Innovation Management Term Paper 2008

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<p>Hochschule fr Angewandte Wissenschaften Hamburg Hamburg University of Applied Sciences Department of Business</p> <p>Innovation ManagementSetting up an Innovation Process and Implementing an Innovative Company Culture</p> <p>- TERM PAPER AIM-Seminar Summer Term 2008</p> <p>Author Markus Massar Address line 1 Address line 2 Matriculation Number xxx xx xx Lecturer Prof. Dr. A. Schikarski Submitted April, 29th 2008</p> <p>Table of Contents1 Introduction..............................................................................................................................3 2 Innovation fundamentals..........................................................................................................3 2.1 Modes of innovation.............................................................................................4 2.2 Types of innovation..............................................................................................6 2.3 Elements of innovation........................................................................................8 3 Implementing innovation.........................................................................................................9 3.1 Kick-off by leadership........................................................................................10 3.2 Importance of strategy.......................................................................................11 3.3 Processes to put in place..................................................................................13 3.4 Assessing innovation culture.............................................................................16 4 Critical review........................................................................................................................19 5 Conclusion.............................................................................................................................21 Literature..................................................................................................................................23 Internet Sources.......................................................................................................................23</p> <p>List of TablesTable 1 Explanation of the Levels in the Reference Model (Bessant 2003: 68-69)..............18</p> <p>List of DiagramsDiagram 1 Options for Involvement in the Innovation Process (Bessant 2003: 49)...............6 Diagram 2 Categories of Innovation (Wheelen and Hunger 2008: 303).................................7 Diagram 3 The Enterprise Model Internal Variables (Brache 2001: 5)................................8 Diagram 4 Linked Business Elements (Own Illustration 2008)..............................................9 Diagram 5 Basic Problem Finding / Solving Cycle (Bessant 2003: 107)..............................15 Diagram 6 The Five-Stage Model of High-Involvement Innovation (Bessant 2003: 57).....17</p> <p>2</p> <p>1 IntroductionBusinesses exist in dynamic and competitive environments nowaways. Thus, the number one strategic goal of businesses is to gain and maintain competitive advantage. By programs of continuous improvements companies try to reduce costs, to enhance quality, and to increase speed of responsiveness to customer needs. Additionally, most businesses have some sort of innovation program on their agenda to stay ahead of (or at least keep in pace with) their competitors. Still, finding a common ground on what innovation is and what business elements to consider when implementing innovation seems intricate. The research on the topic of this term paper reveals a wide range of terms associated with innovation. Some examples are 'research and development (R&amp;D)', 'product innovation', 'corporate entrepreneurship', 'intrapreneur', 'inventorpreneur', 'think tanks', 'continuous improvement', 'change program', 'market research', 'systems engineering' and 'optimization process'. This term paper lays the fundamentals to understand innovation and its implementation in businesses independent from the type of business on a strategic level.</p> <p>2 Innovation fundamentalsA gateway to innovation is the success story of the manufacturing company 3M. One of the award-winning products of the last century is the Post-it note developed by two employees of 3M. In 1968 the researcher Spencer Silver developed an adhesive that was 'not working properly' as a glue. So he tried marketing his product within 3M to discover a use for his nonadhesive glue. Unfortunately his mission was without immediate success. Years later, the product developer Arthur Fry found a meaningful purpose for the 'non-working' thing. Subsequently 3M worked out a product to be marketed. Since then 3M's notes have been sold worldwide in 400 different variations of the original product (3M 2002: 38-40). Innovation can be a function of an area or areas within a corporation whereas functions are performed by a diverse range of employees. Although the original product itself was developed in a research department, the latter idea for use of the product was the result of a need that arose by one person. Needless to say that the consequential implementation was a</p> <p>3</p> <p>team-effort again. These functional areas are circumscribed in this term paper as the modes of innovation. The term 'innovation' is defined by 3M (Gundling 2000: 23) as follows: "New ideas + action or implementation which results in an improvement, gain, or profit." At first glance, some business areas seem to be hidden in 3M's definition where innovation can take place. Sloane (2003: 8) describes these types of innovation within business strategy and business processes in a more elaborate way: "Innovation is not just releasing new products. It also encompasses implementing new business processes, fresh ways of doing things, radical alliances, brilliant new routes to markets and business strategies." Innovation needs time and is based on trial and error. The development of a breakthrough product isn't something you can do on the fly. It is the result of individual and corporate features coming together at a certain point of time. These are the elements of innovation, this term paper will look at. Thus, innovation can be summarized as the business process of inventing, developing, putting new concepts into practice and gaining benefit of new products, new services, new processes, or further revolutionary business elements. The following sub-chapters explain the modes of programs, highlight innovation types and select key elements to consider for successful implementation of innovation management.</p> <p>2.1 Modes of innovationThe historic development of scientific management and the industrial revolution led to specialization of workers. Specialization increased output but also raised the need for coordination because single parts in the production process had to be put together to a final product. The idea of specialization led to the 'innovation monopole' of research and development (R&amp;D) departments. R&amp;D was the birth-place of the whole product or service.</p> <p>4</p> <p>Meanwhile, due to the increasing number of diverse customer demands and competitive pressure the question has been raised why a company should limit its creative capability to a couple of employees within R&amp;D. Especially, when the whole workforce could be involved in innovation and open the throttle for the full-blown potential of a new idea or new concept. Still, the argument for the specialist group inventing new ideas is the possible innovative lever this can create for the rest of the organization (Bessant 2003: 7-10). Nevertheless, there seems to be a paradox when it comes to the modes of innovation. Bessant (2003: 44) refers to the model of organizational design researches by Burns and Stalker which describe two opposing "organizational 'archetypes'": mechanistic versus organic. The mechanistic part is about reproduction of products and services which enable a company to produce large quantities and satisfy customer demands. The organic part is about anticipation of customer demands, its implementations and refinements. None of the two can exist without the other. Most companies apply both elements in a unique share and by different modes of innovation such as R&amp;D or innovation projects. Thus, there is a reproduction part about innovation and a creative part about innovation to be study (Bessant 2003: 43-46). According to Bessant (2003: 47-49), there are three things that relate to organizing innovation: 1. Exploitable results of innovation are rather achieved through a long-term evolutionary process by a diverse group of people rather than one-time 'big hits' involving specialists only. 2. Involving a larger part of employees fosters the understanding for the constant need of corporate change. Change itself produces outputs that reinforce the cultural values of innovation. 3. The more diverse the input of variations to a new concept or new idea, the bigger is its possible innovative power of the output. Depending on the level of involvement into innovation and impact of innovation, Bessant (2003: 49) draws the following diagram on the modes of innovation:</p> <p>5</p> <p>Options for Involvement in the Innovation Processwith minor modifications to source: Bessant 2003, Page 49</p> <p>High High impact, low involvement Impacti.e. innovation by specialists (R&amp;D)</p> <p>High-Involvement Innovationi.e. major innovation projects with high impact</p> <p>Low innovative activityi.e. few people involved and low-impact projects</p> <p>Low impact, high involvementi.e. lots of small innovations have impact</p> <p>Low Low</p> <p>Extent</p> <p>High</p> <p>Diagram 1 Options for Involvement in the Innovation Process (Bessant 2003: 49)</p> <p>Bessant (2003: 49) demands to found or develop "a real learning organization": One in which all employees should be involved to a large extent into the creation of a large number of break-through innovations. This is what Bessant (2003) labels as "High-Involvement Innovation". These findings suggest that a brilliant kick-off to innovation could be achieved by setting up a smaller innovation project in order to gather experience in creative change. Rolling out the innovation to the larger working community is a subsequent step. This term paper still needs to envision in what respect innovation can take place and what elements need to be considered in leading a corporation to managing innovation.</p> <p>2.2 Types of innovationLinking back to the example of 3M and the R&amp;D model, the first and most popular type of innovation becomes visible: Product innovation. One way to take a closer look at product innovation is displayed by the four categories of (product) innovation by Wheelen and Hunger (2008: 303-305).</p> <p>6</p> <p>Categories of InnovationNew 3 Organizational Capabilities Develop New Capabilities 1 Improve Core Business Existing Limited Strategic Scope</p> <p>taken from source: Wheelen and Hunger 2008, Page 303</p> <p>4 Create Revolutionary Change 2 Exploit Strategic Advantages Unlimited</p> <p>Diagram 2 Categories of Innovation (Wheelen and Hunger 2008: 303)</p> <p>The diagram shows the connection of strategic scope with organizational capabilities of a business in relation to its products. The lowest and easiest category of innovation lies in quadrant 1 with simple product modifications. Quadrant 2 is about taking a glance with existing offerings at new groups of clients. Existing product groups are renewed and refined in quadrant 3. Of particular interest to this term paper is quadrant 4 because it is a reference to the management innovation model of Hamel (2006). Although still related to customer demand in products, it is termed "Create Revolutionary Change" and entails development of "a new business model" (Wheelen and Hunger: 2008: 303-304). The second type of innovation has already been highlighted shortly in chapter 2. Sloane's definition (2003) refers to innovation of business strategies and businesses processes. When it comes to process innovation, Wheelen und Hunger (2008: 299) see this as a subsequent part of product development. Process optimization mostly aims at quality improvement and cost reduction. Nevertheless, the concept of management innovation by Hamel (2006: 4) is even more radical and represents the third and last type of innovation discussed within this term paper. Management innovation is "[] a marked departure from traditional management principles, processes, and practices or a departure from customary organizational forms that significantly alters the way the work of management is performed."</p> <p>7</p> <p>This definition seems compatible to the definitions of innovation mentioned earlier in this term paper. The key difference is that it is no longer related to products or processes only. It incorporates management practices. The model itself is made up of the following four key imperatives (Hamel 2006: 5-11): 1. Aim for the big challenge will produce radical results. 2. Get to the bottom of old practices and invent novelties. 3. Critically question the structures, systems, processes and policies in place. 4. Find, assess and employ examples of novel management principles. This suggests that innovation management itself should be seen as an element for innovation. Of course, this is one possible approach which is imaginable as this term paper will show in chapter 3. Whether the organization is focusing on product, service, process or management innovation or allows mixtures of any of these, largely depends on strategic decision. Since strategy is one of the key business elements, it will be discussed in the following chapters.</p> <p>2.3 Elements of innovationA business is composed of so-called "performance variables" (Brache 2001: 5-11). Due to the reason that the other referenced internal variables have been analyzed to be duplicates of the remaining four, the diagram has been simplified for the purpose of this term paper. The following diagram shows the modified enterprise model with major internal elements to consider when implementing innovation:</p> <p>The Enterprise Model Internal VariablesLeadership</p> <p>modified from source: Brache 2001, Page 5</p> <p>Strategy</p> <p>Business Processes</p> <p>Culture</p> <p>Diagram 3 The Enterprise Model Internal Variables (Brache 2001: 5)</p> <p>8</p> <p>One of the key performance drivers is leadership. Leadership sets goals and provides role models. Normally, the founder or founders of a company play an important role as leaders. Their intention for setting up the business as well as their understanding of the benefit that a company can potentially add to the life of its customers, its employees, its founders, and its social, ecological and economical environment are key in getting a framework to achieving goals and the results produced by the business. Thus, leadership is also about transporting values and creating corporate culture by formulating a business strategy and setting up business processes (Brache 2001: 32-35). Although this term paper's topic is abou...</p>