What is innovation and what measures should companies take based on the latest research?
There are innovations in a variety of settings: new businesses in large companies, start-ups, basic research, etc. For an organization such as a company to continue to develop, there is a limit to the efficiency of existing businesses alone, and innovation is said to be essential (Christenson, 1997).
In this section, we would like to consider what innovation is and what is needed to bring about innovation, both from the perspective of academic theory, including the latest research, and examples from actual business, and examine what measures companies should implement in the main.
Definition of Innovation
Innovation is often described in relation to the process of creating, developing, and implementing new ideas, products, services, and processes that bring novel value.
Here we list several key definitions of innovation.
- The process of introducing new combinations of factors of production, such as new production methods, new products, new markets, new sources of supply, and new organizational forms (Schumpeter & Swedberg, 2021)
- Sustained innovation (improving existing products and services for existing customers) and disruptive innovation (creating new markets and value networks, often displacing existing market leaders ) (Christenson, 1997)
- A multi-step process that transforms ideas into new products, services, and processes that enable organizations to advance, compete, and successfully differentiate themselves in the marketplace(Baregheh et al., 2009)
- The two main dimensions of innovation are the degree of novelty (i.e., whether the innovation is new to the firm, new to the market, new to the industry, or new to the world) and the type of innovation (i.e., process or product, service, or system innovation ) (Edison et al., 2013 )
- Innovation is a function specific to entrepreneurship, whether it is an existing business, a public service organization, or a new business started by a single individual in the family kitchen. It is the means by which entrepreneurs create new wealth-generating resources or add wealth-generating potential to existing resources. (Drucker, 2002)
- Innovation involves not only the creation of new creative ideas, but also their actual realization (Hartley et al., 2013 ) .
To briefly summarize.
- Being new
- To create wealth => to be profitable
- To increase sales
- Cost reduction
are the main elements of innovation.
Examples of Innovation
Let us pick up some examples of innovation to give you a concrete image of innovation.
- Internet : The development of the Internet has enabled information sharing and worldwide communication. (Leiner et al., 1997)
- Smartphones : the integration of computer functions into mobile devices has made it easier for people to interact and access information.(Katz & Aakhus, 2002)
- Blockchain technology: Originally conceived for the digital currency bitcoin, blockchain technology has enabled secure, decentralized record keeping.(Nakamoto, 2008)
- 3D printing: 3D printing technology, also known as Adaptive Manufacturing, has enabled the creation of complex 3D objects from digital models. ( Wohlers & Others, 2014 )
- CRISPR-Cas9 Gene Editing: CRISPR-Cas9 has enabled the editing of parts of the genome by deleting, adding, or altering portions of DNA sequences, offering great potential in medicine, agriculture, and biology. (Doudna & Charpentier, 2014 )
Innovation Processes
The process by which innovation occurs has been described in various literature; for example, the following processes have been introduced
- The innovation process is 1) idea generation, 2) problem solving, and 3) implementation. (Utterback, 1971)
- 1) problem definition, 2) idea generation, 3) testing, 4) implementation, 5) dissemination, 1) problem definition -> ... and so on in a cycle (Hartley et al., 2013)
In the above, the order of idea generation and problem solving is reversed, but this may be related to the fact that both cases are assumed, whether the needs are first or the seeds are first.
Innovation Initiatives
Types of innovation
- End-user innovation. this is the development of innovations by individuals or companies for their own (personal or internal) use because existing products do not meet their needs. (von Hippel, 2009)
- Co-creation, co-production: the creation of value through interaction between companies and customers(Galvagno & Dalli, 2014), a collaborative and open process involving companies and users(von Hippel, 2009 )
- Open innovation: open innovation is a paradigm in which companies can and should use external as well as internal ideas to advance technology(Chesbrough, 2003)
- Openness: engaging with different types of partners to obtain ideas and resources from the external environment in order to keep up with the competition(Dahlander & Gann, 2010)
Examples in business
- Atlassian, a software and tools company, conducts quarterly "ShipIt Days." (Atlassian, n.d.)
- Google employees spend 20% of their time on independent projects (known as Innvation Time Off)(Schrage, 2013 )
- This technique may also be used in drug discovery. Thousands of compounds are subjected to high-throughput screening to determine whether they have activity against target molecules identified as biologically important for a disease.
- A related technique, A/B testing, is often used to optimize the design of websites and mobile apps.
- The iron industry in 19th century England regularly shared the design and performance of the blast furnaces they built in verbal exchanges and in publications. (Allen, 1983)
- Ideas were sold, licensed, or offered as patents (Dahlander & Gann, 2010 )
- Most innovations arise from borrowing rather than inventing, including the use of existing ideas and technologies, externally available ideas, and introducing them into the innovation process through the marketplace(Cohen & Levinthal, 1990 )
- Software development using open source (von Krogh et al., 2012)
Factors that drive innovation
Previous studies have identified a variety of factors that drive innovation, and some of the major ones are listed below.
- Ability to incorporate new technologies internally, technological knowledge, and knowledge of the external environment (Cohen & Levinthal, 1990)
- Presence of competition: the existence of firms, markets, and competition as a precondition for innovation (Hartley et al., 2013 ) ; innovation enables firms to survive in competitive markets (Hartley et al., 2013 )
- Funds: large organizations have more resources to invest in innovation and have the ability to absorb the costs of innovation failure (Hartley et al., 2013 )
- Changes in industrial structure, changes in market structure, changes in regional and global demographics, changes in human perception, changes in the amount of available scientific knowledge, etc. (Drucker, 2002)
Summary: Measures of Innovation
Based on the above examples and elements of innovation, the following figure summarizes the measures that companies should implement in order to innovate.
First, it is important to understand political, economic, and social changes and technological progress as the external environment: future trends and issues should be analyzed, and in the case of technology, research should be conducted by the company's own R&D department or the research results of other organizations should be utilized.
After that, the company will examine the issues and create solutions, either with its own personnel or with other companies with which it collaborates, or by developing solutions in-house, using other companies' products, or acquiring existing companies.
Finally, we implement and disseminate the created solution as a service, improving the service through various patterns and AB testing, and expanding the service by injecting funds or acquiring existing companies.
References
Allen, R. C. (1983). Collective invention.
Atlassian .(n.d.). About us. Atlassian. Retrieved November 15, 2023, from https://www.atlassian.com/company
Chesbrough, H. W. (2003). Open innovation: The new imperative for creating and profiting from technology. https://books.google.com/books?hl=en&lr=&id=4hTRWStFhVgC&oi=fnd&pg=PR9&dq=.+Open+Innovation:+The+New+Imperative+for+Creating+and+Profiting+from+Technology&ots=XuZFUQw7wG&sig=HKm5AIP1XtOgAZSo_crGktbuf_A
Christenson, C. (1997). the innovator's dilemma. Harvard Business School Press, Cambridge, Mass.
Dahlander, L., & Gann, D. M. (2010). How open is innovation? Research Policy, 39 (6), 699-709.
Drucker, P. F. (2002). the discipline of innovation. Harvard Business Review. https://www.academia.edu/download/57049925/6._The_Discipline_of_Innovation.pdf
Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system. Decentralized Business Review. https://assets.pubpub.org/d8wct41f/31611263538139.pdf
Schrage, M. (2013, August 20). Just How Valuable Is Google's "20% Time"? Harvard Business Review. https://hbr.org/2013/08/just-how-valuable-is-googles-2-1
Schumpeter, J. A., & Swedberg, R. (2021). December 2007 - page 7 -. Cambridge Forecast Group Blog; taylorfrancis.com. https://doi.org/10.4324/9781003146766/theory-economic-development-joseph-schumpeter-richard-swedberg
Wohlers, T., & Others.(2014). Wohlers report 2017: 3D printing and additive manufacturing state of the industry: annual worldwide progress report. (No Title). https://cir.nii.ac.jp/crid/1130282269773835776