ISL456U-TECHNOLOGY AND INNOVATION MANAGEMENT
Chapter 1: Technology and Innovation Management: Key Concepts
Introduction
Innovation is a frequently used word not only in management books but also in the academic business literature. The concept of innovation and technology management and research policy has attracted significant interest starting from the second half of the 20th century. A better future is possible through developing and sustaining innovative capabilities, and the dominant organizations in many sectors are more innovative than their close rivals. It brings novelty into the economic sphere and predicts performance differences of organizations, regions and countries.
Technology and innovation management is a multidisciplinary field, so the subject changes accordingly. Economists tend to use the term “firm”; business scholars prefer using “business” and “companies” while denoting the same entity. Although all of them can be used interchangeably, in this chapter, the term organization is used as an umbrella concept covering all the entities mentioned above and not-for-profit/non-governmental organizations.
Interdisciplinary Historical Roots
Technological innovations not only provide wealth for the innovator but also to the country where this has occurred.
According to Martin’s (2012) systematic analysis of the science policy and innovation studies, the field in which technology and innovation management related research activities are conducted has matured. The field now includes sub-fields such as the (a) economics of innovation, technology and growth, (b) management of industrial innovation and the resource-based view of the firm, (c) organizations and innovation, (d) systems of innovation, (e) sociological and other contributions, and (f) measuring technology and innovation.
Historically, innovation was studied as an artifact between the 1950s and 1980s, as technology and organization between the 1980s and 1990s, and as networks embraced electronically from 1995 until today (Clark, 2003: 21). Moreover, no single discipline can deal with all aspects of technology and innovation management; thus, cross- and inter-disciplinary understanding is a must (Fagerber, 2005: 3).
Economics
One of the world’s greatest and most influential economists Joseph Alois Schumpeter (1883-1950), is known as the founder of modern growth theory. Schumpeter has coined the idea that the development and diffusion of new technologies by profit-seeking entrepreneurs formed economic growth sources. Schumpeter popularized the term creative destruction, which views innovation as waves of power restructuring the whole market. Joseph Schumpeter argued that organizations and/or entrepreneurs who grasp the discontinuities faster than others will thrive. Schumpeter is said to be one of the few economists who recognized the
importance of innovation to economic development, the role of entrepreneur, and later the role of organized research and development (R&D) in developing innovative capabilities.
Economists of the earlier century observed that acceleration in economic growth resulted from technological progress, but how technological changes and advancements contributed to the progress remained a mystery until Schumpeter’s theorization.
Several names advocated the long-waves theory of innovation by asking “How do company’s innovation – in its response to innovative ideas change as the company grows and matures?”. The Second World War caused even greater interest among economists searching for economic growth causes. Based on successful innovations of military research and development activities, industrial research and development, as we generally abbreviate as R&D, was institutionalized (Trott, 2017: 7-8). All in all, it is argued that the innovation process is treated as a “black box” in economics. Although its effects on the economy were analyzed, what happens in the box was left unanswered (Fagerberg, 2005: 3).
In the second half of the 20th century, Schumpeter’s ideas were developed by further scholars such as Robert Solow, who moved the attention from how capitalism administers existing structures to how it creates and destroys them. Later, Paul Romer developed these theories further, and he is said to be responsible for the modern theory of economic growth, which is sometimes called the neo- Schumpeterian economic growth theory. According to neo-Schumpeterian economic growth theory, sustained economic growth results from the inter-firm competition. To increase their profit, firms have devoted their resources to developing new products or developing new processes to make existing products better and more efficient.
Sociology
Martin (2012: 1228), tracing back to the sociologist contributions, specifically states two publications. One of them is Coleman, Katz and Menzel’s (1966) Medical Innovation: A Diffusion Study and the other one, Everett Rogers’s (1962) Diffusion of Innovations. Diffusion of Innovation is the most cited book within the field of science policy and innovation studies written by a sociologist. Rogers (1962) argued that diffusion of technology and innovation follows the S-curve type movement, and the respondents can be classified into various categories such as innovators, early adopters, early majority, late majority, and laggards.
Management and Organizational Studies
Most of the earlier studies can both be classified as either management and organizational studies fields. First of all, one should be aware of technology and structure debate, and hence Joan Woodward comes into the scene. Joan Woodward focused on the management of technology, arguing that the type of technology used has a significant
effect on the organization’s structural characteristics. Thomas J. Allen’s Managing the Flow of Technology was also a significant contribution to communication in R&D organizations. Allen introduced the term “technological gatekeepers,” which denotes a crucial role of the people linking the organization with the external environment and vice versa. Furthermore, Burns and Stalker (1961) introduced widely-known two generic forms of organizations, such as mechanistic vs. organic. Mechanistic organizational structures are designed to induce people to behave in predictable ways, whereas organic organizational structures promote flexibility. When Woodward’s and Burns and Stalker’s views are integrated, one can conclude that small-batch technology requires organic, mass production technology requires mechanistic, and finally, continuous-process technology requires organic structure. A good fit between technology and organizational design leads to success, whereas a poor fit leads to failure.
Concept of Technology Management
Technology can be defined as “the combination of skills, knowledge, abilities, materials, machines, computers, tools, and other equipment that people use to convert or change raw materials into valuable goods and services” (Jones, 2013: 263). Technology is the knowledge applied to products or production processes. Technology comes from employing and manipulating science; thus, it can also be called the out-growth of science (Trott, 2017: 18).
Technology in organizations exists at three levels, namely individual, functional, and organizational levels. Technology is about personal skills, knowledge, and competences that an individual possesses at the individual level. Functional level which can also be classified as departmental level, is about how groups work to perform their work, creating competencies that constitute technology. At the organizational level, technology is defined as the overall way that organizations use to convert inputs into outputs (Jones, 2013: 261-262).
Technology management is defined as “a process, which includes planning, directing, control and coordination of the development and implementation of technological capabilities to shape and accomplish the strategic and operational objectives of an organization (NRC, 1987 cited in Çetindamar et al., 2016).” By applying effective technology management, principals, strategy, and practices, organizations will recognize technological opportunities and threats, thus will be in a better position for converting them into commercial gains. As a conversion process, technology management will support organizations to translate their current technology into operational performance. Patent management, portfolio management, roadmapping, S-curve, stage-gate, and value analysis are tools used in technology management.
Fundamentals of Innovation Management
Schilling (2013:18) defines innovation as the practical implementation of an idea into a new device or process.
Afuah (2003: 4) approaches from the profit-making potential and defines innovation as the use of new technologies and market knowledge to offer a new product or service that customers will want. Trott (2017: 12) suggests viewing innovation as a process. Newly developed knowledge, processes, and products are the eventual output, and discovery of the eventual output is called the innovation process. Similarly, Jones (2013: 389) delineates innovation as “the process by which organizations use their skills and resources to develop new goods and services or to develop new production and operating systems so that they can better respond to the needs of their customers.” Borrowing from Myers and Marquis (1969), innovation can be viewed as the totality of all sub-process, from the conception to invention and eventually to a new product or a process, acting in an integrated fashion (Trott, 2017: 15). In other words, single innovation is the result of many interrelated innovations (Fagerberg, 2005: 5).
Conception is the kick-off stage for any innovation. Initial and interesting ideas are neither invention nor innovation. They are a collection of thoughts; conceptualizations in our minds. With the help of science and technology, ideas can be transformed into a tangible or intangible artefact such as a good, a service or a process. This transformation is called invention. When you have the invention, it has to be combined with cross-functional efforts of the people who will convert the invention into products or processes which will eventually improve organization’s performance, thus called exploitation (Trott, 2017: 15).
Earlier studies within neo-classical economics conducted during the 1950s concentrated on the internal characteristics of the innovation process. Incorporating economics, organizational behavior, business, and management, these studies looked at (1) the generation of new knowledge, (2) the application of this knowledge in the development of products and processes, and finally, (3) the exploitation of these products and services in terms of income generation; so, the main question regarding innovation management was managing the process itself and the characteristics making some organizations better in managing this process.
Schumpeterian view incorporates economic, strategy, and organizational behavior perspectives for better understanding the internal activities while recognizing organizations’ interactions with the external environment.
Sources of innovation can be individuals, organizations, universities, government-funded research, and private non-profit organizations (Schilling, 2013: 19). Within the global context, diffusion of successful innovation results in economic growth and improvement in living standards. Besides, organizational level improvements in terms of knowledge, process, and product development, any conceptualized idea, once successfully exploited, diffuses globally; thus, organizational level growth aggregates at the global level.
Innovation has many meanings, thus many types. Schmookler (1966 cited in Fagerberg, 2005: 7) made the initial distinction between product and process innovation, though he named the former one as product technology and the latter as production technology. Further, Freeman and Soete (1997) classified innovation comparing the required change relative to the current technology. Continuous improvements are classified as incremental or marginal innovations. Jones (2013: 388-389) talks about two main types of technological change which are labeled as quantum change and incremental change. Christensen (2003) makes a distinction between disruptive and sustaining innovations. Schumpeter classified the types of innovation into five categories: new products, new production methods, new sources of supply, the exploitation of new markets, and new ways to organize business (Fagerberg, 2005: 6).
Models of innovations are forms of deduction that have the potential to explain the whole. Initially, there were two schools of thought. One of them, the social deterministic school, emphasizes the importance of the environment, and the other one, the individualistic school, emphasizes the role of innovators as the driving force of innovation. Recently, drivers of innovation have been bifurcated as the market-based view and the resource-based view.
Starting from the 1950s, chronologically, we have witnessed many innovation models such as technology push, market-pull, dominant design, coupling model, interactive model, architectural innovation, network model, and open innovation.
Varieties of linear models of innovation rely on a step-by- step monodirectional understanding of the innovation process. For almost 40 years, linear understanding dominated the technology and innovation management realms, which eventually lost momentum after recognizing that interaction among science, technology, and innovation could be the primary development triggers. The two main variants of this approach are technology- push and market-pull. In the technology-push model, the innovation process is initiated by the serendipity of scientists’ unexpected discoveries, technological experts apply these discoveries to new product ideas, engineers and designers transform them into prototypes to be tested before manufacturing experts make the process possible for effective and efficient production. Finally, marketing function comes into play and crafts a sound marketing strategy based on 4Ps. Marketers make decisions mostly on the price, placement, and promotion, and less about the product. The target audience is the passive recipient of the whole process. Keeping many drawbacks of the technology push-model in mind, the market-pull model was introduced. Consumers are not the passive recipients, but became influential partners of the innovation process. As it is self-evident, unlike the former one, the market-pull model starts with the customer’s needs. A state of felt deprivation of the customer initializes the innovation
process, then this input is used by R&D experts for the design and engineering of the prototype and then for manufacturing.
Kline and Rosenberg (1986: 173) state that “[M]odels that depict innovation as a smooth, well behaved linear process badly misspecify the nature and direction of the causal factors at work. Innovation is complex, uncertain, somewhat disorderly, and subject to changes of many sorts’’. Approaching innovation as a linear, routinized, and a sequential process seems to be unrealistic. Recalling from the many definitions given before, it is an integrated series of activities in a never-ending loop of further research and development, context-dependent, and requires creative touch throughout the process. In brief, the circular model is made up of interconnected cycles with feedback, concurrent, and feedforward control. The iterative nature of the model motivates creative thinking; thus, creativity has become the model’s prominent logos. The entrepreneur’s location sitting at the center made her/him capable of looking for new opportunities and constructing new businesses.
Creativity, design, and entrepreneurship are all main building blocks of the innovation process. Creativity is the ability to produce novel and useful work (Schilling, 2013: 19). Design is developing or creating something (Trott, 2017: 13-15). Entrepreneurship is a process; an entrepreneur is a person who accomplishes that process. Traditionally, an entrepreneur spots an opportunity and develops business for exploiting that opportunity. In other words, entrepreneurship is the process of seeking business opportunities under conditions of risks and entrepreneur is the businessperson who accepts both risks and the opportunities involved in creating and operating a new business venture.
Organizational Characteristics Required for Successful Management of Technology and Innovation
Organizations are expected to cultivate the capacity for absorbing outside knowledge, which is known as absorptive capacity. Besides external threats, organizations should also foster sufficient freedom for employees to experiment with new solutions and establish new ties within the organization’s structure and create external linkages (Fagerberg, 2005: 11). At the individual level, according to Bessant and Tidd (2015: 16), successful innovators have the following characteristics:
• Exploring and understanding different dimensions of innovation, • Managing innovation as a process, • Creating conditions to enable the organization to repeat the innovation trick, • Focusing on creating the innovative capability to move their organization’s forward and • Building a dynamic capability.
Dyer et al. (2011) looked at the individual characteristics and consequently developed a model which they called The Innovator’s DNA Model for Generating Innovative Ideas. Dyer et al. (2011: 27) initiated the model by underscoring the importance of courage. Successful innovators should be able to challenge the status quo and take risks. Behavioral characteristics inherent in the model are questioning, observing, networking, and experimenting. Having this in mind, successful innovators are said to cognitively associate abstract and novel inputs, thus generating innovative business ideas.
According to Trott (2017: 10), acquiring knowledge and applying this to the development of new products that provide better solutions will always be detrimental to an organization’s success, thus becoming one of today’s most challenging management problems. Nevertheless, there is no secret magical formula for the successful management of technology and innovation. Virtual management, managing without authority, shared leadership, and building extensive networks are new skills required for success (Trott, 2017: 34).