory one”. Success depends of a variety of:

• Internal factors– Good management– Core competencies– Clear innovation strategy– Right technology

• External factors– Links with market and suppliers– Learning from competitors– Institutional support: financing, human capital, etc

Table 2.3 Problems of partial views of innovation


Table 2.3 Problems of partial views of innovation (continued)


Successful innovation

• New products, processes and services account for an

increasing share of sales

– Lower prices

– Better-performing products

– Better features for certain users (niche)

• ½ of resources devoted to the development of new

products go to unsuccessful projects

• 35% of products launched fail commercially

Summary of Chapter 2

• Models of the innovation process

• Routines and capabilities

• Innovation management process

• Partial views on innovation

SEMINAR ASSIGNMENT WEEK 1

• Give examples from the real world of – a firm that has been successful at innovation– a firm that has failed to innovate successfully

• What, would you say, might be the most important difference between the successful and the unsuccessful firm?

• Please hand in half a page or one page or so, and bring a print-out of your answer with you to the seminar!

• (The assignment will not be graded, but you have to bring it with you to the seminar in order to participate!)

How to select firms

• See separate sheet for guidelines• You could:a) Follow one firm over the entire course

- Of course, you should be able to cover many aspects of innovation using this case

b) ...or switch firm based on the assignment- Note! Doing this too often may take a lot of time!

• You don’t have to decide now...• ...however, a recommended strategy is that

you choose case(s) with enough ’richness’ to cover several aspects of innovation

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