Innovation Realization Processes and Strategies Based on Latest Research

Automatically translated from the Japanese original.

Innovation shows up in many settings: new business ventures at large corporations, startups, basic research. For companies and other organizations to keep growing over the long term, simply making existing businesses more efficient will only take them so far; innovation, it is said, is indispensable (Christenson, 1997).

In this article, we examine what innovation actually is and what it takes to make it happen, drawing on both academic theory (including the latest research) and real-world business cases. Our main aim is to explore what concrete measures companies should put into practice.

Defining Innovation

Innovation is frequently discussed in connection with the process of creating, developing and implementing new ideas, products, services or processes that deliver genuinely novel value.
Below are several of the major definitions of innovation.

The process of introducing new combinations of the factors of production, such as new production methods, new products, new markets, new sources of supply and new forms of organization (Schumpeter & Swedberg, 2021)
Innovation comes in two forms: sustaining innovation (improving existing products and services for existing customers) and disruptive innovation (creating new markets and value networks, often displacing established market leaders in the process) (Christenson, 1997)
A multi-stage process through which organizations transform ideas into new products, services or processes in order to advance, compete and successfully differentiate themselves in the marketplace (Baregheh et al., 2009)
Innovation has two principal dimensions: the degree of novelty (that is, 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 (that is, whether it is a process innovation or a product, service or system innovation) (Edison et al., 2013)
Innovation is the specific function of entrepreneurship, whether in an existing business, a public service institution, or a new venture started by a lone individual in the family kitchen. It is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth. (Drucker, 2002)
Innovation involves not just generating new, creative ideas but actually bringing them to fruition (Hartley et al., 2013).

To put it succinctly, the key elements of innovation are:

Doing something new
Generating wealth ⇒ producing profit
- Growing revenue
- Reducing costs

These are the main components that make up innovation.

Examples of Innovation

To make innovation more tangible, here are a few concrete examples.

The Internet: The development of the internet made it possible to share information and communicate on a global scale. (Leiner et al., 1997)
Smartphones: By bringing computing capabilities into a mobile device, smartphones made it far easier for people to interact and access information.(Katz & Aakhus, 2002)
Blockchain technology: Originally devised for the digital currency Bitcoin, blockchain technology enabled secure, decentralized record-keeping.(Nakamoto, 2008)
3D printing: Also known as Adaptive Manufacturing, 3D printing technology made it possible to produce complex three-dimensional objects from digital models. (Wohlers & Others, 2014)
CRISPR-Cas9 gene editing: CRISPR-Cas9 makes it possible to edit parts of the genome by deleting, adding or altering sections of the DNA sequence, opening up enormous possibilities in medicine, agriculture and biology. (Doudna & Charpentier, 2014)

The Innovation Process

The literature describes the process by which innovation occurs in a variety of ways. Here are two examples.

The innovation process consists of 1) idea generation, 2) problem-solving and 3) implementation. (Utterback, 1971)
A cycle that runs 1) problem definition, 2) idea generation, 3) testing, 4) implementation, 5) diffusion, then back to 1) problem definition -> ... and so on (Hartley et al., 2013)

The innovation process (Hartley et al., 2013)

Note that idea generation and problem-solving appear in opposite order in the two models above. This likely reflects the fact that innovation can begin from either direction: sometimes a need comes first, and sometimes a "seed" (a technology or idea) does.

Initiatives for Driving Innovation

Types of Innovation

End-user innovation: Individuals or companies develop innovations for their own use (personally or in-house) because existing products fail to meet their needs. (von Hippel, 2009)
Co-creation, co-production: Companies and customers generate value through their interactions (Galvagno & Dalli, 2014); a collaborative, open process involving both firms and users (von Hippel, 2009)
Open innovation: A paradigm holding that firms can and should use external ideas as well as internal ones in order to advance their technology (Chesbrough, 2003)
Openness: Engaging with many different types of partners to acquire ideas and resources from the external environment in order to stay ahead of the competition (Dahlander & Gann, 2010)

Examples from Business

Software tools company Atlassian runs "ShipIt Days" every quarter. (Atlassian, n.d.)
Google employees spend 20% of their time on self-directed projects (a practice known as Innovation Time Off) (Schrage, 2013)
This approach is also used in pharmaceutical drug discovery: thousands of compounds are run through high-throughput screening to determine whether they show activity against target molecules that have been identified as biologically significant for a given disease.
A related technique, A/B testing, is commonly used to optimize the design of websites and mobile apps.
In the 19th-century British iron industry, ironmasters routinely shared the designs and performance data of the blast furnaces they built, both through word of mouth and in published form. (Allen, 1983)
Selling or licensing ideas, or making them available as patents (Dahlander & Gann, 2010)
Most innovations arise from borrowing rather than invention: using existing ideas and technologies, drawing on ideas available from outside the organization, and bringing them into the innovation process through the market (Cohen & Levinthal, 1990)
Software development built on open source (von Krogh et al., 2012)

Factors That Drive Innovation

Previous research has identified a wide range of factors that give rise to innovation. The main ones are listed below.

The capacity to absorb new technologies into the organization, together with technical knowledge and knowledge of the external environment (Cohen & Levinthal, 1990)
Competition: the existence of firms, markets, and competition is a precondition for innovation (Hartley et al., 2013), and innovation is what enables firms to survive in competitive markets (Hartley et al., 2013)
Funding: large organizations have more resources to invest in innovation and are better able to absorb the cost of innovations that fail. (Hartley et al., 2013)
Shifts in industry structure, shifts in market structure, regional and global demographic change, changes in human perception, changes in the amount of scientific knowledge available, and so on. (Drucker, 2002)

Summary: Measures for Driving Innovation

Drawing on the innovation cases and factors discussed above, the measures a company should take to bring about innovation can be organized as shown in the figure below.

The first step is to understand the external environment: political, economic, and social change, as well as advances in technology. This can involve analyzing future trends and challenges, conducting research in the company's own R&D department where technology is concerned, or drawing on research results from other organizations.
Next, the company works on examining problems and generating solutions. Problems are examined together with in-house talent and partner companies. Solutions can be generated by developing them in-house, adopting other companies' products, or acquiring existing businesses.
Finally, the solutions that have been generated are rolled out and scaled as services. While refining the service through multiple variations and A/B testing, the company expands it by injecting capital and acquiring existing businesses.

References

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