“Innovative, creative thinking in entrepreneurship” · Training material for non-formal education program “Innovative, creative thinking in entrepreneurship” Module 1. INNOVATION

Training material for non-formal education program

“Innovative, creative thinking in entrepreneurship”

Module 1. INNOVATION AND INNOVATIVE ENTREPRENEURSHIP

The material has been developed within the framework of Nordplus Adult project “INNOSTARTUP”, project number: NPAD-2014/10053

Project partners:

Zemgale Region Human Resource and Competences Development Centre (Latvia)

Šiauliai City Municipality Education Center (Lithuania)

Tavastia Education Consortium (Finland)

2 Project “INNOSTARTUP”, project number: NPAD-2014/10053

Authors:

Līga Miķelsone

Elīna Miķelsone

May 2016 Access to training material: https://innostartupproject.wordpress.com/materials/ LEGAL NOTICE This project has been funded with the support from the Nordplus Adult programme financed by The Nordic Council of Ministers.

https://innostartupproject.wordpress.com/materials/


MODULE 1. INNOVATION AND INNOVATIVE ENTERPRENEURSHIP

Contents

Learning outcomes .......................................................................................................... 4

Key words ....................................................................................................................... 5

1. Innovations and their Basic Principles .................................................................... 6

1.1. Definitions of Innovation ................................................................................. 7

1.2. Principles of innovation ................................................................................... 9

1.3. Preconditions of Innovation ............................................................................... 10

2. Sources of Innovation ............................................................................................... 11

3.Different Ways of Innovation Classification ............................................................. 14

3.1. Product, Process, Marketing, Organization Innovation ..................................... 14

3.2. Gradual and Radical Innovation ........................................................................ 15

3.3. Technological and Non-technological Innovation ............................................. 15

3.4 Open and Closed Innovation ............................................................................... 16

3.5. New Concepts of Innovation ............................................................................. 17

4. Innovation Process .................................................................................................... 18

5. Innovation management ............................................................................................ 20

6. Innovative Company, its Characteristics .................................................................. 22

Bibliography ................................................................................................................. 24

Tasks and activities ....................................................................................................... 27

Module assessment scheme .......................................................................................... 30

Handouts and presentations .......................................................................................... 31

Additional presentations comments for trainers ....................................................... 31


LEARNING OUTCOMES

Innovation has been the drive for development since the dawn of mankind, but the term itself is relatively new and there isn’t a common understanding of its definition and it has been tried to define by economists, politicians and other experts.

The aim of Module No. 1 is to give basic knowledge of what innovation is from theoretical perspective, as well as review practical examples and strengthen the knowledge by various tasks.

The first module has six chapters. The first chapter gives the definition and essence of the term Innovation. The second chapter reviews various sources of innovation. The third chapter lays out ways of classifying innovation by various criteria. The fourth chapter gives an insight into the essence of innovation process, the fifth chapter looks on the ways of managing innovation, and the sixth chapter gives the characteristics of innovative organization.

It takes 16 hours to go through the first module. The knowledge acquired in this module is fundamental in understanding the rest of the course.

Finishing the module, the students will know:

1. What innovations and their sources are;

2. What types of innovations there are;

3. What an innovation process is;

4. What an innovation management is;

5. What an innovative organization is.

The students will be able to demonstrate:

1. Skills to recognize an innovation and to distinguish its types;

2. The ability to spot the sources of innovation;

3. The proficiency to describe innovation process and innovation management;

4. Skills to describe an innovative organization.

The learners will be able to:

1. Understand the term innovation and its essence – what is and what is not innovation, which are the preconditions and fundamentals;

2. Understand the potential sources of innovation;

3. Describe the variety of innovation;

4. Describe an innovation process, an innovation management and an innovative organization.


KEY WORDS

Innovation, definition of innovation, sources of innovation, classification of innovation, innovation processes, innovation culture, characteristics of innovative organization, product/ process/ marketing/ organization innovation, gradual/ radical innovation, technological/ non-technological innovation, closed/ open innovation.


1. INNOVATIONS AND THEIR BASIC PRINCIPLES

Task no 1.1. Recall an innovative product or service which you have encountered in your life – describe why you consider it innovative.

_______________________________________________________________________________________________________________________________________________________________________________________________________________

Currently – at the age of information based economy the role of innovations becomes even more crucial.

The role of innovations has been widely discussed nowadays, because of the drawn conclusion, that it is the main precondition for the ability to maintain competitiveness of economy (Porter, 1985); (Christensen et al., 2003), (Tidd et al., 2005) and business (O’Reilly, 2008), (Chirstensent al., 2003); (Nooteboom, 1999). The main motivating factors for implementing innovations in a company are covered by Oslo Manual:

1. Improvement of company operations;

2. Improvement of productivity;

3. Increase the ability to create innovations;

4. Maintaining competitiveness and creation of competitive advantage (OECD,

2005).

As it seems innovations are a crucial element of our age, but what is innovations? There is a variety of definitions, but they all have common consensus on these elements:

1. Innovation is the main force behind economic development and has existed

since the dawn of the mankind;

2. Innovation is the process and the effect of the process can be managed to

influence its results;

3. The result of the innovative process gives measurable benefits to the parties

involved;

4. Most well-known manifestation of innovations are the development of new

products, manufacturing of product from new materials, development of

new product design, method or strategy that is used to achieve better

results;

5. Invention is a part of innovation.

Innovation as a concept is not limited to business activities – it is also becoming a widely used term in other fields (Godin, 2008), for example, biologists explore innovative practices in animal kingdom (Reeder et al., 2003), while chemists try to synthesize new compounds, that can stimulate innovative human behavior (Greely et al., 2008).


1.1. Definitions of Innovation

Task no 1.2 Make groups of five people. Each member of the group chooses one of the following concepts – innovative product, innovative individual, innovative organization, innovative process and innovative result – and writes down his definition of the term (10 minutes). Then everybody introduces others with one’s definition and it is followed by a discussion with a goal to make a common definition of the term ‘’innovation’’ within the group. The definition must be written down (20 min).

_______________________________________________________________________________________________________________________________________________________________________________________________________________

The term innovation has been defined in various ways and each definition encompasses a different aspect of the concept:

1. An innovation is the implementation of a new or significantly improved

product (good or service), or a process, a new marketing method, or a new

organizational method in business practices, workplace, organization or

external relations (OECD, 2005).

2. The minimum requirement for an innovation is that the product, process,

marketing method or organizational method must be new (or significantly

improved) to the company. This includes products, processes and methods

that companies are the first to develop and those that have been adopted

from other companies or organizations (OECD, 2005).

3. A common feature of an innovation is that it must have been implemented.

A new or improved product is implemented when it is launched on the

market. New processes, marketing methods or organizational methods are

implemented when they are brought into actual use in the company

operations (OECD, 2005).

4. An innovation is defined as:

The introduction of a new item that is one with which consumers are not

familiar yet, or of a new quality of an existing item.

The introduction of a new method of production, which needs by no means

be founded upon a discovery of something scientifically new, and can also

exist in a new way of handling a commodity commercially.

The opening of a new market; that is the market into which a particular

branch of manufacturer of the country in question has not previously

entered, whether or not this market has existed before.

The conquest of a new source of raw material supply or half-manufactured

goods, again irrespective to whether this source has already existed or

whether it has first been created.


Carrying out of a new organization of any industry, like the creation of a

monopoly position (for example through trustification) or breaking up of a

monopoly position (Schumpeter, 1934).

5. In an essential sense, innovation concerns the search for, and the discovery,

experimentation, development, imitation, and adoption of new products,

new production processes and new organizational set-ups (Dosi, 1988).

Tags: new ideas; process; results; demand.

! Innovation is the invention + implementation.

! To become an innovation, the idea has to be realized and has to create value.

To better understand what innovation is and what it is not, The Oslo Manual points out changes in company, which are not innovations:

Trading of new or improved products by wholesalers, retailers, warehouses

and transport companies are not considered innovations;

Purchasing or minimal upgrading of hardware that is identical to already

installed one or extension or modernization is not innovation. New

hardware or upgrade must be new in the company un must contain

significant technical improvements;

Firms engaged in product production and make single and often complex

items according to customers’ orders. Unless the one-off item displays

significantly different attributes from products that the firm has previously

made, it is not a product innovation.

Changes in the price of the product or the productivity of the process as a

result of change in factual prices;

If a company suspends some activities aimed at improving its efficiency, it

is not an innovation;

In certain industries such as clothing and footwear there are seasonal

changes in the type of goods or services provided which may be

accompanied by changes in the appearance of the products concerned.

These types of routine changes in design are generally neither product nor

marketing innovations. For example, the introduction of new season

anoraks by a clothing manufacturer is not a product innovation unless the

anoraks have, for example, a lining with significantly improved

characteristics. However, if the occasion of seasonal changes is used for a

fundamental change in product design that is a part of a new marketing

approach used for the first time by the firm, this should be considered a

marketing innovation (OECD, 2005).


Task no 1.3. Does the newly acquired information improve your understanding of the concept of innovation? How would you complement your previously made definition of innovation? Introduce others with your complemented definition and think of a practical example which reflects this definition! (15 minutes)

Definition of innovation Example

1.2. Principles of innovation

The principles of innovation help understand better the essence of the concept. P. Druker has laid down 5 principles of innovation (Drucker, 1993):

1. Begin with an analysis of the opportunity. It starts with the reflection on

potential sources of innovation. For example company Lego has a vast range

of instruments and methods how to get information about the habits of its

clients – from Lego conventions where the users can express their thoughts

on the product, to experiments where the a person is allowed to use (or

better say play) with the product.

2. Analyze the opportunity to see if people will be interested in using the

innovation. For example P&G (Procter and Gamble) has implemented a

system which makes the company employees on all levels to contact with its

clients, to better understand needs regarding the existing products and their

willingness to use new or improved products.

3. To be effective, the innovation must be simple and clearly focused on a

specific need, for example Lego created a new series for girls called Lego

Friends.

4. Effective innovations start small. For example, Apple found a solution to

three fundamental problems of portative computers by implementing new

power packs which were more energy efficient thus reducing the computer

heat as a result making cooling fans unnecessary. Getting rid of the cooling

fans made the computers smaller, quitter and cooler.

5. The aim is to become a market leader in a certain environment. The

company Tata-Nano made their cars specifically for Indians who are used to

riding scooters.

Task no 1.4. Each participant, using any three objects around him/her, creates something new (10 minutes) and argues whether their creation is an innovation.


1.3. Preconditions of Innovation

Some researchers write about the preconditions of innovation, for example, Skarzynski and his partners have identified 3 crucial preconditions – time and space, diverse thinking, combinational chemistry (see figure No 1.1.)

Figure no. 1.1. Preconditions of innovation

Source: Skarzynski et al. (2008)

Innovations have to have a defined time and space where people can operate within the process of innovation – that is to generate ideas and experiment. For example Lattelecom has created a special ‘’Thought space’’. Google has 70/20/10 law, which allows employees to use 10% of work time for their projects, 20% for strategic goals and 70% for their direct work. Such companies as 3M and Gore have followed the example of Google by giving their employees respectively 15% and 10% of their time for innovations.

Diverse thinking is also crucial for innovations. To create such a thinking company one needs:

1. Analytical and creative thinking;

2. People from different levels in the organization;

3. People with and without experience;

4. People of different ages;

5. People who master technologies and people who master people’s

psychology;

6. People from within and outside company.

The third precondition is to make the combinational chemistry, by making the structure of the company open to such initiatives, provide free flow of ideas etc.

Task no 1.5. Each group of three people (the groups must be formed by people with different characteristics) must create something new using 3 objects around them (10 minutes) and argue whether their creation is an innovation. When was it easier to come up with an idea – by yourself or in a group making the combinational chemistry?

Time and space

Diverse thinking

Combinational chemistry


2. SOURCES OF INNOVATION

P. Drucker suggested that purposeful, systematic innovation begins with the analysis of opportunities, and classifies “Seven Sources of Innovative Opportunity”. The first four lie within business or industry and second set of sources outside business or industry (Drucker, 1993).

Sources within Business or Industry:

Source of Innovation Number 1: Unexpected Success and Failures. For example, an unexpected success came when IBM calculating machines for banks started to be used by libraries; Ford Edsel failure which leads to legendary Ford Mustang production. Unexpected innovation often is the continuation of existing work, where existing knowledge and experience are used.

Source of Innovation Number 2: Incongruities. Discrepancy and dissonance between what is and what "ought" to be, or between what is and what everybody assumes to be. There could be incongruity between the reality of an industry, and the assumptions about it, for example, Nikita Khrushchev (Russian politician who led the Soviet Union during the part of the Cold War) was wrong when saying that "the Russians will never want to be car owners – taxis are cheaper’’. He did not take into account the fact that the vehicles mean something much more than reduced costs, they also mean freedom, mobility, etc. There could be incongruity between perceived and actual customer values and expectations, for example, the request for a small car with still enough space inside seems to be incongruent. This, however, was solved in a new design as the Smart. There is also incongruity within the rhythm or logics of a process, for example, eye surgeons had one important problem in surgeries – cataract ligament sectioning. But Alcon enzyme solved this problem since it was able to break cataract ligaments with some drops of Alcon. This enzyme was created from a certain enzyme, which only needed to find the way to preserve it longer. The possibility of incompatibility usually sees who works in a particular sector.

Source of Innovation Number 3: Innovation Based on Process Needs. Incongruities in process needs essentially look for a weak or missing link in an existing process. There could even be the situation when everybody is aware of the problem, but there is no solution, for example, the reflectors on highways in the United States and Japan. In order to create successful solutions, it is necessary to understand the users' needs and have knowledge of a particular subject.

Source of Innovation Number 4: Changes in Industry and Market Structures. Changes in industry and market structures usually take place as a result of changing customer preferences, tastes and new values. For example, the rapid growth of a particular industry is a reliable indicator of changing industry structures, like it was when, Japanese penetration of the USA auto market with smaller and more fuel-efficient cars when there was a dramatic increase in gasoline price. It allowed them to take advantage of changing consumer preferences for vehicles. So these could be social, political or technological changes. For example, first aid centers in the USA were developed on the basis of changes in industry.

Changes outside Business or Industry:


Source of Innovation Number 5: Demographics (population changes). Demographics and population changes (age, education, disposable income, geographic shift, etc.,) are one of the most reliable predictors of the future. For example, the ”aging” of Europe and the decrease of birth rate means that there will be an increase in demand for products, which elderly people use. An increase of the number of people in retirement age will decline market need for the products for young people. For example, in Japan there is a rapid increase in the development of robots, because they understand that there will be lack of low skilled labour.

Source of Innovation Number 6: Changes in Meaning and Perception. That is how we look at the facts, they do not change, but change their meaning, such as health indicators in recent decades have greatly improved, but we are health conscious even more than before, so there is the development in healthcare journals, healthy food and other businesses etc.

Source of Innovation Number 7: New Knowledge (scientific and non-scientific). New knowledge can be a source of innovative opportunities but has the longest lead time of all innovations. Knowledge-based innovations are almost never based on one factor but on the convergence of several different kinds of knowledge. For example, the jet engine was originally patented in 1930. Its first military test was in 1941 and the first commercial jet plane was the Comet in 1952. Boeing eventually developed the707 in 1958, 28 years after the patent and required the convergence of the technologies of aerodynamics, new materials, and fuels.

There are also other approaches how to classify the innovation sources, for example, we can classify two kinds of innovation sources:

Science push. Studies have shown that companies that invest in research and development operate more efficiently, with greater market value and sales growth (EARTO, 2002). For example, biotechnology, nanotechnology, etc. have been the source of many innovations.

Demand pull. Such as human desire for more compact, multifunctional phones, encourages manufacturers to create ever-new solutions.

Referred to other research the sources of innovation could be new technologies, scientific research and discoveries, niche markets, customer requirements, competitive bid, standards and legislation, cooperation with customers, experts and other interested parties, etc.(Gilliard, 2014). There is a tendency that more and more people are involved in innovation processes and topical issue in the open innovation paradigm, where external sources are very important. External creators of open innovation in practice, see in figure 2.1.


Figure no. 2.2.Open innovation external innovation sources

Source: ATKearney (2013)

Customers and users as sources of innovation are becoming more common because they are the most motivated to find solutions and understand best what is important for them. For example, the sailing boat 'Laser' design was created by the Olympic athletes – Bruce Kirby, Ian Bruce and Hans Fogh.

Close links with competitors, suppliers and providers of complementary products can b ea source of innovation. For example, Kodak and Fuji were competitors on the camera and film market, but now Fuji is supplemented by Kodak.

Task no 2.1. Which sources of innovation do you think are the most promising? Explain your idea. (10 min)

_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

External innovation

sources

Clients

Suppliers

Employees Users

Strategic partners


3. DIFFERENT WAYS OF INNOVATION

CLASSIFICATION

Innovation can be classified by its results, pace of implementation, significance, process of cooperation etc. Each of the innovations can be classified in many different ways, for example, iPhone 6 could be considered as a technological innovation as well as product innovation or gradual innovation, etc.

3.1. Product, Process, Marketing, Organization Innovation

A product innovation is the introduction of goods or services which are new or significantly improved with respect to their characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics. Examples – e-book readers, Walkman or GPS. Improved product innovations are a new model of Gillette razors or a new smartphone model.

A process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software. Examples – implementation of barcodes or new machinery in the process of manufacturing, use of computers in product design, new methods of supply etc.

A marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing. Examples –mineral water producer Zaķumuiža fills its water in bottles as well as different types of plastic containers like small yogurt cups. As a marketing innovation, an unusual advertisement in social networks or new methods of funding using Kikstarter may be considered etc.

An organization innovation is the implementation of a new organizational method in the company business practices, workplace organization or external relations. Examples – remote work opportunities or non-hierarchical organization of company or self organization, like transport sharing network Uber.

Task no 3.1. Try to think of 3 examples of each of the given classes (10 min). Discuss these examples in group and write down the examples of others (30 min).

Product innovation

Process innovation

Marketing innovation

Organization innovation

World

Country

Your company (or your potential company)


3.2. Gradual and Radical Innovation

By their pace and significance innovation can be categorized as either gradual or radical innovation (Schumpeter, 1934) (Garcia et al., 2002).

Gradual innovation is a continuous and uninterrupted process, in which minor changes or improvements are made in the product or service. Gradual innovation helps to maintain competitiveness and position in the market and helps to find new solutions and functions for the already existing products, processes etc. A good example is the evolution of means of writing with ink – from simple quills to advanced ballpoint pens. Other example is the Internet which becomes faster.

Radical innovation is a process, which brings fundamental changes and principal novelty in the industry, technology or organization. The innovation materializes in creation of totally new product, e.g. steam engine, television, wireless internet etc.

Usually are radical innovation forms the base for gradual innovation like in the case of television which gave way to innovations in technological development in other fields, such as marketing.

Gradual innovation can be compared to evolution, which happens step by step, but radical innovation can be considered as a great leap, which results in a new product and it is possible that it makes the previous product obsolete.

Task no 3.2. Name one incremental innovation and one radical innovation (10 min)

Gradual innovation Radical innovation

World

Country

3.3. Technological and Non-technological Innovation

All innovations can be divided as either technological or non-technological innovations.

Technological innovation is a process, in which new or improved technologies are developed and used in manufacturing and the implementation of new products or processes. These kinds of innovations are usually product and process innovations. They are characterized by the need of greater financial investments (in permanent assets and purchasing of non-material assets) and that it is easier for competitors to mimic or copy them (Scmidt et al, 2007). Examples are the implementation of internet banks or interactive television.


Non-technological innovation is a novel organizational or marketing method, which increases the value of clients in the company (Scmitdt et al, 2007). The main kinds of non-technological innovation are a marketing, strategic, ecologic, brand, business model, a supply chain, financial and other innovations. These innovations require less financial investments and they are harder to be copied by competitors (Scmidt et al, 2007). Examples are lean management, creation of training and motivation systems for employees, economizing recourses etc.

Researches indicate a positive effect of the combination of both technological and non-technological innovations for company operations and the ability to implement novelties in the market (Mothe et al., 2010). If a new product is created (a technological innovation), its success can be vastly improved by non-technological innovations.

Task no 3.3. Use the examples of innovation in previous tasks and categorize them as technological and non-technological innovations, create new examples (10 min)

Innovation

Technological innovation

Non-technological innovation

3.4. Open and Closed Innovation

A company can choose between open and closed innovations or combinations of both as in the case of Procter&Gamble.

Open innovation is a strategy, in which company acquires the knowledge from different sources and a partnership is of a great importance.

Closed innovation is a strategy based on contracting experts and developing the innovation inside organization.

Closed Innovation Principles Open Innovation Principles

Most of smart people in our field work for us

Not all the smart people work for us, so we must find and tap the knowledge and expertise of bright individuals outside our company

To profit from R&D, we must discover, develop and ship ourselves

External R&D can create significant value; internal R&D is needed to claim


some portion of that value

If we discover it, we will get it to market first

We don't have to originate the research in order to profit from it

If we are the 1st to commercialize, we will win

Building a better business model is better than getting to market first

If we create the most and the best ideas in the industry, we will win

If we make the best use of internal and external ideas, we will win

Table no 3.1. Difference between open and closed innovation

Source: Chesbrough (2003)

3.5. New Concepts of Innovation

Various researches continue quest for new possible classifications and many of them have been called future conceptions.

Customer-based Innovation is all about finding new and more profound ways to engage with customers and develop deeper relationships with them.

Proactive business model Innovation is a business model which defines how to create and capture value within a value chain, considering both operations and strategy.

Frugal Innovation, sometimes referred to, almost interchangeably, as ‘Reverse Innovation’, is all about originating and developing innovations in lower-income, emerging markets, taking the needs of poor consumers as a starting point, then transferring, adapting, applying and distributing them in developed markets.

High Speed/Low Risk Innovation is about reducing the time to market and selectively to increase the speed of product cycles. If there is a chance to make accurate virtual simulations, these processes may also be considered High speed/low risk innovations.

Integrated Innovation is all about taking innovation approaches that were once the domain of New Product Development only – such as idea management, stage gates and portfolio optimization – and applying them consistently as an integral part of business strategy to achieve not only growth but also competitiveness. (Eager et al, 2011).

There are also new innovation concepts such as blue ocean innovation (Kim et al., 2005), organic innovation (Moore, 2005), etc.

Task no 3.4. Classify the products in presentation by the first 3 classifications (10 min)

Task no 3.5. Imagine you are the manager of a toy factory, which manufactures paper dolls. What kind of process, product, marketing and organization innovations you could implement (20 min)


4. INNOVATION PROCESS

There are many views of how to define the innovation process, but one of the well-known conceptions is a theory of author A.T. Kearny – that innovation process consists of three parts – idea management, development processes and launch/ continuous improvements (IMP3prove, 2014) , See Figure 4.1.

Figure no.4. 1. Innovation process

Source: developed on the basis of IMP3prove (2014)

The first part of innovation process is idea management. It consists of two parts – idea generation and idea development. Usually the first part is used to find a solution to a defined problem. Ideas could be created by a closed group(using a variety of methods described in Modules 2 and 3), or the process of creation could involve many parties, such as customers, partners, suppliers, etc. Ideas could be created after a competitor or partner analysis (more in Chapter 2). This process involves also idea management – idea evaluation and project/business plan development.

The second part of the innovation process is development processes, which includes research, development and deployment. The second phase may include a variety of activities:

• Research and scientific basis.

•Invention and intellectual protection.

•Prototype, pilot development, testing and improvement.

•Implementation planning.

•The required purchase of technology or the improvement.

•The launch.

The third phase is the launch/continuous improvements. At this stage the most important activities are innovation marketing, controlling, monitoring. Innovation process in organization can be managed by a particular manager (the enterprise, innovation or project manager), which carries out the process of innovation management in collaboration with stakeholders. But it is possible that each stage of the innovation process has its own responsible person.

Task no 4.1. Identify the process of innovation within your company or life and describe each stage of the innovation process management (20 min).

Idea management Development

processes Launch/ continuous

improvements


Description

Name of innovation

Idea management

Development processes

Launch/ continuous improvements


5. INNOVATION MANAGEMENT

In chapter 4 we discussed the innovation process which reflects the innovation life cycle-from an idea to market. Innovation management’s goal is to successfully implement the innovation. On the base of it there is an innovation process, but the innovation management is a complex system, which includes other components essential for innovation management.“A.T. Kearney House of Innovation” reflects a complex nature of innovation management. See Figure5.1.

Figure no. 5.1. “A.T. Kearney House of Innovation”

Source: A.T. Kearney (2013)

‘’A.T. Kearney House of Innovation” concept covers all innovation management elements – from innovation strategy, innovation organization and culture to the innovation process (innovation life cycle management) and the enabling factors of innovation management (human resource management, IP-/knowledge management, project and program management, controlling, IT management), innovation results.

So far, we have already learned about the innovation process (innovation life cycle) (see. Chapter 4) but other innovation management components are not less important.

An important part of innovation management is innovation strategy. It should define and document the company innovation objectives, setting priorities and goals, provide long-term perspective and feedback on their implementation. If a company does not have a separate innovation strategy (document defining the company's vision for innovation, and future market prospects), it should be viewed in the context of the company's development strategy – there is an innovation component in it.


Also company's innovation culture is very important. A culture of innovation is the environment that supports creative thinking and advances efforts to extract economic and social value from knowledge, and, in doing so, generates innovation. Culture of innovation is characterized by:

1. the values of the company – initiative, promoting initiative, continuous

process of learning and encouraging the spread of knowledge;

2. systems, such as the stimulation of innovation, knowledge management,

etc.;

3. processes ranging from investment in improvements to systematic

innovation management.

The culture of innovation within the company determines company’s strategy, rules, management, pay and other motivators, work environment, research and development, the company's microclimate. A healthy culture of innovation has a shared set of values and mutually reinforces beliefs on the importance of innovation as well as an integrated pattern of behavior that supports research and innovation (Hepburn, 2013). A thriving culture of innovation can leverage the existing strengths of a given research and innovation ecosystems (Hepburn, 2013).

In innovation management, the enabling factors of innovation management play an important role, which is the basis for ‘’A.T. Kearney House of Innovation”. Resources are necessary, such as, people with relevant knowledge and ability to manage and control processes and technology, to realize innovation management. So, human resource management is very important (includes personnel management and maintenance of qualification and training), knowledge management (knowledge creation, storage, dissemination and exploitation process), quality management, project management, etc.

Task no.5.1. Answer the following questions:

1. Has your company (an existing or emerging company, or any well-known

company) got a separate strategy for innovation or is innovation component

included in general business strategies?)

2. How do you evaluate a current innovation culture in the organization?

3. What are the enabling factors in the organization?


6. INNOVATIVE COMPANY, ITS CHARACTERISTICS

What is an innovative organization? There isn’t one answer and there are many theories of how to spot one. For example, the EU published material 'Innovation Management and the Knowledge-Driven Economy', in which it is noted that the innovative company is the one which in the last three years has introduced new or improved products, processes or services (EC, 2004), but the 'Oslo Manual' gives such definition – an innovative firm is the one that has implemented an innovation during the period under review (OECD2005).

Even a country can have its own definition of it and criteria for innovative company. For example, in Latvia an innovative company is the company that over the past three years has launched at least one new competitive product/service or used new technology to increase the competitiveness, plus it should be based on the knowledge which is created in the company or in cooperation with scientific research institutions (universities), individual experts in the field, or with other companies, plus the invested funds into new product or service development must be at least 0.5% of its annual turnover. Not only these three criteria should be met to be considered an innovative company in Latvia but also at least two of the following three criteria: at least 25% of company turnover comes from products or services, the implementation of which the market has started not earlier than5 years ago; profit from new (not older than 5years) products or services are at least 10% of the total profit; new products or services provided at least 5% increase in turnover in the year (LTC, 2007).

This innovative company description has one essential weakness-it does not include human factors-people knowledge and skills, but the advantage that it focuses on measurable results.

There are other innovative business concepts that focus on non-measurable outcomes, such as Joe Tidd and John Bessant (see Table 6.2.).

Criteria Features

Shared vision, leadership desire to innovate

Clear objectives, flexible plans, employee involvement.

Appropriate structure Structure of the organization that promotes interaction, creativity, and learning.

Leaders and individuals In a variety of roles that promote innovation, such as supporters, leaders, etc.

Continuous individual development

Long-term orientation to education and learning, in order to ensure a high level of competence and skills to learn effectively.

A wide range of communication network

A wide range of communication network within the organization and from the outside world.

High levels of participation in Employee participation in organization-wide


innovation processes continuous improvement activities.

External focus Internal and external customer orientation. Total quality culture.

Creative atmosphere Positive approach to creative ideas supported by the incentive compensation system.

The company is constantly studying

High-level involvement within the company and outside the company, proactive experimentation, finding solutions and finding, communicating and sharing their experiences, knowledge, perception and distribution.

Table no 6.2. Innovative company components and features

Source: Tidd et al. (2001)

So it can be concluded that there is a variety of innovative enterprise conceptions, which can be characterized by:

1. measurable indicators, such as the assessment of the company investment

in research and development of new products, sales of new products and

profit from them, etc. ;

2. not measurable company components and evaluation of the features, such

as the creative atmosphere of participation levels, etc.

Comprehensive view of the innovative companies can provide a plan of both types of indicators.

! Innovative business is closely linked with innovative organizations (TIDD et. al., 2001), so businesses following criteria may also be applied to other types of organizations in assessing whether they are innovative organizations.

! There are various stools which help to identify not only innovative companies, but also their innovation capacity, for example through 'innovation capacity self-assessment' (see: http://www.innosupport.net/index.php?id=2229)

Task no. 6.1. Which 3 criteria could characterize innovative enterprise best in your opinion (15 min)?

http://www.innosupport.net/index.php?id=2229


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TASKS AND ACTIVITIES

Task no 1. Recall an innovative product or service which you have encountered in your life – describe why you consider it innovative.

Task no 2. Make groups of five people. Each member of the group chooses one of the following concepts – innovative product, innovative individual, innovative organization, innovative process and innovative result – and writes down his definition of the term (10 minutes). Then everybody introduces others with one’s definition and it is followed by a discussion with a goal to make a common definition of the term ‘’innovation’’ within the group. The definition must be written down (20 min).

Task no 3. Does the newly acquired information improve your understanding of the concept of innovation? How would you complement your previously made definition of innovation? Introduce others with your complemented definition and think of a practical example which reflects this definition! (15 minutes)

Definition of innovation Example

Task no 4. Recall an innovative product or service which have begun with analysis (5min)

Task no 5. Recall an innovative product or service which you would like to use (5min)

Task no 6. Recall an innovative product or service which is simple and focused

(5min)

Task no 7. Recall an innovative product or service which had started ‘’small’’ (5min)

Task no 8. Recall an innovative product or service which have the aim to be market leader (5min)

Task no 9. Each participant, using any three objects around him/her, creates something new (10 minutes) and argues whether their creation is an innovation.

Task no 10. Each group of three people (the groups must be formed by people with different characteristics) must create something new using 3 objects around them (10 minutes) and argue whether their creation is an innovation. When was it easier to come up with an idea – by yourself or in a group making the combinational chemistry?

Task no 11. Which sources of innovation do you think are the most promising? Explain your idea (10 min)

Task no 12. Try to think of 3 examples of each of the given classes (10 min). Discuss these examples in group and write down the examples of others (30 min).


Product innovation

Process innovation

Marketing innovation

Organization innovation

World

Country

Your company (or your potential company)

Task no 13. Name one incremental innovation and one radical innovation (10 min)

Gradual innovation Radical innovation

World

Country

Task no 14. Use the examples of innovation in previous tasks and categorize them as technological and non-technological innovations, create new examples (10 min)

Innovation

Technological innovation

Non-technological innovation

Task no 15. Classify the products in presentation by the first 3 classifications (10 min)

Task no 16. Imagine you are the manager of a toy factory, which manufactures paper dolls. What kind of process, product, marketing and organization innovations you could implement (20 min)

Task no 17. Identify the process of innovation within your company or life and describe each stage of the innovation process management (20 min).


Description

Name of innovation

Idea management

Development processes

Launch/ continuous improvements

Task no 18. Answer the following questions:

Has your company (an existing or emerging company, or any well-known company) got a separate strategy for innovation or is innovation component included in general business strategies?)

How do you evaluate a current innovation culture in the organization?

What are the enabling factors in the organization?

Task no 19. Which 3 criteria could characterize innovative enterprise best in your opinion (15 min)?

Task no 20. What are these products in presentation, what kind of main functions they have (15 min) ?


MODULE ASSESSMENT SCHEME

Achievement of learning outcomes will be tested and assessed after every topic by questions with tasks.

At the end of every question there will be the task but at the end of the whole theme there will be one task which summarises all the knowledge acquired.

There will be individual tasks and group tasks, but at the end there is a discussion which helps to develop knowledge in cooperation.

Learning outcomes will be tested as an activity and on the basis of accuracy of the tasks fulfilment.

After every task the trainer gives comments and summative assessment, the best performer of the task could be praised.

Figure 9. Task and assessment scheme

Theme

Summative task/ Assessment

Question 1

Task/ Assessment

Question 2

Task/ Assessment


HANDOUTS AND PRESENTATIONS

Handout for students – from Chapter 1 to Bibliography.

Presentations – there are 4 presentations.

Additional presentations comments for trainers

Presentation no.1

Slide no.2. Gradual increase in temp and complicity is needed to advance to next module. It is expected, that the participant will acquire [..]. This module will give the maximum benefit to those who will find interest in subjects regarding innovations and have stimulus to search and create innovations and the information about them.

Slide no. 5. In conclusion it must be said that there is no common ground on the definition of the term innovation and there isn’t one correct answer. Available literature is vast and researchers who work in the field of innovation give different definitions, but there are some common points in the understanding of what innovationis:

1. Innovation is the main driving force behind economic development and has been since the dawn of mankind;

2. Innovation is a process and it can be manageable to influence the results;

3. Innovation process is beneficial to all the parties involved;

4. Innovation manifests itself as a development of a new product, creating the product from new materials, new ways of using familiar products and technologies, new designs of product, new method or strategy that can be used to achieve better results.

5. Inventions are part of innovations.

The term innovation is not restricted only to the field of entrepreneurship

Slide No. 14. For idea to become an innovation it has to be realized, and it’s the lesson that has been taught since the early childhood through fairytales. One of such fairytales is a tale of mouse council. The mice in the council had decided that they need to put a tinkler on the tail of the cat. But as none of the mice was brave enough the idea was never realized and so it didn’t become an innovation.

Presentation no. 2

Slide no. 4. Danish company Lego has the system which allows clients to create their own sets of LEGO. It’s a great way for the company to get feedback from its customers and when combined with the minds of LEGO designers these ideas become truly innovative toys. Before using this system LEGO as most other companies relied on contact groups and interviews, but such methods work with the already existing products and don’t bring much in for LEGO. But when a customer sees his idea realized he is ready to pay higher price for his unique set of LEGO. The system also brings other benefits such as ability to put customer’s ideas on vote and see which potential products attract the most audience.


Slide no. 6. Fundamental aspect of innovation is its ability to be attractive to use. P&G implemented the system which made employees from all levels of company to contact with clients to find out which products they already use and which don’t. Amazon took another approach in which it finds out what its clients want by focusing their analysis on their client data. This approach led to the development of Amazon kindle e-readers because the data showed that there could be a demand for compact e-reader in which client could download a desired book in less than 60 seconds.

Slide no. 11. The fourth principle of innovation – effective innovation starts small – Apple developed its new….

Slide no. 12. Shopping mall Meadowhall in England has a ‘’high-speed’’ tracks for the more hurrying clients: small but effective innovation.

Presentation no. 3

Slide no. 7. Hugu teddy bears can record messages because of sound recording technologies in them.

Slide no. 12. Marketing innovations can also be unusual advertising materials – Nivea gave out child tracking devises calling them beach assistants – Nivea positioned itself as the company whose products not only successfully protect from sun, but also protect children from getting lost on the beach.

Slide no. 16. Similar, but not identical approach was demonstrated by Valve, which has a flat organization structure – there are no bosses or subordinates and employees can switch between projects. The relations between employees are regulated by a handbook. This system is proved to be successful – one Valve employee is more productive and brings in more profit than their Google counterparts.

Slide no. 20. Gradual innovation or from a tent to a tent that can charge your mobile device. This is the solution made by Bang Bang, which uses solar energy and converts it into electricity in USB port. The solution is targeted at festivalgoers in summer.

Slide no. 21. Rise app is an app, which provides direct communication with dietician, who can follow diet observation.

Slide no. 24. Wind tunnel Aerodium allows everyone to fly.

Slide no. 31. Colun Light’s Asi da gusto marketing action – in which members can pay for their sport equipment by calories lost while running.

Slide nr. 32. BBC North in Manchester office allows everyone to change it easily because it is made from material called Velcro.

Slide nr. 39. Watch without primary function to show time – a gradual technological innovation.

Slide nr. 40. Airline which offers to track client’s luggage: process (but possibly also product and marketing), gradual and technological innovation.

Slide nr. 41. App that allows to find the nearest emergency point: product, gradual and technological innovation.


Slide no. 42. Southwest Airlines – operating without managers: organizational, gradual and non-technological innovation.

Presentation no. 4

Slide no.13. The example when crowdfunding platform was used in launch and development processes. For example, it was used to launch product ‘’Ring’’.

Slide no. 23. Boogie board – eco-tablet in which user can save up to 35 000 pages.

Slide no. 24. Plate.

Slide no. 25. Water pebble – helps to economize water in showers by showing when there is too much water used.

Slide no. 26. Page holders for reading.

Slide no. 27 Raid on – pram that can be transformed in suitcase.

Slide no. 28. Snail – assistant for blind readers, which can record the text.

Documents

“Innovative, creative thinking in entrepreneurship” · Training material for non-formal education program “Innovative, creative thinking in entrepreneurship” Module 1. INNOVATION