ISL456U-TECHNOLOGY AND INNOVATION MANAGEMENT
Chapter 3: Sources of Innovation
Inside Sources
A significant part of these sources is in the firm itself or its sector. The sources in the company itself or its sector are called inside sources. We can divide these sources into four groups. These are unexpected occurrences, incongruities, innovation based on process needs and industry and market change sources.
Unexpected Occurrences
Unexpected occurrences refer to an unexpected success, failure, or an unexpected external event. Unexpected occurrences as a source of innovation are the ability to use the information obtained as a result of the success and failure of the firm. Unexpected successes or failures can be considered an important resource in finding innovation opportunities. Many firms do not tend to transform the results of their success or failure into innovation. However, every hint of success and failure brings the firm one step closer to innovation.
Incongruities
Sometimes the expectations or assumptions of firms, customers, suppliers in the sector may not match what is happening. These types of incongruities are a high potential source for innovation. New ideas or solutions that eliminate incongruities may result in innovation. Incongruities may have various causes. When various organizational activities such as production, distribution, marketing, communication are examined, it may be observed that there are various incongruities between each other. Incongruities are more likely to occur, especially between interacting activities. People generally tend to get used to routines. If the activities of the firm or the relationships in the sector have been in the same routine for a long time, this situation may create blindness. To see the incongruities, it is necessary to examine the processes from outside.
Innovation Based on Process Needs
Drucker describes this innovation source as perfecting a process. When there is a clear need to improve the process, there are opportunities for innovation. The processes are specific because they are defined and their outputs can be known in advance. A pre-existing process can be refined to innovate with process needs. Weak connections in the process can be strengthened or the old process can be redesigned. To innovate in the process, the company needs to think about what is needed in the process. If the current process does not respond to emerging needs and needs have to be improved or modified, this process is likely to bring innovation (Iraz, 2005).
Industry and Market Change
Markets and industries are in a state of flux. The changes that take place over time cause the markets and industries to have a dynamic structure. In some sectors, this change is fast, while in others it is slow. After all, every industry
and market changes over time. Where there is change, there are many opportunities for innovation. For this reason, it is necessary to make observations, and closely follow the developments to predict the changes in the market and to take measures of them. Analyzing the sector creates an early warning system for companies.
Firms that anticipate changes can act faster to innovate. They identify opportunities to innovate and start working in this area. Thus, it becomes possible to adapt to change and react quickly by starting innovation studies in time. In many cases, companies that are market leaders carry out innovations that shape the market to maintain their positions. Sometimes, a company that has just entered the market can take an assertive position with a product that changes the structure in the market. Firms are in intense competition to find innovations that will change the structure of the market because an innovation that manages to change the structure of the market can easily lead the company to be the market leader.
Outside Sources
The second place among the firm’s sources of innovation is the outside sources of innovation. These sources are located in the environment, not in the firm or sector. Therefore, these sources are common to every firm in the sector. Opportunities that can be a source of innovation should be identified by constantly analyzing the environment. These sources are demographic changes, changes in perception, mood and meaning, and new knowledge.
Demographic Changes
Any change in the population, for example in terms of average age, dependency ratios, life expectancy, family structures, birth rates etc. means demographic changes which is one of the most important variables for firms. Firms need to take the demographic structure into account while analyzing their markets. One of the best ways to understand future market trends is to follow the demographic variables of the market. Most of the improvements or changes in the company’s production processes are designed according to potential future changes. Therefore, it is important to follow the demographic change.
The differences in consumption between generations, differences in expectations, population growth rate in the regions, migration rates, gender, age and income status of the audience that make up the firm’s market determine the areas to be innovated. All of these features are included in the demographics. For example, with the rapid development of China’s economy in recent years, its per capita income has also increased. This changed the variety of products demanded in the Chinese market. Now, the number of people demanding luxury products in China is more than in many countries in the world.
Changes in Perception, Mood and Meaning
Perception is the way people identify something. Firms and products have a reputation in society. Sometimes it’s positive, sometimes it’s negative. A company’s corporate reputation is the sum of all the views, perceptions and beliefs held about the company based on its history and its prospects in comparison to close competitors. Perceptions can change over time. Public perception changes due to cultural changes, globalization, and scientific developments. For example, the negative health effects of carbonated drinks, tobacco, or sugar were previously unknown to the public.
There may even be changes in the laws over time. For example, products that are harmful to health can be advertised only on certain channels. Over the years, there have been significant changes in the way people perceive the world. These changes are happening faster than ever due to the power of social networks today. People can change their perception of a particular product, brand, or industry overnight. Changes in perception cause businesses to innovate and develop new products and services that are compatible with the new perspective of customers.
New Knowledge
When thinking about innovation, the first thing that comes to mind is a new product, technology, and process. Innovation that occurs when improving an existing process does not come to mind. Developing something that has never existed before has been the most important innovation. These kinds of innovations are stars. New information is required for such innovations. Many innovations that have brought commercial success to companies and made them a leader in the market have been developed based on new knowledge. Although innovations developed with new knowledge are considered to be more profitable, it is not always easy to turn new knowledge into innovation. Companies allocate a significant part of their income to research and development expenses today. The most important reason for this is to obtain new information. The transformation of new information into a product or service and its introduction to the market may also take a long time. This type of innovation source can turn into innovation at the end of a long process in many cases.
Other Potential Sources
Other potential sources of inspiration for companies to innovate include customers, competitors and suppliers, universities and research centres.
Customers
Firms must meet the expectations of their customers to gain a competitive advantage. It should also determine the expectations and requests of the customers well. The best way to do this is to do regular market research.
Market research is important to understand what customers want. Innovation can be made by developing new products and services with the information obtained here. Firms can quickly launch the new product they have developed after collecting clues about the customers’ requirements. Thanks to the increase in production technologies and advanced techniques in marketing activities, companies can sometimes reveal needs that the customer is not aware of and develop a product for this. These strategies, based on the requirements and expectations of the customers, are called customer- oriented strategies.
Firms that make innovation by following this strategy include customers in the processes. If companies involve the customers in the process while determining their innovation strategies, they will achieve successful innovation management.
Competitors and Suppliers
One of the sources for obtaining new ideas or technological information that firms will need for innovation is competing firms. Information sharing between the firm and its competitors can be realized through some agreements between the parties. New product and service ideas developed based on information received from competitors can produce highly productive and profitable results for the firm with an effective marketing strategy. Suppliers and distributors can also provide information that includes key opportunities for innovation. For example, improvements made by suppliers in the materials can be a source for some innovations related to the product or service that the business will produce.
Universities and Research Centers
Universities, research centres and innovation-related institutions, as well as private institutions and organizations, can be counted among the important sources of the innovation process. New ideas, technologies or knowledge as a result of scientific studies conducted in universities can be a source of new products and services to be developed by firms. In addition to universities, applied research is also carried out in different institutions and organizations. From this point of view, the information produced in public institutions and private organizations with research laboratories can also be a source of inspiration for the innovation process of enterprises.