Innovation,

a management imperative for sustainable competitive advantage:

Doses of too little and too much both may heart.


A term paper
By
Aruna Dayanatha
MBA(Sri.J), MBCS CITP(UK), Assoc. CIPD(UK), MCPM(SL)
PHD/09/85


Theoretical Aspect oI Management
PhD in Management Studies
Lecturer: ProIessor Uditha Liyanage


!ostgraduate Institute of Management
University oI Sri Jayewardenepura
Colombo
2011
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. Abstract
The term innovation, in the dictionary meaning explains as creating new or renewing. In business
terms innovation supposed to create value in the market place. Thus innovation includes the
creation oI ideas and taking the idea to the market or commercializing the idea. Thus it was
expressed that innovation is innovation is 1 inspiration and 99 perspiration. Innovation thus
can be translated in to a competitive advantage. Innovation however is not hit-and-miss
operation; it`s a careIully nurtured deliberate process. Innovation is what creates wealth in
market place; it`s the Iactor that creates growth in business. Businesses should do new things,
should generate new knowledge in order Ior growth. Ultimately as Drucker points out, in
absence oI innovation businesses will eventually die. Thus there are circumstances that are
identiIied as circumstances that organization should think about innovation, such becomes signs
where the cure Ior the business is nothing but innovation. By resorting to innovation, senior
management gets an opportunity to tap in to a massive organizational resource. Once innovation
eIIorts are pooled, there are signed that managers could use in order to veriIy that such eIIorts are
not derailed. However, innovation need not be an expensive aIIair, renovation beIore innovation
has become an advice oI a wise man.

In identiIying the drivers oI innovation, demanding nature oI the customers, organizations
execution capacity, systems thinking and systems organization, continuous scanning oI sources
oI innovation, Knowledge, awareness oI the context and the unit oI analysis Ior the market and
conceptual capabilities oI people, whole brainess oI people, and managing the areas identiIied as
roadblocks oI innovation come at the top.

However much we treat the innovation as important, doing innovation over and above, as well
may become disruptive. Thus innovation should be managed, doing suIIicient renovation beIore
innovation may be an eIIective approach to innovation.
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%able of Contents
1 AbsLracL l
2 lnLroducLlon 1
21 WhaL ls lnnovaLlon? 1
22 WhaL lnnovaLlon ls noL? 3
23 lmporLance of lnnovaLlon 6
3 8uslness Case for lnnovaLlon 8
31 lnnovaLlon LhaL change buslness dynamlcs 14
32 lnnovaLlons LhaL synLheslze 1echnologles 14
33 lnnovaLlon LhaL creaLe new Lechnologles 13
4 urlvers for lnnovaLlon 16
41 Approach for lnnovaLlon 22
411 ulvlde Lhe labor 22
412 Assembllng Lhe dedlcaLed Leam 23
413 AnLlclpaLe and MlLlgaLe Lhe SLralns 23
3 Sources of lnnovaLlon 23
31 unexpecLed occurrences 23
32 lncongrulLles 26
33 rocess needs 26
34 lndusLry and MarkeL Changes 27
33 uemographlc Changes 27
36 Changes ln ercepLlon 27
37 new knowledge 28
6 lnnovaLlon and Complex AdapLlve SysLems 29
7 SLraLeglc lnnovaLlon 33
8 ulsrupLlve lnnovaLlon 33
9 8eference 37


lll

ist of tables

Table 1 : Behavior oI innovation while inputs change 4
Table 2: The evolution stages oI a business ecosystem 30


1

. Introduction

Importance oI innovation has never been discussed and considered important as in today`s
context. Simply explained, the goal oI innovation is to create business value by developing ideas
Irom mind to market (Innovation, 2005). Creating a value in the market place is a necessary
element oI an innovation. Objective oI this paper is to explore the concept oI innovation, in
diIIerent Iacets and in diIIerent context, in order to understand the term 'Innovation clearly.

..What is Innovation?

Cambridge Dictionary deIines innovation as ideas and methods that are diIIerent (Dictionary).
OxIord dictionary deIines innovation as a process oI making changes in something established,
especially by introducing new methods, ideas, or products (Dictionaries). Further the OxIord
Dictionary explains the origin oI the word tracing back up to mid 16
th
century; Irom Latin word
innovate` which means renewed, altered`, Irom the verb innovate, Irom in-into`novate-make
new` (Irom novus-new`) (Dictionaries). Using the meaning we obtained Irom dictionaries and
Irom the origin oI the word, we could device an explanation Ior innovation. It could be a process,
or a method that make new things, or a process that make existing things be renewed, or altered.
However, the dictionary meanings do not give a clear idea about to whom` the innovation is
meant Ior. Ultimately, in business terms, every activity is executed keeping the consumer or the
customer in mind. In business sense, the innovation will be Ior the customer as well. It will be
the process that provides something new, or something renewed that IulIills a 'want oI a
customer.

It was pointed out that innovation should create value in the market. Simple creation oI a
product, a process, or a technology will not come under the deIinition oI innovation. The
2

Invention and innovation together is reIerred as innovation, as argued by David NordIors
(America, 2009). Innovation again is deIined as exploiting new ideas leading to the creation oI
new products, services, and processes in the business environment. Inventing an idea is not
treated as innovation; but 'bringing to market which is identiIied as innovation (Shukia, 2009).
Invention may create a product, service, or a process. Yet it will not create a value in the market,
unless the invention was taken to the consumer. Thus innovation will be completed, only iI the
invention was taken to the market, through an appropriate process. New ideas putting in to
practice, exploiting the inventions in a manner that leads to new products, services or systems
that leads to value addition, quality improvement is deIined as innovation (Shukia, 2009). Thus
Iollowing do come under the process oI innovation;
4 Technological TransIormation
4 Management restructuring
4 xploiting new technologies
4 mploying out oI the box thinking to generate new values to the society (Shukia,
2009).
Innovation will not be restricted to products, services, or processes. Anything and everything can
be innovated. In business sense, scope oI innovation is very large; innovation could virtually
happen in any part oI the value creation process oI the business.

Planned and measured combination oI ideas, objects, and people leads to innovation, resulting
new business ideas and technological revolutions (Shukia, 2009). Such makes the deliberate
eIIort oI innovation possible. Responsibility oI the management in nurturing innovation within
an organization is to bringing the ideas, objects, and people together under the right interaction.
In the process oI taking the invention to the market, Iacing the pressures oI the competition
would be inevitable. Thus the most important part in business invention is the,
commercialization. Thus making a strong process oI commercialization as well will come under
the responsibilities oI management as well. In order to be termed as an 'innovation those
products, services, and processes leading to innovation need to be strong enough to progress
through rigorous commercialization process to invade the market place (Shukia, 2009).
3

The process oI innovation in an organization should stand the competitive pressure Thus
innovation within an organization would become a competitive advantage. Jack Welch, ex-CO
oI most admired company G, stated once that organizations ability to learn, and to translate that
learning into action rapidly, is the ultimate competitive business advantage (Innovation, 2005).
Innovation within an organization will thus be the management`s ability to maintain an
environment that nurtures the ability to learn and ability to translate the learning in to actions
quicker than the competitor. Thus innovation is a competitive activity.

Innovation is a deliberate and careIully considered process. Innovation is not hit-or-miss, trial
and error, or lateral thinking, but a repeatable process (Innovation, 2005). Businesses cannot stop
innovation or be satisIied with the innovations achieved so Iar. Competition will imitate the
innovation commercialized iI not out innovate. Thus a system oI continuous innovation and a
structured process Ior innovation should exist in an organization. Innovation is achievable
through a systematic process (Innovation, 2005). IT guru Kevin Keiiy once stated that 'Wealth
Ilows directly Irom innovation, not optimization. Wealth is not gained by perIecting what is
known (Innovation, 2005) (Shukia, 2009). Keiiy suggests that what is unknown should be
discovered in order to innovate. Optimization, is achieving the optimum value (Database), i.e.
the best possible to achieve (Database) with what is known or what exists in the present context,
thus is reIerred as eIIiciency, i.e. avoiding waste oI time and eIIort (Database). IIiciency, while
a necessary condition Ior business success, is ineIIicient to sustain the growth over decades. For
an organization to achieve new level oI eIIiciency and productivity, innovative solution is
required (Innovation, 2005). Underpinning idea is that organizations working on the initiatives oI
improving what exist, or Iine-tuning and improving what they have been doing will not create
wealth over and above the level it does at the present context. Organizations should look beyond
what exists presently, or what they do in the present context, which is innovation, to create
Iurther wealth.

Organizations to continuously grow, stay ahead in the competition, should have a systematic
process oI nurturing innovation, continuously. This becomes ability or a capacity oI an
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organization. An organization`s capacity Ior innovation is deIined as the creativity multiplied by
execution (Govindarajan, Innovation is Not Creativity, 2010). II either oI the elements is
assessed to be zero, the total organizational capacity Ior innovation will be evaluated to zero
(Govindarajan, Innovation is Not Creativity, 2010). Simply on the Iact that multiplication was
used, an important Iactor is the nature oI behavior in the result, when the inputs are changing.
When the values oI Creativity and execution are maintained at 100 or above, innovation takes
the maximum value. II both Iall below 100, the innovation Ialls below the minimum value.
Thus organizations should concentrate on maintaining either one at 100, or both at 100. With
a small change in the inputs, results will change with multiplying eIIect. Organizations will not
be innovative in absence oI creativity, invention, the ability to create something in the mind
(Database), or the ability to take the idea to the market. A workIorce that invent, alone will not
lead the organization to be innovative. Having a strong commercialization process without
creative workIorce, will not make the organization innovative. Management should develop the
creative people, and a strong process that take the ideas through to customers.

%able : Behavior of innovation while inputs change
Creativity Execution Innovation Observation
1 1 Result takes the value oI maximum input
0.5 0.5 Result takes the value oI maximum input
0. 0.5 0.125 Result drops below the minimum input
1.5 1.5 Result takes the value oI maximum input

Above description will give two components Ior innovation to be eIIective, rather than existing
inside an organization. They are Invention or creativity and commercialization process.
Invention or creativity is a mental process, a thinking process, Ior generation oI an idea. The
commercialization process would be a job that requires lots oI eIIort. Thomas dison speaks
about the innovation. As he puts it 'innovation is 1 inspiration and 99 perspiration
(Govindarajan, Innovation is Not Creativity, 2010), thus thinking is rated at 1 oI the total
3

process oI innovation, whereas sweating or the physical eIIort or the commercialization process
accounts Ior a vast majority iI not 99 oI the innovation activities.

It`s worthwhile to look at the innovation through productivity Iormula. Productivity Iormula is
what gives an organization the proIitability. Looking at the innovation through the productivity
Iormula, productivity is the output divided by Input. You can increase the result by reducing the
inputs or by increasing the output, and many other ways appearing in between. Reducing input is
cost cutting, and increasing the output can be achieved by resorting to innovation (Innovation,
2005). Reducing inputs is working with what we do now; working with the knowledge we have
in present context. As it was discussed, working with what we do now, or what we know
presently will not create additional wealth. In order to create additional wealth, we need to start
doing what we have not done so Iar, explore what we have not known so Iar, which is
innovation. Increasing the output drastically while increasing the input little, reduce the input and
keep the outputs at the same level, reducing the inputs while increasing the output, options which
comes in between the continuum oI the productivity improvement are options that can be
achieved through innovation.

..What Innovation is not?

Vijay Govindarajan, in a HBR blog points out that oIten the managers treat creativity and
innovation as equal concepts. He points out that innovation is not creativity (Govindarajan,
Innovation is Not Creativity, 2010). Creativity is about coming up with a big idea, whereas
innovation is about executing the idea or commercializing the idea. In other words converting
the idea in to a successIul business (Govindarajan, Innovation is Not Creativity, 2010). Thus
organization`s eIIort iI they Iocus on making a creative workIorce, will not bring in innovation
within the organization. People may think creatively beIore the creativity trainings are
conducted. Leaders should look at the process oI commercialization oI creative ideas. lse no
6

matter how creative the employees are the organization is not going to beneIit, no additional
wealth going to be generated through the creativity among the people.

.3.Importance of Innovation

Innovation leads to wealth creation (Shukia, 2009). It`s a vital Iactor required Ior business
growth. Businesses may sustain its position, yet will not be able to grow, without innovation in
the long run (Shukia, 2009). Going back to the basic argument, organization will not grow by
doing things that are done present, or working with the existing knowledge. In order Ior
businesses to grow, organizations should do new things, should generate new knowledge, or
organizations should do what they have not done so Iar, learn things what organizations have not
given prominence, explore the horizons that organization have never imagined, such require
innovation to happen in the strategic thinking, strategic planning, or strategic management. In
today`s context the innovation has become a major inIluencer Ior the strategic planning (Shukia,
2009). Innovation is today the most important driver oI economic growth (America, 2009). The
government oI America has identiIied the importance on innovation in the context oI economic
growth, and is given due prominence in the report 'what is innovation published by the
government oI America. Management guru Peter Druker has pointed out, iI an organization
which is established is not being able to innovate in this era where the innovation is an
imperative, will Iace decline and will extinct (Shukia, 2009). Innovation thus has become a
problem oI survival, rather than a consideration Ior growth. This implies that other organizations
out there continue to innovate. Your competitors are being innovative and are taking over your
share, i.e. in the market, your market share. Competitors are Iinding new ways oI satisIying the
wants oI the customers, new ways oI being more productive, new ways oI creating wealth. It has
become the status quo, or the norm in the market, iI you lag behind; you lose the right oI being in
existence as a business.

7

Innovation in entrepreneurship, demonstrated by coming up with a new solution to a product or a
service that would IulIill the needs and the wants oI the consumers (Shukla, 2011). Products and
services innovated at the entry to the market by entrepreneurs aimed at IulIilling the needs
identiIied in the market, many more solutions to IulIill these needs will evolve to satisIy the
needs better, easier, and more useIul (Shukla, 2011). Thus entrepreneurs should keep up with the
innovation trends to survive. ManuIacturers continue to produce without sacriIicing quality, thus
they need innovation (Shukla, 2011).


8

3. Business Case for innovation

Over 75 oI the COs oI Iastest growing companies have stated that their strongest competitive
advantage is as unique products and services and distinct business processes that give the edge in
the market (Innovation, 2005), this reIers to the innovation in the products, services, and business
processes in those companies. Innovation within their organization is the Iorce that places them
in the category oI 'Iastest growing.

Following quotation, made by Chip Holt, owner oI Aero Service Company, gives a good insight
oI the business case Ior innovation, 'I characterize a lot oI my eIIort as the pursuit oI
productivity. I am amazed at how many perspectives can be brought to bear in the pursuit oI that
one word. In this simple Iorm.. Productivity being the ultimate measure oI proIitability oI
businesses helps to look at innovative ways that provides many ways that can lead to
improvements. It was identiIied what happens when organizations commit Ior innovation. When
organizations want to bring innovation live, organizations typically commit one or two sins
(Govindarajan, Five Warning Signs Your Innovation IIorts Are Going OII the Rais, 2010).
Mostly they will lead the core business to do innovation, or they will create skunk work. Core
business may Iail since the core business is generally grated Ior eIIiciency (Govindarajan, Five
Warning Signs Your Innovation IIorts Are Going OII the Rais, 2010). Creating skunk works
means keeping the innovation away Irom the core business, such as well is not a good practice
since innovation must leverage some assets Irom the core business (Govindarajan, Five Warning
Signs Your Innovation IIorts Are Going OII the Rais, 2010). Forcing the core business to get
involved in innovation, may Iail due to the Iact that, while they are working towards the
eIIiciency, which is time bound, they will devote the Iill time to get the maximum result Irom
what they do at present. That will not give any room Ior innovation, since innovation cannot
achieve Irom what we do now. At the same time, organizations cannot keep the innovation away
Irom the core business. Ultimate beneIit oI the innovation should be to the core business, through
9

with the creative idea, or the invention is commercialized. Thus creating skunk work as well is
not an eIIective approach.

Innovation theorists have pointed out circumstances, where an organization should think about
improving the operating system Ior innovation. They are;
1. You Ieel you are nearing the end oI a long and expensive development race and your
competitors are about to pass you by and win a valuable brand name and proIitable
chunks oI the market beIore you are able to act.
2. The value in your industry is shiIting Irom perIecting the old, towards inventing the new,
in process, products and services.
3. ven when you take on signiIicant new contracts, vast amounts oI new work or hundreds
oI new orders, your share price won`t budge.
4. It seems that the innovation eIIorts in your Organization are not systematic enough and
are based on chance clashes oI genius or ad hoc ideas raised by individuals in skunk-
work projects.
5. You sense that your R&D staII members are sated and have settled in to complacency,
and the Ilow oI ideas is not what it was
6. Your company has an excellent product that, iI we could only solve that problem,`
would conquer the world
7. You are certain that reducing development time, production costs, and product price by
15 percent would make your Iirm and your product a winner
8. Despite all the consultants, ISO standards and best practices you deploy, the cancer oI
it`ll be okay` and oI undirected improvisation, has taken a grip on your Iirm, and this is
something you are unwilling to accept (Innovation, 2005).

This suggests that organizations should look at the operating
'system Ior innovation, iI above symptoms are visible within the organization. Thus it`s vital to
understand that the innovation inside organization should be looked at Irom the systems
10

perspective. It is vital that the manager has an understanding that the innovation eIIorts are going
in the right direction or the eIIort that are being pooled in is bring the innovation.

Organizations will show signs iI their innovation eIIorts are derailed. A HBR blog discusses Iive
oI such signs;
1. The members oI the dedicated team (team assigned specially Ior innovation inside the
organization) Irequently use words such as rebellion` and conspiracy`
2. The dedicated team members act as though they are the company`s saviors.
3. Those assigned to the dedicated team Ieel like winners and those aren`t Ieeling like
losers, or vice versa.
4. Core-business employees are obsessed with the dedicated team`s special treatment, such
as perIormance standards or compensation Iormulas that depart Irom the company`s
norms.
5. Core business leaders go out their way to argue that the innovation is Iailing by
highlighting its shortIalls against the company`s perIormance expectations
(Govindarajan, Five Warning Signs Your Innovation IIorts Are Going OII the Rais,
2010).
Govindarajan`s identiIication oI symptoms mainly Iocuses on the integration oI the dedication
team created Ior innovation, with the operations team. Such signs may crop up when two teams,
i.e. dedication team and the operations team clashes, or compete. Thus looking at the body
Iormed Ior innovation, in systemic manner would deIinitely be a vital consideration that drives
the innovation.

Innovation will not be successIul, by an individual making a contribution or eIIort. Organizations
cannot aIIord to rely on individual innovator`s contributions, working alone (Innovation, 2005).
Very oIten innovation is resulted Irom planned and deliberate recombination oI ideas, people,
and objectives (Innovation, 2005). Organizations must adopt a distinct-but-linked organizational
model in order to nurture innovation (Govindarajan, 10 Tips Creating Distinct-but-linked
11

Innovation Groups, 2010). This model suggests that companies should develop a dedicated unit
Ior innovation (Govindarajan, 10 Tips Creating Distinct-but-linked Innovation Groups, 2010).
Idea oI having a dedicated team is that the team is to minimize the conIlict with the companies`
perIormance engine (Govindarajan, 10 Tips Creating Distinct-but-linked Innovation Groups,
2010). Ten tips on nurturing strong partnership between innovator and the core business are
provided by Govindarajan, as Iollows;
1. Articulate a motivating vision oI victory in which both the dedicated team and the
perIormance engine win.
2. Highlight the reality that the dedicated team and the perIormance engine are mutually
dependent.
3. Create a common enemy, the competition.
4. ReinIorce the values that the dedicated team and the perIormance engine share, even iI
they are simple and universal values, like a commitment to integrity.
5. Make the division oI responsibilities, between the dedicated team and the perIormance
engine as clear as possible.
6. Anticipate resource constrains created when the shared staII must simultaneously handle
the demands oI innovation and ongoing operations.
7. Gather data to understand whether Iears about cannibalization are valid or unIounded
8. Alter incentives, specially evaluate 'ability to collaborate across organizational
boundaries on perIormance reviews.
9. Use inIluential and collaborative insiders at points oI interaction between the dedicated
team and shared staII.
10.When the innovation initiatives succeed, share credits liberally, with both the dedicated
team and the shared staII (Govindarajan, 10 Tips Creating Distinct-but-linked Innovation
Groups, 2010) .

In the basic premise built by Govindarajan, argues, that both the dedicated team and the
perIormance engine be handled in the systems perspective. Having a common enemy will create
bot the subsystems, (i.e. the subsystem Ior innovation) and subsystem Ior operations to have a
12

common objective to achieve. Further many oI the initiatives suggested propose to have a high
level oI cohesion between the two sub systems.

Retired CO, Jim O`Neal quotes 'Creativity methods provide senior management with a unique
tool to tap in to a massive organizational resource. Learning on leverage the creative thinking
skills oI every individual, regardless oI their level, creates the sustainable competitive advantage
every corporation is striving Ior (Innovation, 2005). Organization as a system stores this
massive resource that senior management can harness. Senior management should drive the
system together considering each department, and each individual as elements oI the system need
to be driven together Ior the achievement oI installing the sustainable innovation.

Gary Hamel conveys a message to those business leaders who sits on the Ience oI innovation and
conventional wisdom. '.out there in some garage is an entrepreneur who`s Iorging a bullet
which your company`s name on it. You`ve got one option new to shoot Iirst. You`ve got to out
innovate the innovators. Conventional thinking says go back to basics, conventional wisdom says
to cut costs. Conventional wisdom is doomed (Innovation, 2005). Companies can`t beat the
competition unless they can out-innovate the competition. When the company runs out oI
innovation, it runs out oI growth (Innovation, 2005) (Moore, 1993).

Innovation has become the mantra, in the business: Innovate or Die (Innovation, 2005). This
statement indicates the importance oI innovation in today`s context. Innovation however cannot
evolve in a vacuum (Moore, 1993). Businesses must attract capital, partners, suppliers, and
customers (Moore, 1993). Thus innovation mantra has to be applied in every market that
businesses compete on, be it consumer market or Iactor market. James F Moore claims that
business theories discussed in management hardly discusses the managerial challenge oI Turing
the complex business communities that bring innovations to market (Moore, 1993). Question oI
how companies come in to business with innovation that changes the entire market, and
gradually loses the control over the sustainability oI the innovation, has become a phenomena
13

worthwhile oI studying in depth. What are the qualities oI leadership that matter Ior changing
conditions (Moore, 1993). Managerial challenge thus, is to maintain a continual wave oI
innovation within the company (Moore, 1993). xecutive`s role is to develop new ideas and
tools Ior strategizing, tools Ior making tough decisions when it comes to innovating, business
alliances, and leadership oI customers and suppliers (Moore, 1993).

Innovation does not have to be an expensive aIIair. II a brand or a business gets older, impulse is
to scrap it and starts over, but more oIten the innovation does not work (Innovation, 2005).
Zyman, discuss the Iact in his book 'Renovate beIore you Innovate (Innovation, 2005). Him
being the chieI marketing oIIicer oI Coca Cola, points out;
'.many companies mistakenly Iocus on innovation to drive growth. They look
to create new products and lines oI business instead oI the more promising
alternative oI marketing renovation. Renovation may be a better bet because it
involves doing a drastically better job oI leveraging your existing assets and
competencies

Thus, in some situations renovation would be a better alternative Ior innovation (Innovation,
2005). A business better improve what it`s doing at the present, this may be based on the
premises that every business has the room Ior improvement, until the maximum potential is
achieved. Basic argument is that you should Iirst harness the maximum potential Irom your
present product or what you are doing; this can be viewed as a good strategy to consider beIore
innovation.

Author oI the HBR article 'Managing Innovation in the InIormation Age, claims that GM, IBM
business leaders have become prisoners oI the deeply ingrained assumptions, inIormation Iilters,
and problem solving strategies that make up their world view (Handerson, 1994). She claims that
those solutions (innovations) once made them great, have given them new problems to be
resolved (Handerson, 1994).
14

Innovation is identiIied as a speciIic Iunction oI entrepreneurship (Drucker, 1998).
ntrepreneurship is an activity, and heart oI it is the innovation (Drucker, 1998).

In modern day the business innovations takes a larger scope, does not get restricted to product
innovation. Taking a case oI India HBR article 'Innovation`s Holy Grail discusses Iew
unconventional innovations categories that give business the competitive advantage.

3..Innovation that change business dynamics
Bharati Airtel, when not making proIits, looks hard at its business. They changed the way they
look at their business. They looked at themselves as a Iactory that produces wireless minutes. As
a result oI this shiIt Bharathi Airtel outsourced its entire Iunction except six, i.e are customer
management, regulatory aIIairs, brand management, and strategy creation (Mashelkar, 2010).

As a result oI this innovation Bharathi Airtel were able to make proIits, grow and provide service
across India, bring down the per second cost oI phone calls.

3..Innovations that synthesize %echnologies
Some Indian companies have combined cutting edge technologies and developed new
capabilities (Mashelkar, 2010). The mergency Management and
Research Institute (MRI) has woven together the latest telecommunication, computing,
medical, and transportation technologies to provide aIIordable, mostly Iree emergency services
in tribal, rural, and urban area. Income generation comes Irom Public Private Partnership
initiatives (Mashelkar, 2010). MRI, has been organized with training and technology that
emergencies are attended within the golden hour, i.e. the Iirst 60 minutes oI the emergency. They
are taking initiatives to educate the people to recognize emergencies; latest innovation that they
13

are Iocusing on is to send help in two wheelers, so they can reach the emergency ahead oI the
Iour wheeler teams (Mashelkar, 2010). MRI is the only emergency responder with a research
institute (Mashelkar, 2010).

3.3.Innovation that create new technologies
Pharmaceutical innovations usually start Irom the lab, and moves to clinic through complex
stages oI validations. Indian pharmaceutical companies started Irom the clinics and to the
laboratories and came back to the clinics. This approach has reduced the time it takes to invent
drugs and the cost involved Ior same (Mashelkar, 2010).

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. Drivers for innovation

Researchers have indicated that combination oI competition and strong demand is a major driver
Ior innovation (Shukia, 2009) (Shukla, 2011). Intensity oI competition is a determinant oI
innovation and productivity (Shukia, 2009). Porter points out the same with relevance to the in
'competitive advantage oI nations. Porter describes the Demand Condition -More demanding
the customers in an economy, the greater the pressure Iacing Iirms to constantly improve their
competitiveness via innovative products, through high quality etc. (Management.net, 2011).
While the competition is a phenomenon that every business has to Iace, the demanding nature oI
the customers will create the intensity oI the competition. Thus organization will opt to innovate
to be better competitive in the market. Demanding customers will require higher quality and
organizations will be Iorced to innovate Ior high quality as well.

Organizations tend to develop the capacity Ior creativity; authors have identiIied this as the Iront
end oI the total problem oI innovation (Govindarajan, Innovation is Not Creativity, 2010). But
the real problem with respect to innovation is identiIied as the execution, or the back end,
whereas the creativity is identiIied as the Iront end (Govindarajan, Innovation is Not Creativity,
2010). Govindarajan quotes the Iailures oI business world, is the Iailure oI execution in
innovation. To establish the argument, that the problem on innovations lies at execution,
Govindarajan presents the Iollowing argument;
'. consider companies that struggle even aIter a competitor entered the market
and made the great idea transparent to all. Did Xerox stumble because nobody
there notices that Canon had introduced personal copiers? Did Kodak Iall behind
because they were blind to the rise oI digital photography? Did sears suIIer a
decline because they had no awareness oI Wal-Mart`s new every-day-low-price
discount retaining Iormat?

17

Thus execution is identiIied as the stepchild oI innovation (Govindarajan, Five Warning Signs
Your Innovation IIorts Are Going OII the Rais, 2010). II the organization gives the stepchild,
rather the step motherly treatment to the execution process, no matter how strong the creativity is
the entire phenomena oI innovation will not succeed.

Peter Senge, in his book 'The FiIth Discipline pointed out the Iact that Irom early ages we are
used to break down problems in to manageable parts. This is Ior easy management oI complex
tasks. He points out that by doing such; we are missing the understanding oI the big picture. He
identiIies that as a price that we pay (Innovation, 2005). Answer to this problem is systems
thinking (Innovation, 2005). System thinking helps the creative individuals to see wholes,
perceive relationships, uncover connections, and expose root causes and master complexity
(Innovation, 2005). dward De Bono thinks that there is a systems thinking Iramework Ior
innovation (Innovation, 2005). As it was discussed in early sections oI this paper, systems
execution will also be necessary to support innovation. Individual sections, and individuals
themselves being Iully involved in the innovation process, the organization will not gather the
big picture, and innovation dedicated team will not have a cohesion with the perIormance engine,
or the operations department. Thus 'Systems Thinking and 'Systems Organization within
organization will be key drivers oI organizational innovation.

An example quoted Irom Proctor & Gamble (P&G), when they were Iaced with the threat Irom
competitors on soap. Their initial attempts Iailed. Their creativity approach enabled them to shiIt
Irom competing Ior the market share to experience oI using the soap, and came up with a bar oI
soap, where they advertised on the illusion oI swimming in the ocean (Innovation, 2005).

Companies need more than creativity, they need a reliable process Ior innovation. Just as they
have processes governing all other activities and aspects oI the business (Innovation, 2005).

18

Analysis oI the sources oI new opportunities is the start oI the process, and that can be driven to
a successIul systematic innovation process (Drucker, 1998). Depending on the context, sources
oI innovations will take diIIerent positions oI importance. However it is important that
innovators analyze all the sources oI innovation Ior opportunities (Drucker, 1998). Rather a
continuous scanning oI sources oI innovation will be required; most important question to
answer is who is assigned with the responsibility oI scanning the sources oI innovation. Is it the
dedicated team who are supposed to scan the sources oI innovation? lse iI the organization is
capable oI drawing Irom the mass power oI every employees thinking put together, where
individual employees, groups continue to scan the sources oI innovation Ior opportunities.

Innovation is both conceptual and perceptual (Drucker, 1998). Thus having a broad learning by
way oI looking, asking, and listening will become an important driver Ior innovation (Drucker,
1998). Perception is a cognitive phenomenon; it is the process oI attaining awareness oI
understanding or sensory inIormation (Wikipedia.org, 2011). Innovation is conceptual, thus
innovation should immerge as a concept in human mind. Innovation is perceptual, since it
depends on the awareness an individual attained with the sensory inIormation one has
experienced. Thus, extent oI the organization provides inIormation to the employees, or the
dedicated team oI innovators, will drive the practicality oI the innovation, and the
operationalization oI the concept.

SuccessIul Innovators will be using both right and leIt brains (Drucker, 1998). They will look at
Iigures, people, they will work out analytically what the sort oI an innovation will satisIy the
opportunity (Drucker, 1998). What Drucker suggests is that the brain orientation oI people will
be a driver Ior the innovation. 'Whole braininess oI the employees or at least the dedicated
team Ior innovation will determine the success oI innovation initiatives oI the organization. An
eIIective innovation should be simple at the Iirst glance. Best appreciation Ior an innovator will
be a comment 'This is obvious! Why didn`t I think oI it? It`s so simple? (Drucker, 1998).
Innovations should start simple, and grow. They need not make big innovations. Continuous
small innovations will lead to big innovations (Drucker, 1998). However, no one will be able to
19

predict or Ioresee iI a given innovation would end up in a big business or a modest achievement
(Drucker, 1998). Discussion suggests that individual`s innovative experience will account Ior the
richness oI the innovation. ven thoughno one will be able to predict the outcome oI the
innovation, how Iar the innovation is going to satisIy the opportunity may depend on the
experience oI the innovators. It`s obvious that anyone will not become a successIul innovator
overnight, initially the individual may make mistakes, cause losses, yet organization may have to
tolerate such in order to nurture the individuals in to a level oI innovators, as the experience oI
3M, Iailures should be celebrated.

Innovators should Iocus on setting standers Irom the start (Drucker, 1998). II the innovator does
not aim to take the leadership, the innovation may not be innovative enough (Drucker, 1998).
Innovator taking the leadership is how Iar the innovation takes the lead beyond the status-quo, or
the present standard oI things happening in the market. Further the leap taken by the innovator,
the richer the industry will be, intensive the competition will be, and thus innovator taking the
leadership will determine the amount oI wealth created Ior the organization.

Innovation is work rather than genius (Drucker, 1998). It requires knowledge and ingenuity the
power oI creative imagination, and Iocus (Drucker, 1998). Innovation is hard working with
Iocus, ingenuity, knowledge. In the context oI work, comes the diligence, persistence, and
commitment (Drucker, 1998).

Best practices drawn Irom a company, Lincoln lectric, a company that keeps reducing their cost
Ior the beneIit oI the customer, were as Iollows;
1. Creating and sustaining a corporative environment that values better perIormance above
everything else.
2. Structuring the organization to permit innovative ideas to rise above the demand oI
running the organization.
20

3. Clearly deIining the strategic Iocus that lets the company channel its innovative eIIorts
realistically, in ways that will pay oII in the market.
4. Knowing where to look Ior good ideas and how to leverage them once they`ve Iound
5. Going aIter good ideas at Iull speed, with all the company`s resources brought to bear
(Pearson, 1988).
Maintaining all the Iive areas live and running required lots oI discipline Ior the company
(Pearson, 1988). Systematic eIIort in institutionalizing innovation is what gives the market
leaders their competitive advantage (Pearson, 1988). These require that top management must be
deeply and personally involved in the process oI innovation (Pearson, 1988).Simply stated
innovative companies are led by innovative leaders (Pearson, 1988). Such managers set tough
goals to drive innovation Ior themselves and Ior the others in the organization, thus Iorcing the
organization to innovate (Pearson, 1988). Leaders need not be creative, idea driven they should
welcome change. They should understand that their competitive survival depends on innovation
(Pearson, 1988). An innovative way oI searching Ior innovations in a company manuIacture
trucks in urope was losing at their business through the eyes oI Japanese competitors. (Pearson,
1988). By looking at your business through the eyes oI the competitor is an eIIective way that
you can identiIy opportunities oI innovation earlier than the competitors themselves.

Having a clear understanding oI you, your competitors and their moves in the market, will be a
strong driver Ior innovation. Companies should look in to every competitor who erodes the
proIits oI the company little by little (Pearson, 1988).

Innovative companies need to do lot oI experiments, obviously not all the experiments be
successIul. Organization should be willing to take risks, incur costs that in short term perceived
as loss yet pay oII in the long run (Pearson, 1988). Managers may convey wrong messages with
respect to risk taking; one oI such is to be short term orientated and conway the message that
only the winners will be promoted (Pearson, 1988).
21

Organizational roadblocks Ior innovation were identiIied through the structure, process, and
people. ven though the organization structure, process, and people are organized to achieve
organizational perIormance, they can stand as roadblocks Ior innovation (Pearson, 1988).
Innovative idea can die beIore it reaches the senior management due to too much layering in the
structure (Pearson, 1988). Financial yard-sticks can kill an idea beIore it`s matured enough to use
in the market place (Pearson, 1988). Organizations require two systems, one to run the operation,
and another to Ioster the creative activity (Pearson, 1988). SuccessIul innovations require Iour
key inputs;
1. A champion who believes that the new idea is really critical and who will keep pushing
ahead, no matter what the roadblocks.
2. A sponsor who is high up enough in the organization to marshal its resource-people,
money, and time.
3. A mix oI bright creative minds (to get ideas) and experienced operators (to keep things
practical)
4. A process that moves ideas through the system quickly so that they get top level
endorsement, resource, and perspective early in the game not at the bottom oI the ninth
inning (Pearson, 1988).

The strategic direction will provide the direction Ior your innovations. Having a clear strategic
direction will help the innovators to be Iocused (Pearson, 1988) or the innovation required by the
organization. This will eliminate the wastage created by unIocussed pool oI innovative idea
generators (Pearson, 1988). An example quoted was a toy manuIacturing company, Hasbro do
not Iocus on creating block buster toys, and they will accept iI one oI the toys becomes a block
buster. They are Iocusing on the toy line like GI Joe, TransIormers, and pre-school basics which
can be renewed every year (Pearson, 1988). Keeping the strategic direction will cause the people
to think simple, as it was discussed in the article, innovations should be very simple and obvious.

Knowing what happens in the business is an important driver Ior innovation (Pearson, 1988).
Organizing the knowledge in the Iollowing Iacets is helpIul to know what is going on;
22

O What`s already working in the market place that you can improve on and expand
O How you can segment your markets diIIerently and gain a competitive advantage
O How your business system compares with your competitors (Pearson, 1988).
Failure in the innovation process should be anticipated and tolerated, Innovation does not come
at the Iirst attempt right. They need to be developed incrementally (Pearson, 1988). The
management needs to invest on identiIying the innovations, reIining the innovations, and be
persistent with its execution. All these are characteristics oI leadership that nurture the
innovation inside organizations. Leadership practices should set the context Ior innovation.

Leadership practices to get the innovation right in organizations are outlined as Iollows;
O Develop a deep commitment to serving the unnerved
O Articulate and embrace a clear vision
O Set very ambitious goals to Ioster an entrepreneurial spirit
O Accept that constrains will always exist, and creativity operate within them
O Focus on people, not just shareholder wealth and proIits (Mashelkar, 2010).

When large organizations ask people to innovate in isolation or assigned in to a dedicated team,
it creates duplication and leads to conIlicts with the main operation, which is driven Ior
eIIiciency (Mashelkar, 2010). In an attempt to quote an example where such conIlicts were
eradicated and successIul partnership oI the operations team and innovation team was created
was highlighted in the HBR article 'Stop the Innovation Wars.

..Approach for Innovation
... Divide the labor
Start the Iormation oI teams with deIining the responsibilities oI the team that require attending
to the innovation project. Then the responsibilities to be among the perIormance engine and the
23

innovation team proportionately. Rule oI the thumb is that perIormance engine should be
allocated with the task that they are routinely doing. At the same time the work relationship
among the individuals as well has to be taken in to consideration. Any task that Ialls beyond the
capabilities oI perIormance engine should be assigned to the dedicated team and perIormance
engine should not be over loaded (Trimble, 2010). Asking more Irom the perIormance engine is
disruptive, such will embeds conIlicts so deeply in to the perIormance engine, and managing will
be impossible (Trimble, 2010).

... Assembling the dedicated team
Once the job roles are properly designed, the dedicated team should be Iormed. This is executed
as iI you are Iorming a small startup organization (Trimble, 2010). A right mix oI people sourced
Irom diIIerent places (i.e. internal, external, and outsourced) will have to be adopted in
assembling the dedicated team. Organizations tend to draw people Irom internal operations
engine alone. That will have some issues oI the dedicated team becoming another small
operation team (Trimble, 2010). It was highlighted that a major characteristic oI the operations
engine is eIIiciency. II the entire dedicated team is drawn Irom the operations engine, theme oI
the dedicated team will be eIIiciency, at the same time they may be thinking on what they do at
present, thus achieving a good mix is a vital aspect oI creating the innovation team. Job roles,
perIormance targets, incentives have to be tailor made to suit the purpose oI the dedicated team
(Trimble, 2010). At the same time it is important that career paths being drawn Ior the
individuals to get back to the perIormance engine aIter the project is completed (Trimble, 2010).

..3. Anticipate and Mitigate the Strains
Maintaining a healthy partnership between the dedicated team and the operations engine is a
tricky thing. Tensions become rivalries, rivalries become hostilities, and hostilities become all-
out wars, and the business perIormance is the ultimate victim (Trimble, 2010). Thus tensions
should be manages properly (Trimble, 2010). Leaders must counter conIlicts with constantly
reinIorcing the purpose with mutual respect to both the parties (Trimble, 2010).
24

Leaders must be careIul, not to be cheerleaders only Ior innovation (Trimble, 2010). At the same
time they should not be exclusive cheerleaders Ior operation as well.


23

. Sources of Innovation

Peter Drucker points out that successIul innovation are not through accidents, but are results oI
conscious, purposeIul search Ior innovation opportunities (Drucker, 1998). Opportunities Ior
innovation do exist in several situations;
1. Unexpected occurrences
2. Incongruities
3. Process needs
4. Industry and market changes
5. Demographic changes
6. Changes in perception
7. New knowledge (Drucker, 1998).
These sources may overlap with each other (Drucker, 1998). They may be diIIerent in the nature
oI their risk, diIIiculty, and complexity and the potential Ior innovation may lie in more than one
area at any given time (Drucker, 1998). All these changes and new knowledge should be
assessed against what the company is doing at present and how such impacts the company and
how such can be used to satisIy the market. This links back to the impact oI having a clear
strategic direction discussed earlier in this paper. Having a clear understanding oI the strategic
direction will deIinitely be a result oI clear strategic direction.

..Unexpected occurrences
Unexpected occurrences are identiIied as the easiest and simplest source Ior innovation
opportunity (Drucker, 1998). Peter Drucker quotes the story oI accounting machine, designed by
IBM back in 1930s. Banks didn`t want to buy this machine, years aIter one library wanted to buy
the machine, and they sold a considerable number oI machines to libraries. Further he quotes that
IiIteen years later when the computers were identiIied as a machine Ior scientists, one business
26

expressed the interest Ior a machine that could do payroll, so UNIVAC was redesigned to
Iacilitate the processing oI payroll and they became the leader in computer industry (Drucker,
1998). These are quoted as unexpected success in innovation. Unexpected Iailures as well, may
be a source Ior innovation (Drucker, 1998). Failure oI Fords, dsel model was quoted as being a
Iailure as a source Ior innovation. dsel model was developed by Ford to counter General Motor.
However the model has Iailed in the market, assessing the Iailure, Iord has learned to reestablish
the market segmentation. arlier the market segmentation was based on the income group and
they reestablish the market segmentation based on liIestyle. Ford launched the model Mustang,
model which gave the market leadership to Ford (Drucker, 1998).

Most companies dismiss, disregard, and even resent the unexpected success and Iailures, which
are sources oI innovation (Drucker, 1998). Attitude oI managers, it should not have happen
draws the attention oI managers away Irom the source oI innovation (Drucker, 1998).

..Incongruities
Out oI several incongruities discussed by Druker, it was stated the ship building industry was
Iocusing on making the ocean Ireighters Iaster and more Iuel eIIicient. However much the
companies were succeeding in these areas, the ocean Ireighters once were almost dying, until the
incongruity was identiIied. ProIitability oI the operation was not decided by the sailing time oI
the ocean Ireighters, but with the birth time, Ior loading and unloading. Thus they created the
containers Ior ocean Ireighters, which gave a rebirth to the ocean Ireighters (Drucker, 1998).

This was quoted as an incongruity between the expectations and the results (Drucker, 1998).
Having a Iresh look at what we are doing when what we do does not bring in results.

.3.!rocess Needs
27

Process needs are illustrated by an example Irom the marketing Iield by Drucker. Newspaper
industry today, Ilourishes with two innovations which Iacilitate the needs oI the processes.
Linotype machine which was invented by Ottmar Mergentaler which made the quick production
oI newspaper and making the advertising in newspaper that made the New York Times and New
York World, to give away newspapers Iree oI charge, whereas proIits oI newspapers are coming
Irom the advertisements published in the paper (Drucker, 1998).

..Industry and Market Changes
Changes in the industry structure create massive opportunities Ior innovation (Drucker, 1998).
Drucker quotes the innovation opportunity created by the changes in the health care industry, in
America. Changes have created opportunities Ior independent surgical and psychiatric clinic, and
emergency centers (Drucker, 1998).

..Demographic Changes
Peter Druker, points out that Japan, has exploited the changes enIorced by demographic changes.
They have Ioreseen the Iact that with the emerging knowledge workers in the country, people
will not opt to blue collar jobs. Thus they Iocus on innovation oI robotics (Drucker, 1998).

.6.Changes in !erception
Chang oI perception does not change Iacts, it simply change their meaning (Drucker, 1998).
Peter Drucker in his article points out the change oI perception oI computer. Once perceived as a
machine Ior scientists, a machine Ior big businesses, and to threats Ior people- as a machine that
would replace people, to something that can be bought by doing a relatively less complicated
job, and in todays` context an equipment that keep you in touch (Drucker, 1998), Has created
enough opportunities Ior innovation.
28

Change oI perception was attributed to the metaphor oI halI-Iilled-glass and halI-empty-glass.
Person, who sees the glass as halI Iull, will see the opportunities Ior innovation (Drucker, 1998).

.7.New Knowledge
Knowledge based innovations diIIer Irom all other in the time they take, in their causality rates,
and in their predictability (Drucker, 1998). In order to become an innovator oI this sort, you need
diIIerent kinds oI knowledge (Drucker, 1998). Availability oI knowledge oI diIIerent kind will
not automatically cause innovation. It was pointed out that all the knowledge was available in
1918, Ior the Iirst operational digital computer. Yet did not become a reality until 1946 (Drucker,
1998). A long lead time and a need Ior convergence among diIIerent kind oI knowledge explain
the innovations based on knowledge (Drucker, 1998). It may be diIIicult, yet knowledge based
can be managed (Drucker, 1998). CareIul analysis oI needs and convergence oI diIIerent kinds oI
knowledge blend with individual capabilities will give opportunity Ior innovation using new
knowledge (Drucker, 1998).

29

6. Innovation and Complex Adaptive Systems

Co-evolution oI both natural and social systems provides a useIul starting place Ior innovation
Gregory Baston et. al (Moore, 1993). Mind and Nature, a book by Gregory Baston, describes that
co-evolution is a process where independent species evolve in an endless reciprocal cycle
(Moore, 1993). Where change in species 'A sets the stage Ior the natural selection oI changes in
species 'B and vis-a-vis (Moore, 1993). Biologist Stephen Jay Gould, has observed and argues
that natural echo systems collapse when environmental conditions change too rapidly (Moore,
1993). Dominant combinations oI species may lose their leadership in the echo systems (Moore,
1993). New echo systems will establish by it, this is a metaphor Ior what happens in the business
environment, businesses where innovation happen will become the dominant players in the
industries. Businesses are treated a 'Business cho Systems (Moore, 1993). In the business
echo systems, companies co-evolving capabilities around a new innovation. They work
coopetitivly (i.e. combination oI cooperation and competition), to support new products (Moore,
1993). Such innovations are targeting the customer satisIaction, and eventually would be
resorting to incorporate the next round oI innovations (Moore, 1993). Such resembles the
behavior oI Complex Adaptive Systems.

When leader in a business echo system innovates, it is valued by the rest oI the echo system
(Moore, 1993). Such innovation enables all the agents in the business echo system to invest
towards a shared Iuture in which they anticipate proIiting together (Moore, 1993).

When a new business is established, managers in the echo system cannot ignore the existence oI
the new business (Moore, 1993). New business will cause interactions with the existing players
and iI the new business is in to innovation, will challenge the existing leadership and change the
norms oI the business echo system and entire system will shiIt in to a higher level.
30

Business ecosystems develop in Iour distinct stages, birth, expansion, leadership, and selI-
renewal or iI not selI-renewal death (Moore, 1993). Table 2: The evolution stages oI a business
ecosystem, illustrate the cooperative challenges and competitive challenges in business
ecosystems, during the Iour stages oI growth. However identiIication oI such stages may not be
clearly visible, they will be blur, still managers responsibility is to drive the organization in the
next level (Moore, 1993).
%able : %he evolution stages of a business ecosystem
The evolutionary stages oI a Business cosystems
Cooperative Challenges Competitive Challenges
Birth Work with customers and suppliers to
deIine the new value proposition
around a seed innovation
Protect your ideas Iorm others who
might be working towards deIining
similar oIIers. Tie up critical lead
customers, key suppliers, and
important channels
xpansion Bring the new oIIer to a large market
by working with suppliers and partners
to scale up supply and to achieve
maximum market coverage
DeIeat alternative implementations, oI
similar ideas. nsure that your
approach is the market standard in its
class through dominating key market
segments.
Leadership Provide a compelling vision Ior the
Iuture that encourages suppliers and
customers to work together to continue
improving the complete oIIer
Maintain strong bargaining power in
relation to other players in the
ecosystem, including key customers
and valued suppliers
SelI-renewal Work with innovators to bring new
ideas to the existing ecosystem.
Maintain high barriers to entry to
prevent innovators Irom building
alternative echo systems. Maintain
high customer switching costs in order
to buy time to incorporate new ideas
into your own products and services

31

During the Iirst stage oI ecosystems, companies must do more than satisIying customers (Moore,
1993). To make a prominent presence in the market or to challenge the existing leadership in the
business ecosystem, the new company should come up with an innovation (Moore, 1993).
Absence oI such innovation will not push the company in to the next stage expansion. Product
innovation will be the required proIiciency in this stage.

Stage two, expansion is identiIied as conquering broad new territories (Moore, 1993). Businesses
will be competing against each ecosystem to control the strategic markets (Moore, 1993).
Innovation in the strategy would be the theme in this stage. Innovation required at this stage is
identiIied in two Iold;
1. A business concept that a large number oI customers will value
2. The potential to scale up the concept to reach this broad market (Moore, 1993).

An important challenge is to stimulate the market, in a manner that it will not grow beyond your
capacity to cater Ior same (Moore, 1993).
ssential conditions oI ecosystems in stage three are;
1. cosystem should have a strong enough growth and proIitability to be worth oI Iighting
over
2. Structure oI the value adding components and processes that are central to the business
ecosystem must become reasonably stable (Moore, 1993).

Apart Irom the growth and proIitability, the innovation pertaining to the process and structure Ior
the value adding process are areas where the Iocus oI innovation should be placed in.

Forth stage is concerned over, how dominant companies deal with the threat oI being obsolete
(Moore, 1993). There is no guarantee, that once a company expands and come to the leadership
32

in the business ecosystem, that it will remain at top Iorever or immoral (Moore, 1993).
Companies should Iocus on the leading successive generations oI innovation at this stage, to
prevent the company Irom dying (Moore, 1993).

33

7. Strategic Innovation

Strategic innovation is identiIied as a game-changing innovation in products/services, business
models, business processes, and/or positioning vis-a-vis competitors to improve perIormance
(Strategic Innovation new game strategies Ior Competitive Advantage, 2009). A new game
strategy is deIined as a set oI activities adopted by organizations in creating appropriate values in
new ways that determines the perIormance in Iace oI a strategic innovation (Strategic Innovation
new game strategies Ior Competitive Advantage, 2009).

Sometimes the new games are not innovations with respect to products (Strategic Innovation
new game strategies Ior Competitive Advantage, 2009). They have been about changing the
rules oI the game, i.e. changing the rules oI getting a product across to the customer or
innovatively positioning a company to be in a better value proposition (Strategic Innovation new
game strategies Ior Competitive Advantage, 2009).

Understanding the market structure and craIting the response to the market comes under the
strategic innovation. When company looks out at the market, oIten it appears that market is
structured by the characteristics oI the products and its customers. Organizations tend to Iocus
innovation eIIorts to the market segments (Christenses, 2008). However, the customers always
purchase goods to get a job perIormed (Christenses, 2008). Customers may not buy the product
Ior the same job that company intends to sell the product Ior (Christenses, 2008). It was quoted
that Iast Iood restaurants have the milk shake as a dessert item, yet huge number oI milkshakes
were sold in the morning as standalone sale. Research has Iound out that customer who are
driving a long way oIten buy the milkshake as a quick breakIast, and to have something to do
while they are driving, to kill the monotonousness (Christenses, 2008). Understanding the unit oI
analysis is an important driver Ior the strategic innovation. Turning around the unit oI analysis
Irom how company segments the customers, to why customers purchase the product is a key Ior
34

innovating successIully (Christenses, 2008). Such will overlap with the driver oI innovation
discussed earlier, the competition. Such selection oI unit oI analysis will give a good insight in
to the identiIication oI the competition Ior the purpose oI innovation as well.

33

. Disruptive Innovation

Innovation creates wealth, innovation help organizations to Iace the competition, and sustain the
competitive edge. This has been the most prominent argument with respect to innovation.
However, the Disruptive Innovation Theory, suggests that innovation as well should be perused
with caution, sustaining the innovation may lead to disruption oI the business sustainability. It
was pointed out that only 25 oI new products introduced to markets by established companies
succeed in the market, seventy-Iive percent said to be Iailing (Innosight, 2005). Only 10 oI
companies are capable oI maintaining the level oI growth that satisIies their stakeholders over a
long time (Innosight, 2005).

Disruptive innovation theory proposed by Chiristensen, and Iurther elaborated by Macher and
Richman explains why some companies Iail to sustain their market position in respective
industries (Lesley H Curtis). Disruptive innovations theory assumes that customer preIerences
Ior individual technologies are widely distributed (Lesley H Curtis). In a market, the early
innovators enter the market with basic products that meet the needs oI a segment oI the market
(Lesley H Curtis). In the process oI innovation, innovation process in the company makes
innovation to the products; such improvements mostly will be appealing to the high-end
consumers, these customers potentially oIIer higher margins and are more proIitable (Lesley H
Curtis). Business processes and structures as well will evolve to satisIy the demands oI above
customer segment. This may cause the organizations to ignore the average customer oI the
company, or to deviate Irom the original segment that the organization has selected by the
organizations business strategy (Lesley H Curtis). Disruptive Innovation, occurs when
competitors enters the market with a product with relatively low sophistication, and appeals to
the average customer. This may cause the Iirst company to lose market share (Lesley H Curtis).

36

Such may explain the question, why those companies came to the market with an innovative
product Iails to stay in the competition. Initial innovation nurtured inside the organization has
brought them to the top, yet continuous innovation or lack oI innovation, has disrupted their
position in the market. Organizations should have a strategy, which deIines and regulate the
innovation inside the organization in to an eIIective level, in order to sustain the momentum oI
innovation.
37

. #eference

Strategic Innovation new game strategies for Competitive Advantage. (2009). New York:
University oI Michigan.
America, G. o. (2009, November 6). What is innovation. Retrieved February 1, 2011, Irom
america.gov: http://www.america.gov/st/scitech-
english/2009/November/20091109105608ebyessedo0.6893579.html
Christenses, C. (2008). Disruptive Innovation and Catalytic Change in Higer ducation. Forum
for the future of Higher Education.
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