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LECTURE NOTES BY: DR.

SADAT DAAKI SSEKIBAALA
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Lecture One: Contents

vWhat is innovation?
vThe Study of innovation
vDefinition and vocabulary
vModels of innovation

Lecture One: Learning Objectives

When you have completed this chapter you will be able to:
Ø recognise the importance of innovation;
Ø explain the meaning and nature of innovation management;
Ø provide an introduction to a management approach to
innovation;
Ø appreciate the complex nature of the management of
innovation within organisations;
Ø describe the changing views of innovation over time;
Ø recognise the role of key individuals within the process; and
Ø recognise the need to view innovation as a management
process.

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Lecture One: Introduction and Overview

v Innovation is one of those words that suddenly seems
to be all around us. Firms care about their ability to
innovate, on which their future allegedly depends
(Christensen and Raynor, 2003), and many management
consultants are busy persuading companies about how
they can help them improve their innovation
performance.
v Politicians care about innovation, too: how to design
policies that stimulate innovation has become a hot
topic at various levels of government.

Lecture One: Introduction and Overview

• There is extensive scope for examining the way innovation is
managed within organisations. Most of us are well aware
that good technology can help companies achieve
competitive advantage and long-term financial success.
• But there is an abundance of exciting new technology in the
world and it is the transformation of this technology into
products that is of particular concern to organisations.
• There are numerous factors to be considered by the
organisation, but what are these factors and how do they
affect the process of innovation?

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Lecture One: Introduction and Overview

• There is extensive scope for examining the way
innovation is managed within organisations. Most of us
are well aware that good technology can help
companies achieve competitive advantage and long-
term financial success.
• But there is an abundance of exciting new technology in
the world and it is the transformation of this technology
into products that is of particular concern to
organisations.

Lecture One: Introduction and Overview

• There is extensive scope for examining the way
innovation is managed within organisations. Most of us
are well aware that good technology can help
companies achieve competitive advantage and long-
term financial success.
• But there is an abundance of exciting new technology in
the world and it is the transformation of this technology
into products that is of particular concern to
organisations.

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What is Innovation
Innovation is defined as the process of bringing about new ideas,
methods, products, services, or solutions that have a significant
positive impact and value.
It involves transforming creative concepts into tangible outcomes
that improve efficiency, and effectiveness, or address unmet
needs.
Innovation is not limited to technological advancements and
encompasses novel approaches to problem-solving, products,
processes, organizational practices, or business model innovations.
At its core, innovation involves challenging the status quo, thinking
outside the box, and taking calculated risks to drive progress and
achieve breakthrough outcomes.
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What is Innovation
Innovation is key to organizations today. Organizations have to
change, adapt to changing circumstances and lead in broader
economical and societal change. Without innovation, firms run a large
risk of disappearing in the short or medium term.
Innovation is driven by a combination of factors, including curiosity,
creativity, and the desire for improvement. It requires a mindset that
embraces change, welcomes ideation, and encourages
experimentation.
Innovation can occur in various contexts, such as business, science,
technology, social sectors, or public services. It can lead to economic
growth, social progress, improved quality of life, and sustainable
development.

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What is Innovation
v Creativity and Ideas: Creativity is the fuel for innovation. It involves
generating new and original ideas, challenging assumptions, and
thinking beyond conventional boundaries. It is the ability to connect
disparate concepts and envision novel possibilities. The generation
Key of diverse ideas, both incremental and disruptive, serves as the
starting point for innovation.
Components
of Innovation v Culture of Innovation: An organizational culture that fosters and
supports innovation is crucial. It includes values, attitudes, and
behaviours that encourage curiosity, risk-taking, collaboration, and
experimentation. A culture of Innovation promotes an open and
inclusive environment where individuals feel empowered to
contribute their ideas and embrace change.

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What is Innovation
v Resources and Infrastructure: Adequate resources, both financial
and non-financial, are essential for innovation. This includes
dedicated funding, skilled human capital, technology infrastructure,
research and development capabilities, and access to relevant
Key information and data. Organizations need to allocate resources
strategically to support innovation initiatives.
Components
of Innovation v Leadership and Vision: Effective leadership plays a vital role in
driving and supporting innovation. Leaders set the vision, create a
sense of purpose, and provide guidance and resources for
innovation initiatives. They foster an environment that encourages
risk-taking, empowers employees, and leads by example. Leadership
commitment and support are crucial in nurturing a culture of
innovation and driving innovation efforts.
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What is Innovation
v Feedback and Adaptation: Innovation requires a feedback loop that
allows for continuous innovation. Feedback can come from customers,
users, stakeholders, and market trends. Organizations need
mechanisms to gather and analyse feedback, learn from successes and
failures, and iterate on their innovation initiatives. The ability to adapt
Key and pivot based on feedback is essential to refine and enhance
Components innovative solutions.
of Innovation v Effective Risk Management: Innovation involves inherent risks and
uncertainties, which makes effective risk management crucial to
mitigate potential challenges and ensure successful outcomes.
Organizations need processes to identify, assess, and manage risks
associated with innovation initiatives. This includes evaluating the
feasibility, viability, and potential impact of innovative ideas and
implementing risk mitigation strategies.
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What is Innovation
Forms of Innovation

Innovation can be defined as making

something new that creates value. It’s
essential to understand the variety of
approaches to determine which ones will
provide the most value.

Here’s a look at the different ways

innovation can take shape, how those
definitions lead to different outcomes, and
why certain methodologies may be more
effective than others.
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What is Innovation
1. Disruptive Innovation: is often the most well-known type. It comes
with effective uses of new technology and high-impact results. While
disruptive innovation is extremely flashy and grabs headlines, it comes
with many nuances and challenges. The most common organizations
exhibiting the characteristics of disruptive innovation are start-ups
targeting overlooked segments in the market to deliver an offering that
Forms of is more affordable, convenient, or simpler than the established players
Innovation can.
2. Incremental Innovation: constitutes a gradual, continuous
improvement of existing products and services. While the least flashy
of any of the categories, it offers the most evident value to an
established bottom line. By continuously improving products, services,
and business operations, organizations can reduce stagnation and
consistently grow market share.
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What is Innovation
3. Sustaining Innovation: is the best way to protect an organization’s
position in a market. “Incremental” focuses on small improvements to
existing products and services to increase value or customer
satisfaction. Sustaining focuses on larger changes to gain or maintain a
market-leader position. This category is focused on creating new features
or services that differentiate a product from all of its competitors.
Forms of
Innovation 4. Radical Innovation: typically utilizes a technological breakthrough that
transforms industries and creates new markets. This type completely
changes how an organization interacts with the marketplace. The success
of the underlying technological shift to drive this type of innovation is
often related to the firm’s organizational behaviours and capabilities that
create the right conditions for new ideas to be successfully
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What is Innovation
Forms of Innovation

v Technology newness describes

whether a novel output is based on
emerging or well-proven
technologies.

v Low-market impact ideas are easier

to implement, with compounding
effects over time.

v High-market impact ideas tend to be

difficult, costly, and risky to develop
but arrive with high potential value.
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The Study of Innovation

q Innovation has long been argued to be the engine of growth. It can provide
growth, almost regardless of the condition of the economy. 19th century
economic historians observed that the acceleration in economic growth was
the result of technological progress.

Innovation q Schumpeter (1934, 1939, 1942) was amongst the first economists to
& Growth emphasise the importance of new products as stimuli to economic growth.
He argued that the competition posed by new products was far more
important than marginal changes in the prices of existing products. For
example, economies are more likely to experience growth due to the
development of products, such as new computers or new pharmaceutical
drugs than to reductions in prices of existing products. Indeed, countries
that focus on innovation have experienced high levels of economic
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The Study of Innovation

After the Second World War, one of the most important influences on
innovation seemed to be industrial research and development.
After all, during the war, military research and development (R&D) had
produced significant technological advances and innovations, including radar,
aerospace and new weapons which were very important in winning the war.
Innovation
A period of rapid growth in expenditure by countries on R&D was to follow,
& Growth exemplified by US President Kennedy’s 1960 speech outlining his vision of
getting a man on the moon before the end of the decade. And indeed, there
was a moon landing.
This inspired innovation in production technologies, food technologies,
medicine and pharmaceuticals, electronics and electricals thereby enforcing
the industrial revolution
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The Study of Innovation

There was a need to understand how science and technology affected the
economic system. A series of studies of innovation were undertaken in the
1950s, which concentrated on the internal characteristics of the innovation
process within the economy.
A feature of these studies was that they adopted innovation as a cross-
Innovation discipline approach, incorporating economics, organisational behaviour and
business and management.
& Growth
The studies looked at:
v the generation of new knowledge;
v the application of this knowledge in the development of products and
processes;
v the commercial exploitation of these products and services in terms
of financial income generation.
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The Study of Innovation

Innovation & Growth

The Schumpeterian view sees firms as

different – it is the way a firm manages its
resources over time and develops
capabilities that influences its innovation
performance.
The varying emphasis placed by different
disciplines on explaining how innovation
occurs is brought together in the
framework in the Figure.

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The Study of Innovation

• From the previous figure, this overview of the innovation process includes an
economic perspective, a business management strategy perspective and
organisational behaviour, which attempts to look at the internal activities.
• It also recognises that firms form relationships with other firms and trade,
compete and cooperate with each other. It further recognises that the activities
of individuals within the firm also affect the process of innovation.
Innovation
• Each firm’s unique organisational architecture represents the way it has
& Growth constructed itself over time. This comprises its internal design, including its
functions and the relationships it has built up with suppliers, competitors,
customers, etc. This framework recognises that these will have a considerable
impact on a firm’s innovative performance.
• So, too, will the way it manages its individual functions and its employees or
individuals. These are separately identified within the framework as being
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The Study of Innovation

Innovation
& Growth

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Definitions and Vocabulary

• The popular and traditional view of entrepreneurship is
that of an individual who spots an opportunity and
develops a business; it is understood that entrepreneurs
often seem to have innate talents.

Entrepreneurship • The subject of innovation management is often covered

within ‘entrepreneurship’. It is the analysis of the role of
the individual entrepreneur that distinguishes the study of
entrepreneurship from that of innovation management.

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Definitions and Vocabulary

• Furthermore, entrepreneurship is starting small businesses and
growing them into large and successful businesses that was the
traditional focus of attention of those studying entrepreneurship.
• However, this has been changing over the years, especially in
developed countries, where there is now considerable emphasis on
Entrepreneurship trying to understand how entrepreneurship and innovation can
help create the new technology intensive businesses of tomorrow.
• Moreover, it is the recognition of the entrepreneur’s desire to
change things that is so important within innovation. None the
less, the role of an entrepreneur is central to innovation
management since entrepreneur drive innovation and new product
development in organisation.

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Definitions and Vocabulary

The definition of design encompasses almost all aspects of business. For many
people design is about developing or creating something; hence we are into
semantics regarding how this differs from innovation.
Design is concerned with the emergent arrangement of concrete details that
embody a new idea. A key question, however, is how design relates to research
and development. Indeed, it seems that, in most cases, the word design and the
Design word development mean the same thing.
Traditionally, design referred to the development of drawings, plans and sketches.
Most dictionaries refer to a designer as a ‘draughtsman who makes plans for
manufacturers or prepares drawings for clothing or stage productions’
Today, the process is dominated by computer software programs that facilitate all
aspects of the activity; hence the product development activities and the
environments in which design occurs have changed considerably
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Definitions and Vocabulary

Design

In the aerospace industry, engineers

and designers previously would have
worked closely together for many
years, developing drawings for an
aircraft.
The Figure shows, along the
horizontal axis, the wide spectrum of
activities that design encompasses
from clothing design to design within
electronics.
The interaction between development
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Definitions and Vocabulary

• Many people confuse these terms.. It is true that innovation is the first cousin
of invention, but they are not identical twins that can be interchanged. Hence,
it is important to establish clear meanings for them.
• Innovation itself is a very broad concept that can be understood in a variety of
ways. One of the more comprehensive definitions is offered by Myers and
Innovation & Marquis (1969):
Invention Innovation is not a single action but a total process of interrelated sub
processes. It is not just the conception of a new idea, nor the invention of
a new device, nor the development of a new market. The process is all
these things acting in an integrated fashion.
We can distinguish innovation from invention by suggesting that innovation is
concerned with the commercial and practical application of ideas.
Therefore: Innovation = theoretical conception + technical invention +
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commercial exploitation
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Definitions and Vocabulary

However, all the terms in this equation will need explanation in order to avoid
confusion.
The conception of new ideas is the starting point for innovation. A new idea by
itself, whilst interesting, is neither an invention nor an innovation; it is merely a
concept, a thought or collection of thoughts.
Innovation &
The process of converting intellectual thoughts into a tangible new artefact
Invention (usually a product or process) is an invention. This is where science and
technology usually play a significant role. At this stage, inventions need to be
combined with hard work by many different people to convert them into
products that will improve company performance.
These later activities represent exploitation. However, it is the complete process
that represents innovation. This introduces the notion that innovation is a
process with a number of distinctive features that have to be managed.
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Definitions and Vocabulary

Industrial innovation includes not only major (radical) innovations but also
minor (incremental) technological advances. Indeed, the definition offered
above suggests that successful commercialisation of the innovation may
involve considerably wider organisational changes.

Types of For example, the introduction of a radical, technological innovation, such

as digital cameras by Kodak and Fuji, invariably results in substantial
Innovations internal organisational changes. In this case, substantial changes occurred
with the manufacturing, marketing and sales functions.
Hence, technological innovation can be accompanied by additional
managerial and organisational changes, often referred to as innovations.
This presents a far more blurred picture and begins to widen the definition
of innovation to include virtually any organisational or managerial change.

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Definitions and Vocabulary

Types of
Innovations

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Definitions and Vocabulary

• We also need to consider the role played by science and technology in
innovation. The continual fascination with science and technology at the end
of the nineteenth century and subsequent growth in university teaching and
research have led to the development of many new strands of science.
• Science can be defined as systematic and formulated knowledge. There are
Technology clearly significant differences between science and technology. Technology is
often seen as being the application of science and has been defined in many
and Science ways
• It is important to remember that technology is not an accident of nature. It is
the product of deliberate action by human beings. The following definition is
suggested:
Technology is knowledge applied to products or production processes.

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Models of Innovation
Traditional arguments about innovation have centred on two schools
of thought.
1. The Social deterministic school: which suggests that innovations
are a result of a combination of external social factors and
influences, such as demographic changes, economic influences and
cultural changes. The argument was that when the conditions were
right, innovations would occur.
2. The individualistic school: which suggest that innovations are the
result of unique individual talents and such innovators are born.
Closely linked to the individualistic theory is the important role
played by serendipity; more on this later.

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Models of Innovation
Over the past 10 years, the literature on what drives innovation has tended
to divide into two schools of thought:
i. The market-based view
ii. the resource-based view.
1. The market-based view: argues that market conditions provide the
context that facilitates or constrains the extent of firm innovation
activity (Porter, 1980, 1985). The key issue here, of course, is the ability
of firms to recognise opportunities in the marketplace. Trott (1998)
suggest that firms have the ability to scan and search their
environments effectively.

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Models of Innovation
2. The resource-based view of innovation: suggests that a market-driven
orientation does not provide a secure foundation for formulating
innovation strategies for markets that are dynamic and volatile; rather
a firm’s own resources provide a much more stable context in which to
develop its innovation activity and shape its markets in accordance
with its own view (Eisenhardt and Martin, 2000).
The resource-based view focuses on the firm and its resources,
capabilities and skills. It argues that when firms have resources that are
valuable, rare and not easily copied they can achieve a sustainable
competitive advantage – frequently in the form of innovative new
products.

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Models of Innovation
• Many studies of historical cases of innovation have highlighted the
importance of the unexpected discovery. The role of serendipity or luck is
offered as an explanation. As we have seen, this view is also reinforced in
the popular media. It is, after all, everyone’s dream that they will
accidentally uncover a major new invention leading to fame and fortune.
Serendipity
• On closer inspection of these historical cases, serendipity is rare indeed.
After all, in order to recognise the significance of an advance, one would
need to have some prior knowledge in that area. Most discoveries are the
result of people who have had a fascination with a particular area of science
or technology and it is following extended efforts on their part that advances
are made. Discoveries may not be expected, but in the words of Louis
Pasteur, ‘chance favours the prepared mind’.

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Models of Innovation
• The recognition that innovation occurs through the interaction of the
science base (dominated by universities and industry), technological
development (dominated by industry) and the needs of the market was a
significant step forward. The explanation of the interaction of these activities
forms the basis of models of innovation today.
Linear
Models

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Models of Innovation
The innovation process has traditionally been viewed as a sequence of
separable stages or activities. There are two basic variations of this model for
product innovation.
1. The Technology Push Model of Innovation: assumes that scientists make
Linear unexpected discoveries, technologists apply them to develop product ideas
and engineers and designers turn them into prototypes for testing. It is left
Models to manufacturing to devise ways of producing the products efficiently.
Finally, marketing and sales will promote the product to the potential
consumer.

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Models of Innovation
2. The Market-Pull model of innovation. The customer needs-driven model
emphasises the role of marketing as an initiator of new ideas resulting
from close interactions with customers. These, in turn, are conveyed to
R&D for design and engineering and then to manufacturing for
production.
Linear
In fast-moving consumer goods industries the role of the market and the
Models customer needs remains powerful and very influential. The in this model,
knowing your customer is crucial to turning innovation into profits:

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Models of Innovation
Criticism of the Linear Models:
Whether innovations are stimulated by technology, customer need,
manufacturing or a host of other factors, including competition, misses
the point. The models above concentrate on what is driving the
Linear downstream efforts rather than on how innovations occur (Galbraith,
1982).
Models
The linear models are able to offer only an explanation of where the
initial stimulus for innovation was born, that is, where the trigger for
the idea or need was initiated.

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Models of Innovation
Simultaneous
Coupling Models The simultaneous coupling model shown
in Figure suggests that innovation is the
result of the simultaneous coupling of
the knowledge within all three functions
that will foster innovation.
Unlike in the linear models, the point of
commencement for innovation is not
known in advance.

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Models of Innovation
Henderson and Clark (1990) divide technological knowledge along two
dimensions:
v knowledge of the components and
v knowledge of the linkage between them, which they called
Architectural architectural knowledge.
Innovation The result is four possible types of innovation: incremental, modular, radical
Models and architectural innovation. Essentially, they distinguish between the
components of a product and the ways they are integrated into the system,
that is, the product architecture, which they define as innovations that
change the architecture of a product without changing its components.

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Models of Innovation
• Prior to the Henderson and Clark model, the radical/incremental
dimension suggests that incumbents will be in a better position if the
innovation is incremental, since they can use existing knowledge and
resources to leverage the whole process.
Architectural • New entrants, on the other hand, will have a large advantage if the
Innovation innovation is radical because they will not need to change their
knowledge background.
Models
• Furthermore, incumbents struggle to deal with radical innovation both
because they operate under a managerial mindset constraint and
because, strategically, they have less of an incentive to invest in the
innovation if it will cannibalise their existing products.

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Models of Innovation
Interactive Models

The interactive model develops links

together the technology-push and market-
pull models.
It emphasises that innovations occur as the
result of the interaction of the marketplace,
the science base and the organisation’s
capabilities. Like the coupling model, there is
no explicit starting point.
The use of information flows is used to
explain how innovations transpire and that
they can arise from a wide variety of points.
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Models of Innovation
• Whilst still oversimplified, this is a more comprehensive representation
of the innovation process. It can be regarded as a logically sequential,
though not necessarily continuous, process that can be divided into a
series of functionally distinct but interacting and interdependent stages.
• The overall innovation process can be thought of as a complex set of
Interactive communication paths over which knowledge is transferred.
Models
• These paths include internal and external linkages. The innovation
process outlined in the Figure(See previous Slide) represents the
organisation’s capabilities and its linkages with both the marketplace
and the science base. Organisations that are able to manage this process
effectively will be successful at innovation.

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Models of Innovation
• At the centre of the model are the organisational functions of R&D,
engineering and design, manufacturing and marketing and sales. Whilst, at
first, this may appear to be a linear model, the flow of communication is not
necessarily linear. There is provision for feedback.
• Also, linkages with the science base and the marketplace occur between all
Interactive functions, not just with R&D or marketing. For example, as often happens, it
Models may be the manufacturing function that initiates a design improvement that
leads to the introduction of either a different material or the eventual
development by R&D of a new material.
• Finally, the generation of ideas is shown to be dependent on inputs from three
basic components: technological developments; the needs of the marketplace;
the science and technology base.

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Models of Innovation
Open innovation and the need to share and exchange knowledge
• Innovation has been described as an information–creation process that
arises out of social interaction. Chesbrough (2003), adopting a business
strategy perspective, presents a persuasive argument that the process of
Open innovation has shifted from one of closed systems, internal to the firm, to a
new mode of open systems involving a range of players distributed up and
Innovation down the supply chain.
and Network
• Significantly, emphasis on the new knowledge-based economy that informs
Models the concept open innovation.
• In particular, it is the use of cheap and instant information flows that places
even more emphasis on the linkages and relationships of firms. It is from
these linkages and the supply chain in particular that firms have to ensure
that they have the capability to fully capture and utilise ideas.
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Models of Innovation

The chronological
development of models
of innovation
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Models of Innovation
Innovation needs to be viewed as a management process. We need to
recognise that change is at the heart of it. And that change is caused by
decisions that people make.
The framework in Figure 1.9 attempts to capture the iterative nature of the
The Cyclical network processes in innovation and represents this in the form of an endless
innovation circle with interconnected cycles. This circular concept helps to
Model of show how the firm gathers information over time, how it uses technical and
innovation societal knowledge, and how it develops an attractive proposition.
This is achieved through developing linkages and partnerships with those
having the necessary capabilities (‘open innovation’). In addition, the
entrepreneur is positioned at the centre.

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Models of Innovation
The Cyclical Model of
innovation

The framework in the Figure is referred to as

the ‘cyclic innovation model’, a cross-
disciplinary view of change processes (and
their interactions) as they take place in an
open innovation arena.
Behavioural sciences and engineering as
well as natural sciences and markets are
brought together in a coherent system of
processes with four principal nodes that
function as roundabouts.
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Models of Innovation
The combination of the involved changes leads to a wealth of business
opportunities. Here, entrepreneurship plays a central role by making use of
those opportunities. The message is that without the drive of entrepreneurs
there is no innovation, and without innovation there is no new business. Figure
1.9 shows that the combination of change and entrepreneurship is the basis of
The Cyclical new business.
Model of Adopting this approach to the management of innovation should help firms as
innovation processes should not be forced into simple one-way pipelines, but rather be
organised by interconnected cycles with feedforward and feedback
connections: from linear to non-linear thinking. In that way, a dynamic network
environment is created in which the social and behavioural sciences are linked
to engineering, and where the natural and life sciences connect with market
goals
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Discussion Questions:
1. Explain why it is necessary to view innovation as a management process.
2. What is wrong with the popular view of innovation in which eccentric scientists
develop new products?
3. How does an ‘open innovation’ approach help firms?
4. What is the difference between an unsuccessful innovation and an invention?
5. To what extent do you agree with the controversial view presented by the chairman
of Sony?
6. Show how the three forces shaping the twenty-first century, according to Salkowitz
(2010) – youth, entrepreneurship and ICT – are captured in the cyclical model of
innovation.
7. Explain Sergey Brin’s (co-founder of Google) comment that coming up with an idea is
easy, but innovation is difficult.

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