Innovation refers to conception and implementation of novel ideas, processes, system, services, new or improved products, and new models to achieve high quality, efficiency, success and positive impacts. According to George et al. (2012), innovation is an active and self-motivated process to find ways to best utilize the organizational resources to attain positive outcomes such as high growth and productivity. Innovation management plays a significant role in modern organization through its contribution in enhancing productivity, increasing organizational members ability to cope with internal and external business environment, meet customers’ expectations, respond to challenges effectively and assist the organization to achieve competitive edge over other competing businesses. However, despite the multifold benefits, the process of innovation and its implementation is not an integral part of many organizations (Hervas-Oliver et al., 2014). This demands a mechanism that assists mangers and change agents to gain a broader understanding of innovation processes, goals, outcomes and management of change. This highlights the need for innovation management to manage organizational innovation process from idea creation to its execution. Accordingly, innovation management is required to promote creativity and increase capability of workforce to adapt and respond to changing business landscape to capture internal and external growth opportunities.
This essay presents an overview of the innovation management and related concepts for a broader understanding of the topic from different contexts. The first section of this essay examines and reviews the different concepts of innovation management such as such as types of innovation, open innovation, innovation strategy, organization structure impact and knowledge management role. The second section provides detail analyses the concept of open innovation in terms of its advantages and disadvantages. The third section concludes the key points of section one and two.
The literation highlights different type of innovation that hold relevance for organization growth and productivity. The most common referred type of innovation are product innovation and process innovation. Product innovation is the creation of an entirely new product while process innovation is the alteration (newness or improvement) in the way the products are being formed and delivered. These two forms of innovation are dependent and thus, influence each other as the formation of new products is often associated with transformation in the production process. However, Prajogo (2016) argues that new product development demands organizational change within the firm internal environment.
The innovation is reliant onnew technological development for different type of innovation such as product, service and process innovation (Chang et al., 2012).When the organization develop a new service, it is said to be service innovation. It can be noted that the product, service and process innovation is dependent on the organization development stage. In the study of Bucherer et al. (2012), found that the in the initial growth stage of the business, the organization mainly adopts product innovation which is later followed by service innovation.
The author also states that with the growth and increase in complexity of the business operations the organization adopts process innovation for the introducing new products in the competitive marketplace. The product innovation is a risk venture as the success can lead to high profitability through enhanced productivity and the failure can cause huge losses. On the different side, Hervas-Oliver et al. (2014) states that the adoption of process innovation is assumed to involve less risk due to high volume of production and low cost of production.
The literature also highlights radical and incremental innovation. Radical innovation brings fundamental changes that are entirely new or differs with existing invention. This kind of innovation practices involve central changes to introduce completely new products in the organizational activities that deviate from current practices. Oerlemans et al. (2013) mention that radical innovation promotes new business operations, restructuring of organizational structure and adoption of new business strategies.On the contrary, Chang et al. (2012) viewed that this kind of innovation presents a bigger risk and challenge for the existing organizational structure and receive a strong resistance to change from the organizational member. It can be added that the change in the organizational structure also modify the responsibilities and duties of managers and executives which is difficulty to determine and lead to more uncertainty in implementation of radical innovation practices.
Another kind of innovation is incremental which brings small deviation from the existing practices within an organization. Honda, Google, and General Electric are some organizations that have been successful adoption and implementation of incremental innovation. According to Oerlemans et al. (2013), incremental innovation provides extension to previous innovations to improve existing products, services or processes. This innovation kind do not interfere much with the organizational structure and strategy.Thus, it can be understood that radical innovation is difficult to adopt relative to slow or incremental innovation methods like total quality management, six sigma etc.
The types of innovation provide different strategic choices for the organization and its developmental stage and directs the organizational efforts for new or improved product, process or service development and match the innovation fit with the overall organizational structure and strategy. Consequently, it can be said that it is essential to organization to focus on categorization of innovation to explore the type of innovation that might be best suitable for the organization desired outcomes and to attain success in innovation management.
The growth of companies such as Apple, Microsoft and Google are driven by continuous innovation practices which have proved to become a competitive edge. Innovation has also supported companies in the period of economic downturns by redefining the market through its new or improved product and services. Peppard and Ward (2016) remind many companies failed in realizing continuous innovation which is a challenging task. In the finding of West and Bogers (2014) suggest innovation to consider as an open system for a mature culture that supports creativity and creation, sharing and retaining of knowledge.
An open innovation system promotes knowledge inflow and outflow to drive innovation that can help the company to achieve external outcome such as increased market share and enhanced market competitiveness.An open system of innovation would facilitate the research and development from internal and external perspective such as by investment in new human capital or investment in new emerging technologies or technological ventures. The internal R&D efforts can focus on commercialization through joint undertakings, strategic alliances or licensing (Oerlemans et al., 2013). In an open innovation system, ideas are not restricted to internal environment but are recognized from the external organization environment.
In the opinion of Chesbrough et al. (2014), an open innovation system helps in managing overall performance and growth though selection of innovation strategies.The adoption of open innovation the company boundaries allow the company internal resources to link with external knowledge resources and technological resources. Thus, it can be understood that open innovation supports external knowledge resources and capabilities to discover new idea for reducing uncertainty and risk associated with innovation and to leverage on scarce internal organizational resources. The understanding of already developed external capabilities and requirements, the organization can effectively organize resources and select and plan for the new initiative and develop a robust innovation strategy.
The innovation strategy is required to effectively manage the process of innovation and its continued success within an organization which demands investment in terms of time, money and continuous efforts. Prajogo (2016) remindsthe focus of innovation strategy on identifying the source of innovation, organizing the internal environment and members for the process and determine ways to capture value from the implementation of the innovation.Xia (2015) states that the lack of innovation strategy led to failure of innovation and improvement efforts such as Nokia.
The innovation strategy aims to bring reinforcing policies and modify behavior and transform a culture that help in successful management of innovation. In the finding of Hervas-Oliver et al. (2014), innovation strategy playacentral roleinaligning the objectives and change significance with diverse functions such as R&D, finance, marketing, etc. to gain more support in new initiatives. It can be understood that innovation strategy draws the organizational efforts towards the selection of technologies, organize resources required for new initiative, embrace open innovation, develop cooperative process and systems and plan to implement innovation in alignment with the business strategy.
In support of this, Snow et al. (2011)point outthat innovation strategy directs the organization for technological development and commercialization. Similarly, it can be added that absence of innovation strategy the organization can have conflicting goals and priorities and non-alignment with business strategy and organizational structure. The implementation of innovation strategies involves the knowledge management practices for external collaboration with internal system, activities, decision related to innovation management. George et al. (2012) mentions that the different perspectives of innovation strategy are vital for innovation leadership for long orientation of innovation management.
The formal organization structure is responsible for building organizational effectiveness and success through idea source and innovation giving competitive edge over competitors (Zheng et al., 2010).The innovation process brings changes in the organizational structurethrough changes in role and responsibilities, changes in position and reporting relationship. The organizational structure has an influence on the adoption and implementation of innovation as it alters the behavior of organizational members towards achieving organizational goals and understanding the value associated with new initiatives.
The centralization is found to have both positive (freedom of managers to take decisions and managers empowerment) and negative relationship (in terms of narrow communication channel and filtering of information) with the outcomes of radical and incremental innovation process (Kalay and Lynn, 2015). However, several authors viewed that a formalized organization structure has certain degree of control on the innovation process to drive the innovative performance through a better coordination and collaboration among the organization functional units.
Similarly, Schultz et al. (2013)states a formalization in organization structure has clearly defined rules and specific roles that decreases level of uncertainty and risk, minimize occurrence of error and increase cost effectiveness for a better innovation. On the opposing side, Kalay and Lynn (2015) argue that there exists a negative relationship between innovation process and a high degree of formalization in organization structure. The author specifies that a high formalization controls the employee empowerment andhighroles specificity decides the course of action which limits the employee to engage in open innovation process.
Moreover, it is seen that knowledge sharing plays a vital role as a driver of open innovation. The widely distributed knowledge supports workforce creativity, development of new idea and building an innovation culture within the organization. In the views of Tseng (2010), the knowledge sharing practices contributes to innovation by building competent workforce to cope with new process, system or technological adoption. It can be noted that a culture with knowledge sharing practices would encourage development of open innovation system.The collaboration of knowledge resource from internal and external environment is vital to bring innovation.
The internal knowledge resources help to determine the existence of tactic knowledge in collaboration with employees (López-Nicolás and Meroño-Cerdán, 2011). This helps to identify creativity and expertise among the employees to foster innovation culture. External knowledge resources from external customers can be helpful for the organization to gain an insight about customers’ expectations from the products or services offerings. This would help in the organization to evaluate its capability in terms of available resources and existing organizational capabilities to drive innovation as compared to its competitors.
Tan and Nasurdin (2011) argued that a successful innovation management in complex and changing business environment demands an open and flexible organizational structure along with integration of knowledge management practices. It can be added that knowledge management requires integration of knowledge resources with external capabilities like technologies for an efficient innovation management.Thus, it can be said that knowledge management role in innovation holds relevance for creation, retaining, distribution and maintenance of knowledge resources from internal and external sources for creating competitive edge through effective knowledge utilization by integrations with capabilities. This is also crucial for sustaining innovation in technological advancements, changing customer expectations and high market competition as observed in companies like Hitachi. It can also be noted that innovation management through knowledge management practices help in improving knowledge reach, availability and accessing knowledge internally and externally to reduce complexity in the process of innovation.
Open innovation plays an influential role in creation, capture and protect value of intellectual development and becoming an integral part of industry practices such as information technology, electronics, automobile and service businesses. The open innovation serves as a medium to convert risk into opportunities through discovering better ways to problem solving, best utilization of scare and knowledge resources(Ibarra et al., 2015), protect and capture value such as intellectual property.
In support to this, the success of Microsoft and Cisco highlights the use of open innovation system. The internal innovation is supported through scanning of external knowledge resources and organization investment to maximize the returns. The open innovation provides opportunity to organization to realign the innovation strategy with the external knowledge to create and capture value from combination of internal and external innovation. In contrast to this, many organizational face difficulties in adoption of open innovation system which affect the organizational capability to achieve internal development and internal innovation.
The article by Van de Vrande et al. (2009) describes the challenges and opportunities in context of open innovation. The author states challenge to open innovation involves inconsistency in the decision making regarding investment for R& D efforts when the outcomes of the efforts are accessible to the competing businesses. It can be noted that the organization adopting open innovation system make investments which are shared with competitors. The author also specifies the challenges related to open innovation are issues related to intellectual property and legal risks, incorporation of external ideas with internal capabilities and creating an efficient internal culture and structure to support open collaboration.
In the study of Ibarra et al. (2015)found some key challenge to open innovation system such as motivation factor of organizational members, difficulty in maximizing returns and incorporation of external knowledge resources in the organization innovation process and related activities. It can be said that to maximize the return from internal innovation and to effectively exploit the internal capabilities of R& D activities the organization require licensing of intellectual property, robust company product/service offering, cross-license patents for technology, and adoption of new emerging technologies and giving up obsolete technologies.
The lack of financial returns influences the motivation level of workforce to contribute in the knowledge creation, sharing and to provide their contribution in the intellectual property. This pose a challenge in the open innovation for creation of intellectual property.The motivation model for expectancy theory can also be related in this context as the theory states that individuals are inspired through attractiveness of a reward or extrinsic that can be either intrinsic or extrinsic and the route that led to internal rewards or extrinsic compensation.Another challenge identifies is the incorporation of external innovation activities with internal R&D capabilities to facilitate internal innovation.
Cui and Wu (2016) mention that the determination of external innovation is not always incorporated in new product development or innovation. This is due to the fact organization with already integrated innovation would consider its innovation practices better thus, would not invest in external knowledge or competing ideas. For instance, during 1980s the technology giant, Apple did not consider the external idea for hand held computers due to its successful innovations for user interface. It can be said that the challenge associated with incorporation the external know-how can sometimes be of no advantage if the organization reject or fails to identify the significant knowledge incorporation into its internal innovation process.Enkel et al. (2009) point to the willingness of the organization to incorporate or integrate the external and internal innovation in concern for challenge of knowledge incorporation.
Despite these challenges, open innovation provides opportunities for advancement of R& D capabilities, strengthenlegal perspective, technology management, enhance knowledge capability, enhanced collaboration and implication for economic aspects.The technologies play a significant part in driving sustainability thus, the reliance on technologies to identify and analyses the research findings is formed through process of open innovation such as sourcing of internal and external ideas and provide open data platform to enhance collaboration with other partners for innovativeness, and combined problem solving and encourage joint innovation.
The article by Van de Vrande et al. (2009) highlights that open innovation provide opportunity to firm to enhance its own knowledge resources through integration of external and internal know-how. It can be said that the open innovation provides opportunity to enhance the organizational innovativeness and experience to cope with internal and external changes in terms of employees, customers, suppliers, competitors and other stakeholders. The open innovation also provide opportunity to bring and transfer ideas into marketplace to earn high profits and return on investments through intellectual property selling and development of technologies through leveraging the external knowledge (West and Bogers, 2014) and innovation for internal R&D development.
The open innovation also provides prospects to form a strong alliance or joint venture with matching partners for commercialization of innovation for better success in in changing business landscape (Enkel et al., 2009).In addition to this, open innovation in environmental technologies provide opportunities to the organization for environmental protection, best utilization of resources, waste recycle and avoid legal risk and fines.It can also be added that open innovation also present opportunity to develop a knowledge sharing culture and to enhance collaboration and develop strategy for protection of assets. Thus, it can be viewed that open innovation provides better chances for enhancing the organizational performance.
It can be summarized that innovation management is crucial for the success and failure of organization initiatives. The understanding of the related concepts such as type of innovation kinds, innovation strategy, role of knowledge management, impact of organization structure, the concept of open innovation system is essential in the management of innovation within an organization. It was also observed that open innovation presents both opportunity and challenges for managing organization performance and market competitiveness. The successful implementation of open innovation can provide competitive edge through new product development and improved processes or service and lead to enhanced R & D capabilities to manage combined innovation.
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