Teaching Guide Management Innovation, fourth edition, 2009

Session 1 Introduction to Innovation

1. Innovation as a Source of Competitive Advantage (Book Chapter 1) Different Ways in which this can Emerge The key point to make here is that innovation is a survival imperative. If an organization doesn't change what it offers the world and the ways in which it creates and delivers its offerings, it could well be in trouble. There are many examples of how innovation contributes to competitive success - not just in financial terms but in terms of what the organization is trying to do in its environment. In introducing these concepts it might be useful to refer to the service sector, the not-for-profit sector, the public sector and so on. There are some examples in the book.

2. Types of Innovation The key point here is to give people a sense that innovation can take place in a number of different ways. The 4Ps : product innovation changes in the things (products/services) which an organization offers; process innovation changes in the ways in which they are created and delivered; position innovation changes in the context in which the products/services are introduced; paradigm innovation changes in the underlying mental models which frame what the organization does. Stress that there is a range of options available from incremental to radical. Potential to explore all of the innovation space which this defines and risk of not covering it.

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Teaching Guide Management Innovation, fourth edition, 2009

3. Importance of Incremental Innovation Incremental innovation is often underestimated and this kind of do what we do better improvement can make a huge difference. In product terms this often comes from building up on an established platform which allows a continuous stream of developments, while in process terms it allows for the pattern of continuous improvement that characterized the quality revolution and more recently lean thinking.

4. Innovation and Knowledge Innovation as a process of learning and acquiring knowledge. Much of the competitive advantage available through innovation is around being able to harness knowledge in both tacit and explicit form. Innovation involves combining different kinds of knowledge and this is why cross-functional and sometimes cross-organizational knowledge sharing is so important. However sometimes difficulties emerge when innovation takes place at the architectural level rather than at the component level, and organizations that are very good at dealing with change in the latter can find themselves upstaged when the knowledge rules - the architecture - of their particular game are shifted.

5. Discontinuous Innovation Most of the time innovation takes place within a set of rules of the game which are clearly understood, and involves players trying to innovate by doing what they (product, process, position, etc.) but better. Some manage this more effectively than others but the rules of the game are accepted and do not change. But occasionally something happens which dislocates this framework and changes the rules of the game. By definition these are not everyday events but they have the capacity to redefine the space and the boundary conditions they open up new opportunities but also challenge existing players to reframe what they are doing in the light of new conditions. We call this discontinuous innovation.

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Teaching Guide Management Innovation, fourth edition, 2009

6. Different Stages in the Innovation Life Cycle Over time innovation seems to follow a pattern moving from a fluid and highly uncertain phase when a whole host of new possibilities are opened up by the emergence of new technologies or markets through to later stages of gradual maturity and focus on incremental improvement innovation. Different responses and management are needed at these different stages. Newcomers do well in the fluid phase whereas existing incumbents often do badly.

7. Christensens Theory of Disruptive Innovation This refers to a particular example when disruption occurs around the emergence of a new market with different needs. It developed from Christensens detailed studies of the computer disk drive industry but as a theory has been applied to account for a significant question across several industries including steel, mechanical excavators and low-cost airlines. The details are in his book The Innovators Dilemma, but the essence of his argument is that new markets emerge with different needs and create opportunities for innovation. Although existing incumbents are generally in a position to exploit such opportunities, they rarely do because their existing markets are far more attractive than the emerging new ones. As the new market develops the technology improves but from a much lower cost base until it reaches the point where it begins to challenge the existing incumbent in its established markets. At this point disruptive innovation takes place and at best existing players can only imitate and try to catch up.

8. Other Sources of Discontinuity The challenge posed by technological and market change is significant. In general, when discontinuous conditions emerge existing incumbents tend to do badly and new entrants do well. This raises the question of the kind of management and organisation needed to sustain an existing business as opposed to that needed to grow a new one. Ideally organisations need to seek an ambidextrous capability when they can manage both kinds of innovation but in practice this proves extremely difficult. The problem is made more complex by the fact that discontinuities emerge for a variety of reasons as table 1.4 indicates.

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Teaching Guide Management Innovation, fourth edition, 2009

9. Innovation Is Not Easy The trouble with innovation is that it is inherently uncertain and even with careful attention to technological and market research it is possible to get it wrong. Although we can all find examples of spectacular failures, the pattern is much more typically one of experiments and trial and error in which getting it wrong is part of a process of learning and improvement.

10. But It Is Imperative Innovation may be difficult and carry the risk of failure but this needs to be set against the bigger risk of failing to change in a turbulent and uncertain environment. If organizations do not change and continue to change along all the dimensions of innovation highlighted in point two above, they risk their survival and growth.

11. The Generic Model of the Innovation Process In the book we suggest that organizations have to manage four phases making up the innovation process. They have to:
Scan and search their environments (internal and external) to pick up and process signals about potential innovation. These could be needs of various kinds, or opportunities arising from research activities somewhere, or pressures to conform to legislation, or the behaviour of competitors but they represent the bundle of stimuli to which the organization must respond.

Strategically select from this set of potential triggers for innovation those things that the
organization will commit resources to doing. Even the best resourced organization cannot do everything, so the challenge lies in selecting those things that offer the best chance of developing a competitive edge.

Resource the option, providing (either by creating through R&D or acquiring through
technology transfer) the knowledge resources to exploit it. This might be a simple matter of buying off the shelf, or exploiting the results of research already carried out r it might require extensive search to find the right resources. It is also not just about embodied knowledge, but about the surrounding bundle of knowledge often in tacit form which is needed to make the technology work

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Teaching Guide Management Innovation, fourth edition, 2009

Implement the innovation, growing it from an idea through various stages of development to final launch, as a new product or service in the external marketplace or a new process or method within the organization. Capture the benefits from innovation, economic and social, through the business model, intellectual property and knowledge management. This includes learning and reflection upon the previous phases and review experience of success and failure, in order to learn about how to manage the process better and to capture relevant knowledge from the experience.

12. Three Key Questions in Innovation Management The questions that form the basis of this book are: How do we structure the innovation process appropriately? How do we develop effective behavioural patterns (routines), which define how it operates on a day-to-day basis? How do we adapt or develop parallel ones to deal with the different challenges of steady state and discontinuous innovation?

13. New Challenges in Innovation Management The other problem with innovation management is of course that it is shooting at a moving target. New problems emerge triggered by new technologies, market shifts, political instability, movements in public opinion and so on. We suggest that, although the challenges may shift, the underlying implications for innovation management, at the level of dealing with the core renewal process, remain the same.

14. Concluding the Session You could conclude the session with a discussion around some of the emerging themes in innovation management. We highlight four in the book globalization, sustainability, the challenge of the virtual society and networking but there may be others around which a discussion or class exercise could be built.

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