Influences on Innovations and their Success
Strategic issues
Strategic choices – Although your textbook author describes innovation as essential to organizational survival, note that companies must make strategic choices regarding the extent to which they want to innovate. Product innovations cost a lot in terms of time and money and they often fail to achieve commercial success; companies with a cost leadership strategy may be better off doing little innovation (other than innovations that streamline their processes or cut administrative costs).
Slack resources – Because innovation requires a lot of investment of time and money, firms need to have “slack” (extra) resources available. You can’t expect a lot of innovation if your company is understaffed or isn’t willing to risk throwing away some money. The company that wants to do a lot of innovation is likely to need to charge more for their products/ services.
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Firm financial performance – Though companies need some slack resources to innovate, the best innovators have been found to be companies that are having some performance issues. When things are going well, companies are somewhat less likely to seek change.
Timing of entry – Historically, the “first entrants” in new product categories haven’t been as successful financially as the ones who wait a while and copy what the earlier innovators did, but making some additional product improvements of their own. But while you don’t necessarily want to be the “first to market,” you also don’t want to be the last, as you’ll miss out on the opportunity to establish yourself as a player.
Base of users and complementary goods – Exceptions to the above point have occurred in industries where establishing a base of users and getting other firms to make products that complement yours helps you quickly corner the market. For example, Microsoft Office may not be the best software in the world, but everyone uses it because they can share files readily with others; competitors to Facebook have had difficulty establishing themselves because everyone’s friends are already on Facebook; video game systems with large bases of users have had an easier time of getting other companies to make compatible games, thereby making the system even more attractive to consumers.
Individual influences
Changes in top management – After years in the same position, managers tend to see things in routine ways and fail to scan environment for opportunities. Bringing in new managers can help.
“Idea champions” (technological and management champions) – Innovations often happen because one or a few “idea champions” take it on themselves to make sure innovation happens, even though it’s not even part of their jobs. Technological idea champions are people who come up with or help develop innovations, and management champions are the people who help push ideas through the bureaucracy. Giving these individuals encouragement, time, and money to develop innovations can often pay off. Idea champions often establish an informal chain of people who support innovations; downsizing can break down these links.
Specialized managerial positions – Some companies assign specific responsibility to individuals for innovation (e.g., VP for Innovation)
Boundary spanning roles – Boundary spanners are individuals with positions that require contact with the external environment. These individuals are often in a good position to see opportunities and threats.
Organizational characteristics
Age of organization – Both young and old organizations innovate. But young organizations are often the ones to introduce radical, “competence-threatening” innovations (that is, innovations that totally change the old way of doing things, making it difficult for established companies to imitate); old organizations tend to do innovations that build on what they already do.
Size of organization or subunits – Size interferes with innovation, though large organizations often have more slack resources. Large organizations often break into smaller subunits to enhance innovation.
Specialized departments – R&D and marketing are examples of departments that often have major roles in the innovation process
Technical expertise – Hiring or contracting with experts can improve innovativeness
Formalization and centralization – top-level directives (and support) and formal budgets and can help support innovation, but formalization and centralization that dictate behavior can interfere
Ambidexterity – Companies that do some, but not necessarily constant, innovation often need “ambidextrous” structures—that is, structures that allow the company (or certain departments in it) to be organic when needed for innovation, but mechanistic when efficiency is needed.
Horizontal linkages – Linking departments–especially in ways that allow for direct, face-to-face, personal communication–can assist innovation
Configurations – Divisional, matrix, horizontal, and modular structures can all help improve innovation (though each has some disadvantages that must be weighed too)
External linkages
Joint ventures – Can allow opportunities for companies to share expertise, risk, cost, etc.
Outsourcing/Partnering – Can allow access to expertise, equipment, etc.
Licensing – Can allow a company to offer an array of products and services developed by other companies
Marketing research – Can give insight regarding customer ideas and preferences
Conferences/trade shows – Allow firms to learn about new ideas
Networks– Some companies create external alliances to get ideas from individuals or other organizations (suppliers, inventors, scientists, customers, etc.)
“Open” innovations – Permitting others to see your software code, hardware design, etc., can allow innovators outside the firm to develop apps, tweak your software, create video games, etc. in ways that make your products more valuable to the consumer
Field trips – Allow employees to get out to observe customers, competitors, etc., in action
Online communities – The general public can provide ideas and feedback via product reviews, blog comment sections, surveys, and other online methods
Management tools and techniques
Venture teams – Teams sent off to work on their own as a small group, with financial support from the larger organization.
“Grant” money – Can be offered support employees who wish to develop an idea
Temporary relocation – moving people off-site can allow them to work as if in a small company environment
Physical spaces for collaboration –Establishing a “war room,” where people can post ideas on the walls, write comments, etc., can help the innovation process. Software can similarly allow for electronic collaboration.
Group dynamics – A lot of companies encourage a culture of shared views, when often it’s the encouragement of dissent that helps make innovations happen.
“Quality circles”- These are groups of (typically) blue collar workers who are involved in innovation by meeting periodically (e.g., every week or two) to discuss problems they see and potential solutions
Metrics –Tracking ROI (return on investment), speed of innovation, % revenue from new products helps establish what is valued
Goal setting and performance review – Setting goals and evaluating performance based on the above metrics, or evaluating “growth traits” such as “external focus” and “imagination and courage” can foster innovation
Reward systems – Finding ways to reward individual, group, or departmental innovation can help (assuming it’s possible to determine which individuals, groups, or departments deserve credit for the innovation). Alternatively, one may find it useful to reward the whole firm for innovation.
Influences on Innovations and their Success – p. 3