MANAGING INNOVATION

The functions of management as defined by Henri Fayol:

- Planning: A decision-making activities that tries to look into the future and make decisions
that will enable a particular outcome to be achieved;
- Organizing: A people-centered activity which involves specifying and structuring working
relationships between individuals;
- Leading: Conveying a sense of purpose to the whole organization and individuals;
- Controlling: Monitoring and evaluating the progress of activities to ensure that they are going
according to plan.

Innovation has to be managed because of the uncertainty, complexity, messiness, disruptiveness,

and creativity of its nature.

Planning techniques:
- Project Management (PM): A general purpose planning technique that is widely used to help
with the management of projects, particularly ensuring that they are completed on time and
within budget. A project is a one-off, even unique, activity which is time-constrained and has a
specific goal. It involves five main steps:
 Determine the project goal(s);
 Identify the activities or tasks to be undertaken;
 Estimate the duration of the activities/tasks;
 Determine the sequence in which the activities/tasks have to be completed and link them into
a model of the overall project;
 Develop a project plan that provides an overall schedule for the project:

 Gannt/Bar chart: The project’s activities are listed on the vertical axis and the duration of them
is recorded on the horizontal axis;

 Network diagram: The activities/tasks are typically denoted as nodes and arrows showing how
they are linked together.
- Development funnel/cyclone: A structured approach to getting from an idea(s) to the successful
launch of a new product or service. It starts with many ideas and then provides a systematic
method of filtering them so that only a relatively small number are actually developed and
launched as commercial products or services.

Organizing
Organizing concerns the arrangement or structure of the internal shape of an organization. The
internal structure is important because it involves the communication channels; flows of
information; working relationships; working practices; work environment and corporate culture.
Corporate venturing: In the context of funding innovation, corporate venturing is used to
describe large organizations taking a stake in small ones. Currently, corporate venturing refers to
attempts by large organizations to establish conditions conducive to innovation through a range
of initiatives that take the form of internal structural devices that provide a focus for innovation.

Leading
Leadership is about setting a direction or vision for others to follow. It can be exercised by
creating roles individuals can fill or by creating the kind of culture or climate which triggers
innovation. Some leadership roles are:
 Project leader: He or she is likely to possess a mix of talents, combining the
communicating and motivating skills required to provide a sense of direction of a team
that is multidisciplinary, alongside the analytical skills required to ensure effective
organization and management;
 Product champion: He or she will act as an advocate for the innovation, prepared to
support and defend it even in the most difficult circumstances;
 Godfather: A godfather has to be able to exercise power and influence within the
organization. He or she provides support for the innovation and moral support for the
innovation team;
 Gatekeeper: A person that holds the key to accessing knowledge. He or she acts as a
repository of knowledge; knows who possesses the knowledge; exercises skill in making
connections; and acts as a ‘go-between’ for parts of the organization or between
organizations.

Motivational schemes are used to tap into the creativity of employees by motivating them to
participate in innovation by coming up with ideas that can form the basis of new
products/services or process enhancements:
 Bootlegging: Motivated individuals secretly work on the development of new products
based on their own ideas;
 Ideas programs: Employee-based schemes designed to encourage employees to come
forward with ideas;
 Research clubs: To bring together companies with common interests in particular
research areas.

Corporate culture refers to the shared values and beliefs, both implicit and explicit that shape
the behaviors and experiences of individuals working within an organization. Organizations with
a strong record of innovation will have a corporate culture that values and promotes: outward-
looking orientation; openness to new ideas; acceptability of failure, etc.

Controlling
The stage-gate process of innovation is a technique that provides a series of evaluation points
during the course of an innovation project. At each gate (initial screening, business/finance
analyses, pre-commercialization business analysis), there are three possible decision outcomes:
go, hold or kill.
INNOVATION POLICY
Governmental intervention to aid and assist innovation rests upon a variety of factors: public
nature of knowledge; uncertainty; complementary assets; network externalities; market
inflexibility.
The problems that arise when the innovator tries to appropriate his or her knowledge includes:
imitation/copying; non-rivalrous aspects; spill-overs/leakages; knowledge in the public domain.
Support for innovation can have a variety of different objectives and take a variety of different
forms.
The policy objectives pursued by the government in recent years include:
 Technology forecasting: To increase awareness of current trends in technology
department and to highlight future implications;
 Knowledge transfer;
 Location: To affect the location of innovative firms with a view to them being clustered
together;
 Research & Development;
 Exploitation / licensing;
 Lead user.

There are also agencies that promote innovation, such as:

- Business Link: Publicly funded agencies set up as a ‘one-stop-shop’ to provide advice and
training primarily for small businesses and start-ups;
- BTG plc: To help exploit technology drawn from both public and private sector organizations.

INNOVATION CLUSTERS
There are a number of attributes associated with innovation clusters (also known as high-
technology clusters or innovation milieu):
 Geographical concentration;
 High degree of specialization;
 Large number of mainly small and medium-sized firms;
 Ease of entry and exit;
 High rate of innovation.

Industrial district: Agglomerations of small specialized firms found in particular localities,

which centre around three sources of collective efficiency: a local pool of specialized labor;
firms specializing in the intermediate stages of production; knowledge spill-overs.

Types of clusters
- Neo—Marshallian industrial district (ID) cluster: A structure characterized by the presence
of large numbers of small, locally owned firms. Firms being locally owned, investment and
production are typically made within the region. There will be a substantial amount of local
trading, with inputs bought locally, resulting in strong inter-firm linkages within the cluster;
- Hub-and-spoke cluster: A number of large firms or facilities that act as a hub around which
are to be found many small firms that may well be tied to the hub firm by virtue either of origin
or of ongoing exchange relationship;
- Satellite platform cluster: A concentration of branch plants of large externally owned and
headquartered organizations;
- State-anchored cluster: This occurs where some form of public sector or not-for-profit
organizations acts as an ‘anchor tenant’ within a region, such as military bases, public
laboratories and the like.

There are a number of features of clusters that are particularly conducive to innovation:
 Networking: Innovation is something which is carried on as a multi-actor process that
requires a high level of inter-firm integration;
 Specialization;
 Ease of entry and exit;
 Resource mobility.

NATIONAL INNOVATION SYSTEMS

The notion of a collective system recognized that, although innovation is often introduced by
private individuals and private firms, it is ultimately a product of a system of institutions that are
closely linked together by economic and social relationships. The term ‘system of innovation’
describes the configuration of institutions and the resulting flows of knowledge:
 National innovation systems:
 Corporate governance: The mechanism surrounding the exercise and control of
corporate ownership;
 Political governance: The role of government in fostering innovation:
 Policy function and regulating function
 Regional innovation systems;
 Sector innovation systems.

At the heart of any system of innovation lies the network of institutions in the public and private
sectors whose activities and interactions initiate, import, modify and diffuse technologies:
 Industrial institutions:
 Financial institutions: Commercial banks, investment banks and venture capitalists;
 Science and technology institutions: Public research laboratories, universities, firms and
consortia;
 Educational institutions: Schools, colleges and universities.

ROLES OF THE STATE:

 Infrastructure building: e.g. charging stations for electric cars along highways.
 Purchasers: e.g. government purchasing electric cars.
 Competition regulation: e.g. the zero emission vehicle mandate.
 Financing
 R&D: e.g. feed--‐in--‐tariff for solar energy.
 Information and decision center, political stability: e.g. heavy swings in support.
 Macroeconomic conditions: e.g. economic crisis killed many solar energy companies.
 Environment & safety regulation: e.g. banning incandescent light bulbs.
 Education and other societal effects: e.g. Postbus campaigns.
INDUSTRIAL RESEACH AND DEVELOPMENT
R&D = developing new knowledge and apply scientific or engineering knowledge to connect the
knowledge in one field to that in others.
R&D needs to be managed according to the specific heritage and resources of the company in its
competitive industry.
R&D expenditure and long-term growth are positively related. R&D should thus be viewed as a
long-term investment, even though it may reduce short-term profitability.
Industrial research has focused on a variety of research activities performed within the
organisation. The expectations of the industry expanded to include the development of
knowledge into products.

Main activities of industrial R&D:

 Discovering and developing new technologies
 Improving understanding of the technology in existing products
 Improving and strengthening understanding of technologies used in manufacturing
 Understanding research results from universities and other research institutions

Basic/fundamental research = discovery of new knowledge and scientific principles. It

involves work of a general nature intended to apply to a broad range of uses or to new
knowledge about an area.
Applied research = the activity of transforming scientific principles into technologies that can
be applied to products. This activity involves the use of existing scientific principle for the
solution of a particular problem.
Product development = development of products for commercial gain. This activity is similar to
applied research in that it involves the use of know scientific principles, but differs in that the
activities centre on products.
Technical service focuses on providing a service to existing products and processes. This
frequently involves cost and performance improvement to existing products, processes or
systems.

The planning process:

1. Environmental forecasts
2. Comparative technological cost-effectiveness
3. Risk
4. Capability analysis

The management of R&D needs to be fully integrated with the strategic management
process of the business.
The strategic roles of R&D:
1. Defend, support and expand existing business
2. Drive new businesses
3. Broaden and deepen technological capability

There is a trade-off between using R&D for building knowledge for the entire business and using
R&D for gaining depth of knowledge for particular businesses. The need for strategic positioning
forces the decision to focus resources and build strategic knowledge competencies, represented
by the downward curve.

Categories of the technology base:

 Core technologies – central to all or most of the company’s products
 Complementary technologies – additional technology that is essential in product
development
 Peripheral technologies – technology that is not necessarily incorporated into the product but
whose application contributes to the business (e.g. software)
 Emerging technologies – technology that is new to the company but that may have a long-
term significance for its products.

Technology leverage is the extent of influence that a business’s technology and technology base
have on its competitive position.
The state of a business in terms of its markets, products and capabilities will largely determine
the amount of research effort to be undertaken.
Two forms of R&D activities:
1. Growth:
a. Break the mould
b. Technology mastery
2. Maintenance
 a. Competitiveness
b. Survival

Key factors to be considered when setting the R&D budget:

 Expenditure by competitors
 Company’s long-term growth objectives
 The need for stability
 Distortions introduced by large projects

Types of internal R&D:

1. Centralized laboratories - advantage of critical mass
2. Decentralized laboratories – reinforce the link with the business, its products and its
markets, fosters communication and product development
3. Internal R&D market – essentially involves establishing a functional cost centre, where each
business pays for any R&D services required

Types of external R&D:

1. Contract R&D – when the firm has a low level of understanding of the technology
2. R&D strategic alliance – share expertise and reduce inevitable costs and risks
3. R&D consortia – consists of 20-50 companies usually centred around a trading company and
involving component suppliers, distributors and final product producers, all interwoven through
shareholding and trading arrangements. It reduces competition  cartel
4. Open source R&D – customers are co-producers of the products and services