Innovation is said to occur when something is done in a radically new way. Apple has been frequently cited as the innovation leader in technological world. It, under the leadership of its CEO Steve Jobs, introduced products which were radically different as for as design was concerned. Compared to Apple, Dell’s computers have no innovative design or technical feature. The importance of innovation is such that most of the successful companies around the world are spending huge sums of their profits on innovation related projects.
Many people confuse innovation with invention. Innovation and invention are different things. Invention is the first step toward the development of something new. It is the manifestation of an idea while innovation happens when that idea is put to use successfully. Invention can occur any moment while for innovation to occur, years may pass by as it takes a lot of time from researching to introducing a new product. It takes one person to invent and many to innovate as a lot of people are required to do research, test, and market a particular product.
Following are the four types of innovation types as described by Oslo Manual: 1- Product Innovation. This type of innovation is said to occur when a significantly different product is introduced by a company. The difference may occur due to design, improved technical specification etc. 2- Process innovation. If a production process is novel and delivery system improved then process innovation is said to have occurred. 3- Marketing Innovation. When a product’s pricing, packaging, or positioning is done in a totally new way then marketing innovation is said to have occurred.
4- Organizational innovation. If organizational culture is changed bringing in a lot of value than organizational innovation is said to have occurred. Innovation is result – oriented, the two main outcomes of innovations as described in a report published by Boston Consulting group are: • Tangible Outcomes: Tangible outcomes refer to new products and design that are achieved as a result of innovating. They are provided legal cover by various intellectual property instruments like copyrights. • Intangible Outcomes: These are outcomes that cannot be quantified and legally protected.
A new production process is a tangible outcome. Not every organization that engages in innovative pursuits succeeds. Many organizations complain that their money invested in innovation process is wasted. This does not mean that every organization fails rather there are various success factors that determine whether an organization will succeed and come up with innovative products or services or not. Idea generation is a first step where most organizations fail. If resources are not invested properly, bright ideas might not come to executive’s attention.
Companies also need to look to their customers for ideas. Then they need to have proper processes in place to carry forward the best ideas and make most of them. Another success factor that many organizations lack is the absence of good leaders who can gauge the whole innovation process. Innovation process will be disrupted if an organization does not have enough skilled workers. In research and development labs of many successful companies, quality of employees is one factor which has played a big role. Importance to Innovation for Organizations
Innovation is critical to any company’s success in these times because it is the main driver of competitive advantage. It is one of the factors that drives the growth and shareholder value of any organization. Every organization wants to come up with creative ideas which they can manifest and implement successfully. One study suggests that distinct products/services and novel business processes are the main competitive advantage that any organization can have. This is also the opinion of the 70 percent of the CEOs of the fastest progressing companies.
Almost every organization has realized the value of innovation so much so they have not decreased their R&D budget in this time of recession. One Wall Street Journal report says that big US companies have not decreased their spending on R&D despite a fall of 7. 7% in their revenue. It is true that history teaches us great lessons. The same is case with business world. IPod was introduced soon after the incident of 9/11. Among those who plan to spend almost the same amount on R&D as they did in 2007 are Microsoft, Intel and 3M.
Apple is a perfect example of a company which gained competitive advantage mainly by innovative pursuits. It realized that investment in innovation pursuits is the only way to boost profitability that’s why they increased their R&D investment by more than 42% during 1999 to 2000 despite a decrease of 6% in their revenue. This led to products like IPod and ITunes store. They have mainly relied on innovation in design. Apple has also succeeded in capturing a share in cell phone market by introducing another innovative product called IPhone. In the last century, people talked about efficiency and shareholder value.
They applied various principles to reduce cost and achieve economies of scale. But their rivals in low- income countries could outclass them because of lower costs of production there. Now is the time to gain competitive advantage by innovation. Human resource of any organization is the best place for creative ideas. It is the people of any organizations that can help give it a competitive advantage by innovating new products and services. Google is another company which has gained significant competitive advantage over its rivals by introducing innovative products.
More than 50 percent of internet users use Google as their primary search engine. It introduced the new way of targeting ads based on internet surfing behavior of its users. Google Voice is another of their innovation. Apart from that, they have introduced services like Google mail, Google News etc. The owners of Google have made fortune by indulging in innovation pursuits. Automaker industry also drives its strength from innovation. Toyota, ranked third by Business Week as most innovative company, has come up with cars with very innovative features.
It will introduce the powerful Prius which will have solar- powered air conditioner. Microsoft is another company which has gained competitive advantage by rolling out innovative product. It recently introduced Windows 8. It can, therefore, be concluded that if any organization is to gain a competitive advantage, it should foster the innovative environment. This can be achieved by giving way to open culture at organization, empowering people at all levels, and encouraging employees to give their ideas about new products and/or services.
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