2. understanding innovation

Understanding Innovation
Content:
1. What is innovation?
2. Why is innovation important?
3. Types of innovation
4. Innovation drivers & barriers
5. How to “initialise” innovation?
6. Open Innovation
7. Innovation in arts & humanities
2

“The reasonable man adapts himself to the world; the
unreasonable one persists in trying to adapt the world to
himself. Therefore all progress depends on the
unreasonable man.”
- George Bernard Shaw -
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Content:
6. Open Innovation
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Innovation
Something
different?
Something
better?
Something
cheaper?
Do at a
different
location?
Do in a
different
timeframe?
Something
new?
5

• There are many definitions for innovation! Term widely used….
• Innovation:
– Lat. “novus” (new) and “innovatio” (to create
sth. new) → something new or different introduced, the act of
innovating, introduction of new things or methods
• “[…]the application of new ideas to the products, processes, or
other aspects of the activities of a firm that lead to increased
“value.” (Greenhalgh & Rogers 2015: 4; „Innovation, Intellectual
Property, and Economic Growth“)
• “The process of translating an idea or invention into a good or
service that creates value or for which costumers will pay.”
(www.businessdictionary.com)
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• Innovation different from invention
– Innovation → refers to the use of a better and, as a result,
novel idea or method
– Invention → refers to the creation of the idea or method itself
• Innovation different from improvement
– Innovation → refers to the notion of doing something different
– Improvement → rather refers to the notion of doing the same
thing better
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Content:
6. Open Innovation
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2. Why is innovation important ?
• Innovation as a term established in the 90`s
• Innovation nowadays part of daily life: Everybody is or
wants to be innovative
• Economist Jospeph A. Schumpeter is “father” of innovation
→ did not invent the term but introduced it economics!
(“Theory of Economic Development”, published 1912)
• Innovation is important as it is one of the primary ways to
differentiate your product from the competition
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2. Why is innovation important ?
• Importance of innovation may seem obvious but importance is also
matter of perspective:
– Macro-perspective (country-level)
• Foundation for growth of a countries economy
• Basis for global competiveness
– Micro-perspective (firm-level)
• Foundation for growth of a company
• Basis to ensure long-term competitiveness of a company -> ensures “survival” of
companies
• However, firms are also able to survive with little amount of
innovation
• Macro- and micro-level importance of innovation are naturally
interlinked
• State policies needs to support innovation activities of companies
• Companies “do” innovation
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Content:
6. Open Innovation
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• Different types of innovation can be classified in
several ways!
• Two dimensional approach on innovation to structure
different types:
Innovation Types
Application of
Innovation
Degree of Novelty
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• Application of innovation
– Product Innovation
– Marketing Innovation
– Process Innovation
– Organisational Innovation
• Degree of novelty (Does the innovation involve little,
much or no novelty?)
– Radical Innovation
– Architectural Innovation
– Modular Innovation
– Incremental Innovation
• Innovation types not 100% distinguishable, some
might as well “overlap”
= Henderson & Clark Modell
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Product Innovation
• A good or service that is new or significantly improved. This
includes significant improvements in technical specifications,
components and materials, software in the product, user
friendliness or other functional characteristics. (OECD)
• the introduction of a new product, or a significant qualitative
change in an existing product
– Product does not need to invented -> improvement of existing product also
innovation
– Trend towards product improvement rather than totally new products (since
70`s)
• Examples: Dyson vacuum cleaner, Computer
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Process Innovation
• A new or significantly improved production or delivery
method. This includes significant changes in
techniques, equipment and/or software. (OECD)
• the introduction of a new process for making or
delivering goods and services.
• Examples: automobile produced by robots compared
to that produced by human workers
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Marketing Innovation
• A new marketing method involving significant changes
in product design or packaging, product placement,
product promotion or pricing. (OECD)
• Example: Facebook, Twitter etc.
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Organisational Innovation
• A new organisational method in business practices,
workplace organisation or external relations. (OECD)
• result from a shift in underlying organizational
assumptions,
• are discontinuous from previous practice, and
• provide new pathways to creating public value.
• Example: first implementation of an organisational
model that gives the firm’s employees greater
autonomy in decision making and encourages them to
contribute their ideas
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Radical Innovation
• It represents a drastic change in the way that the
product or the service is consumed. It generally,
brings a new paradigm to the market segment that
modifies the existing business model
• Example: the evolution of the music CD to digital files
in MP3 extension
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Architectural Innovation
• “The essence of an architectural innovation is the
reconfiguration of an established system to link
together existing components in a new way […] The
important point is that the core design concept behind
each component-and the associated scientific and
engineering knowledge-remain the same.” (Henderson
& Clark 1990:12)
• Example: Sony Walkman (all main components
existed before already but were used in other
products)
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Incremental Innovation
• It reflects small continuous improvements in products
or product lines. It generally represents small
improvements in benefits noticed by the consumer
and it does not change significantly the business
model or the way the product is consumed.
• Example: iPhone → smartphones existed before apple
entered the market but apple introduced larger
touchscreen, app store, and an overall improvement
in usability
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Modular Innovation
• Uses the architecture and configuration associated
with the existing system of an established product but
employs new components with different design
concepts
• Use of new or different component is key factor of
modular innovation
• Less dramatic impact than radical innovation
• Example: Clockwork radio (radios were already there
but different power supply, not autonomously as in
clockwork radio)
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Technological vs. non-technological
innovation
• Taking the different types of innovation it is clear, that
innovations can be of technological and of non-
technological nature
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Business
Inno-
vation
Marke-
ting
Strategic
Oper-
rational
Non-Technological
Technological
Product
Etc.
Process
Techno-
logy
Etc.

Content:
6. Open Innovation
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• Innovation is not deterministic
– There are elements that may foster or hinder the development of
innovation
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Innovation drivers
• There are many drivers that can lead to innovation
• However, certain drivers are more commons than
others:
1. Frustration with the Status-Quo
2. Responding to Crisis
3. New emphasis on prevention
4. New emphasis on results
5. Adapting of technology
6. Inclination of “doing the right thing” (moral
imperative)
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Innovation barriers
• Of course, there are also many barriers that can
hinder (business) innovation
• However, a couple of barriers are particularly
common:
1. Inadequate funding
2. Risk avoidance
3. “Siloing”
4. Time commitments
5. Incorrect measures
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Inadequate funding
• Innovation usually requires some sort of funding
• Funding a project leading to an innovation oftentimes
means taking away money from established programs
• Getting the money in the right time not easy
(organisations often work on annual funding cycles)
• However, there are many ways to receive (public)
funding for innovational activities → check for funding
programs in your community or state
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Risk avoidance
• Many people avoid risk to preserve what they have ->
understandable but not a good attitude for becoming
an innovator
• No progress will be made without a certain amount of
calculated risk or change
• Risk avoidance goes often along with fear of failure
– In some societies one gets “stigmatized” for failing
– In a successful innovative company/society an atmosphere of
entrepreneurial spirit ought to be created to foster innovation
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“Siloing”
• Organisations seek to protect their identities, get
proper credit, sustain themselves and protect
themselves
– they create boundaries, assign responsibilities and put rules in
place
• By nature, innovations tend to cross boundaries
and create new categories within organisations
– innovations that might benefit the whole enterprise can be “killed”
29
• better understanding of the needs
and concerns of organisations can
be a starting point for managing
natural organisational conflicts
innovation creates

Time commitments
• Time is a scarce resource
• Time needs to be used efficiently in a company ->
management responsibility to assure that
• If management invests in on-the-job training,
experimentation etc. that might stimulate innovation
there is no guarantee that it will pay off
– Conflict of interest as innovation is wanted but not clear to what
price
– it’s difficult to prove that such “investments” pay off
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Content:
6. Open Innovation
32

• Companies must encourage and support the
development of innovation
• Innovation can be seen as dynamic process
• → Hamel (2000): „Leading the revolution“
– describes what he calls „the wheel of innovation“
• However, this is only one concept among others
– Rather “new” understanding of how innovation works
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Innovation as a process
• Innovation is really not only an end in itself and it can
be a long-term process!
34

Wheel of Innovation
• Innovation in a 5 step process:
1. Imagining: thinking about new
possibilities, making discoveries by
ingenuity of communication with others,
extending existing ways
2. Designing: testing ideas on concept;
discussing them with peers, customers,
clients, or technicical experts; building
initial models, prototypes, or samples
3. Experimenting: examining practicality
and financial value through experiments
and feasibility studies
4. Assesing: identifying strengths and
weaknesses, potential costs and benefits,
and potential markets or applications;
and making constructive changes
5. Scaling: gearing up and implementing
new process; putting to work what has
been learned; commercialising new
products or services
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Imagining
Designing
Experi-
menting
Assessing
Scaling
IDEA

Idea Creation
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Where do ideas come from?
Where did your idea come from?
Chance
remark
Luck
Brain
Stormin
g
Innocent
remark
Dream Mistake
The bath
(Eureka
Moment)

Content:
6. Open Innovation
37

6. Open Innovation
• New concept for innovation
– Innovation process is not limited to inside company efforts but also open
for external influences to create innovations through knowledge (sharing)
– Internal and external ideas have impact on innovation (development of new
products, services or business models)
• 3 main approaches:
– Outside-in: integration of external knowledge (e.g. make use of knowledge
of external partners -> producer, supplier, customers etc.) to raise quality
and pace of innovation process
– Inside-out: new process already exist in company (e.g. knowledge is
externalised through creation of a start-up)
– Cooperative: mixture of the formers ones; externalisation of internal
knowledge and internalisation of external knowledge → ideas are developed
jointly (e.g. optimising processes between producers and suppliers)
38

Open Innovation Example: Mauna Lai
Tropical I/II
Situation:
• a group of entrepreneurs purchased a failing beverage
brand
– Goal: Revitalise business within 5 years
– Problem: they had all marketing rights for the products but no
operational or product development capabilities (had to rely on
original owner → high costs)
→ growth potential was very limited
Strategy:
• Enhance value of the brand by establishing an open
innovation system for product development
→ Creation of new product pipeline & reduction of operating costs
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Open Innovation Example: Mauna Lai
Tropical II/II
Tactics:
• Establishment of a distributed product development team,
including outside experts (product development beverage
formulation, food processing and market research etc.)
• Management of the team by professional consultancy in a
phased review process
→ Cost reduction for existing products
→ Development of product line extensions
Results:
• Increased sales and profitability
• New excitement about the brand among distributors (also b/c of
better product pipeline increased value of the brand)
• Owners were able to sell the brand two years ahead of schedule at a
substantial gain
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Content:
6. Open Innovation
41

• Research in arts & humanities contributes significantly to
growing body of knowledge on human experience, agency,
identity and expression (language, literature, performance
etc.)
• Strong affiliation with creative industry (strongly
innovative)
• Sciences, technologies and arts & humanities complement
each other and are interdependent
– E.g. arts & humanities can help to translate science to wider public
– E.g. arts & humanities provide understanding of the effects of change on
society
• arts & humanities create language that helps to
communicate complex matters in a comprehensible way
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• Knowledge is at the heart of innovation
• HEI provide a vital source of fundamental knowledge
(sharing/transmission, creating and accumulating knowledge)
• Innovation system depends on knowledge coming from HEI
– This not only true for technological inventions but also for
innovation coming from arts & humanities
– Strength of innovation system depends on effectiveness of HEI
to disseminate knowledge to others
• However, innovation does not just evolve within HEI→ special
skills and a certain mind-set is needed to be innovative
– Can be linked to entrepreneurial skills
– Entrepreneurial skills need to be taught in arts & humanities to
better transmit ideas from HEI to business and vice versa →
ventures
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• Everybody can be an innovator!
→ Concept of intrapreneurship (behaving like an entrepreneur while working within
a large organisation)
• Difference between entrepreneur & intrapreneur?
• Entrepreneur: someone who creates (through his/her passion, skills, innovation)
a business and is willing to take full account for its success or failure
• Intrapreneur: utilizes his/her skill, passion and innovation to manage or create
something „useful“ for someone else`s business
• Arts & humanities need to teach typical skills throughout their
education which enables students to become intrapreneurs!
• Increases chances to become either entrepreneur or intrapreneur
• Increases chances on job market as companies look increasingly for graduates
with intrapreneurial mind
• Increases the chances for innovation to evolve → nourishes the innovation
system
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