ISL453U-ENTREPRENEURSHIP
Chapter 3: Innovation
What is Innovation
Innovation is defined as the creation or the adoption of new ideas, products, services, programs, technology, policy, structure, or new administrative systems and is acknowledged as a source of sustained competitive advantage of organizations. Innovation is a concept that starts with curiosity, intuition, and turns into products, services, and social benefits. The concept includes invention and R&D and creativity. Innovation is a process that consists of introducing something new and spreading it among users.
Innovation is the main factor in continuous economic development and growth for economy, the main element of social progress and prosperity for society, and the crucial factor of competitive advantage and power for companies.
Innovation also has significant benefits for businesses. The importance of innovation for companies can be summarized as developing the ability to create the most added value with minimum input. Innovation is one of the most critical factors for companies to develop, grow, survive, benefit in competitive environments, and become the industry leader.
Determinants of Innovation
Different factors can play a role in innovation and innovation processes, and these factors are called the determinants of innovation. We can classify the determinants of innovation under two headings as individual determinants and organizational determinants.
Individual Determinants of Innovation
Innovation activities range from individuals to groups of people who come together to achieve a specific goal.
We can classify the individual determinants of innovation under six headings. The first one is intelligence, that is, the ability to grasp and intellectual responsibility. The second component is expressed as the concept of personality, and with this concept, the openness of the person to experience is defined. The third component is the concept of motivation. The fourth component is the concept of knowledge, which is explained by one’s experience and level of expertise and is a crucial human resource for innovation in organizations. The fifth component is strong communication, and this component defines the behavioral dimension in social relations. The sixth and final component is called emotional intelligence.
Organizational and Environmental Determinants of Innovation
Organizational innovation refers to the decision-making, workflow, and distribution of tasks among the organizations and departments with new methods. In this context, organizational determinants ensure the
implementation or change of new procedures and processes in different departments within the organization. We can define the organizational and environmental determinants that affect innovation as follows
• Specialization • Professionalism • Technical information resources • Administrative intensity • Managerial tenure • De-Centralization • External and Internal Communication
Factors Hampering Innovation Activities
Various factors can prevent innovation activities. There may be reasons for not starting innovation activities at all, or there may be factors that slow down innovation activities or jeopardize expected results. These include economic reasons such as high costs and lack of demand, enterprise factors such as skilled personnel and lack of information, and legal factors such as regulations and tax rules. According to the Oslo Manual (2005), the factors that hinder or may hinder innovation are cost factors, knowledge factors, market factors, institutional factors and other factors.
Concepts Related to Innovation
There are innovation-related concepts that are similar with innovation, but different by definition. Innovation includes different concepts such as invention, creativity, R&D, and change, and just because a product is new, it would be wrong to consider it innovation. In this section, concepts such as invention, creativity, R&D, entrepreneurship, and their relationship with innovation will be explained.
Innovation and Invention
Inventions and innovations on the product cause a firm to grow faster than expected. The most crucial point here is that the company attempts to create inventions or innovations and then commercializes the inventions and innovations it creates.
We cannot accept every invention as innovation. The most apparent difference between innovation and invention is that innovation must be approved by, produced for, and presented to a broad audience. The invention should have the potential to generate social and commercial benefits.
Innovation and Research Development (R&D)
Research and development, in its abbreviated form, R&D, can be defined as a planned, programmed, and systematic working group carried out under the guidance of information to produce new products, tools, and technology.
Innovation and Creativity
Creativity is the ability to create a pattern or find an original idea, which has not been done before. We can list the effects of creativity as improving innovation ability,
helping to develop new jobs and professions, promoting entrepreneurship, and accelerating economic development and growth. Creativity comes first among the concepts that will be associated with innovation.
The creation of new ideas can be considered as the first stage of the innovation process. The process of creating these unique and useful ideas can be defined as creativity. Two types of creativity play an essential role in the innovation process.
The first is individual creativity. Individual creativity is a function of intellectual skills, knowledge, way of thinking, personality, motivation, and environment. Organizational creativity, on the other hand, is a function of the creativity levels of individuals within the organization, social processes within the organization, and the relationships between individuals.
Innovation and Entrepreneurship
New ideas and new products can be offered to consumers continuously and economically. Entrepreneurs develop solutions for different needs of consumers through innovations and launch many new products to increase customer satisfaction.
Types of Innovation
There are several classifications for the types of innovation. One of the first studies on this subject, Schumpeter (1934) has defined five main types of innovation: introduction of new products, introduction of new production methods, opening of new markets, development of new supply resources for raw materials and other inputs, creation of new market structures in the industry. Technical innovation can be about developing existing products, services, or processes, as well as creating entirely new products, services, or processes. Managerial innovation is about organizational structure and administrative processes.
Oslo Manual (2005) examined the types of innovation under four headings: (i) organizational innovation, (i) product innovation, (ii) process innovation, (iii) development of new ways of working and doing business, and (iv) developing and implementing different marketing methods, or marketing innovation, including the improvement of existing marketing methods.
Types of Innovation by Application Area
Product Innovation
Product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components, and materials, incorporated software, user-friendliness, or other functional characteristics.
Service Innovation
Service innovation is when an enterprise develops a new and different service and offers it to its customers.
Process Innovation
Process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment, and/or software.
Types of Innovation by Level of Knowledge Used
Radical Innovation
It refers to major, fundamental, and essential changes in input, output, and processes. Radical innovation, which identifies new problems and creates new opportunities, brings together new and different information and changes established assumptions about factors such as environment and technology. Such innovations refer to essential product and process developments that have led to significant changes in an industry (for example, the first introduction of ATMs in the banking industry).
Incremental Innovation
Incremental innovation is an innovation process that emerges using existing technologies and forms. Innovations of this type develop and restructure an existing product.
Modular Innovation
Many products are made up of all the different components that are placed inside each other. The element forms the visible part of the product and includes a basic design and a well-defined function. For example, a bike consists of wheels, brakes, saddles, and many more. Each of these components also has different constituents in themselves. The seat, which is a component of the bike, is also a separate system with many elements such as metal, plastic skeleton, leather, steel rails.
Architectural Innovation
This innovation includes the changes that occur by re- assembling the existing system and re-assembling the parts differently. Unlike modular innovation, Architectural innovation aims to change the overall design of the system or to create a new product by improving the interaction of the components of the system. An example of architectural innovation is the Walkman developed by Sony.
Changes Which are Not Considered Innovations
We can explain the changes which are not considered as innovations under six headings.
• Ceasing to use a process, a marketing method or an organization method, or to market a product • Simple capital replacement or extension • Changes resulting purely from changes in factor prices • Customization • Regular seasonal and other cyclical changes • Trading of new or significantly improved products
Adoption of Innovation And Innovation Traditional Innovation Strategy
Strategies In the traditional strategy, the product does not change at Knowing the adoption and spread of innovation will make all or only slightly. In the dependent strategy, the product it easier to identify such possible causes. can vary significantly in line with customer demands.
Adoption Process of Innovation Opportunist Innovation Strategy
The process from the first time the individual hears Opportunistic strategies are an innovation-generating innovation to adopting it is called the adoption process of strategy by following the gaps and deficiencies noticed in innovation. There are five main factors that influence the the markets and creating products that will meet the adoption of an innovation, and each of these factors is at requirements that may not have occurred before
play to a different extent in the five adopter categories. These stages are; awareness, interest, evaluation, trial, and adoption stages.
The Spread of Innovation
Dissemination is the acceptance and implementation of innovation among members of a social system within a specified period through specific channels. We can define the spread of innovation as the spread of all segments of society after the adoption of innovation. Mass media, such as advertising, emerge as a valid form for the spread of innovation, especially in the early stages.
Innovation Strategies
Innovation strategy means setting the rules and principles regarding the implementation of innovative applications.
Innovation strategies should not only be seen as a competitive strategy in the market, but they should also be compatible with other approaches determined by the company. Variables such as market share, target market, and growth target of the company are also the determining factor in the innovation strategy. We can examine the innovation strategies of businesses under five main headings. These strategies can be listed as offensive, defensive, imitative, dependent, traditional, and opportunist strategies.
Offensive Innovation Strategy
Offensive innovation strategy aims to be a leader in the market and the technical field by introducing a new product to the market or developing a new production process before the competitors
Defensive Innovation Strategy
Defense-oriented innovators do not want to be the first in the world, but they also do not want to lag behind the technical change.
Imitative Innovation Strategy
Businesses that follow an imitative innovation strategy generally try to use existing technology and information by following innovations from a distance.
Dependent Innovation Strategy
The dependent strategy involves acceptance of a satellite role in relation to other stronger firms, and these firms do not attempt to initiate or imitate technical changes in their product.