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Èñòî÷íèê: Äí³ òî𳿠òà ïðàêòèêè ³íâåñòóâàííÿ - 2011,
I don?t know if you have pointed it out, but there are more and more articles and books in the Management area that deal with the concept of innovation, putting it at the front of the economic stage. In 1990, just for the European Union, some 670 new books whose main subject was innovation were published. In 1995, this number increased to 1130. The last figures in this area are showing that this number has reached 1540 publications of books for the present year. No one will then contests that this notion is at the centre of many current managers? concerns.
Innovation, like spring, is in the air. Creativity is all the rage, Entrepreneurship is on every agenda. As Einstein tells us, it seems managers are more and more ?using their legs? (and their brains) to convert their ideas into constructive products. Indeed, a lot of serious surveys show that more and more product or service innovations arrive on the market. According to a survey made by the WTO in 2003, for 100 new products or services developed in 2000, there were 123 in 2002, and 164 in 2003. How come this quite new and tremendous interest for what should be a daily preoccupation of managers?
I will try to demonstrate that one of the major reasons is that, with the acceleration of globalization process, innovation is more and more seen as the appropriate tool to create business value. Hence the three parts of this article which aims at giving a general overview of the topic. First, we will describe the general framework of both free trade market and current economic trends, then we will analyse more deeply the core concept of innovation. Finally, implementation of innovation will be treated, before widening our thought regarding key concepts such as value, and knowledge management.? Indeed creativity and innovation concern the process of creating and applying new knowledge. As such, they are at the very heart of the emerging knowledge management.
By focusing on the interaction between innovation and business, this paper argues that contrary to the popular perception, innovations do not succeed quite by chance, coincidence or accident. On the contrary, figures point out that innovations have to be thought, managers need a real strategy, and the products and services have to be marketed and diffused in coherence with the overall strategy.
I finally precise this article?s aim is not to be exhaustive, but just to give some tracks about what could be one of the bedrocks of the 21st century?s management.
I. Knowledge, general trends, and market in the 21st free trade economy.
Some definitions
To have a meaningful conversation about innovation, knowledge and creativity, it is essential to carefully define the words we use. People often use the same words with subtly different meanings. Many English words in every day use are utilised loosely and ambiguously. If we do not think about their usage we greatly hinder communication. Defining our words helps set a framework in which we can better discuss the concepts which with we are dealing. It also helps better differentiate the concepts and relate them to each other in a more meaningful way.
Let's first differentiate between data, information, knowledge and wisdom as the distinctions are often blurred or confused. Although knowledge is often seen as a richer form of information, this differentiation is not terribly helpful. A more useful definition of knowledge is that it is about know-how and know-why. A simple non-business metaphor is that of a dish. An analysis of its molecular constituents is data ? for most purposes not very useful. A list of ingredients is information ? more useful ? an experienced cook could probably make the dish ? the data has been given context. The recipe though would be knowledge ? written knowledge ? explicit knowledge ? it tells you how to make the dish. An inexperienced cook even with the recipe might not make a very successful dish. A person, however, with relevant knowledge, experience, and skill ? knowledge in their heads - that is not easily written down - tacit knowledge ? would almost certainly make an excellent dish from the recipe. Finally wisdom ? well that's about knowing which dish to prepare! It is about wise judgement.
An important point to note here ? to make knowledge productive ? you need information. Knowing how to make a dish is not sufficient ? you need information ? the list of ingredients. And to make a wise decision you need information too ? the likes and tastes of the consumers of the dish. So knowledge on its own is never good enough ? you need information and knowledge ? and of course ?doing the wrong thing well? is also not productive ? you need wisdom also.
Know-why is also important. Let us suppose you are missing a key ingredient of the dish ? knowing why a particular ingredient was part of the recipe might help a knowledgeable cook substitute an alternative. In fact know-why is often more important than know-how as it allows you to be creative - to fall back on principles ? to re-invent your know-how.
Having said that, if you discover a new recipe, a new way to make the dish, or something related with the organisation of the preparation, then you can surely be proud of yourself: this is a culinary innovation!
Now, let?s try to make the differences between creativity and innovation. Often we mix them up. Sometimes, they are merely seen as part of the process by which knowledge is developed and transformed into business value. This is a perfectly acceptable definition but again, like the failure to differentiate between information and knowledge, it is not very useful for practical purposes.
?Creativity is thinking up new things. Innovation is doing new things.
~ Theodore Levitt ~
Indeed, a more useful approach is to view creativity as the process of generating ideas while seeing innovation as the sifting, refining and more critically ? the implementation of those ideas. Creativity is about divergent thinking. Innovation is about convergent thinking. Creativity is about the generation of ideas and innovation is about putting them into action.
Creativity ? coming up with new ideas - is not enough. We need innovation. This requires the application of existing knowledge and the development of appropriate new knowledge. Coming up with new ideas is the food of Innovation. Innovation is a far tougher proposition than creativity.
2. Innovation and free-trade economy.
Before analysing the very concept of innovation, let us outline the general frame in which innovation production and diffusion take place. What are the different ingredients composing a market? According to Porter?s forces well-known model, let us recall the market is governed by five major forces:
- The first force is that of the buyers. Towards them must be oriented all the efforts of the firm, particularly concerning modifications of switching costs, manufacturing processes, or the positioning of the products and services.
- Suppliers must also be taken into account. Because of their huge power of negotiation, they are able to weigh dull as far as supplying is concerned.
-Thirdly, firms must pay attention to the threat of substitutes, and to the fact that followers do not have to support the R&D costs in the production process, and thus are able to implement the innovative service or product at a lower cost.
-The fourth element playing a great role in the innovation environment is that of entry or exit barriers. Anticipating and managing if necessary the different entry and exit barriers should be one of the major preoccupations of the firms operating on the market.
-Last but not least, Rivalry among competitors has numerous consequences on the level of activity, as well as on the value chain, by increasing or lowering one or several structural elements of the market.
3. Current trends?
Until now, the world economy, and more especially markets and firms structures have known a lot of major trends, from a technology push model, going through a market pull model (1960-1970), then to an innovation coupling and to networks firms? current ?fashionable? structure (1990-2000).
As a result, it is important to be aware of current economic trends as far as production and diffusion of innovations are concerned for a better understanding of the phenomenon. It seems managers have to cope with three major trends nowadays: the first one is the growing environmental pressure, due to the increasing competition in the business sphere. Globalization process is one of the explanations of this evolution.
The second trend is related to the time compression, between invention and innovation (i.e. invention plus commercialization). On the one hand, firms are faster and faster to create innovations, and on the other hand the speed of innovations adoption time is getting less and less long (To measure this evolution, McKinsey Consulting has created an index reflecting it. Comparing the Ford T and the DVD creation and adoption processes, the time compression calculated is 91%; Procter&Gamble, for its part, is using the ECR , i.e. Efficient Consumer Response linking producers, consumers and innovations, to measure this trend on its core business markets). This means time between the creation of an innovation product or service and its adoption by consumers has been divided by ten on average. Thus the ?market pull? economy since the 70?s and 80?s has progressively given way to a ?technology push? system directed towards innovation.
Thirdly, the number of new products or services directed towards consumers increases by 11% each years (Peters, 1997). This is due first to the growing number of mergers; more and more global firms pool the risks in order to win on all the markets and to benefit from different configurations. Moreover, this is related to R&D intensity and to the fact that top patenting company are based near high knowledge places, as Novartis implanted near the Route 128 in Boston.
To sum-up, innovation process has to deal with the more and more global shape of the environment, the need for fast life cycle innovations, and the interdependence of research and business institutions.
Now we have seen the general economic context, let us explore the core concept we are talking about.
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http://economics.about.com/library/weekly/aa060204a.htm