PAR T T W O

Innovation: Internal Strategy

Chapter

Innovation:
Planning

PowerPoint Presentation by Charlie Cook

The University of West Alabama
2007 Thomson/South-Western. All rights reserved.

Overview
Issues addressed in this chapter include:
The pros and cons of internal innovation
Product innovation and process innovation
The basic steps in planning for innovation
The technology stages and their possibilities for

innovation
The development of a climate for internal innovation

2007 Thomson/South-Western. All rights reserved.

32

Innovation
Innovation Defined
The new technologies, products, or processes

developed by or that result from the internal creative

efforts of firms.

Benefits of Innovation
1. Greater control of the process and the outcomes
2. Greater understanding of the technology produced

and how to apply it

3. Greater ability to potentially develop the next
generation of technology
4. Greater profit potential as a first mover
2007 Thomson/South-Western. All rights reserved.

33

Choices to make
Internal innovation
Obtain new technology or process from external
source

Promoting Internal Innovation

A clear vision that defines the firm as focused on
innovation Explicit in the mission of the
company
Employees are allowed to spend 15 % of their
time on project of their own
Seed money given to actually begin
experimentation of their new product idea
6 7 % of reveneus spent on R&D yearly
Compensation system rewards employees for
innovation
2007 Thomson/South-Western. All rights reserved.

35

Innovation (contd)
Factors That Discourage Innovation
The time required for an internal development

strategy is greater than purchasing an immediately

available product externally.
There is a greater risk of failure to develop the right

product at the right time.

Keeping a pipeline of new products and/or processes

is difficult at best. There is always the danger that

another firm will enter the market first.

2007 Thomson/South-Western. All rights reserved.

36

Types of Innovation
Product Innovation (R&D)
Basic: pure research and development- creation of

new knowledge, innovation or something unknown

see how nature works, not make products
Applied: new product development - add value to the
firm and customers
Systems integration: product improvement or market
expansion incremental in nature low risks and
rewards also known as tweaking because it
involves adjusting the ways the firm organizes it
existing knowledge to increase its leverage

2007 Thomson/South-Western. All rights reserved.

37

Which type of innovation to choose?

Depends on the analysis of what competitors are doing
what is occurring in the industry now and what will occur
in the future.
Need to segment the industry to identify which firm to
target.
E.g.Nintendo Game Boy electric gaming industry.
YPG online pay-as-you-play electric gaming segment.
Strategic group map identify competitors in the same
segment then study the product, processes, potential
actions of each actions of competitors information got
from published articles, national association analytical
reports by experts, academicians. Info which firm is
investing most on new product research, new processes,
and new markets

Process Innovation
Offer the organization to continue improving value of
organization and its viability.
Restructuring changes in communication and
coordination patterns within the organization
E.g. info not going to the right person to make timely
decision slow decision making
Opportunities and threat missed by the organization
Disruption in the firms environment that is stressful
Downsizing laying off workers
Reengineering increase productivity, optimizing value
to shareholders, achieving quantum results,
consolidating functions, eliminating unnecessary levels
and works

FIGURE 3.1

Examples of Applied Research Outcomes

from Particle Physics

2007 Thomson/South-Western. All rights reserved.

310

Fundamental Dimensions of Internal

Innovation
1. The firm must acknowledge that the goal of
internal innovation is for the firm to outperform
its competition.
2. Internal innovation is a process that involves
many individuals, capabilities, and resources.
3. Resources are critical to the innovation
process.

2007 Thomson/South-Western. All rights reserved.

311

FIGURE 3.2

Levels of the Organization

2007 Thomson/South-Western. All rights reserved.

312

Innovation Planning Process

Determine the Vision
Set the Mission
Establish Goals and
Objectives
Set Strategy
Specific Tactics and
Actions

2007 Thomson/South-Western. All rights reserved.

313

FIGURE 3.3

Steps in Planning for Innovation

2007 Thomson/South-Western. All rights reserved.

314

Factors That Aid Innovation Planning

Organization-wide
Organization-wide
Issues
Issues

Creativity
Creativity

Innovation
Innovation
Planning
Planning

Political
PoliticalIssues
Issues

2007 Thomson/South-Western. All rights reserved.

315

FIGURE 3.4

Innovation Requires Perceptual

Challenging

SOURCE: Perpetual Challenging and Its Components, Enhancing Organizational Creativity: The Process of Perpetual
Challenging, Constantine Andriopoulos and Andy Lowe. Management Decision (2000,Vol. 38, No. 10). MCB University
Press. http://www.emeraldinsight.com/md.htm. Republished with permission, Emerald Group Publishing Limited.
2007 Thomson/South-Western. All rights reserved.

316

Factors That Aid Innovation Planning

(contd)
Communication
Communication

Reward
RewardSystems
Systems

OrganizationOrganizationwide
wideIssues
Issues

Organizational
Organizational
Assumptions
Assumptions
2007 Thomson/South-Western. All rights reserved.

317

FIGURE 3.5

Technology Stage and Contributing

Processes

2007 Thomson/South-Western. All rights reserved.

318

FIGURE 3.6

Myths about Innovation

2007 Thomson/South-Western. All rights reserved.

319

Managerial Guidelines
To plan for innovation, managers need to follow
guidelines that will help them develop the right
climate for success in innovation activities.
1. Recognize innovative individuals exist throughout the

organization.
2. Periodically reconsider how work is accomplished.
3. Encourage turning the prism to put a new light on

problems.
4. Ask employees what their biggest aggravations are.
5. Train people to recognize their creative abilities and

participate in the planning innovation process.

2007 Thomson/South-Western. All rights reserved.

320

Key Terms

applied research
basic research
disruptive technology
downsizing
fast follower
first mover

2007 Thomson/South-Western. All rights reserved.

mission
process innovation
reengineering
strategic group map
switching costs
systems integration

321