Introduction Clg

8/12/2019 Introduction Clg

1/30

1

INTRODUCTION

In 1974, British economist Christopher Freeman reported that few economists have

stopped to examine technological innovation (Freeman, 1974: 16). This is a much

repeated statement in the literature on technological innovation. Economists would have

come late to the study of technological innovation. But late compared to when and to

whom? From a long-term perspective, the statement deserves qualification. Whether one

looks at A. Smith, John Rae or William Stanley Jevons, economic writings on invention

and the use of machines in production, although often short, did in fact exist (Macleod,

2008), and art as a production factor was discussed among the mercantilists early on

(Johnson, 1930). Furthermore, at the time of Freemans writing, the systematic study of

technological innovation existed for many decades among economists. Leaving aside

economic historians like A. P. Usher and W. Rupert Maclaurin, there was an economic

tradition named technological change, as a precursor to the term technological

innovation.

The economic tradition regarding technological change is concerned with innovation as

technological invention used (introduced) in the industrial production process (Godin,

2010a). It is not concerned with the origins of technological innovations. It is not alone.

The tradition simply follows the sociologists and others, who focus on the use (adoption)

of inventions, whatever their origin. At the time, among economists, only economic

historians like Maclaurin and his colleagues at MIT got into the so-called black box,

but Maclaurin soon got forgotten, although his ideas have remained influential for

decades, in obliterated form (Godin, 2008).


2/30

2

FREEMANS REPRESENTATION OF INNOVATION

To Freeman, technological innovation is an essential condition of economic progress

and a critical element in the competitive struggle of enterprises and of nation-states. It is

also important for improving the quality of life (Freeman, 1974: 15). Given the centrality

of technological innovation to modern society, Freemans purpose in The Economics of

Industrial Innovation is the study of the system behind the phenomenon, namely the

professionalized industrial R&D [research and development] system. He identifies three

characteristics of this system over time: its growing complexity, the increased scale of

9

processes, and the specialization of research work (Freeman, 1974: 25, 33). 2 To

Freeman, research is conducted in professional specialized laboratories, as opposed to the

past when research was unorganized and much more a trial-and-error affair. This is a

familiar description, suggested by industrialists and historians since the beginning of the

twentieth century. However, these people spoke of the institutionalization of research, not

its professionalization as Freeman did. As a matter of fact, professionalization refers to

the social process by which an occupation transforms itself into a body, group or

association with qualifications and identity credentials (like diplomas, journals and

grants, in the case of scientists). This is not what Freeman was interested in, despite his

use of the term. Freeman was rather interested in institutionalization: when and how

research and scientists got into organizations, in the present case industries

Be that as it may, to Freeman the twentieth century is the growth period of the researchintensive

sector and saw the rise of a research-intensive economy: the balance has

gradually shifted towards a more research-intensive economy, and a higher rate of


3/30

3

technical change. It is the contention of this book that this is one of the most important

changes in twentieth-century industry (Freeman, 1974: 277). To the increase in scale

and professionalization, Freeman adds the idea that technology relies increasingly on

science, giving rise to what Freeman called science-related technologies. Together,

these three characteristics of the R&D system strongly suggest the need to monitor and

control the direction and pace of technical change (Freeman, 1974: 31).

To Freeman, the monitoring and controlling of technology depends upon understanding,

and an important part of this understanding relates to economic aspects of the process,

such as costs, return on investment, market structure, rate of growth and distribution of

possible benefits (Freeman, 1974: 32). Freeman deplores the elementary state of our

present knowledge (Freeman, 1974: 32). To Freeman, invention and innovation are

outside the framework of economic models, or more strictly, exogenous variables


4/30

4

A CONSTRUCTION

Every theory or theoretical essay is a construction in many senses. Sociology generally

focuses on the determinants (individual and social) that are necessarily involved a

scientists invention or innovation. In this paper, I look rather at construction in the sense

of creative imagination: combining existing ideas (or things) to produce new ones, as the

early psychology of imagination suggested, as many still define innovation today and as

Freeman does (Freeman, 1974: 167-69; 253). Freeman used previous knowledge of many

different sources and scope (combination), to which he added a new perspective

(novelty), using certain sourcesand ignoring othersto ground his ideas

(legitimization):

- Combinations: selecting previous and existing knowledge.

- New perspectives: bringing forth new ideas and a new conceptual framework

Legitimizations: rationalizing and giving identity to the tradition with reference to key

authors.

Freemans book is a wonderful work of combination. Freeman made use of his own

previous works at the British National Institute for Economic and Social Research

(NIESR) and the Science Policy Research Unit (SPRU), sometimes verbatim, including

his contractual works for international organizations like the OECD and UNESCO. He

brings together the latest findings of the literature: almost everything new on the topic

from economics and management studies. He discusses academic as well as government

reports and surveys. And he uses different methods: history, surveys and statistics. Many

of these borrowings he acknowledges from the very beginning of the book. What he does


5/30

5

not and could not do was anticipate the outcome or impact of the combination in future

years.

Freeman starts with what he calls a historical approach. He may have got this approach

from Schumpeter, to whom studies of a historical type are more appropriate than those of

classical economics for the analysis of technological innovation. What we really need,

once stated Schumpeter, we are more likely to find in general economic histories,

above all monographs on individual industries (Schumpeter, 1939: 221). There were

also some examples dealing with this approach from an influential conference held in

(Freeman, 1974: 45).3

It is history designed to give the reader a perspective on what

comes next: the study of firms. It is contextual history designed to support a point of

view, an economic point of view. According to Freeman, it is history from the

standpoint of the economist where attention is concentrated on costs, patents, size of

firm, marketing and time lags (Freeman, 1974: 39). Using the secondary literature,

Freeman brings together findings on the development of several technologies:

processinnovations in chemicals, oil refineries and nuclear energy, synthetic materials and

electronics. In part I, Freeman discusses, among other things, issues such as the role of

the inventor-entrepreneur and the transition to the corporate R&D laboratory, the

increasing dependence of technology on science, the role of government funding, the

wide scope of applications of new technologies, the product-life cycle, the firms

optimum level of R&D funding (or threshold as he called it), and its measurement (the

ratio of R&D to sales). Statistics on patents are used throughout the chapters as empirical

evidence and as a measurement of first commercial production and diffusion (imitation

lags). Comparisons between European and American firms also abound.


6/30

6

NEW PERSPECTIVES

I highlight only two perspectives from Freeman and the tradition. This is certainly a

biased selection. Two considerations drove my selection. First, the perspectives are

macro, and explain many micro perspectives one would find missing in my analysis.

Second, they clearly distinguish this tradition from the first one on technological change.

The two perspectives are:

- A representation of innovation as commercialization. This explains the study of

the innovation process, from invention to diffusionA consideration of policy issues. This gave

rise to an applied or policy-oriented

specialty.

I have deliberately not included the institutional perspective, a major one according to

the promoters of the tradition. As a matter of fact, a lot has been written on the

institutional perspective as a distinctive trait of the tradition. To many authors in the

tradition, this perspective serves to distinguish the tradition from the literature produced

by mainstream economists (Nelson, 1993; 2008; 2009). It gave rise to a whole literature

on a National Innovation System. This perspective is certainly absent from the

econometric approach of the first tradition. In the present case, the perspective is mainly

descriptive, although it makes use of statistics. In fact, another distinctive trait of the

tradition is that researchers conduct their own surveys (like the SAPPHO project at SPRU

in the early 1970s) rather than using only official statistics (this has changed recently with

national innovation surveys conducted by governments and their statistical bureaus).


7/30


8/30

8

concerned with a meaning of and a representation of technological innovation different

from Freemans. Technological innovation in the first tradition was concerned with

process innovation (Godin, 2010a). The second tradition specifically gave greater place

in its analyses to product innovation.

POLICY AS APPL ICATION

The second perspective Freeman brought to the field was the national policy dimension,

consideration of which is relatively absent in the first tradition but which contributed to

Freemans representation of innovation as technological and commercialized. This is, to

my mind, one of the main characteristics of the second tradition. It explains why this

tradition developed in Europe. As a matter of fact, efforts towards developing a national

science policy first emerged in England, and led to the setting up of advisory committees

as early as 1915 and more systematically in the 1940s (Gummett and Price, 1977;

Gummett, 1980). The demands of scientists for national coordination got a

supplementary hearing in the following decade. In the late 1950s, a whole discourse

developed in Europe about lags and gaps in science and technology between Europe

and the Unites States. This fed the OEEC and the OECD efforts to promote the

development of science policies among European countries (OEEC, 1959; OEEC, 1960;

OECD, 1963a), and to measure trends in R&D and the outcome of policies (OECD,

1962). The route through which discourses on national policies developed is definitively

from England to the OECD. As a matter of fact, the first Director General for Scientific


9/30

9

Affairs at OECD was Alexander King, who had been the UK Advisory Council on

Science Policy (ACSP)s first secretary, created in 1947.

To the OECD, technological innovation became a means to economic growth,

productivity and market shares (OECD, 1966; 1970). The then-fashionable model was

(and still is) the United States. Adopting American technology and producing more

innovativeproducts would improve firms productivity and open new markets to

European firms. The European discourses on lags and gaps, largely fed by the OECD, got

into technological innovation studies early on and still continues to be discussed today. 18

To a certain extent, SPRU, founded by Freeman in 1966, was a spin-off from the

OECD. Freeman had acted as consultant to the OECD from the early 1960s.

LEGITIMIZATION

Two authors contributed substantially to Freemans framework in 1974. The conceptual

construction begins by using F. Machlups wide definition of knowledge industries

(Freeman, 1974: 18), as covering the generating, disseminating, and applying advances

in technology (Freeman, 1974: 20). It allows Freeman to suggest the idea of an R&D

system (first suggested in a paper produced for UNESCO in 1969). There is no explicit

definition of what a system is, but one understands that it means a complex whole and


10/30

10

process responsible for the ultimate source of economic advance (Freeman, 1974: 20):

production of new products and processes, management and marketing, diffusion

(including education and training) and interaction with science (Freeman, 1974: 20-21).

Above all, Freemans system refers to a professionalized system whose growth is

perhaps the most important social and economic change in twentieth-century industry

(Freeman, 1974: 21).

The use of Machlups approach is interesting, as it is totally foreign to the first tradition.

Machlups vision is a broad one, looking at both technological invention and its

diffusion, and it would come to characterize the institutional perspective of the second

tradition (Godin, 2006; 2010c). Furthermore, Machlups systemic analysis of the

knowledge system in terms of flows of measurable quantities of input and output (his

table is reproduced in Freeman book on p. 22-23) became that of the second tradition

as well as that of later studies on research evaluation. Freemans appendices (over 70

pages) are entirely devoted to reproducing parts of OECD and UNESCO manuals on

measurements of input and output, manuals to which he contributed.

CONCLUSION

Freeman developed a synthesis (combination) of previous findings on innovation and

introduced a national framework. Until then, innovation was discussed in disciplinary

terms (sociology concentrating on social groups, economics and management focusing on

firms). Following governments discussions of innovation, Freeman introduced a national


11/30

11

perspective: Freeman introduced a national perspective: technological innovation is good

34

not only for individuals and groups as sociologists study, or firms as management

analyse, but source of economic growth for a nation as a whole; and there is a need for

policy to support the innovators. Certainly, Freemans perspective remains selective. His

synthesis is biased toward certain ideas (minimizing innovation as adoption) and

emblematic authors like Schumpeter (for reasons of legitimacy), his representation of

innovation is restricted to technological innovation and isfirm-centered, and over time

the tradition on innovation studies has had little concern with social issues.

Nevertheless, the attention devoted to policy gave the tradition a national perspective and,

consequently, got a government hearing.

POLYSTOR CORPORATION

PolyStor, a privately held company based in Livermore, California, designs, develops,

and manufactures rechargeable lithium-ion and lithium-ion polymer batteries for mobile

devices and portable electronic products. The firm was founded in 1993 to bring to the

market technology that was developed by its founders in the 1980s when they were at

the Lawrence Livermore National Labs (LLNL) and engaged in the development of

lithium-ion (Li-ion) technology for the Strategic Defense Initiative (Star Wars) defense

program. After suffering a sharp decline for its products in 2001, tied to a global

decline in demand for cell phones, PolyStor ceased operations in winter 2002.

PolyStor was the first Li-ion battery producer in the United States and the first to

use a nickel cobalt oxide cathode that delivers the highest capacity and energy density

in the industry. Based on an exclusive license for technology developed by Motorola,

the firm also produced the worlds first commercially available curved Li -ion polymer


12/30

12

battery. In winter 2001 the firm employed roughly 150 people, with a staff of 35 in

research and development.

The founders of PolyStor were interested in spinning out the technology in the

early 1990s at the end of the Cold War when government funding for military projects

such as the one they were engaged in was starting to go down. At the same time, they

had been able to develop some very successful cells and had also applied for patents

to protect this technology. Concerns about conflicts of interest between inventors and

commercial users were avoided by spinning out PolyStor through a Defense Advanced

Research Projects Agency (DARPA) Technology Reinvestment Project (TRP) grant in

which LLNL was also a participant. Commercial companies such as Rockwell were also

partners in this project.

BETWEEN INVENTION AND INNOVATION

Technology Program (ATP) to help it to develop a safe, ultrahigh-capacity rechargeable

battery based on Li-ion polymer gel technology. The objective of this grant was to

allow PolyStor to develop the next generation of safe, ultra-light batteries for the handheld

rechargeable battery market.

Overall, government funding played a central role in PolyStors formation and

technology development efforts. The firm might not have been started but for the

DARPA funding. The SBIR from the BMDO underpinned the research on the Ni-Co

chemistry. The firm would not have had the resources to develop the advanced car batteries

without PNGV fundingthe development of these larger cells at PolyStor was

completely subsidized by the government funding. Most of its venture funding was

focused on meeting near-term financial goals, ramping up production, and marketing.

The government funds were also helpful because these funds gave the company better

leverage in negotiating over other funding. Government contracts also were useful to


13/30

13

PolyStor because they allowed the firm to develop partnerships. Subcontractors

involved in Polystors ATP grant included groups at Argonne National Laboratory, Entek

International, and the Illinois Institute of Technology.

MAPPING VENTURE CAPITAL AND ANGEL

INVESTMENTS

How can we quantify the three major sources of private finance for early-stage conversion

of inventions to innovationsventure capital seed investment, angel investments,

bootstrap financing? Can we get any useful breakdown by technology/industry and by

geographical region? Is there any way to know or estimate how much of this funding is

spent on technical work, such as R&D, rather than other business costs associated with

building a new enterprise? Is this money captured in the NSF survey?

How well do our working definitions of the stage in technology development from

invention to innovation correspond to the definitions of stage of development of a new

firm or venture (such as seed or early stage)? How are the definitions operationally different

for different industries/technologies?

What is your interpretation of the significant shifts in the pattern of early-stage

resources in recent years? Are such patterns likely to be cyclical or long range?

Should venture capital investments be seen as national, regional, or local in scope

and coverage? In other words, is the concentration of venture capital investment in the

coasts, Texas, and a few other areas a reflection of where the venture capital firms and

wealthy angels are located, or is it a realistic reflection of the differences in socio-economic

capital, regionally

REGIONAL DISTRIBUTION OF INVESTMENTS AND

STATE PROGRAMS

What is the role of the states in funding early-stage, high-tech invention-to-innovation


14/30

14

transition? How large is the total investment, and regionally, how does it compare to

private and or federal investment? To what extent are these programs tied to or at least

intended to leverage private or federal money?

Does achieving a more broadly distributed pattern of high-tech innovation in the

U.S. depend on local and regional efforts to enhance all the elements of infrastructure

(social capital) that are required for efficient innovation, and, if so, have any states

demonstrated their ability to make a significant difference?

Maryann Feldmann, Johns Hopkins University (moderator)

Marianne Clarke, State Science and Technology Institute

Robert Heard, National Association of Seed and Venture Funds

TECHNOLOGY FOCUS: LIFE SCIENCES

How is the search for invention-to-innovation funding influenced by the subsidy of the

pre-invention research in a government-supported, not-for-profit organization (for

instance, university, hospital, or government laboratory)? Do public funds, especially in

biomedical fields, allow the work to go beyond proof of concept and thus become part

of the picture of resources for invention-to-innovation conversion? Do the patterns of

funding for biomedical innovations differ significantly from other kinds of high-tech

innovations?

Christopher Coburn, Cleveland Clinic Foundation Innovations

Jeff Schloss, National Institutes of Health

MAPPING FEDERAL GOVERNMENT INVESTMENTS

What are the federal programs of R&D support that most nearly correspond to the

invention-to-innovation transition? In each case how well do the starting and ending

points correspond to our model, and how variable are they from case to case, program

to program? Consider ATP, SBIR, public-private partnerships, and any others that come


15/30

15

to mind. What can we know about the distribution by technology/industry and by geographical

region of this funding?

MAPPING VENTURE CAPITAL AND ANGEL

INVESTMENTS

How can we quantify the three major sources of private finance for early-stage conversion

of inventions to innovation-venture capital seed investment, angel investments,

and bootstrap financing? Can we get any useful breakdown by technology/industry and

by geographical region? Is there any way to know or estimate how much of this funding

is spent on technical work, such as R&D, rather than other business costs associated

with building a new enterprise? Is this money captured in the NSF survey? How well do

our working definitions of the stage in technology development from invention to innovation

correspond to the definitions of stage of development of a new firm or venture

(i.e., seed, early stage)? How are the definitions operationally different for different

industries/technologies? What is your interpretation of the significant shifts in the pattern

of early-stage resources in recent years? Are such patterns likely to be cyclical or

long range? Should venture capital investments be seen as national, regional, or local

in scope and coverage? In other words, is the concentration of venture capital investment

in the coasts, Texas, and a few other areas a reflection of where the venture capital

firms and wealthy angels are located, or is it a realistic reflection of the differences in

socio-economic capital, regionally?

INSTITUTIONAL INNOVATIONS: NETWORKS AND

INCUBATORS

As a broader community of would-be private-equity investors look for ways to participate

in the returns generated in 19992000, investors look for more efficient ways of


16/30

16

covering their due diligence, and entrepreneurs look for more effective ways to access

sources of capital, what new forms of networks and other institutional arrangements are

appearing? Are these new mechanisms achieving their goals? Do they provide a more

effective mechanism for covering the early-stage and seed-funding needs of high-tech

innovators? We learned last week that a new and substantial source of private equity is

from corporate venture funds. Are these a major factor in your experience? Are they

likely to grow? What more novel forms of finance are arising and what is their likely

future (angel mutual funds, venture capital-bank collaborations with debt capital

attached to equity investments, Internet packagers of angel deals?)?

TECHNOLOGY CASES

The questions here are similar to those for Panel 2 (above). But because these innovations

are largely in the life/medical science area, some additional issues are of special

interest:

To what extent was the early (seed) stage of the work funded by government (for

instance, NIH), and if so did the terms of the support encourage or discourage the

work required to make the business case for the innovation? Was the initial innovator in

a not-for-profit institution when the commercial effort was launched?

Was seed funding from an established medical or drug company, and if so, did it

fund the work in a non-profit organization or was the support for a new startup firm?

BEHAVIORALAND INSTITUTIONAL ISSUES

Against the background of Part I of the project working paper (summarizing practitioner


17/30

17

views on early-stage innovation), a group of leading behavioral economists, organizational

theorists, and a prominent angel investor discuss how risk, trust, objectives, information,

and institutions interact to define the particular obstacles and opportunities

facing technology entrepreneurs. Among the issues of interest:

How do we explain the proliferation of institutional forms supporting technology

development in the space between invention and innovation? How does the presence

of behavioral and institutional disjunctures complicate the task of assessing the supply

and demand for early-stage funding?

How do insights from behavioral financefor instance, loss aversion, status quo

bias, barn-door closing96 and herdinghelp us understand technological innovation,

particularly in the context of early-stage projects? Might such insights help us understand

the tendency of private-sector investments to concentrate at any point in time on

a limited subset of technological sectors (such as in the three years prior to March

2000, Internet, and biotech), as well as the strong variations over time in these preferred

sectors?

To what extent is the disjuncture between invention and innovation, as described

by practitioners, a transient phenomenon that we expect will be eliminated by institutional

adaptation, or, instead, a more fundamental phenomenon reflecting underlying

discontinuities (for instance, that between the definition of scientific success and that of

commercial success)?

MAPPING THE FUNDING FOR EARLY-STAGE

INNOVATION:

THE NUMBERS AND WHAT THEY MIGHT MEAN

With the initials results from the project team (Part II of the working paper) as a point of

reference, core contributors to the empirical literature on R&D and an experienced


18/30

18

technology manager discuss strategies for arriving at a comprehensive accounting of

project-level investments in early-stage technology development. Among the issues of

interest:

What definition (or set of definitions) of early-stage, technology-based inventionto-

innovation transition can be applied across the full range of potentially relevant institutional

settings (such as universities, existing corporations, startups)?

What published sources (such as raw data, surveys, empirical analyses) exist that

can be used to justify a first-approximation estimate of the relative magnitudes of funding

from key sources (private and public) that are used for project level R&D support for

early-stage technologies?

Aside from funding, what other measures of inputs might be used to construct a

comprehensive picture of the distribution support for early-stage technology creation?

TURNING IDEAS INTO PRODUCTS:

NEW PERSPECTIVES ON GROWTH THROUGH

INNOVATION

In a recent article, Weitzman (1998) presents a model of recombinant growth in which

new ideas arise from old ideas being reconfigured in new ways.97 Weitzmans model

suggests that the ultimate limits to growth may lie not as much in our ability to generate

new ideas, so much as in our ability to process an abundance of potentially new

seed ideas into usable forms. In this session, leading economists of innovation and

growth and a veteran technologist/CTO discuss the process of early-stage innovation

as it relates to long-term growth. Among the core issues:


19/30

19

I N V E N T I O N A N D I N N O VAT I O N

There is a subtle difference between these two words, but it is an important one for Business Studies students.

Inventionif the formulation of new ideas for products or processes

Innovationis all about the practical application of new inventions into marketable products or services

Most of us have visions of mad inventors who come up with ideas with no practical use! Like everything else in

Business Studies, we are interested in activities that actually help a firm meet its objectives, such as growth,

profitability, increased market share or stabilityso it is Innovation, rather than Invention, that really counts.

Innovations can fall into one of two categories:

P R O D U C T ( O R S E R V I C E ) I N N O V A T I O N

As the name suggests, this is all about launching new or improved products (or services) on to the market.

Advantages might include (note links to marketing)

First mover advantage which can include some of the following;

Higher prices and profitability

Added value

Opportunity to build early customer loyalty

Enhanced reputation as an innovative company

Public Relationse.g. news coverage

Increased market share


20/30

20

P R O C E S S I N N O VAT I O N

This has to do with finding better or more efficient ways of

producing existing products, or

delivering existing services.

CREATIVITY INVENTION AND INNOVATION

Innovation is closely associated with and flows out of creativity

- In practice, in most instances innovation can result from discovery or invention

- Most innovations occur in organizations of some kind

- Innovation works as a value adding process leading to commercialisation of ideas and inventions and ultimately to

a better business

- It is a common business notion that businesses need to innovate or they will not be competitive

- High-tech companies are more likely to have a pool of creative talent than other industries because of the changing

nature of technology

- Creativity is the essential source of all invention and innovation and is derived from imaginative thought rather

than from rational thought

- Creativity creates change

- Creativity is a process:


21/30

21

= Awareness and interest: the recognition of a problem or situation which engenders curiosity and compelling

interest to do something about it

= Preparation and understanding: early analysis, diagnosis and planning which increases understanding of how the

task might be approached and the situation remedied

= Absorption and incubation: working out the problem by seeking out possible solutions

= Inspiration and illumination

= Testing and verification

= Refinement and adjustment

= Acceptance and commitment: the creation in whatever form it exists must be sold to others as novel, attractive,

workable and cost effective

= Implementation: the solution must be sold or implemented successfully

- Success often requires relentless attention to making effective changes and improvements

- Creativity in business is needed to counter the effects of aging, complacency, obsolescence etc (new ideas become

old ideas)

- Managerial creativity is a vital factor contributing to business survival and success problem solving and problem

avoidance

- Seemingly nonsensical ideas can spawn creative solutions to complicated problems

- Sharing of ideas can lead to creative solutions

- Discovery can occur because of planned action to achieve a result, an accident or other methods

- Invention is making something new which will do something new or better


22/30

22

- Innovation is the application of an invention or an idea creativity is the thought process of the idea or invention,

innovation is its implementation

- Innovation can also be described as the generation, acceptance and implementation of new ideas, processes,

products or services techno-stress is a condition that affects those who cant cope with the rapidly changing world.

- Change needs to be managedhence, an innovation needs to be carefully considered before implementing it

- Change is often resisted some common reasons are:

= Uncertainty

= Threatened self interest

= Wrong perception of change

= Personal disruption to routine and self confidence

- Every effort must be made to reduce the negative effects of change on people

- Survival, rather than growth or change, must be given top priority

- Small firms generally have difficulty in deciding whether or not they need to grow and how fast they should grow

- Unless well managed, growth can seriously undermine resources

- It can be fatal to neglect a business opportunity if you are afraid of the growth of your business or the change in the

business.

- All innovation has a cost and that cost must be weighed against the benefits

- Although there are no businesses that can shrink themselves to success, there are those who have attempted

growth and gone bust


23/30

23

THE NEED FOR CREATIVITY AND INNOVATION

Innovation in a business is not an option, it is an imperative for survival

- John D Rockerfeller admonished his employees if they stuck to the old ways and didnt look towards new ways

and innovative methods of doing business

- Almost all innovations in the workplace is undertaken for a particular purpose and not for its own sake

- A business can survive or fail on whether or not it is conducive to change and embraces change

- Purposeful innovation destroys and makes obsolete the old ways/methods/products/services

- Innovation must have a purpose

- Innovation allows you to:

= Create a new business: the business had to be differentiated from all of the others by a unique business idea or

fulfils existing needs better

= Achieve total responsiveness to customer wants: pay close attention to what the target market wants adapt to the

change in customer needs and wants (become obsessed with dekivering quality products and services, too)

= Offset customer attrition: it is inevitable that you will lose customers over time so it is vital that you replenish the

customer base with new customers (a business can lose 50% of its customers in 3-5 years)

= Enhance value adding: make better use of your productive resources to add value to the business Something

cannot become a resource until a use is found for it Peter Drucker

= Offset product and process obsolescence: every existing product and service will inevitably become increasingly

irrelevant and thus obsolete

= Renew the product life cycle


24/30

24

= Create new technology life cycles. Limits in the success of a single product or service without improvements or

changes prompt businesses to innovate to overcome those limits and progress (once Robert Bannister changed his

training techniques, he was able to break the 4 minute mile and progress further)

= Once a technology has reached its peak, the only solution to stay in business is to change technology

= Help solve problemscomplex problems that cannot be solved by traditional, routine or common methods must

be solved by using an innovative solution

= Problem prevention

= Build a sustainable and competitive advantageinnovation is vital for business successdo something that your

competitors cant or something they havent heard of

- Innovation needs to be implemented carefully to fit in with the direction of the business and the product and with

the protection of resources in mind when resources are very limited

- Time is the biggest cost in innovation

- Can the firm afford not to make the change?

TYPES OF INNOVATION

Inventions

= Invention is the essential first stage of innovation

= One of the most visible forms of creativity at work

- New and Improved Products


25/30

25

= Product innovation is the most visible form of innovation

= The sources of satisfactions underlying the reason people buy them are varied (eg: Price,

service, quality perceptions)

= R&D is an essential part of the innovation process

= Often the products developed by smaller firms are bought by larger firms because of their

ability to realise the products true potential through their massive resource base

= Product improvement keeps manufacturers on edge because they have to keep up with the

competition, gain or sustain a competitive advantage

= Some innovators improve on existing products to the point where consumers believe that they

are new products

- New and Improved Services

= Services are intangible: quality is often harder to measure

= Service performance (delivery) and consumption are inseparable: the consumer is almost

always present while the service is being performed

= Services are perishable: this problem is overcome by using pricing schemes (eg: cheaper

tickets for matinee shows or off-peak rates etc)

= Services are labour intensive: it costs more to employ a person than a machine

= Services are more heterogeneous: because most services are different, it stands to reason

that each service will differ for each consumer


26/30

26

= Services are performed rather than produced: some companies, eg: pizza delivery, sell both

the tangible (pizza) and the intangible (delivery) and are judged on both

= Business has to improve in both service quality and consistency as well as improving

productivity and efficiency

= Innovation in service must be directed towards: recruitment, job skill, interpersonal relations,

customer service, attitude development, time management etc

- New and Improved work operations, processes and methods

= Process innovation is important for business

= All work operations must add value

= Unless operations are well planned and maintained, a business can self destruct

= Quality control is vital for successful business

= A Boeing 767 has six million parts, Boeing holds 25 million spare parts at any one given time,

Boeing manufactures the equivalent of 2 Jumbos a week in its 26 hectare building which houses

9000 employeesif one process fails, the flow of work can come to a grinding halt

= Waste and errors must be minimised, costs controlled, processes must be co-ordinated etc

= Innovation can be applied to improving all parts and components of the end product

- New and improved machine design, engineering and layout

= This applies especially to manufacturing


27/30

27

= Plant and office layout can either contribute to an increase or decrease in efficiency

- New Markets and Marketing Methods

= Some focus on improving their marketing and others focus on creating new markets or

expanding into new markets (market development)

= Market penetration can result from a careful marketing strategyie continually generating

new demand for their products

= Diversification can attract new buyers

= Innovation in marketing should not be ignored when redefining the companys goals

- Pattern Multiplying

= Devise new ways to do business

= Create a distinctive way to do business, such as franchising McDonalds burgers which was

innovative in its day

- Synthesis

= Combining existing products, services or process to create a new idea, product or service (eg:

adding convenience stores, motels, restaurants etc to petrol stations is an example of

combining existing services to create a new one)


28/30

28

- Replication

= Take someones good idea and apply it to a new situation

INNOVATION MYTHS

- Myth 1: Innovation is easy

= Innovation involves coming up with exciting ideas, the fun of discovery and creativity and

enjoying the rewards of a successful commercialisation of the new product or implementation of

a new process

= Making progress and solving frustrating problems can be exhilarating. In many innovation

projects there can be long periods in which little worthwhile seems to be happening, and the

daily grind of thinking, discussing, testing and running meetings

- Myth 2: Innovation can be planned as a logical step by step activity

= It is virtually impossible to plan an innovation project in fine detail

= You are moving through unfamiliar territory

= Employees must be accountable for their time and keep in mind that a business is not a social

club

= Broad guidelines and objectives need to be put into place


29/30

29

- Myth 3: Innovation depends totally on new technology

= Innovation can be the combination of existing technologies

= Innovation can be the restructuring of a system or process

- Myth 4: Innovation involves making big changes

= Some innovations are based on significant technological or scientific breakthroughs, but most

innovations come from small changes

= Small improvements to work methods can cut costs

= Small changes are less risky

- Myth 5: Creativity and innovation depend on dreamers

= All creativity begins as an intellectual activity but having a vision is not what creativity is all

aboutyou have to bring it to fruition

= You need focus, leadership and resources to transform an idea into a reality

- Myth 6: Most Innovation has an unacceptably long lead time

= Some forms of innovation take a long time, but most innovations are the outcome of small

projects to improve existing projects

= If the business has achieved an innovative culture, it will take less time to implement

innovations within the business


30/30

- Myth 7: Innovation is too risky for small firms

= Refusing to change is far riskier than changing

= Making many small innovations, rather than large innovations, reduces the risks involved

- Myth 8: No business can have too much innovation

= Innovation must have a defined and predetermined purposeinnovation for innovations sake

is worthless and can be detrimental

= Innovations must result from strategic decisions to make specific changes

- Myth 9: Innovation is really only appropriate for manufacturers

= Innovation stems from knowledge so a change in a companys knowledge, be it a

manufacture, service or retail business can be considered an innovation

- Myth 10: Innovation really only needs money

= Sometimes there is a financial cost involved in innovation, but there are some resources

needed for innovation that money cant buy praise for workers, non-financial incentives etc

Introduction Clg

Documents

Transcript of Introduction Clg