UNIT-1

Innovation Management
Introduction:
CONCEPT OF INNOVATION:
Innovation can be simply defined as a "new idea, creative thoughts, and new imaginations in
form of device or method". However, innovation is often also viewed as the application of
better solutions that meet new requirements, silent needs, or existing market needs. Such
innovation takes place through the provision of more effective products, processes, services,
technologies, or business models that are made available to markets, governments and
society.
Innovation is:
 New stuff
 That adds value
 For various stakeholders
 Can be monetized
 Creates a competitive advantage
 And is sustainable
 Until the advantage deteriorate
Definition of innovation:
Innovation is a process by which a domain, a product, or a service is renewed and brought up
to date by applying new processes, introducing new techniques, or establishing successful
ideas to create new value.
Innovation is the process of turning opportunity into new ideas and of putting these into
widely used practice. It is the management of the entire activities involved in the process of
idea generation, technology development, manufacturing and marketing of a new (or
improved) product. The process of translating an idea or invention into a good or service that
creates value or for which customers will pay. In business, innovation often results when
ideas are applied by the company in order to further satisfy the needs and expectations of the
customers.
For example, Godin (2008) defines 12 concepts of innovation which can be described as
follows:
A: innovation as process of doing of something new
 innovation as imitation;
 innovation as invention;
 innovation as discovery;
B: innovation as human abilities to creative activity:
 innovation as imagination;
 innovation as ingenuity;
 innovation as creativity;
C: innovation as change in all spheres of life:
 innovation as cultural change;
 innovation as social change;
 innovation as organizational change; political change; technological change;
D: innovation as commercialization of new product
OBJECTIVES OF TNNOVATION:
 To reap in the economic benefits of new technological inventions by commercializing
them on time
 To integrate technology into overall strategic objective of the organization
 To get into and out of the technologies faster and more efficiently
 To accomplish technology transfer
 To reduce new product development time
 To manage large complex and interdisciplinary projects and systems

IMPORTANCE OF INNOVATION:
 Solving problems
 Adapting to change
 Maximizing on globalization
 Facing up the competition
 Evolving workplace dynamics
 Customers’ changing tastes and preferences
Solving Problems –
If your business provides services, you might realize that your customers do not have an
avenue to share their opinions, complaints, and compliments.
So, to solve the problem, you could decide to operate a virtual office where customers’ needs
can be attended to within a short time. The customers will be happy and as a result, your sales
will go higher.
Adapting To Change –
Change is inevitable and innovation is the method to not only keep your business afloat but
also ensure that it remains relevant and profitable. So, when you develop an innovation
culture, you remain relevant at all times.
Maximizing On Globalization –
Markets all over the world becoming more interlinked and greater opportunities are emerging
in these new markets.
For instance, if your company hopes to tap into this market share, innovation is a must to
enable you to capitalize on the opportunities opening up.
Facing Up The Competition –
To retain or establish your company’s cutting edge, you can compete strategically by having
a dynamic business that can make strategic and innovative moves and thus cut above the rest.
Evolving Workplace Dynamics –
The demographics in the workplace are constantly changing. Innovation is therefore critical
to ensure the smooth running of the company.
Customers’ changing tastes and preferences-
The current customer has a great variety of products and services available to him. Hence, the
company must keep itself abreast of these evolving tastes and also forge new ways of
satisfying the customer.

INNOVATION MANAGEMENT :
Innovation management is a combination of the management of innovation processes, and
change management. It refers both to product, business process, and organizational
innovation. Innovation management includes a set of tools that allow managers and engineers
to cooperate with a common understanding of processes and goals. Innovation management
allows the organization to respond to external or internal opportunities, and use its creativity
to introduce new ideas, processes or products. It is not relegated to R&D; it involves workers
at every level in contributing creatively to a company's product development, manufacturing
and marketing. By utilizing innovation management tools, management can trigger and
deploy the creative capabilities of the work force for the continuous development of a
company. Innovation management helps an organization grasp an opportunity and use it to
create and introduce new ideas, processes, or products industriously.

TYPE OF INNOVATION:
Innovation can be in different forms and outcomes. When we talk about innovation, most
people think of new products while there is a wide array of different innovation outcomes
possible. Here we list the most common

1. Product innovation: A product innovation is the introduction of a product or service that

is new or significantly improved with respect to its characteristics or intended uses.
Examples of product innovations:

The first electric vehicles introduced in the car’s market were also innovative, and new
batteries with longer ranges that keep coming out are also an example of innovation.

2. Process innovation:
Process innovation generally refers to the implementation of a new or significantly improved
production or delivery method

3. Marketing innovation:
A marketing innovation is the implementation of a new marketing method involving
significant changes in product design or packaging, product placement, product promotion or
pricing. Marketing innovations are aimed at better addressing customer needs, opening up
new markets, or newly positioning a firm’s product on the market, with the objective of
increasing the firm’s sales.

An innovation is typically considered to be a marketing innovation if it brings significant

changes to the “traditional” marketing mix (4Ps: Price, Product, Promotion and Place) of the
industry in question.

Example of marketing innovation:

Touch Packaging Design has partnered with Nestlé Ice Cream to create a reusable, durable
container for its Häagen-Dazs brand that can be used in the new Loop circular shopping
platform.

4. Organizational innovation: An organizational innovation is the implementation of a

new organizational method in the firms business practices, workplace organizational or
external relations.
Managing and sharing resources in a new way can also be an innovation. This way it’s
possible to use resources and assets in a completely new way.

Examples of organizational innovations:

The companies adopted a four-day week working schedule.

The companies that started to use the power of digital and allowing employees to skip the
office and work from home.

5. Technology Innovation

New technologies can be also the basis for many other innovations. The best example was the
Internet, which was itself an innovation but also lead to other innovations in various fields.

6. Business Model Innovation

Business model innovation is a fundamental change in how a company delivers value to

its customers or captures it from the market.

Many of the most successful companies in the world managed to innovate their business
model. Using different channels, technologies and new markets can lead to new possible
business models which can create, deliver and capture customer value.

Digital ecosystems are a well-known example of innovation using several technologies and
creating a whole new type of business.

Examples of Business Model innovations:

Amazon found a new channel through technology by eliminating the traditional retail
distribution channel and developing direct relationships.

IBM has managed changes in customer offers from mainframes to personal computers to
technology services.

7. Service innovation

Service innovation refers to a new or significantly improved service concept, product or

process in a new or existing market. It can be for example a new customer interaction or
distribution channel, a system that improves the delivery process or new solutions in the
customer interface.

LEVELS OF INNOVATION:
First, we need to understand that there are various ways that innovation can have an impact
on products, services, and processes. Most commonly we differentiate between 4 levels of
innovation – Incremental, Disruptive, Architectural and Radical.

1. Incremental Innovation
Existing Technology, Existing Market
One of the most common forms of innovation that we can observe. It uses existing
technologies within an existing market. The goal is to improve an existing offering by adding
new features, changes in the design, etc.

Example

The best Example for incremental innovation can be seen in the Smartphone market where
the most innovation is only updating the hardware, improving the design, or adding some
additional features/cameras/sensors, etc.

2. Disruptive Innovation
New Technology, Existing Market

Disruptive innovation is mostly associated with applying new technologies, processes,

or disruptive business models to existing industries.

Disruptive innovation is a theory that refers to a concept, product, or a service that creates a
new value network either by entering an existing market or by creating a completely new
market.

Examples

Amazon used Internet-Technologies to disrupt the existing industry for book-shops. They had
the existing market for books but changed the way it was sold, delivered and experienced due
to the use of disruptive technologies. Another example was the iPhone, where existing
technologies in the market (Phones with buttons, keypads, etc.) were replaced with touch-
interface-centered devices combined with intuitive user interfaces.

3. Architectural Innovation
Existing Technology, New Market

Architectural innovation is something we see with tech giants like Amazon, Google, and
many more at the moment. They take their domain expertise, technology, and skills and apply
them to a different market. This way they can open up new markets and expand their
customer base.

Examples

Especially digital ecosystem orchestrators like Amazon and Alibaba use this innovation
strategy to enter new markets. They use existing expertise in building apps, platforms, and
their existing customer base to offer new services and products for different markets. A
recent example for this: Amazon recently entered the medical care field.

4. Radical Innovation

New Technology, New Market

Even it is the stereotypical way most people see innovation; it is the rarest form of them all.
Radical innovation involves the creation of technologies, services, and business models that
open up entirely new markets.

Example

The best example of radical innovation was the invention of the airplane. This radical new
technology opened up a new form of travel, invented an industry, and a whole new market.

INNOVATION PROCESS:
Steps of Innovation Process –

Step 1: Idea Generation And Mobilization –

New ideas are created during idea generation. Successful idea generation should involve the
pressure to compete and the freedom to explore.

Mobilization occurs when the idea is moved to a different logical or physical location.

For instance, how Apple waited three years after MP3 players were introduced to create the
iPod, which was attractive, intuitive, and offered capacity for up to 1,000 songs.

Step 2: Advocacy And Screening –

Advocacy and screening help to evaluate the feasibility of a business idea with its potential
problems and benefits.

Hence, a decision can be made about an idea’s future. Companies looking to develop a
culture can establish a few best practices.

For instance, Employees should have plenty of avenues to receive advocacy and feedback.
Also, organizations must understand the difficulties involved in evaluating truly innovative
ideas. Also, organizations need to build transparent evaluation and screening protocols.

Step 3: Experimentation –

The experimentation stage tests the sustainability of ideas for an organization at a specific
time. Experimentation generates new ideas with the information that is gathered on the results
and feasibility of the original idea.

For instance, when Amazon tested its grocery delivery service in certain Seattle suburbs.
After this, Amazon Fresh expanded to Los Angeles, San Diego, and New York City.

Step 4: Commercialization –

Commercialization develops market value for an idea by focusing on its impact. An

important part is establishing the specifications of any given idea.
 Commercialization is the stage that involves the change of focus developments to
persuasion. After the idea is clarified and a business plan is developed, it will be ready for
diffusion and implementation.

Step 5: Diffusion And Implementation –

Diffusion is the company-wide acceptance of an innovative idea, and implementation sets up

everything needed to develop the innovation.

Diffusion and implementation allow the organization to determine the next set of needs for
customers. Receiving feedback, indicators for success metrics, and other benchmarks enable
the organization to stimulate the innovation process.

RISKS OF THE INNOVATION PROCESS :

1.Technological Failure Of The Innovation –

The biggest risk any company takes in the innovation process is whether or not the new
product or idea will work once it is launched. To manage this risk, the company may carry
out trials on a small scale to test its effectiveness.

So, if this is done, the necessary adjustments may be made to avert any huge losses once the
product is mass-produced.

2.Financial Strain –

The innovation process is faced with the challenge of draining out the company resources.
This is because of the returns that are usually long-term as opposed to immediate.

So, if this is done, averting the necessary adjustments may be made to avert any huge losses
once the product is mass-produced.

3. Market Failure –

Failure in the introduction of new products or technology to the market means that demand
would be low and therefore the innovation is not viable commercially.

Hence, you should undertake extensive and in-depth market research before committing
limited resources to its development and production.

4.Redundancy –

With trends in the market, a profitable innovation today may be redundant shortly. Therefore,
there must be constant research on how to improve the existing systems, and the factors
influencing them to stay a step ahead.

5.Lack Of Capacity For Implementation –

Lacking the structural and financial capacity to roll out the innovation is always risky. You
may choose to look for partners who will assist in your area of lack and thus overcome the
challenge.
6.Organizational Risks –

These risks involve the structuring and running of the business. So, following proper
planning and allocation of resources helps to ensure this does not happen.

7. Unprecedented Risks –

They may involve changes in policies or political instability whose ripple effect spills over
hindering the effectiveness of the innovation. Therefore, the business needs to keep a
contingency plan to buffer it against such unseen events.

SOURCES OF INNOVATION:
The first four sources of innovative ideas are described as the "symptoms" that happen
within the business or industry. They are considered to be reliable indicators of changes that
have already taken place or which can occur with little effort. The second set of sources for
innovative opportunity are classified as the ones involving changes outside the business or
industry.

1. The Unexpected

The ever-changing business world is full of surprises. Yet, not only the unexpected failures
but also the unexpected success, or even events that occur in the organization can trigger
innovative ideas and become the creative sources of innovation. Unexpected situations can
have a very powerful influence and can inspire an organization to gain another, new,
perspective on the situation.

2. The Incongruity

When our reality doesn’t meet our expectations we can discover new insights and gain new
perspectives. Incongruity is a dissonance between what is and what it is supposed to be. It can
be a great source of innovative ideas as it compares what is and what everybody else assumes
it to be. Of all incongruities, the dissonance between perceived and actual customers’
expectations is maybe the most common one.

3. Innovation Based On Process Needs

The weak spots in your organization workflows, processes and systems provide practical
opportunities for innovation. Innovation based on process needs is a task-focused rather than
situation-focused. It improves the process that already exists, redesigns existing, old
processes and reinforces the weak links.

4. Changes In Industry Structure Or Market Structure

As the business landscape evolves, every organization has to adapt. Changes in industry
shake-up businesses, yet they can inspire people to explore and create new ideas as well.
Generally, industry or market structure is ever-changing and it can create great opportunities
for innovation in order for organizations to adapt and adjust quickly.

5. Demographics

Changes in demographics are defined as changes in population, size, age structure,

employment, educational status and income. They are the most reliable indicators of future
trends and offer diverse opportunities for innovation. Each new generation demands new and
unique products and services. These changes affect the market as they determine the need for
products, the target population who are buying those products, as well as the number of
products being distributed.

6. Changes In Perception, Mood And Meaning

With the growth of technology, there are significant changes in the way people perceive the
world. People change their perception about a certain product, brand or even industry. This is
basically the question "Is the glass half full or half empty?". Changes in perception are based
on the mood rather than on the facts. Changing your perception from "half empty" to "half
full" opens up incredible innovation opportunities.

7. New Knowledge, Both Scientific And Nonscientific

Every year new ideas are discovered and developed and a lot is added to the existing
knowledge base. Knowledge has always been a source of innovation yet knowledge-based
innovation has long lead time and convergence of knowledge. Technological and scientific
breakthrough are the source of innovation that can’t be neglected. New knowledge can be
applied in every aspect of the organization, starting from learning more about emerging
trends, customer expectations, knowing how to use new technology, to improving customer
service and supply chain.

BARRIERS TO INNOVATION:

1. Fear

The single biggest reason why most organisations and individuals do not achieve their full
potential is fear of failure. There are no guarantees that any new idea will work. We must
accept failing is an important part of learning, development and progress.

“People demand innovation: something no one has done before. But they also want to know
for sure it will work. Which of course makes no sense at all.”
Ken Burnett

2. Lack of leadership

Innovation must be led from the top. Often, trustees, chief executives and directors do not
support or are not in agreement as to the strategic importance of
innovation as a business driver and what it would look like for their organisation.
Consequently, they continue to do what they have always done.

3. Short term thinking

Most charities calculate on a one year return on investment. Any new innovation is
expected to have immediate impact. Under the pressure to deliver return quickly we
conduct inadequate research and rush processes, leading to failure, the
idea being ditched and innovation being perceived as not working.

“There are few (if any) visible examples of larger charities that have deployed strategic
innovation and shown it is successful. No one has ever committed to it for long and
consistently enough”
Iain McAndrew

4. Lack of resource/capacity

Linked to thinking in the short term, charities are apprehensive about investing
in something that does not have guaranteed return on investment and often take a scattergun
approach to innovation or under-resource it. This has a knock on
effect of it not delivering the impact that it should or could.

5. Lack of collaboration
Internal budgeting and structures don’t always facilitate collaboration between teams.
Individual income targets mean people fight over budgets and are reluctant to ‘share’ donors,
even if the return for the organisation could be potentially higher if teams worked together.

6. No time

There is an understandable focus on the fundraising here and now. However, if we don’t start
to make time to take a more long-term view and develop and test new ways to generate
income, charities will struggle to survive.

7. Lack of focus

If an organisation is not clear on where to focus, it can easily spend time on activity that
won’t make a difference. It’s easy to become distracted by new products and new technology,
but if it isn’t helping you achieve your mission then you should not be investing time and
resource in it.

8. Lots of ideas, no delivery to market

Having ideas is not a problem for most organisations, but having relevant ideas and
progressing them can be incredibly hard.

9. No clear process

A process is critical to filter and drive ideas forward, yet only 32% of those surveyed have a
clear process in place for innovation.

10. Lack of urgency

Despite significant changes to the funding landscape and the economic environment, charities
are not responding with urgency to change. Perhaps they believe that if they do nothing they
will be OK, or it seems too difficult to think strategically with so many immediate day-to-day
pressures.

OPEN INNOVATION AND CLOSED INNOVATION:

1.Open Innovation

Open innovation means opening up the innovation process beyond company boundaries in
order to increase one's own innovation potential through active strategic use of the
environment. Innovation therefore arises through the interaction of internal and external
ideas, technologies, processes and sales channels with the aim of the company to develop
promising innovative products, services or business models. Own employees, customers,
suppliers, LEAD users, universities, competitors or companies of other industries can be
integrated.
Place of innovation = inside and outside the company
*Types of open Innovation
There are 2 types of open innovation
i)Inbound open innovation:
Inbound open innovation refers to the acquisition of external technology in open exploration
processes
ii)Outbound open innovation:
outbound open innovation describes the outward transfer of technology in open exploitation
processes.

2.Closed Innovation

A closed innovation is based on the view that innovations are developed by companies
themselves. From the generation of ideas to development and marketing, the innovation
process takes place exclusively within the company.

Place of innovation = within the company

OPEN INNOVATION CLOSED INNOVATION

Difference between Open Innovation and Closed Innovation

OPEN INNOVATION CLOSED INNOVATION

The Best from anywhere

We can do it, we will do it
Conscious import and export
Company philosophy
of knowledge to improve and Innovations emerge from the
accelerate your own company's internal resources.
innovations.

innovation ideas Open exchange of ideas internal ideas

beyond company boundaries
Role of the customer Active co-innovators Passive recipients

Mobility Employees High Low

Venture Capital plays an important role plays only a minor role

It is important that the brightest

minds in the industry work for the
The company works with company. Highly qualified
Qualified persons bright minds inside and employees, especially researchers
outside the company. and developers, are the most
important source of innovative
ideas.

Innovation can come from Design, development and

inside and outside. External marketing of in-house
R&D can create significant innovations: Our own innovative
Role of R&D
value, but internal R&D is still ideas, technologies, processes and
needed to capture part of this markets offer a long-term
value. competitive advantage.

To lead the competition, it is To lead the competition, it is

not necessary to offer the best necessary to offer the best ideas.
Competition
ideas, but to make the most of
internal and external ideas.

Innovation does not have to be The own know-how is treated

created in order to profit from confidentially in order to protect
it. A competitive advantage it and to avoid free rides by
can be created and profit can competitors. Patents, copyrights
Intellectual Property be generated by others using and protection of intellectual
their own intellectual property property were intended to protect
and the company acquires the company's ideas and research
third-party intellectual from the theft of ideas by other
property. companies.

CHALLENGES FACED WHILE MANAGING INNOVATION

They are 9 Challenges Hindering Innovation in Your Organization

Innovation is fast becoming one of the most important factors for an organization’s success
and growth. As such, cultivating innovation in your company should be a critical
organizational initiative. Despite that, many organizations face internal challenges which
hinder the progress of innovation. Here are nine of these common challenges and how to
solve them:

1. Employees aren’t empowered to innovate

Many managers fear that innovation will distract employees

from their day-to-day roles. As a result, around 37% of employees do not feel empowered to
take risks or try new ideas. Internal innovation requires the support of leadership and
managers to take hold across the organization.

2. Employees aren't motivated to innovate

Once employees are empowered, they must also feel motivation to innovate. Motivation
initiatives like inventor incentive programs, contests, or even unstructured time can help
encourage employees to spend time innovating.

3. You're missing an innovation strategy

Like any organizational initiative, developing a concise innovation strategy is crucial. An

innovation strategy dictates the direction of innovation and its operational implementation.
Without one, innovation efforts risk misalignment.

4. Innovation is centralized to one functional group

In many organizations, innovation is the responsibility of solely one functional group, like
R&D or product development. The myth that one functional group is more suited to innovate
than others is a severe hindrance to the pace of innovation; each department provides a
unique perspective on the problems of customers which can be critical for driving successful
innovation.

5. Lack of collaboration

Collaboration is the key to innovation. While many organizations understand the importance
of collaboration internally, collaboration externally can be equally important. Innovation
ecosystems bring together industry partners, customers, and even competitors to drive
innovation in the industry forward.

6. Lack of diversity

Hiring for innovation and subsequently building diverse teams can provide the organization’s
innovation initiatives with a wealth of ideas generated from different perspectives.

7. Current product offerings are successful

Many organizations risk complacency once their current product offerings have reached
success. The fear of pulling investment, resources or customer attention from existing
offerings can be one of the biggest hindrances to future innovation. However, constant
innovation is the key to sustained success long-term.

8. Missed connections with customers

Deep customer empathy is the key to understanding changes in demand and staying abreast
of future trends; it provides the organization with a roadmap for what problems to solve next.
Utilizing customer feedback sessions regularly can help keep your organization tuned in to
the needs of your customers.

9. You're measuring innovation incorrectly

Measuring and benchmarking innovation is core to constantly improving its success.

However, traditional KPIs, like sales volume or revenue, may not give your organization the
best insight into success. Instead, try measuring on the amount of new ideas generated,
percent of time spent on innovation, or the investment value of innovation-related initiatives.