INNOVATION AND ITS STAGES OF DEVELOPMENT

MSc Irakli Khvtisiashvili

International Black Sea University

2011

IDEAS AROUND INNOVATION

“Just as energy is the basis of life itself, and ideas the source of innovation, so is innovation the vital spark of all human

change, improvement and progress”

Ted Levitt

HOW TO DEFINE INNOVATION It is a process through which new idea or invention is translated into the customer’s

consumable products and services

WORLD TRENDS IN INNOVATION

DILEMMA OF TWENTY FIRST CENTURY Why Tiger and central Europe countries can innovate so drastically, while

developing countries suffer from lack of Innovation?

STAGES OF COUNTRY/COMPANY DEVELOPMENT

• IMPORT SUBSTITUTION

• EXPORT PROMOTION

• ORIGINAL EQUIPMENT MANUFACTURING (OEM)

• OWN BRAND MANIFACTURING (OBM)

• INNOVATION

STAGES TO INNOVATION DEVELOPMENT• STAGE I - Import Substitution Strategy

Government strategy that emphasizes replacement of some agricultural or industrial imports to encourage local production for local consumption, rather than producing for export markets. Import substitution are meant to generate employment, reduce foreign exchange demand and accumulate liquid asset inside the country.

South Korea Example

In 1970’s government represented quotas and tariffs to protect native Korean agricultural and labor intensive industrial sectors. (Daewoo became leader textile producer)

Government comity was created to direct substitute product development and implementation.

STAGES TO INNOVATION DEVELOPMENT • STAGE II – Export promotion

Support of government to promote agricultural and labor intensive industrial production export to new markets. Such strategy helps native companies to achieve sustainable advantage and generate more liquid asset inside the organization

South Korea Example

In 1980’s government subsidized companies to export outside the Korea and supported them with government export agencies and special corporations to identify potential markets (Daewoo enquired USA textile import quotas and became leader exporter)

STAGES TO INNOVATION DEVELOPMENT • STAGE III – Original Equipment Manufacturing (OEM)

When company manufactures product or components that are purchased by the famous company and retailed under its strong brand

South Korea Example

In 1990’s government supported native companies to buy technological licenses and sell unbranded products to the famous corporations to brand and sell the product. Such action is explained with lack of knowledge in technology and sales networks (Daewoo got the license for Pontiac Leman and started to sell it collaboration with GM joint venture to USA market)

STAGES TO INNOVATION DEVELOPMENT • STAGE IV – Original Brand Manufacturing (OBM)

When company manufactures product or components under its strong own brand for further resale.

South Korea Example

When government realized that native companies has already gained competitive strong market share red tape stopped industry lobbying and opened markets for competition (Daewoo presented its new 3 car brands and entered with new products to CIS countries - Uzbekistan )

STAGES TO INNOVATION DEVELOPMENT • STAGE V – Innovation

When company innovates new technology, product, service

South Korea Example

Government has supported the technical social capital flow through public and private universities and professional training centers (Daewoo has enquired R&D facilities in UK and GERMANY)

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