Elsevier

Technovation

Volume 25, Issue 3, March 2005, Pages 171-183
Technovation

Targeting innovation and implications for capability development

https://doi.org/10.1016/j.technovation.2004.03.004Get rights and content

Abstract

Innovation is often described in terms of changes in what a firm offers the world (product/service innovation) and the ways it creates and delivers those offerings (process innovation). Arguably this definition is insufficient since it does not take into account two other areas where innovation is possible-market position and business models. Market position relates to the situation where an established product/service produced by an established process is introduced to a new context; here the innovation management challenge is concerned with issues like adoption behaviour and technology transfer. Business model innovation relates to the situation in which a reframing of the current product/service, process and market context results in seeing new challenges and opportunities and letting go of others.

Each of these poses challenges for the ways in which innovation is organised and managed—what we term innovation management capability. The paper explores some of these challenges and also looks at the additional issues raised by discontinuous innovation, moving beyond the steady state conditions of ‘doing what we do but better’ to a new set of conditions in which ‘doing different things in different ways’ becomes the norm.

Introduction

Since the Palaeolithic period (Curwin, 1954) some, but not all, human societies formed enterprises that created new or improved artefacts, devised ’better’ processes, developed new ways of selling and devised alternative models of organising (Diamond, 1997). These enterprises were innovative—they found ways to exploit the latent potential of ideas. Innovation can be defined simply as “the successful exploitation of new ideas” (DTI, 1994). Others have defined innovation more elaborately, but in similar terms; for example (Baumol, 2002) writes that innovation is:

“the recognition of opportunities for profitable change and the pursuit of those opportunities all the way through to their adoption in practice”.

Embedded in these definitions is the notion that innovation can be managed. For example, Drucker (1994) argues that innovation is a core process for a firm; he suggests that: “in…a period of rapid change the best-perhaps the only-way a business can hope to prosper, if not survive, is to innovate. This is the only way to convert change into opportunities. This, however, requires that innovation itself be organised as a systematic activity” (Preface 1).

It follows that enterprises that are better able to manage innovation than others and demonstrate a record of successfully exploiting new ideas can be said to possess, at least for a period of time, a superior ’innovation capability’. Developing such capability is an important strategic issue since innovation plays a key role in survival and growth of enterprises. Baumol (op cit) argues that, “virtually all of the economic growth that has occurred since the 18th century is ultimately attributable to innovation”. This is also true at the level of the firm. Tidd et al. (1997) in their review of the field conclude that:” Management research suggests that innovative firms—those which are able to use innovation to differentiate their products and services from competition—are on average twice as profitable as other firms”.

The words ’on average’ in Tidd et al's assessment are important. The contribution of innovation to the profitability of a firm is not straightforward. Some innovation initiatives have proved to be dysfunctional, occasionally leading to catastrophic losses. Even an ’excessive’ rate of innovation can be disadvantageous as Yoffie and Cusumano (1999) illustrated when considering the increasing resistance of corporate clients to rapid product developments by Netscape in the mid-1990s (Yoffie and Cusumano 1999). So innovation capability needs to include the ability to make such strategic assessments.

It is reasonable to assume that an innovative firm must generally possess ’innovation capability’—an underlying capacity to gain advantage by implementing more and better ideas than rivals. However, innovation capability may not be a unitary set of attributes—just as physical fitness can be sustained in different ways so different kinds of innovation may require distinctive approaches. Indeed, it may be that the capability needed to support some types of innovation conflicts with that needed to support other types. (For example, this situation is central to the argument surrounding the ‘innovator's dilemma’ in dealing with both sustaining and disruptive technologies. (Christenson, 1997).

Section snippets

Targeting innovation

An important aspect of innovation is its functionality—i.e. the uses made of innovation capability. We refer to this as ’targeting’. The well-known case of a Japanese company, Komatsu Ltd., helps us to understand the importance of targeting the exploitation of innovation capability. In the 1960s Komatsu made dumper trucks for the local market. The chairman, Ryoichi Kawai, decided that Komatsu would strive to topple Caterpillar from being the undisputed number one in the EME (Earth Moving

The four ‘P's of innovation targeting

When Komatsu sought to improve quality, reduce costs, develop innovative products and devise new methods of sales and financing they did more than develop new or improved products. They had to improve processes, change their marketing and think about their company in a new way (as a global not Japanese firm). This is typical. Innovation capability is not confined to improving products: it can be targeted in four main ways. Fortuitously, these all begin with a ‘P’.

  • P1 innovation to introduce or

Innovation in product

New product and service development is an obvious target for innovation capability and can be considered on several dimensions. For example (Wheelwright and Clark, 1992) identify criteria that differentiate products including number, timing and rate of change of product platforms, whether they are variations or derivatives, the frequency of introduction/refresh rate, relationship with strategy and degree of modularity. They point out that product innovation is influenced by the state of

Managing product innovation within ABC Lighting

ABC Lighting2 in 1990 had more than 8000 products in their catalogue, some of which were slow-moving, lacked competitive advantage or were priced more highly than competitors’ offers. An obvious remedy would be to go through the catalogue and determine to innovate with some products and cut out others. Why was not this done? The view of top management was that a pruning of the product list could

Innovation in process

Processes are widely (Clarysse et al., 1998), accepted as a target for innovation initiatives. Processes are sequences of activities, often proceeding horizontally across the organisation, that are transformations.5

Innovation in position

A positional innovation does not significantly affect the composition or functionality of the product7 but the meaning of the product in the eyes of the potential customer (Kim and Mauborgne, 1999a, Kim and Mauborgne, 1999b, Kim and Mauborgne, 1999c) and/or the market segments selected as targets.

Positional innovation is not mentioned by some commentators on innovation management who prefer to adopt

Innovation in paradigm

This final ’P’ is more contentious. Not all scholars support the notion that ’paradigm’ is a legitimate target for innovation capability. However, it is not unknown, for example (Rickards, 1999) observes: “Today the term ’paradigm’ has found its way into the vocabulary of organizational management, in such terms as ’paradigm switch’ and ’paradigm breakthrough’. The expressions are broadly taken to imply that a traditional belief system-the old paradigm-has been replaced by a new way of

Moving beyond the steady state

Up till now we have been considering the 4Ps framework in the context of mapping innovation under what might be termed ‘steady state’ conditions, in which firms are concerned to ‘do what they do, but better’. As we have seen there is considerable scope within this envelope, especially in exploring all of the four target areas. But it is also clear that organisations need to develop the capacity to explore ‘outside the box’ and identify radical ‘do different’ options for innovation, again using

Using the 4Ps approach for strategic development

From studying the four Ps it is clear that it is possible to target innovation capability in different ways. One firm might invest significant sums of money, and a great deal of creativity, into developing a new range of products, perhaps based on the latest technology. Another company may keep its products more or less the same but invest a great deal in trying to change the way that potential customers perceive the firm, as oil companies appear to do. The question arises, ’can the 4Ps help a

Further testing of the model

The researchers undertook a preliminary study in order to assess whether the 4Ps model provided a useful heuristic device capable of being used by managers. The data set was collected from five different companies in the Pharmaceutical Industry (companies 1–5 in Table 3 below). Each of the companies had been asked to prepare an innovation plan. We analysed the five planning documents and allocated each planned innovation initiative to one of the 4Ps-either ’do better’ or ’do different’.

The data

Conclusions

Innovation is widely seen as a critical imperative for survival and growth of firms. But responding to this challenge needs to be balanced against the resource constraints of the organization in terms of money, skills, time and knowledge base. In this article we have developed a framework for setting a firm's innovation agenda holistically which makes a contribution to thinking about the strategic portfolio of innovation projects undertaken. It also focuses attention on areas which may not be

Acknowledgements

The authors would like to acknowledge the support of the ESRC/EPSRC Advanced Institute of Management Research for this research

Dave Francis is Deputy Director of CENTRIM. He is a behavioural scientist specialising in competitive strategy, human resource development and innovation management. He has worked with many organisations in Europe, the Far East and the USA. Dave has written or co-authored twenty nine books, including Team Building Strategy, Top Team Building, Managing Your Own Career, Effective Problem Solving, Unblocking Organizational Communication and Step-by Step Competitive Strategy. His latest book (1999)

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    Dave Francis is Deputy Director of CENTRIM. He is a behavioural scientist specialising in competitive strategy, human resource development and innovation management. He has worked with many organisations in Europe, the Far East and the USA. Dave has written or co-authored twenty nine books, including Team Building Strategy, Top Team Building, Managing Your Own Career, Effective Problem Solving, Unblocking Organizational Communication and Step-by Step Competitive Strategy. His latest book (1999) ‘Agile People for Agile Organisations’ has been published by Gower in the UK.

    John Bessant originally a chemical engineer, John has been active in the field of research and consultancy in technology and innovation management for over 25 years. He is the author of 20 books and many articles on the topic and has lectured and consulted widely around the world. He currently holds the Chair in Innovation Management at Cranfield University and is a Visiting Professor at a number of UK and overseas universities. In 2003 he was awarded a Fellowship with the Advanced Institute for Management Research and was also elected a Fellow of the British Academy of Management. He has acted as advisor to various national governments and to international bodies including the United Nations, The World Bank and the OECD.

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