Page 1 ... Innovation: Tools to Create Competitive Advantage for Business. â Mr. Bibhav Adhikari ... business environment to develop ideas for creativity.
Innovation: Tools to Create Competitive Advantage for Business # Mr. Bibhav Adhikari
Abstracts: The successful exploitation of new ideas is crucial for a company to be able to improve its processes, bring new products and enhanced services on the market, and increase its efficiency and, what is most important to improve its performance. Thus, this paper explains the idea to make innovation a key process and outlines the different approaches that help on planning for innovation and creation of appropriate business environment to develop ideas for creativity. It also emphasizes the help and support available to innovative businesses. Introduction: Innovation is promising issue for any supple organization. Innovation brings a new concept for the organization to grow and to be leader in the industry. Broadly, innovation can be defined as the process of bringing new products and services to market. It is one of the most important issues in business research today. Thus, innovative idea can be the boosting factor for the quality and cutting up the prices of products and services. In other words, Innovation can bring paradigm shift in any market. It can modify the conventional practices or even can create new and effective market. Without innovation, organization will slowly lose both sales and profitability. Hence, there is very high probability that the company may be defeated by their competitors. In short, innovation provides an important basis by which world economies compete in the global marketplace. Truly speaking, innovation itself is very vast and multidisciplinary issue. Its various aspects are addressed by assorted areas including marketing, quality & operations management,
technology
management,
organizational
behavior,
product
Lecturer of Information Management and Research at Little Angels College of Management, Affiliated to Kathmandu University. He also serves different NGO/INGO as a freelance Management cum IT researcher and consultant. ~ 1 ~
Electronic copy available at: http://ssrn.com/abstract=1874666
development, strategic management, and economics. Therefore, innovation as a topic can be identified and have been studied in many independent researches and existing understanding and study of innovation can be benefited from an integrative review of these researches. Fundamentally, Innovation may be defined as exploiting new ideas leading to the creation of a new product, process or service. It is not just the invention of a new idea rather it is actually “bringing it to market”, putting into practice and exploiting it in a manner that leads to new products, services or systems that add value or improve quality. It perhaps engrosses technological transformation and management restructuring. Innovations can only be obtained by thinking out-of-the-box to generate new value and to bring about significant changes in society. Hence, Innovation will be successful in true sense if organization is able to understand customer's needs and then built the products that meet those needs. Basically, innovation can be categorized into following types (Matthew, 2008): • Innovation in products
• Innovation in marketing
• Innovation in process
• Innovation in organization
Thus, innovation is not necessarily the invention of a new concept of product / service. It can also refer to the activity of conducting the job uniquely in every aspect of organization considering the requirement of customer. Innovation and competitive advantages for the maintenance of business Innovation is one of the fundamental processes of strategic management, and is generally recognized as the main source of competitive advantage for individual companies, as well as for entire economic and social systems. However, recognizing this fact is not sufficient. We must, in fact be components and know how to manage strategic processes that transform ideas and creative proposals in projects and practical solutions, workable and sustainable in terms of new products, manufacturing processes, organizational forms or new business models in response to the changing needs of society and markets.
~ 2 ~
Electronic copy available at: http://ssrn.com/abstract=1874666
Thus, companies that want to gain a competitive edge must launch radically innovative products (goods, service or ideas), that is able to transfigure the conventional ways of doing business. Therefore, the book "Design-Driven Innovation" (Verganti, 2009), written by Roberto Verganti, Professor of Innovation Management at the Politecnico di Milano suggests us the following points for successful innovation and to be leader in the competition: •
The design is not only imaginative :
Verganti (2009) argues that the technique to achieve competitive advantage is the creative design which is not restricted only to aesthetics rather, should encompass "all actions aimed at changing the existing situation as a favorite" as a defined by Herbert T. Simon, American political scientist, economist, sociologist, and psychologist in the article.
Similarly, Erwin Raphael
McManus (2001) explains that "the beauty and innovation" can emerge sometimes even in competition; as imagination and beauty, when they are the sole drivers used to design a product, are in the sphere of the incremental innovation of meanings. Thus, the new products, and particularly those radically innovative, may not conform to existing standards. However, they try to inflict novelty. " On the contrary, in recent years the market has been dominated by usercentered innovation paradigm, whereby companies that want to start a new project should first analyze the needs of the market (through surveys and research) and carefully observe the behavior of users (thanks to the focus group). It is an approach to the subject usually much appreciated by managers, including cultural background, are very attracted to the methodologies and tools coded, characterized by a clear sequence of actions. •
Companies need to change the meanings
The meaning of radical innovation (innovation-driven design) is rarely requested by customers in reality, but is, instead, proposed by companies. In this context, Verganti (ibid) cites numerous cases in his book of Alessi, Apple, Nokia, McDonald's and Starbucks to clarify the idea. For example, the cafeteria can managed to change its meaning from just a place to buy a coffee to a pleasant place for spending the time or to have get together with friends. •
Innovation not only comes from professional designers
~ 3 ~
Innovation by definition does not arise from a sudden stroke of genius of the designer or contractor, but rather a long process of research sponsored by the companies themselves, who can exploit the whole structure of associations which are implanted to create ideas that are truly revolutionary. In this context, Verganti (ibid.) believes that the designer by profession can make an important contribution to this process, but are not the only actors involved. Even technology vendors, artists, companies in other industries have contributed to the origin of many success stories. This method of thinking about innovation is certainly more risky than the user-centered schema and, in fact, can become more beneficial for companies' outsider rather than the prevailing ones. •
Long-term success
The design-driven innovation may in fact be an important source of profit, if successfully implemented, leading to the creation of a strong personality and unique products that differ from those of the mixed competition. This perspective can be proven from the case with the Swatch in the eighties, where the company had capable of upsetting the hierarchy of the watch market with a brand new plastic product quickly became a cult within few years of its lunching writes Verganti. Similarly, the innovative Nintendo Wii has had weekly sales of the Xbox twice and four times the Play station 3. Likewise, the iPod holds 75% market share in the field of portable music players. Extensive creativity fosters innovation It is often claimed that creativity is not an innate gift but a skill that can be modeled through training. However, the war for talent can be seen in an extensive form at labor market as creative managers remain a small handful and for the most companies the main objective of the staffing research is to identify them and they often steal each other. Nevertheless, it should be noted that the original ideas are not generated only by a few managers, but can come from all members of an organization. So, for innovative idea the organization shouldn't assume that only a few specialists can contribute to make it creative. Hence, it should be realized that all human resources must be recognized as "the raw material for creativity" and the tendency to generate ideas should be sought among the entire population of the organization, and role of any professional level. ~ 4 ~
The realistic approach to innovation is to act by recognizing "widespread creativity" of the entire corporate body, unrelated to the genius inventor and a small circle of talented manages employed by the organization's ability to leverage the resources of the population to generate the "lateral thinking". For this purpose, organization have to develop a series of policies that facilitate the emergence of new ideas, with reward the scheme that the encourage employee to think out of the box (hence considering the error or failure as a possible eventualities and acceptable). Why innovative ideas often fail? Innovation is a key business driver, a proven ways for creating significant differentiation amongst competitive products. This has help in shifting the purchase decision from price (and commoditization) to meaningful features and benefits. However, most innovative project often failed. The basic causes of innovations failure in the marketplace may be based on based on one or more of four key issues given below (Phillips, 2011): 1. Ideas don’t solve an important problem for a customer Many organizations assume that they understand customers' prospect of want and need, so rather than doing the research to understand what customers want and need, they often impose the product. Phillips ( 2011) calls this “inside-out” innovation and most firms are guilty of it. Their innovators and product managers think they understand customer needs based on some market research and company history and don’t engage customers to truly understand unmet or unspoken needs. When the products or services are launched, there are few buyers and the ideas seem uninteresting. That’s because the needs were formed based on misunderstanding or a lack of interaction to discover what customers want. The failure due to this type of issue can be solved using scenario planning and qualitative research like Voice of the Customer or Ethnography to gain more insights about real needs and wants of the customer. 2. Ideas take too long to get to market/Shifts in needs It is often observed that ideas take too long to get to market/Shifts in needs as many organizations don’t have a well-tuned innovation process, even when firms identify the right needs it may take years for a new product to get to market, completely missing a market ~ 5 ~
window or a firm may have lengthy decision procedure that slows down the development and restricts funding of new ideas. So a great idea suffers in product development halfway house and when it is finally released, company habitually missed the market window or needs of customer have shifted. The proposed solution for this issue can be defining a funding mechanism to sponsor ideas that occur out of sequence with annual planning cycles, and develop a well-tuned innovation process to convert ideas to new products and services. 3. Ideas underfunded or poorly launched It's irrelevant that how daintily idea is developed and persuaded to targeted customers, unless new product or service isn’t launched effectively, by considering its position in the ecosystem and actual public relation and marketing necessary to get the word out, it won’t be successful. They will just happen to be a fool’s chore. It should be noted that even the best ideas seeks effective marketing and promotion, on the other hand good ideas are barely marketed at all. Therefore, when the company has a great new innovative product or service, it must have concrete strategy to launch it, or be prepared for disappointment. As a elucidation to this issue, it should be bear in mind that perhaps we can’t all do the “reveal” like Steve Jobs, but we can place more emphasis on building excitement for the launch of a new product or service. 4. Ideas require too much work to adopt Researchers commonly view the value of their ideas in a discerning way and imagine that immediately positioning the product or service will not be impossible. Alternatively, customers often feel the difficulty to determine accurate a product or service that are able to transition their needs and can create the value. Mostly, consumers are less loyal to products and services that offer them less expediency and less value than other offerings in the market; because the effort to change appears to remain high. Frankly, the issue may be the biggest challenge for new innovative
products
and
services. Hence,
understanding of adoption
issues and to launch their product and can make a big deal. Fundamentally, customers with existing relationships and patterns tend to retain those patterns as inertia suggests that bodies at rest tend to stay at rest until external force is applied. Here, ~ 6 ~
innovation can play this function of external force because it seeks to disrupt existing patterns and actions. So, innovative company should offer tremendous benefits and a bridge to port information between the existing platform and your new platform. If not, there is high chance that customers may dive out, even for a minor change in value. Therefore, the adoption effort is not an obstruction to be taken carelessly. In fact, it is one of the biggest barriers for new innovative ideas to deal with. In this circumstance, the organization should understand the entire value proposition of the products or offerings that is to be displaced or break off, help the prospect bridge between their existing platforms and standards and new innovative product. So, for simplifying the adoption process a clear, simple path for people to follow as they leave behind their existing patterns and platforms should be defined. Suggested Approaches to Innovation As per our discussion, Innovation can mean the introduction of products, services or new or improved processes. For the successful innovation following points should be taken under granted: Market Analysis There is no point in looking at innovation in isolation. To move ahead business in competition, analysis of market and understand how innovation can add value to your customers is very crucial. Identifying opportunities for innovation Opportunities for innovation can be identified by adapting product or service to changes in marketplace. For example, if we are a manufacturer of specialty burgers, we might consider lowering the fat content of burgers to attract health conscious consumers. The business can also boom by identifying a product brand new. For example, we could start producing as well as vegan burgers and meat. Similarly, innovation is also possible by introducing new technology, new working practices. Perhaps it is achievable by using better process to give the product a more consistent quality. For instance, if the research confirms that people have less time to get in stores, we could restructure distribution processes by offering customers a home delivery, possibly associated with a system of taking orders online or by phone. Likewise, if main ~ 7 ~
competitor products have a reputation of being cheap and warm, then rather competing on price, we could redesign our business by reshaping marketing to focus on the quality of goods and look to charge a premium for it. Planning Innovation Some innovative ideas may come spontaneously. However, we should ideally ensure that: Innovation is part of your business strategy. The company must have a strategic vision of how business will be nurture. It can be made possible, when manager dedicate time to monitor trends in business sector, and concentrate its efforts in innovation on the most important areas. Here it is to be taken into account that, the innovation will not only increase the chances of survival of business, but will also help grow and generate increased profits. The bottom line for any successful innovation is to start with the end in mind. That means, if given solution solves a problem that real customers have, great, chances of an innovation success are increased and when solution is easily adopted by the target customers, based on their needs and understanding of the adoption issues, then the company win the race. Align innovation with business strategy Many companies are keen for innovation without a clear vision of knowing how it helps to improve their competitive advantage. Thus, most of their efforts are seen as "fad" by the employees and end up becoming the "flavor of the month". In order to avoid this type of situation and to be truly effective, innovation must be aligned with company's strategy. Therefore, before initiating an innovation, its process must be clearly defined. Similarly, the company should also shed light on resources that the company is willing to invest on innovation and should also have to estimate the return on that investment that company gain with particular innovation. In short, the innovation must be viewed as business itself not as a idiocy of manager. Commitment from top management It is obvious that, like any potential changes in a company, innovation will also not be possible if top management does not have the commitment to initiate. Hence, a dramatic difference in ~ 8 ~
the programs of innovation will not be possible that until it is initiated and supported by the top management. If top management does not believe in innovation, that attitude will saturate the entire organization. Ultimately, the zeal for innovation is cannot be simulated. Therefore, for the innovation to occur in reality it must be in the priorities of top management. Once we are clear that we want to focus on innovation in the enterprise and we have the commitment of team management, is necessary to communicate our plans to rest of the organization. The employees need to be familiar with why innovation is important and what is expected of them for the program of innovation and to make business successful. It is often observed that, most people are excited about the topic of innovation, but unknown about the process and the benefit they get if they give good idea for company. This is why it is very important to train people in innovation and creativity thus offering incentives, both intrinsic and extrinsic, that can motivated them to innovate. Training is always necessary for initiating the innovation in organization. This includes explaining what the innovation, what is the difference between creativity and innovation (creativity is to have good ideas, innovation is they are real), what is the process that must continue to innovate and how to identify opportunities for innovation, among others. We must also help employee a proper environment within an organization so they can innovate practices in their work daily, organized around the basic stages of the innovation process (search for opportunities, generating ideas, evaluating ideas, development of ideas and implementation of innovations) Consequently, for proper motivation to people in order to engage in innovative activities, organization must elucidate what benefits exist for people to contribute ideas in the innovation program company. Contrary to popular belief, money is not necessarily the best reward for innovators. People often value more the recognition and the ability to do work they love. Define the structure and roles to support innovation When employees are trained and motivated to participate in the innovation agenda, we must describe a structure, either formal or informal, to support innovation efforts. This structure will be the "bridge" that will allow the ideas are not lost and enter the system of innovation in the ~ 9 ~
enterprise. There must be someone to dedicate a percentage of their time to coordinate innovation in the enterprise and should be leaders or guides in each area of the company to dedicate a percentage of their time to stimulate the generation of ideas and help implement the projects of innovation. Create a process to manage ideas To innovate, it is not enough simply to have good ideas; it is also necessary that these ideas support the business priorities of the company and be quickly implemented. The idea management is therefore the process of collecting, retaining and developing the ideas that meet business objectives. The management of ideas is a formal process, which companies use to seek promising business ideas from their employees and, in some cases their customers and suppliers. This process includes the following main steps: •
targeting (target collection of ideas),
•
capturing (the suggestion of ideas),
•
selecting (the analysis of promising ideas based on criteria established when targeting) &
•
implementing the ideas.
The idea management process should allow any person of the company to contribute ideas, regardless of rank or place within the organization. However, we should be careful on not make too the process bureaucratic. The process of innovation must be simple and maintain a balance between freedom and discipline. Define the process for evaluating ideas It is generally observed that, start of innovation is not basically through good ideas, but a process that allows them to capture and evaluate ideas and select which ones to implement the resource -strapped organization. Still, the problem with many companies is they do not know what to do with the ideas generated within a company. This is why it is very important to define what are the criteria by which front line assess the ideas, the people that will involve in evaluating the ideas and how ~ 10 ~
they will make decisions to select the best ideas. When evaluating, generally the ideas are collected and each is evaluated by the direct hierarchical superior of the creator. At the same time it is made public to all or part of the members of the organization. Most methods advocate a quick response for a few days (maximum one month) to each idea. If necessary, the evaluation (technical and financial) may be entrusted to a team of expertise, but experience shows that in most cases, the process can be managed locally by the team leader. In this context, the growing use of enterprise software allows a more open and shared contribution of idea between contributors, experts and other participants, by encouraging a true community dynamics on intranet. An important aspect that should be clear to the employees of the company is that not all the ideas which they propose can be implemented and that should not delaminating. In fact, a very small percentage of idea develops into true innovations, while the rest will go to the dump or the basket of ideas which should eventually hatch because they have not arrived. After all final innovation is a game of numbers, where "you have to kiss many frogs to find a princess." Encourage a culture of innovation Principally, innovation is a creative gathering of techno-cultural and socio-cultural design. These factors must be cognizant to engage in the design and implementation of innovations with high value addition. Design capabilities, and production initiative are also part of a culture of innovation. Accordingly, though company's innovation strategy may be best of the world, it will not work; unless the proper culture for supporting innovation strategy has not been developed. Therefore, the process of innovation and culture are like the yin and yang of innovation. After all, it is the fact that companies do not innovate itself; it is the people who innovate. And innovation by its nature, involves exploring unfamiliar waves where a risks are always implied. So, if we don’t have a culture that encourage entrepreneurship, experimentation and running risks intelligent, the company will never be very innovative. Hence, it should be noted that the greatest innovators must consider the teaching and dissemination for innovation culture, before talking about procedures and organization.
~ 11 ~
Summary and Conclusion: It is important to be clear about the difference between invention and innovation. The invention means a new idea. Innovation is the commercial application and successful exploitation of the invented as well as existing idea within an organization. Fundamentally, innovation means introducing something novel in business activities. This could include: •
improving or replacing business processes to increase efficiency and productivity, or to allow the company to expand the range or quality of products and (or) existing services;
•
development of products and services entirely new and improved - often to meet the rapid change in demand or the needs of customers or consumers;
•
add value to products, services or markets to differentiate the company from its competitors and increase the perceived value for customers and markets.
Innovation can designate a single major breakthrough; for example, developing a totally new product or service. However, it can also be a series of small incremental changes. Whatever its form may be, innovation is a creative process. The ideas can come from: •
Within the enterprise, i.e. employees, officers or work in research and internal development;
•
Outside the enterprise, i.e. suppliers, customers, media reports, a market study published by another organization or universities and other sources of new technology.
Thus, success comes from filtering these ideas, identifying those on which the company will focus on implementation and resources to exploit them. Hence, introducing innovation can to improve productivity, reduce costs, become more competitive, establish the value of the brand, increase sales and improve profitability, as well as to establish new partnerships and relationships among the stakeholders. Similarly, the greatest innovators must consider the instruction and propagation of a culture of innovation before talking about procedures and organization.
~ 12 ~
References: Creswell, J. W.;. (1994). Research Design: Qualitative and Quantitative Approaches. . CA: SAGE. Matthew. (2008, July 21). News, tools and ideas on innovative strategies. Retrieved February 5, 2011, from Innovation Strategies : http://strategies4innovation.wordpress.com McManus, E. R. (2001). An Unstoppable Force: Daring to Become the Church God Had in Mind. California : Yeat & Yeat, LLP, Literary Agent. Phillips, J. (2011, February 10). 4 Reasons Why Innovative Ideas Fail. Retrieved February 12, 2011, from Blogging Innovation: http://www.business-strategy-innovation.com Verganti, R. (2009). Design Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean. Boston: Harvard Business Press, EtasLab. What Support is Crucial for Innovation? (n.d.). Retrieved February 12, 2011, from http://www.infoentrepreneurs.org
~ 13 ~
