The Importance Of Innovation In Organisations

Question:

Critically evaluate the various dimensions of Invovation and the drivers that contribute to the growth of small start-up entrepreneurs.

Organisations need innovation to thrive and survive. Its regardless of the company’s size innovation has always been a driver for productivity. The innovation process of any organisation depends on its ability to harness creativity and as being dynamic depends upon management, being innovative depends upon the diversity in the workforce. This helps the companies to break the cycle and mould that is limiting thinking. When they take this step they are free to discover many new services, markets and products that help them to lead their business and organisation. Today’s market and business environment is competitive and along with the economic downturn it is increasingly showing that innovation and knowledge is the source of competitive advantage. Innovation is the key to productivity and output growth.( Cooper, 2001) It is the implementation of significant new product that could either be a service or good, marketing method, organisational method or process.

There are many ways through which a company or firm can innovate some of these dimensions are:-

• Offerings
• Processes
• Platform
• Supply chain
• Solutions
• Customer experience
• Presence
• Customers
• Brand
• Networking
• Value capture
• Organisation

These twelve dimensions of business innovation are about company, the customers and the processes it points and employs in the market.

• Offerings:- refers to the organisation services and products. In this dimension of innovation new services and products are created for the customers.
• Platform:-it is a set of common technologies, methods and components that would serve as building blocks for the company. This dimension of innovation involves the power of commonality which enables offerings as more cheaply and quickly than as standalone items or services.
• Solutions:-it is an integrated and customized solution of information, services and products that is about solving the customer problems. This dimension of innovation is about creating value for stakeholders and customers through the depth of integration and breadth of assortment of elements. (Lechner&Dowling, 2003)
• Customers:- this dimension is about the customers that consume or use the services of the organisation for satisfaction of their needs. In order to innovate in this dimension the firm or company can discover unmet needs or new segments.
• Customer experience:- in this dimension everything about the customers are important for the company such as what the customer feels, hears or sees. In order to innovate in this dimension the firm needs to think about the interface between the customers and organisation.
• Value capture:- in this dimension the company recaptures the value. In this dimension innovation can be done by discovering revenue streams, creating pricing systems and expanding the ability to interact with partners and customers which creates value.
• Processes:- are used in internal operations that are about configuring business activities. In order to innovate in this dimension a firm will redesign the processes for higher quality, faster cycle and greater efficiency. These changes involve decoupling its processes and even relocating the process. To achieve this, the company has to decouple each process by its constituent’s elements so that the firm can work and perform in many countries. The advantages are speed and flexibility in the market that helps in accessing the competitive pool that was not assessed prior to this.
• Organisation:-includes employees and partnerships that conclude the structure of the organisation. In this dimension the innovation can be achieved by thinking about the scope the organisational activities along with redefining the incentives, roles and responsibilities of different individuals and business units. (Rothwell, 1989)
• Supply chain:-this represents the agents and activities in a sequence that moves the information, services and goods from the point of source to the delivery point. In order to innovate in this dimension a firm or company has to streamline and arrange the flow of information in such a way that it passes through supply chain. This enhances the working of the participants and changes in the structure of the organisation.
• Presence:-this is about the channel of distribution that are present as point of presence in a company that are used to send the products and services to the market. The point of destination can be even a place where the customers can get access to the goods or services or where they can be purchased. In this dimension innovation can be achieved by creating new points or using the old ones in a new and creative way. This ensures that the customers will get more access to the services or goods.
• Networking:-A firm’s or company’s competitive edge depends on the network through which its goods or services are connected with the customers. In order to innovate in this dimension this network is enhanced that in turn adds value to the firm’s offerings.
• Brand:-these are the symbol, marks or mark through which a firm communicates their vision or promise to the customers. In order to innovate in this dimension the firm has to extends or leverages its brand or vision in a creative way.

We have various examples where both small and large companies have used their ability to innovate to reap benefits. One such example is of Apple Computer Inc where their innovation of a “ipod” is more than a nifty product but it is an elegant invention for the customers.

Hoffman and Gabr in the year 2006 proposed five drivers of the entrepreneurship these drivers are:-

• Demand characteristic or opportunities:-consists of the market demands for a firm’s goods or services. This is about the demand of the firm’s service or product in general. This involves two forces that are opposite towards each other. One force is pushing towards conformity and the other is pushing towards distinction. This creates a demand that is unstable but it is not homogenous as the needs and preferences of customers can be diverse. (Baum&Locke, 1997)
• Abilities:-Is the firm basic ability or knowledge to create and seize oppurtunities.
• Institutional context:-many researchers have documented that changes in law and policy regime have an impact on entrepreneurial oppurtunities. (Dobbin&Dowd, 1997)Dowd and Dobbin conducted a famous study about railroads where they were able to prove that when the state law allowed cartels entrepreneurship decreased but when anti trust laws were passed the competitors increased. Some of the scholars have even pointed out that many entrepreneurial activities are even affected that what can be patented in a country and what cannot be. (Moser, 2005) The entrepreneurs put their efforts in areas where they expect a productive end like innovation. Sometimes the result or output that can attract a entrepreneur can be destructive as well as in crime. (Fritsch&Mueller, 2004)
• Capital:-is the access to stock markets.
• Incentives:-it is the non monitory and monitory incentives that affect motivation in a firm
• Culture:-it is the values and basic assumptions in a firm that affects behavior and attitudes.
• New knowledge:-In an article by Poh Kam Wong titled “Entrepreneurship, innovation and economic growth” he talks about the entrepreneurship for a long time has been ignored in the empirical literature. But there are few examples where recently it has been studied by scholars. As in the year 2006 Lehamann, Keilbach and Audretsch found out that new knowledge is one of the factors that influence the decision to start up a new firm. Carlsson and Audretsch in the year 2009 concluded the same in their research as they proved that when new knowledge is created it motivates entrepreneurship. But we all know that knowledge is not certain as it is asymmetric and uncertain that comes with high costs of divergences and transactions. (Audretsch,& Keilbach, 2004)
• Economic agents:- another driver that encourages the start up entrepreneurs is economic agent which attempts to commercialized value of the new knowledge. In this case entrepreneurship acts like a vehicle through which new ideas are commercialized and implemented in a new firm. (Audretsch, 2004)
• Technological evolution:- many scholars and researchers have argued that the level of technological maturity impacts the entrepreneurial opportunities. Jim Utterback who is a MIT Sloan Professor has successfully proven in his research that young industries present more oppurtunities. (Heschmati, 2001)
• Organisational environment:- in literature we have seen quite distinctinly that the existing organisation in an industry highly impact the new entries. It also depends on the size of the industry as in how crowded it is. It is not advisable for a firm to be the first to offer a service or good in an industry as in that case the customers will not be able to perceive the need for that service or product.( Rothwell, 1989) Whereas entering a crowded industry has its own disadvantages as it has few opportunities and has also a drawback of overlapping suppliers or competitors.

References

Audretsch,& Keilbach, D B. & M , 2004. Does Entrepreneurship Capital Matter?‖ . Entrepreneurship Theory and Practice, 28(5), 419-430

Audretsch, D. B, 2004. Sustaining innovation and growth: Public policy support for entrepreneurship.Industry and Innovation, 11(1), 167–191

Baum&Locke, J.R. & E.A., 1997. The Relationship of Entrepreneurial Traits, Skill, and Motivation to Subsequent Venture Growth. Journal of Applied Psychology,, 89(1), 587-598

Cooper, R. , 2001. Winning at New Products: Accelerating the process from idea to launch. 1st ed. New York, NY: HarperCollins

Dobbin&Dowd, F & T J. , 1997. How Policy Shapes Competition: Early Railroad Foundings in Massachusetts. Administrative Science Quarterly, 42(3), 501-529

Fritsch&Mueller, M. & P. , 2004. ‘Effects of New Business Formation on Regional Development over Time. Regional Studies, 38(1), 961–975

Heschmati, A, 2001. On the Growth of Micro and Small Firms: Evidence from Sweden,‖. Small Business Economics, 17(1), 213-228

Lechner&Dowling, C. &M. , 2003. Firm Networks: External Relationships as Sources for the Growth and Competitiveness of Entrepreneurial Firms,”. Entrepreneurship & Regional Development, 15(1), 1-26

Moser, P, 2005. How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World’s Fairs. American Economic Review, 95(4), 1214-1236

Rothwell, R, 1989. Small firms, innovation and industrial change. Small Business Economics, 1(1), 51–64