The Management of Innovation within Firms

1. Introduction
2. Organisations and innovation
3. Organisational characteristics that facilitate the innovation
process
4. The dilemma of innovation
5. Managing uncertainty
6. The role of the individual
7. Establishing a creative environment
8. Summary and Recap

P Trott innov in firmslec Slide 1

 EXTERNAL INPUTS:
Innovation management macro factors; diversification
framework competition; costs & input prices
Profit; political influences
Entrepreneurship Growth;

organisation &
business strategy

New product
Development
process
EXTERNAL INPUTS:
scientific & technological EXTERNAL INPUTS:
development; societal needs;
competitors; competitors;
suppliers; supplier partnerships;
customers; distributors;
university depts. customers;
strategic alliances.

Source: Trott, 2008

P Trott innov in firmslec Slide 2
 How do we manage innovation?

“The fact is coming up with an idea is the least important

part of creating something great. The execution
and delivery are what’s key.”

Sergey Brin, Co-founder of Google.

Interview with Technology Guardian, p 1, 18 June 2009.

P Trott innov in firmslec Slide 3
Table 1: World’s most innovative companies

Margin Growth Stock Returns

Company
2006 Rank 1995-2005 % 1995-2005 %
1 Apple 7.1 24.6
2 Google NA** NA**
3 3M 3.4 11.2
4 Toyota 10.7 11.8
5 Microsoft 2.0 18.5
General
6 5.7 13.4
Electric
Procter &
7 4.4 12.6
Gamble
8 Nokia 0.0 34.6
9 Starbucks 2.2 27.6
10 IBM -0.7 14.4

P Trott innov in firmslec Slide 4

Source: Business Week April 24, (2006)
Explanations for innovative capability (survey of CEOs)

Innovative Firm Explanation for innovative capability

Apple
Google
Samsung
Procter &
Gamble
IBM
BMW
Starbucks

Toyota

P Trott innov in firmslec Slide 5

Explanations for innovative capability (survey of CEOs)

Innovative Firm Explanation for innovative capability

Apple Innovative Chief executive

Google Scientific freedom for employees
Samsung Speed of product development
Procter & Utilisation of external sources of technology
Gamble
IBM Share patents with collaborators
BMW Design
Starbucks In-depth understanding of customers and their
cultures
Toyota Close co-operation with suppliers

P Trott innov in firmslec Slide 6

2. Some firms have built a reputation for being innovative

• Long-term success is associated with innovation

• Science or technology based companies often associated
with innovation
• 3M, Microsoft, Pfizer are regarded as examples
of innovative companies
• The role of research & development (R&D) (Siemens)?
• Can you acquire technology from outside?
• The role of “prior knowledge”
£3.7billion
every year!
P Trott innov in firmslec Slide 7
 3. Organisational characteristics that facilitate
the innovation process?

Firm related factors:

Organisational heritage Product related factors:
Experience Relative price
R&D team Relative quality
Strategy towards Uniqueness
Innovation Technologically advanced
Organisational structure
R&D intensity Technological Successful Commercial
viability marketable viability
product

Project related factors: Market related factors:

Complementarity Concentration of
Management style Target market
Top management Timing of market entry
support Competitive pressure
Marketing

P Trott innov in firmslec Slide 8

Framework category Measurement area
People
Inputs
Physical & financial resources
Tools
Idea generation
Knowledge management
Knowledge repository Innovation
Information flows
Strategic orientation
management
Innovation strategy
Strategic leadership measurement
Culture
Organisation & culture areas
Structure
Risk/return balance
Portfolio management
Optimisation tool use
Project efficiency
Project management
Tools
Communications
Collaborations
Market research
Commercialisation
Market testing
Marketing & sales

P Trott innov in firmslec Slide 9

Source: (Adams et al., 2006).

Studies of innovation management-50 years

Studies of Innovation management

1. Carter & Williams 1957 Industry & technical progress

2. Project Hindsight- TRACES 1968 Historical reviews of US gvt funded
(Isensen) defence industry
3. Wealth from knowledge (Langrish et al.) 1972 Queens Awards for tech innov
4. Project Sappho 1974 Success & failure factors in chemical
industry
5. Minnesota Studies (van de van) 1989 14 case studies of innovations
6. Rothwell 1992 25 yr review of studies
7. Sources of innovation
(Wheelwright & Clark) 1992 Different levels of user involvement
8. MIT studies (Utterback) 1994 5 major industry-level cases
9. Project NEWPROD (Cooper) 1994 Longditudinal survey of success &
failure in new products
10. Radical innovation (Leifer) 2000 Review of mature businesses

P Trott innov in firmslec Slide 10

3. Summary of organisational characteristics that facilitate
the innovation process

Organisational Characterised by:

Requirement

1 Growth orientation A commitment to long-term growth rather than short-term profit.

2 Vigilance The ability of the organisation to be aware of its threats
and opportunities.
3 Commitment to The willingness to invest in the long-term development
technology of technology.
4 Assemble knowledge The ability to assemble knowledge into business opportunities.
5 Acceptance of risks The willingness to include risky opportunities in a balanced portfolio.

P Trott innov in firmslec Slide 11

 Cont’d

Organisational Characterised by:

Requirement

6 Cross-functional Mutual respect amongst individuals and a willingness to work

co-operation together across functions.
7 Receptivity The ability to be aware of, to identify and to take effective
advantage of externally developed technology.
8 "Slack“ An ability to manage the innovation dilemma and provide room
for creativity.
9 Adaptability A readiness to accept change.
10 Diverse range of skills A combination of specialisation and diversity of knowledge and skills.

P Trott innov in firmslec Slide 12

4. The innovation dilemma:Managing the tension between
the need for creativity and efficiency

organisation
The efficient The development
day to day of new products
operations

creativity gains
and services
efficiency gains

within an requires creativity

organisation and room to try
require stable out new ideas.
routines. This This is usually
is usually achieved in a
achieved in loose and flexible
stable & environment.
controlled
environments.

P Trott innov in firmslec Slide 13

 5. Managing uncertainty

High

1. Exploratory
3. Applications
Uncertainty research
About engineering
output

4. Combining market
Opportunities 2. Development
with technical engineering
capabilities

High
Low
Uncertainty about process
P Trott innov in firmslec Slide 14
6. Key individual roles within the innovation process

• Technical Innovator
• Technical & commercial scanner
• Gatekeeper
• Product Champion
• Project Leader
• Sponsor

P Trott innov in firmslec Slide 15

7. Propagating a virtuous
cycle of innovation The organisation’s
reputation for innovation

High morale and

retention of creative people Attraction of
creative people
Motivates people
within the organisation organisational
and reduces frustration encouragement of
creativity & innovation

development of
A willingness within
innovative products
the organisation to
accept new ideas

P Trott innov in firmslec Slide 16

The end
Any questions?

Thanks for listening.

Health warnings on food?

P Trott innov in firmslec Slide 17

 The need for multiple perspectives

Contingency theory
Classical mgt theory

Activities within
the organisation

Human relations Systems theory

theory

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