Innovation and Commercialization

SZABIST Innovation and Commercialization HND Business (Management) Author’s Name: Imran Imtiaz Butt Date: 24/10/2017  Table of Content……………………………………………………………………………..…….…………………….……02 Introduction………………………….………………………………………………….…..…..………………..... 03 The term “Innovation”.………………………………………………….…..…..…………………….……….. 04 The term “Commercialization”……….…….…………….………………………………….….............. 04 Difference between innovation and invention…………………………..…..………………………. 05 Factors involve in promoting innovation and commercialization.……………….……...….. 06 Sources of Innovation….………….……………………….…………………………………………………….. 07 Types of Innovation.………………………………….……………………………………………………….….. 09 4 P’s of Innovation……………………………………….………..…………………………………………….. 10 Usage of Innovation Funnel in an organization………………..………………….……………….. 11 Conclusion……………………………………….…………………………………………………………………… 13 References…………………………………….…………………………………………………………………….. 14 Introduction: The world has now become a global village and due to this globalization, the phrase “Perform or Perish” has now turned into “Adapt or Perish” for every business sector. For example, due to the technological advancement, now every business should have a strong presence on the internet. The preferences of customers are rapidly changing with the changes in trends. Similar situation is also faced by restaurant sector which forces them to stay in the process of adaptation in relation with the changes in customers’ demands and needs. Some of the challenges which the restaurant sector is facing are; customers’ preferences over healthier food, advancement in technology over delivery of food and dining experience, new entrants, environmental sustainability, marketing strategies, heightened expectations of customers and food processing methods. The businesses can cope up with these challenges through innovation, which is a tool that can provide competitive advantage in order to survive in the rapidly changing and cutthroat environment. In UK, the productivity growth of private sector from 2000 to 2007 was due to the result of innovation (NESTA, 2009) and according to the Organization for Economic Cooperation and Development (OECD Report, 2010) that innovation is the epicenter for the growth in developed countries. Some of the factors involved in the innovation process for restaurants are shown in the figure 1: Figure 1: Factors that fuel innovation process in restaurant business In this report, we will examine the concept of innovation in depth and its types as well as implementation within the organization. The report will further investigate the difference between invention and innovation. Furthermore it will also discuss the sources of innovation and impact of organizational culture, vision, teamwork and leadership upon innovation and commercialization. The term “Innovation”: The concept “Innovation” is become the focus of interest for many large, medium and small enterprises. The factor of innovation in the organization plays a vital role in the development and growth of the business as well as provides competitive advantage. Some researchers emphasized that Small and Medium-Sized Enterprises (SMEs) can introduce innovative ideas more quickly and easily as compared to large firms because SMEs have less bureaucracy, greater enthusiasm to take risks and rapid response with respect to dynamics of the market (Parida et. al., 2012). Definition of Innovation: There are many definitions of innovation put forward by many authors. Generally innovation can be defined as the path of visualizing, developing and executing ideas into manufacturing of goods or providing services that makes value (Business Dictionary, 2017). The term “Commercialization”: Commercialization on the other hand is the broader process of innovation. Commercialization involves number of factors that can perform their functions to commercialize the innovative idea and produce it on substantial scale for financial gains. SMEs contribute greatly in the commercializing new innovative products and adapting new methods upon their existing product despite their low volume of R&D budget (Acs and Auretsch, 1990). Definition of Commercialization: By definition, commercialization can be defined as the process of converting novel ideas, inventions and knowledge into bigger capital for persons, enterprises and communities at large with the purpose of gaining maximum profit by investing on research, production, licensing and marketing for the target market (Business Dictionary, 2017). In order to investigate more about innovation, we should have a basic concept of difference between innovation and invention. The Difference between Innovation and Invention in organizational point of view: According to Robert Edward (1988), the innovation is the sum of invention and exploitation. The invention aspect includes all the steps of brainstorming and visualization in order to create novel ideas and working upon them to shape the product. While exploitation phase involves all the steps of commercial development, applicability analysis and viability checks in order to evaluate the utilization factor and desirability of the market. And then eventually after successful examination, the product then goes for manufacturing process and disseminated. After distribution, the feedback and outcomes will be analyzed. Figure 2: Innovation concept according to Robert Edward (1988) The difference of invention and innovation can also be described as that invention is the first event of the idea for a novel product or service. However, the innovation is the first try to make the product into practice (Fagerberg, 2004). Figure 3: Difference between innovation and invention According to business dictionary, both invention and innovation have distinctive meanings and are different from one another. Invention Innovation Invention can be defined as the novel idea which is to be patentable. The characteristics of invented idea must be unique, have utility and non-obvious. The idea only needs to be proven viable and workable before going to be public. Innovation can be defined as the process of converting an invention or idea into finished good or service that creates value for which the customer will pay. (Business Dictionary, 2017) Factors involve in promoting innovation and commercialization within the organization: The success of every organization lies in the promotion of innovative ideas in their products and services. There are many factors involved in influencing the personal creativity of the employee and innovation aspect of the organization which are organizational culture, leadership, teamwork or organizational vision (Egan, 2005). Organizational Culture impact upon Innovation and commercialization: It has been observed that the innovation and commercialization can be flourished if the organization is willing to encourage its employees to present their ideas in the development of innovative environment. These encouragements can be in the form of incentives, motivations, resources, assistance, trainings and rewards (Ramus, 2001). The amount of resources upon research and development has directly proportional relation to the degree of innovative ideas and commercialization strategies. However, limited resources and less support lead to hinder the development of new ideas (Amabile, 1997). Leadership impact upon Innovation and commercialization: Leadership plays an essential role in the promotion of innovation and commercialization awareness within the organization. Leadership uses two way process for the encouragement of creativity among the employees. First, leaders create opportunities for team members that help in boosting innovation and creativity factor through supporting the constructive team environment, motivating them and rewarding them over their accomplishments (Shalley and Gilson, 2004). Second, leaders symbolize the organizations to become innovative which can be done through resource allocation and management in the form of funds, facilities, time and knowledge (Drazin et. al, 1999). Teamwork impact upon Innovation and Commercialization: There is a possibility that interacting with other team members could generate and foster innovative ideas that can be resulted in influencing the level of creativity factor of individuals. However, the innovative ideas sometimes only be generated by the individuals alone rather than working in a team. Therefore, personal creativity may not be increased under certain circumstances by teamwork. However, there is a chance that commercialization strategies can be developed better if working in a team (Shalley, 1995). Organizational vision impact upon Innovation and Commercialization: The organization’s vision is the fundamental driving force that can boost innovation and commercialization with great pace. Innovative companies such as Google and 3M provide a portion of time in their employees working period to allow them to do whatever they want from the creative point of view. Google dedicates one day a week to pursue its employees’ creative aspects and interest which resulted in the rise of innovative ideas, applications and product being developed such as Gmail (Illuminations, 2012). Sources of Innovation: The innovation generally generates from some source or catalyst, these sources are defined by my researchers and authors with the help of their case studies, research methods and experiments. Peter Drucker, who was one of the finest authors, had put forward seven sources of innovation in his article “The Discipline of Innovation”. He suggested that the most successful innovations generates from a purposeful and conscious search of innovation opportunities. Means that organizations can develop and present most successful innovative ideas through dedicated and purposeful search of innovations by intentionally allocate resources and knowledge on this sector (Drucker, 1999). Below are the seven sources of innovation presented by Drucker: Unexpected Occurrence: The unexpected success, unexpected failures or unexpected outside events which only occurs when the outcome of the product or service against the anticipated results of the management. After the unexpected results, the management then innovates the existing product in order to shape it according to the market requirements. Incongruities: The source of innovation will become active if the innovator calculates the incongruity between expectations and actual results. Competitive advantage can be gained if successfully points out the gaps of missing information in how customer should utilize the product. Example of a shipping container can fit into this category as it reduced the cost of shipping goods to a much lower level because the major cost of shipping was due to the loading and unloading of goods at the time when shipping containers were not introduced. Process Need: Process improvements can open up new opportunities. For example, the invention of the Linotype made it achievable to rapidly print great volumes of newspapers, opening up new options for effectiveness in mass media. Market or Industry Changes: When the certain type of industries grows along with its target market, there are many opportunities begin to develop which is due to the new needs of fastest growing segments that do not match with the traditional business leaders. So there is a big need of innovation in this case. McDonald’s revised its strategy by promoting healthier foods in its menu in order to cope up with obesity factor. Changes in Demographics: Changes in demographics include change in population, age segmentation, education, professions and geographic location. These attributes force the top leadership and management to mould their product accordingly so that the product lifecycle can be increased. Changes in Perception: The public perception should be highly examined which can create new opportunities for innovation. The changing trends, preferences and buying behaviors are fall under this category. Nowadays there is a boom of health consciousness and fitness which leads to open new gates for fitness and health industry to unveil their new innovative products or services that meets the expectations of the market. New Knowledge: The ultimate source of innovation is based on new knowledge where every invention took place in the history were totally based on new knowledge whether technical, scientific or social. The innovation through new knowledge gets immediate attention and popularity. The newest innovation in the present time is teleportation. The scientists at Caltech have successfully teleported a photon, which opens up the possibility that one day humans can teleport large objects to long distances (list25, 2015). Types of Innovation: In any organization, its product lifecycle defines the moment that either the product must be revitalized or discarded when it reaches its saturation point in the market. The decision making process can be assumed as innovation strategy. This innovation strategy has two different approaches such as incremental innovation and radical innovation, both have some advantages and disadvantages (Ettlie, 1984). Incremental Innovation: Incremental innovation is the type of approach which only alters and improves the existing design and functionality of the product (Albors, 2002). This approach is common in many firms which creates new products or services just similar and more advanced to their previous products. Smartphone companies are the best example of this approach. Figure 4: Example of incremental innovation Radical Innovation: Radical innovation is the type of approach that totally introduces a new product or services having new technological functions, processes, concept, design and components. This approach is more complicated because its implementation requires more R&D, new mechanism of manufacturing, new market and new strategy of marketing the product (McDermott, 2002). The digital camera is the best example, as this totally wiped out the conventional film camera from the market. Figure 5: Example of radical innovation 4 P’s of Innovation: The 4 P’s innovation space is a tool which is used to help the organization to find the innovation technique in order to bring improvement in the business. The organization can understand its current position in the market and the method of revitalizing its product, process, position and paradigm. This tool guides the organization to where it should go and what it should need in order to acquire competitive advantage. However, organizations can pursue all four P’s simultaneously. If any organization wants to improve its positioning then there is a much more chance that it can also improve its product (Tidd et al., 1997). Usage of Innovation mix model: As shown in the figure , the tool consists of four sections each is scaled from incremental to radical stage. The organization first put its current position with respect to its product, process, position and paradigm. After analyzing the current status, then organization decides to make changes in any section according to the priority and market conditions. It is the duty of the leadership to analyze either the organization should go from radical to incremental scenario or vice versa. Figure 6: Innovation mix Product: The product section includes the improvement criteria of the product or service which the organization is offering. It is the question of concern that either the existing product should go for improvement or totally replaced with the new one. For example, the mobile manufacturing company started to make smart TVs. Process: The process improvement or changing includes manufacturing process of the product as well as supplying, hiring new people and trainings. There is also a considerable scope of recognizing better and efficient processing methods. For example, a bookselling company started to sell their books through online service rather than bookshops and directly deliver the books at customers’ doorstep. Position: The innovation in position does not considerably influence the structure and functionality of the product but it affects the meaning of the product in the sight of its consumers or the target market. It actually re-positions the perception of the existing product in front of the customers in a specific context. The position innovation is used by the organization to redefine their business for the purpose of gaining organizational goals. For example, Levi-Strauss jeans were known as the uniform of manual workers but later it defined its position and now considered to be one of the best fashion outfits in the world. Paradigm: Innovation in the paradigm of the organization is related to the mental model which redefines the way the organization do business. The paradigm innovation if taken radically can totally change the business model of the organization. Grameen bank in Bangladesh has totally changed the concept of conventional banking system by lending money to the poor in the form of micro financing. Usage of Innovation Funnel in an organization: Many organizations use innovative funnel method to initiate an innovation process by gathering different opinions and ideas of the marketers and R&D department that come from the market and customers’ behavior, then examining them and filtering them step by step in order to acquire a perfect innovative product which will be economically viable and best suitable for the market (Barber, 2011). At the starting of the funnel, the ideas are generated through market analysis, customer knowledge and other sources of information related to the opportunities available for a new product line. After the collection of different ideas and concepts, the funnel then started to process them. The processing is done through four major stages according to the researcher (shown in figure: ): Figure 7: Innovation Tunnel Assessment Gate: Based on what kind of opportunity is best suitable for the company, the next step is to ideate various kinds of products or services that can have a profitable outcome. Development Gate: At this stage, the product development team begins to work on more competitive ideas. This stage defines the product portfolio, its features and its utilization. Test Gate: In this stage, the refined products then presented to the sample of target customers in order to acquire the feedbacks of newly developed products. The testing procedures can be user testing, questionnaires and choice modeling. Launching: In this stage, very few or even a single product is selected by the management and leadership to be launched into market and available to the customers. Conclusion: In this report, we have learned the difference between the invention and innovation. We have also discussed the types of innovation in detail. After analyzing the theoretical findings of the researcher on innovation, we come to know that innovation can be seen as the imperative factor for the growth and survival of the organization. However, the response of the organization over this challenge must be balanced with the resources of the organization in terms of skills, funds, knowledge and time. We have critically examined the framework of initiating the organization’s innovation agenda with the help of such mechanism and tools that can helps in establishing innovative ideas and executing them. The restaurant business needs constant innovation in its product portfolio because restaurants operate under a very competitive environment which needs innovation not just in the kitchen but also on the aroma and texture point of view (Galt, 2013). Reference: Acs, Zoltan and David B. Audretsch,. 1990, Innovation and Small Firms, Cambridge, MA: MIT Press. 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