In virtually every industry, from aerospace to

pharmaceuticals and from motor cars to

computers, the dominant companies have
demonstrated an ability to innovate

Innovation: "The share price is not something

control. We control innovation, sales and
profits". (Rushe and Walpes, 2008)

Corporations must be able to adapt and The Toyota flying car story in Illustration puts In The Boston Consulting Group’s annual report
The importance of innovation
evolve if they wish to survive into context the subject of innovation and new on the world’s most innovative companies,
product development these same firms are delivering impressive
Businesses operate with the knowledge that growth and/or return to their shareholders
their competitors will, certainly, come to the
market with a product that changes the basis
of competition

the industrial revolution of the nineteenth

century was fuelled by technological
innovations

Schumpeter (1934, 1939, 1942) : the first For example: economies are more likely to
economists to emphasise the importance of experience growth due to the development of
new products as stimuli to economic growth products, such as new computer software or
=> the competition posed by new products was new pharmaceutical drugs than to reductions in
far more important than marginal changes in prices of existing products, such as telephones
the prices of existing products or motorcars The varying emphasis placed by
different disciplines on explaining
how innovation occurs is brought
together in the framework

Abernathy and Utterback (1978): contended that

at the birth of any industrial sector there is radical
product innovation, which is then followed by
radical innovation in production processes, followed,
in turn, by widespread incremental innovation. This
view was once popular and seemed to reflect the life
cycles of many industries.
The study of innovation

In USA: concerned with technological change

Two traditions of innovation studies: Europe as the use of inventions in industrial production
and the USA

In Europe: concerned with commercialised invention

The customer: part of the process; in self-
service supermarkets or in the education The importance of dynamic firm capabilities (ability
process in tutorials to acquire and utilise knowledge and apply this to the
development of new products)
Information from customers
The design and management of the conversion processes (complaints or compliments), market
Three important dimensions Operations management
research or government agencies
(standards, laws, EU directives, etc.) Recent and contemporary studies
The control of a conversion process
The physical and business environment <=
from an input to an output
The organisation operates
Sustaining innovations: improvements to
established products More recent innovations and scientific developments, such
High production speed, short throughput time The importance of uncovering and satisfying as signifi- cant discoveries like mobile phones or computer
the needs of customers software and hardware develop- ments, are associated with
Disruptive innovations: improvements greater organisations rather than individuals
Rigid process control than those demanded

High capital investment The pursuit of opportunity beyond the resources you
Enterpreneurship
currently control (Stevenson and Amabile, 1999)
Clear determination of capacity, one routing
for all products

A good example is the food packaging industry Limited volume flexibility Process industries are characterized by
=> Innovations such as Tetrapak, PET bottles and in-
can systems (such as the Guin- ness ‘In-can-system’)
Low product complexity
The development of drawings, plans and
Design
Low added value sketches

Strong impact of changeover times

=> Along the horizontal axis, the wide spectrum
Small number of production steps of activities that design encompasses from
clothing design to design within electronics
Limited number of products

Process innovation: new activities introduced Science Systematic and formulated knowledge
- Product innovation in highly competitive
markets with differentiated products to into a firm’s production (Reichstein and Salter,
stand out 2006) Problems of definition and vocabulary
The relationship between product and process
- Process innovation in less competitive, Being the application of science
innovation
standardized markets to reduce costs and Service operations: achieve lower costs and/or Technology
achieve cost leadership produce higher quality product (Reichstein and Knowledge applied to products or production
- Go unnoticed by consumers Salter, 2006) processes

The thinking of novel and appropriate ideas

Creativity
A concept, a thought or collection of thoughts

A process of converting intellectual thoughts into a

Invention
tangible new artefact (usually a product or process)
Understand customers and their expectations
An example of invention

Assess expectations is difficult <= Customers

Gap analysis: aid understanding of the The commercial and practical application
are different from each other and change
differences (or gaps) between the customer of ideas or inventions
with time Innovation
and producer view or experience of a product
or service Innovation = theoretical conception + technical invention + commercial exploitation

Train employees in quality control and

evaluation techniques, encouraging ideas from
within rather than top-down Successful and unsuccessful innovations
Quality circles and process improvement
Leverage employee participation and teams: a small group of voluntary workers who
empowerment approaches meet regularly to discuss problems and
determine possible solutions
Product innovation: The development of a
Senior management’s support of new or improved product
employee input enhances company-
wide quality, benefit both the business
Process innovation: The development of a new
and its customers
manufacturing process
In market
Meeting the needs and expectations of Radical innovation: very new and different
customers from prior solutions

Covering all the parts of the organisation Incremental innovation: minor change from
To be successful: Chapter 1: An introduction of existing practices
● All the staff in all departments => involved
● Quality and employee improvements => linked and
Everyone in the organisation is included Total quality management (TQM): An effective system for Innovation Management
Different types of innovation Competence-enhancing innovation: build on
part of a continuous cycle integrating the quality development, quality maintenance and
Investigating all costs related to quality quality improvement efforts of the various groups in an the firm’s existing knowledge base (not creating
● Modest and continuous improvements => yield
substantial long-term benefits, surpass the impact of
radical changes
(internal and external) organisation so to enable production and service at the most
economical levels which allows for full customer satisfaction.
Central Topic new product)

● The ‘knowledge’ of the organisation => increased. Getting things right by designing in quality (Feigenbaum, 1986: 96) Competence-destroying innovation: NOT build on the
● Not a substitute for real leadership or a passing fad. firm’s existing competencies or renders them obsolete
Process design and innovation
Chapter 5: Operations and Process
● Not support major innovation (Giaever, 1998) Developing systems and procedures that Focus on business
Innovation Architectual innovation: changing the overall design of the
support quality improvements
system or the way that components interact with each other
Developing a continuous process of
improvement Component innovation: changes to one or
more components, but does not significantly
affect the overall configuration of the system

=> The result of people who have had a

Triggers for innovation The unexpected discovery / luck
fascination with a particular area of science or
Serendipity
technology and it is following extended
Rare
efforts on their part that advances are made

Promotes better understanding of customer The interaction of the science base (dominated
demands by universities and industry), technological
The case in the Japanese car development (dominated by industry) and the This technology-push model dominated
component firm, Kayaba, which industrial policy after the Second World War:
Promotes better understanding of design needs of the market was a significant step
attempted to use the QFD systems of Linear models (US economists after the - Technology push: from company
interactions forward
Toyota and initially suffered failure => Quality function deployment (QFD) ('House Second World War) - Market pull: form market -> demand of
develop its own successful version of quality'): a structured approach to this customer
Involves operations in the process at the Innovation process viewed as a sequence of
(‘Anticipatory Development’) => won a problem that relates the voice of the customer
earliest possible moment separable stages or activities
Deming Prize for its quality to every stage of the design and the delivering
achievements (Lowe and Ridgway, process
2000). Removes the traditional barriers between the
departments

Focuses the design effort Stimulated by technology, customer need,

Simultaneous coupling model (Galbraith,
manufacturing or a host of other factors,
1982)
Quality management should be customer- including competition The simultaneous coupling model shown in
focused The ISO (International Standards Figure 1.6 suggests that it is the result of the
Organization) 9000 approach: a set of simultaneous coupling of the knowledge within
Quality performance should be measured standards governing documentation of a all three functions that will foster innovation
quality programme
=> Not seen as beneficial by all parties Quality management should be improvement- ● A qualified external examiner verifies that the Knowledge of the components
driven company meets all specified requirements and
issues a certification Two new dimensions
Knowledge of the linkage between them => architectural
● Certified companies are then listed in a knowledge innovations that change the architecture of a
Top management must demonstrate their directory accessible to potential customers.
commitment to maintaining and continually product without changing its components
improving management systems
Incremental innovation

Modular innovation
Architectural innovation (Henderson and
4 types of innovation
Clark, 1990)
Radical innovation
Performance measurement is by self-
assessment (‘a comprehensive, systematic, and
regular review of an organisation’s activities and Architectural innovation
results referenced against a model of business
The EFQM excellence model: Results (people, Incumbents will be in a better position if the innovation is
excellence’)
customer, society and key performance) are incremental >< new entrants will have a large advantage if
achieved through a number of enablers in
the innovation is radical.
managing and controlling the input/output
transformation processes involved.

For example: McDonald’s built a restaurant in

Moscow. To achieve its required and expected Link together the technology-push and
Design of the organization and its suppliers: The innovation process outlined in Figure 1.7
level of quality and service, the company set up market-pull models
supply chain management represents the organisation’s capabilities and its
an entire supply chain for growing, processing Interactive model
linkages with both the marketplace and the
and distributing the food to its stores The result of the interaction of the marketplace, science base
the science base and the organisation’s capabilities
Identify customer value: value from the
perspective of the customer
Models of innovation
Map the value stream: all steps in the value
creation process and remove those steps that
do not create value

Create flow: assemble value-creating steps in

a tight sequence to enable value to flow
quickly through the system Lean innovation
Fluid
Establish pull: as value starts to flow, value is
pulled through the system, ideally by the Three different phases Transitional
customer and at the rate of customer
demand (‘build to order’ is a pull system). 5 steps and principles This model can be applied to many consumer
Innovation life cycle and dominant designs Specific
product innovations over the past 20–30 years,
(Abernathy and Utterback, 1978) such as VCRs, CD players and mobile phones
Seek perfection: repeat the previous four Begins with a major technological change and product innovation
steps until all waste has been removed in the → the emergence of competition and process innovations
system. Perfection is a state that the (manufacturing improvements) → a dominant design usually
professionals continue to approach, but
emerges prior to standardisation and an emphasis on lowering cost.
never actually achieve

Open innovation (network models)

(Chesbrough, 2003)
The process of innovation has shifted from one of
closed systems, internal to the firm, to a new
mode of open systems involving a range of Table 1.6 summarises the historical
players distributed up and down the supply chain development of the dominant models of the
industrial innovation process

In low and medium technology (LMT) => not

For example: A small craft brewery exemplifies the DUI
applicable and cannot explain continued
product and process innovations (Doing, Using, Interacting) innovation model by focusing
Doing, using and interacting (DUI) mode of on hands-on experience and community learning rather
innovation than formal R&D =>This DUI approach enables the
In LMT environments innovation => can be brewery to innovate incrementally, leveraging
explained through learning by doing and the practical knowledge, experimentation, and industry
use of networks of interactions and extensive collaboration without extensive R&D resources.
tacit knowledge

Bringing about substantial changes For example:

- Steamships (which disrupted sailing ships)
Discontinuous innovation Displacing existing ones - Music downloads (which disrupted CDs)
- Internet shopping (which disrupted high street
Giving rise to new markets retailing)

The combination of change and entrepreneurship is the

basis of new business => The most important feature of
The cyclic model of innovation (CMI) with Figure 1.9 is that the model architecture is not a chain but a
interconnected cycles circle: innovations build on innovations (new ideas may start
anywhere in the circle, causing a wave that propagates
clockwise and anti-clockwise through the circle)

a series of activities that are linked in some

way to the others, NOT a singular event

“The fact is coming up with an idea is the least

Innovation as a management process Innovation important part of creating something great.
The execution and delivery are what’s key.”

Idea generation

A process Technology development

Manufacturing and marketing of a new

(or improved) product or manufacturing
process or equipment