Innovation management
Chapter 1. Introduction
Importance of technological innovation
Innovation: implementation of creative ideas into new devices or processes requiring
combining of creativity + resources + expertise
Technological innovation: act of introducing a new drive/method/material for application to
commercial or practical objectives
Most important driver of competitive success
Many firms earn over one-third of sales on products developed within last five years
Product innovations help firms protect margins by offering new, differentiated features
Process innovation help make manufacturing more efficeint
The increasing importance of innovation due to globalization of markets + advances in info
technology
1. Introducing new products: protect margins
2. Investing in process innovation: lower the costs
= Firm does not innovate quickly margins diminishing as products become obsolete
“As firms such as Toyota, Samsung, and others adopt these new technologies and increase their
pace of innovation, they raise the bar for competitors, triggering an industrywide shift to
shortened development cycles and more rapid new product introductions. The net results are
greater market segmentation and rapid product obsolescence”
Impact of technological innovation on society
1. Fostering increasing GDP
2. Enabling greater communication and mobility
3. Improve medical treatments
4. However, may result in negative externalities *pollution
Gross domestic product: Total annual output of an economy as measured by its final purchase
price
,Technological innovation increased the amount of output achievable from a given quantity of
labor and capital creation of new knowledge applied to practical problems
Solow residual:
Results of technological innovation:
1. Shorter product life cycle
a. Mobile phones (Greater market segmentation more personalization
demand for more unique offerings)
2. More rapid new product introductions
3. Greater market segmentation
Externalities: costs/benefits that are borne by individuals other than those responsible for
creating them/
If a business emits pollutants in a community, imposes a negative externality on the
community members
If a business builds a park in a community, it creates a positive externality for
community members
While government plays a sig role in innovation industry provides the majority of R&D funds
that ultimately applied to technological innovation
Innovation by industry: The importance of strategy
• Successful innovation requires carefully crafted strategies and implementation
process
Higher innovation higher GDP
Popularity depicted as a freewheeling process that is unconstrained by rules and plans
Innovation funnel
Most innovative ideas do not become successful new products
Only one out of several thousand ideas result in a successful new product
According to product development and management association only about 1 in 9
projects that are initiated are successful and is launched to the market, only about half
earn a profit
,Innovation management: art and science of managing the process of implementation of ideas
into valuable products, process, or services
The strategic management of technological innovation
Improving a firm’s innovation success rate requires a well-crafted strategy
Innovation projects should align with resources and objectives, leveraging its core
competencies and helping it achieve its strategic intent.
A firm’s organizational structure and control systems should encourage generation of
innovative ideas while ensuring efficient implementation.
Should maximize the likelihood of projects both being technically and commercially
successful
To achieve this a firm needs to
1. In-depth understanding of the dynamics of innovations
2. Well-crafted innovation strategy
3. Well-designed processes for implementing the innovation strategy
, Chapter 2: Sources of innovation
Innovation: The practical implementations of an idea into a new device or process
It can originate with individuals, as in the familiar image of a lone inventor or users,
research efforts
Primary engine of innovation: FIRMS
They have greater resources than individuals
Face strong incentives to develop differentiation of new products/ services
“Linkage/Network of innovators”: leverage knowledge and other resources from multiple
sources are one of the most powerful agents of technological
advance
Creativity
Idea: something imagined or pictured in the mind
Innovation begins with generation of new ideas
Creativity: ability to produce novel and useful work
Ability to generate new and useful ideas creativity
The degree to which a product is novel is a function both of how different it is from prior
experience
Reinvention: a product can be novel to its immediate audience, yet be well known somewhere
else in the world
Chapter 1. Introduction
Importance of technological innovation
Innovation: implementation of creative ideas into new devices or processes requiring
combining of creativity + resources + expertise
Technological innovation: act of introducing a new drive/method/material for application to
commercial or practical objectives
Most important driver of competitive success
Many firms earn over one-third of sales on products developed within last five years
Product innovations help firms protect margins by offering new, differentiated features
Process innovation help make manufacturing more efficeint
The increasing importance of innovation due to globalization of markets + advances in info
technology
1. Introducing new products: protect margins
2. Investing in process innovation: lower the costs
= Firm does not innovate quickly margins diminishing as products become obsolete
“As firms such as Toyota, Samsung, and others adopt these new technologies and increase their
pace of innovation, they raise the bar for competitors, triggering an industrywide shift to
shortened development cycles and more rapid new product introductions. The net results are
greater market segmentation and rapid product obsolescence”
Impact of technological innovation on society
1. Fostering increasing GDP
2. Enabling greater communication and mobility
3. Improve medical treatments
4. However, may result in negative externalities *pollution
Gross domestic product: Total annual output of an economy as measured by its final purchase
price
,Technological innovation increased the amount of output achievable from a given quantity of
labor and capital creation of new knowledge applied to practical problems
Solow residual:
Results of technological innovation:
1. Shorter product life cycle
a. Mobile phones (Greater market segmentation more personalization
demand for more unique offerings)
2. More rapid new product introductions
3. Greater market segmentation
Externalities: costs/benefits that are borne by individuals other than those responsible for
creating them/
If a business emits pollutants in a community, imposes a negative externality on the
community members
If a business builds a park in a community, it creates a positive externality for
community members
While government plays a sig role in innovation industry provides the majority of R&D funds
that ultimately applied to technological innovation
Innovation by industry: The importance of strategy
• Successful innovation requires carefully crafted strategies and implementation
process
Higher innovation higher GDP
Popularity depicted as a freewheeling process that is unconstrained by rules and plans
Innovation funnel
Most innovative ideas do not become successful new products
Only one out of several thousand ideas result in a successful new product
According to product development and management association only about 1 in 9
projects that are initiated are successful and is launched to the market, only about half
earn a profit
,Innovation management: art and science of managing the process of implementation of ideas
into valuable products, process, or services
The strategic management of technological innovation
Improving a firm’s innovation success rate requires a well-crafted strategy
Innovation projects should align with resources and objectives, leveraging its core
competencies and helping it achieve its strategic intent.
A firm’s organizational structure and control systems should encourage generation of
innovative ideas while ensuring efficient implementation.
Should maximize the likelihood of projects both being technically and commercially
successful
To achieve this a firm needs to
1. In-depth understanding of the dynamics of innovations
2. Well-crafted innovation strategy
3. Well-designed processes for implementing the innovation strategy
, Chapter 2: Sources of innovation
Innovation: The practical implementations of an idea into a new device or process
It can originate with individuals, as in the familiar image of a lone inventor or users,
research efforts
Primary engine of innovation: FIRMS
They have greater resources than individuals
Face strong incentives to develop differentiation of new products/ services
“Linkage/Network of innovators”: leverage knowledge and other resources from multiple
sources are one of the most powerful agents of technological
advance
Creativity
Idea: something imagined or pictured in the mind
Innovation begins with generation of new ideas
Creativity: ability to produce novel and useful work
Ability to generate new and useful ideas creativity
The degree to which a product is novel is a function both of how different it is from prior
experience
Reinvention: a product can be novel to its immediate audience, yet be well known somewhere
else in the world
