Managing the Process of Innovation

This article will focus on managing the process of innovation. The article will provide an overview of the main types of innovation found in organizations, including incremental and breakthrough innovation, the trajectory of innovation, barriers to innovation, and the history of private and public sector innovation. This overview will serve as a foundation for discussion of managing the innovation process. The issues associated with managing breakthrough innovation will be addressed. A case study of Boeing's formalized innovation program will be in included. The case study will provide an example of how a company can effectively manage the innovation process on an extremely large scale and the ways in which successful innovation creates competitive advantage in the marketplace.

Keywords Breakthrough Innovation; Competitive Advantage; Incremental Innovation; Innovation; Private Sector; Public Sector

Management > Managing the Process of Innovation

Overview

There is an established relationship between business strategy, innovation, and organizational performance. Innovation, which refers to the use of a new product, service, or method in business practice immediately subsequent to its discovery, influences economic success and market share in increasingly competitive global markets. In response to new technology-driven global markets, companies have increased their use of advanced technologies as well as their innovation efforts (Zahra, 1993). Innovation is associated with competitive advantage in both growing and mature markets. Innovation, unlike most other business practices, can change the competitive balance in mature markets (Brown, 1992). The concept and practice of innovation became closely associated with economic gain and competitive advantage in the 1930s. In the 1930s, economist Joseph Schumpeter (1883-1950) created a theory of economic development based on five types of economic innovations: set up or discovery of a new product, a new manufacturing process, a new market, source or new organization (Leteneyei, 2001). Contemporary business theory argues that companies must compete to keep or gain market share. Innovation is considered to be the key to creating competitive advantage (Stalk, 2006).

The following sections will provide an overview of the main types of innovation found in organizations, the trajectory of innovation, barriers to innovation, and the history of private and public sector innovation. This overview will serve as a foundation for discussion of managing the innovation process. The issues associated with managing breakthrough innovation will be addressed. A case study of Boeing's formalized innovation program will be in included. The case study will provide an example of how a company can effectively manage the innovation process on an extremely large scale.

Types of Innovation

Numerous types of innovation occur in organizations. Examples include marketing innovation, technological innovation, organizational innovation, product innovation, service innovation, and process innovation.

• Marketing Innovation: Marketing innovation refers to a process in which people gradually become familiar and accepting of a new idea. Marketing innovation is a social learning process that results in consumers slowly changing their attitudes and values. Market innovations are often technologically driven. When a technology is developed, the new technology is often in need of a new type of market application. Market innovation is based on the following assumptions: Innovation is driven by a learning process within social groups; some individuals have a higher propensity to try innovative products than others; and the speed of adoption may vary from one business to another (Brown, 1992).
• Technological Innovation: Technological innovation is the process by which industry generates new and improved products and production processes. Technological innovation includes activities ranging from the generation of an idea, research, development and commercialization to the diffusion throughout the economy of new and improved products, processes and services. Effective technological innovation includes either the diffusion process or the spread of the innovation commercially (Zairi, 1992). Technological innovation requires and is followed by new technology exploitation. New technology exploitation (NTE) refers to the utilization of new technology or scientific developments to improve the performance of products or manufacturing processes. The failure of management to recognize and manage breakthrough technology innovation often results in organizational inefficiencies and frustration (Bigwood, 2004).
• Organizational Innovation: Organizational innovation can be defined as the process of changing the organization by introducing different methods of production or administration. Organizational innovation includes the adoption of ideas from outside the organization and the generation of ideas within. Organizational innovation involves planning initiation, execution, selection, and implementation (Spender & Kessler, 1995).
• Product Innovation: Product innovation involves the introduction of a good that is new or substantially improved.
• Service Innovation: Service innovation involves the introduction of a service that is new or substantially improved.
• Process Innovation: Process innovation involves the implementation of a new or significantly improved production or delivery method.

All of the innovation types described above has elements and trajectories in common. There are two main approaches to innovation that span and characterize all innovation processes: incremental and disruptive innovation. Incremental innovation refers to improvement of technology performance or product feature enhancement. Breakthrough innovation, also referred to as disruptive, radical, or discontinuous innovation, refers to innovation based on technologies previously new to the world. These two different types of innovation have separate development trajectories and associated management strategies (Hacklin, 2005).

The Trajectory of Innovation

The trajectory of innovation is most often conceived of as an s-shape pattern with three distinct levels of diffusion and adoption of the innovation. For example, the s-curve for technology innovation includes three main phases (Hacklin, 2005):

• Pacemaker Technology Phase: Emerging technology is called a pacemaker technology as it is new to the world and the future potential and applications are identified. The diffusion of the innovative technology has not yet started in this phase.
• Disruptive Technology Phase: Established technology evolves into disruptive technology when it has managed to outperform competing technologies in respective mainstream markets. The diffusion of the innovative technology is occurring at a rapid pace in this phase.
• Key Technology Phase: The performance of the technology becomes more efficient and the technology become widely-adopted by the customer base. The diffusion of the innovative technology is complete in this phase. The innovative technology, if successful, has saturated its market and become ubiquitous technology among its users.

Organizational Barriers to Innovation

Innovation, which requires active learning, risk-taking, insight and vision, does not occur in every firm. Common organizational barriers to innovation include (Brown, 1992):

• A heavy reliance on market research to minimize risk when drawing up and approving plans for new products.
• The use of financial techniques, such as risk minimization, to assess innovation projects that are inherently risky.
• A tendency to invest in and rely on what has served the company well in the past rather than what may serve it better in the future.
• Systems of rewards and promotion that encourage a low-risk, custodial approach to management rather than a high-risk management approach.

History of Private & Public Sector Innovation

Innovation in the twentieth century was characterized by public and private sector partnerships and relationships. The private and public sectors significantly influence one another's innovation processes. The relationship between public and private sector innovation became very close during the Cold War from the 1940s until the early 1990s. After World War II, and during the Cold War era, publicly-funded science and technology research, development, and innovation grew for three main reasons: First, science and technology research was fueled by the belief in the need for strong national defense technologies. Second, science and technology research was fueled by the belief that scientific research, which had delivered nuclear weapons, antibiotics, and jet aircraft, would produce other innovations of national interest. Third, science and technology research was fueled by the belief that a large national science system was perceived by other countries as representative of national prestige and cultural achievement.

Cold War era, science and technology research and innovation, motivated by concerns for national defense more than economic growth, produced many of the university research and laboratory programs, government laboratories, and other technical institutes such as the National Science Foundation (NSF) and the National Aeronautics and Space Administration (NASA). The United States, along with other countries such as Canada, Australia, Great Britain, France and Switzerland, invested in significant national scientific infrastructures during the Cold War years (de la mothe & Dufour, 1995). Cold War-era defense-related spending resulted in the development of such high-technology industries as semiconductors, computers, and commercial aircraft.

During the 1980s and 1990s, private sector science and technology development and innovation grew and defense-related, military research and innovation slowed. In contrast to the pattern of the previous five decades, technological development began to flow from civilian to military applications. In 2000, the Clinton administration reduced the role of defense-related research and design funding in U.S. technology policy. Instead, the Clinton administration focused resources and policies on commercial technology research, development, innovation, procurement, and adoption (Ham, 1995). The largest high-tech private sector innovators will remain tied to the public sector for two main reasons: First, the public sector, including the military, remains one of the main customers of high-tech innovators. Second, the public sector has the funds available for public-private partnered and cooperative research and development programs.

Applications

Managing the Innovation Process

The success of an innovation is connected to a market forecast of customer needs and wants as well as effective management of the innovation process. Firms have numerous economic tools and approaches for successfully developing a market and customer forecasts but are only recently, in the last two decades, developing and articulating management practices for the innovation process. While firms may or may not institute a formalized innovation policy and procedure to guide employees and mangers, there are a set of principles that guide the innovation process across businesses and industries:

• Innovations should meet customer needs, please shareholders, and motivate staff.
• Innovation requires vision to drive the change process.
• Innovation requires a risk-tolerant environment.
• Innovation requires a lifelong learning orientation that involves all members of the organization.
• Innovation requires creative thinking in a diverse and information-rich organizational environment.
• Innovation requires a cross-functional systems perspective for analyzing the impact of change and overseeing implementation.

Managers of the innovation process address numerous issues within the organization to ensure successful development and implementation of an innovation. The main innovation management responsibilities include reducing the sense of risk; managing the customer interface; training customers; managing staff performance; engaging front-line staff; and using information technology (Riddle, 2000).

Managers of the innovation process need feedback about their management performance. While market share will eventually reflect the success of management efforts, there exists another method for management review. Innovation management can be judged and evaluated through an innovation management measurement framework. The framework of the innovation management process consists of seven categories: inputs management, knowledge management, innovation strategy, organizational culture and structure, portfolio management, project management and commercialization. Innovation management measurement is used within firms by managers and executives. The innovation management measurement framework allows managers to evaluate their own innovation activity, explore the extent to which their organization is innovative, and identify areas for improvement (Adama & Bessant, 2006).

Issues

Managing Breakthrough Innovation

The process of managing breakthrough innovation, also referred to as disruptive or discontinuous innovation, varies greatly from managing incremental changes in products and technologies. The objectives of incremental innovation, such as speed, cycle time, profit impact, and quick cash recovery, generally do not apply to the breakthrough innovation process. Innovation managers recognize that the evaluation process for new products, processes, or services differs significantly from that used for extension projects. The potential market for incremental innovations is evaluated through conventional market research methods such as written surveys, focus groups, or concept tests. Breakthrough innovation projects are generally evaluated on their long-term value, impact on the market, and magnitude. The potential market for breakthrough innovations is evaluated through three main venues:

• Professional conferences and meetings.
• The demonstration of the product via early prototypes for reaction within the firm.
• Potential customers' evaluations of early working versions.

Determining the value of the innovation within the market is a speculative process. The project life-cycle for breakthrough innovations includes unpredictability, long time horizons, starts and stops, and periods of stagnancy. Management practices that facilitate the breakthrough innovation process include:

• Mechanisms for directing the technology-market arenas in which breakthrough innovations occur;
• Mechanisms for proactively stimulating discontinuous breakthrough innovation;
• Mechanisms for protecting projects that operate with high risk, uncertainty, and potential for failure.

Innovation managers are responsible for encouraging and facilitating the development of new businesses, product lines, and production processes based on breakthrough innovations. In addition, managers are responsible for developing and implementing management practices that reduce the high uncertainty associated with developing and commercializing breakthrough innovations. Managers, responsible for managing the breakthrough innovation process, use five types of managerial strategies to influence the process:

• Innovation Mangers Set Boundaries To Direct And Constrain Discontinuous Innovation Activities;
• Innovation Mangers Take Proactive Approaches To Stimulating Discontinuous Innovation;
• Innovation Mangers Stabilize A Systematic Approach To Evaluation And Screening Breakthrough Innovation;
• Innovation Mangers Create Incubating Organizational Arrangements;
• Innovation Mangers Recognize The Key Role Of Individual Initiative And Capabilities In The Innovation Process.

Ultimately, the breakthrough innovation process is not deliberately managed so much as encouraged and facilitated. Traditional management techniques are unsuitable for breakthrough innovation projects up until the point that uncertainty is reduced. The managers' main job is to reduce uncertainty and fear of failure up until the point where traditional management practices once again are appropriate. Managers of a breakthrough innovation project must be cognizant and accepting of the realities of the life cycle of a discontinuous innovation project. Breakthrough innovation projects are long-term lasting ten years or longer; have highly uncertain and unpredictable outcomes; are sporadic, with many stops and starts, deaths and revivals; have changing leaders and personnel; and require extensive exploring and experimenting rather than targeting and developing. Ultimately, breakthrough innovation projects, though potentially profitable to the business, are most successful when they are separated from traditional business expectations and ongoing business activities (Rice, 1998).

Case Study: Boeing's Global Enterprise Technology System (GETS)

In 2003, Boeing, a $54-billion-a-year aerospace company, developed and applied a new process for managing its enterprise-level research and development called the Global Enterprise Technology System (GETS). The Global Enterprise Technology System (GETS), which combines strategies from systems engineering, software process improvement, organizational psychology, and anthropology, provides a strategically-driven and systems-engineering-based approach to managing innovation. GETS is an example of applying the concepts of systems engineering to research and design.

The Global Enterprise Technology System is a collaboration between Boeing's business units including Boeing Commercial Airplanes, Integrated Defense Systems, and Phantom Works. The scale of Boeing's business operations includes customers in 145 countries with products and services such as commercial airplanes, defense products such as military airplanes, rotor-craft, missiles, communications systems, and space products such as satellites and launch vehicles. Technological innovation within Boeing's huge system and markets occurs primarily at the research organization called Boeing Phantom Works. Boeing Phantom Works is often referred to as Boeing's catalyst of innovation.

The scale of Boeing's enterprise necessitated an approach to managing innovation across many areas in a manner that is focused and connected without squashing vision and creativity. Boeing developed the GETS program to satisfy the following goals and objectives: highly collaborative, systematic, efficient, continuous, traceable, effective, and simple. The Global Enterprise Technology System is organized into four distinct phases including Discover, Decide, Develop, and Deploy. These four phases occur continuously at various levels.

• Discover: The discovering process is rooted in the constant dialog between what is desirable in the marketplace and what is possible to accomplish with technology.
• Decide: The deciding process draws on the outcomes of the discovering phase. Managers ask the following questions: What have we learned about the future? What new opportunities have surfaced? What assumptions have changed? What areas of emphasis are changing?
• Develop: The developing process, characterized by focus and efficiency, is about carrying out the work ideas. Technologists develop plans for the chosen research and design efforts and execute them within existing resource constraints.
• Deploy: The deployment process involves the placement and marketing of the innovative technology.

Boeing's GETS program has produced a generic model of technology and product development management that is used as a guide to establish research and development management processes for different parts of the enterprise. The GETS program facilitates process development workshops, conducts a broad-based formal inspection of the process, and promotes continuous improvement philosophy. Boeing considers the GETS program to be successful in guiding and managing the innovation efforts of their 2,500 researchers and their managers. Boeing reports the followings benefits and gains from the GETS program (Lind, 2006):

• Stronger Working Relationships Across Technology, Product, And Market Arenas;
• More Strategically Focused Portfolio That Delivers Greater Value To Boeing Business Units;
• More Effective Long-Term Focus, Strategic Planning, And Synergy;
• Reduced Meetings And Travel Associated With The Portfolio Planning;
• More Flexible Technology Portfolio To Meet The Changing Needs Of The Business;
• Reduced Complexity And A Stronger Innovation Process That Is Easier To Apply To New Areas.

The GETS program is a model of large-scale innovation management. Boeing created GETS as an institutionally approved, supported, and overseen space for creativity and breakthrough innovation.

Conclusion

In the final analysis, the management of the innovation processes across businesses and industries shares numerous characteristics. Patterns of disciplined innovation management include understanding the product development process, making support functions time-invisible, grouping critical resources together, and maintaining management continuity (Stalk, 2006). Managers of the innovation process can improve their firm's chances at successful innovation by lowering sales expectations, assessing risks and rewards, sharing the rewards, encouraging innovation, allowing for learning and failure, and promoting experimentation and the need for change (Brown, 1992).

Questions that managers of the innovation process should ask themselves as they develop and implement their management strategies include the following: Is innovation stated as part of your corporate objectives and business plan? Do you provide support to staff that try out new ideas, even if the ideas fail? Do you have experiments or pilots of new service concepts being conducted within your business? Does your financial reporting system reflect innovation as an investment or a cost? (Riddle, 2000). Ultimately, innovation, when properly managed, gives companies competitive advantage in the marketplace.

Terms & Concepts

Breakthrough Innovation: Innovation based on technologies previously new to the world; also referred to as disruptive, radical, or discontinuous innovation.

Cold War: The period of conflict, tension, and competition between the United States and the Soviet Union and their allies from the mid-1940s to the early 1990s.

Firm: A business that is owned by stockholders and operated by professional managers.

Incremental Innovation: Improvement of technology performance or product feature enhancement.

Innovation: The use of a new product, service, or method in business practice immediately subsequent to its discovery.

Organizational Innovation: The process of changing the organization by introducing different methods of production or administration.

Private Sector: All enterprises that are outside of government control including micro, small, medium, and large enterprises.

Public Sector: The economic and administrative enterprises of a local, regional, or national government.

Technological Innovation: The process by which industry generates new and improved products and production processes

Bibliography

Adams, R., Bessant, J., & Phelps, R. (2006). Innovation management measurement: A review. International Journal of Management Reviews, 8, 21-47. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=20387011&site=ehost-live

Bigwood, M. (2004). Managing the new technology exploitation process. Research Technology Management, 47, 38-42. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=14935409&site=ehost-live

Brown, R. (1992). Managing the 'S' curves of innovation. Journal of Consumer Marketing, 9, 61. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=5517061&site=ehost-live

Costa Souza, J., & Bruno-Faria, M. (2013). The innovation process in the organizational context: an analysis of helping and hindering factors. Brazilian Business Review (English Edition), 10, 108-129. Retrieved November 15, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=91678530&site=ehost-live

de la Mothe, J. & Dufour, P. (1995). Techno-globalism and the challenges to science and technology policy. Daedalus, 124, 219-237.

Eschenbaecher, J., & Graser, F. (2011). Managing and optimizing innovation processes in collaborative and value creating networks. International Journal of Innovation & Technology Management, 8, 373-391. Retrieved November 15, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=66183155&site=ehost-live

Ham, R., & Mowery, D. (1995). Enduring dilemmas in U.S. technology policy. California Management Review, 37, 4-107. Retrieved April 27, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=9510031720&site=ehost-live

Letenyei, L. (2001). Rural innovation chains. Review of Sociology, 7, 85-100.

Lind, J. (2006). Boeing's global enterprise technology process. Research Technology Management, 49, 36-43.

Hacklin, F., Raurich, V., & Marxt, C. (2005). Implication of technological convergence on innovation trajectories. International Journal of Innovation & Technology Management, 2, 313-330. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=18526428&site=ehost-live

Morris, L. (2013). Three dimensions of innovation. International Management Review, 9, 5-10. Retrieved November 15, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=91879701&site=ehost-live

Rice, M., O'Connor, G., Peters, L., & Morone, J. (1998, May). Managing discontinuous innovation. Research Technology Management, 41, 52-58. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=575443&site=ehost-live

Riddle, D. (2000). Managing change in your organization. International Trade Forum, , 26-27. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=4845035&site=ehost-live

Spender, J., & Kessler, E. (1995). Managing the uncertainties of innovation: Extending Thompson (1967). Human Relations, 48, 35-57. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=12243776&site=ehost-live

Stalk Jr., G. (2006). Hardball innovation. Research Technology Management, 49, 20-28. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=19962271&site=ehost-live

Mohamend, Z. (1992). Managing user-supplier interactions: management of R & D activity. Managerial Decision, 30, 49-58.

Zahrah, S., & Covin, J. (1993). Business strategy, technology policy and firm performance. Strategic Management Journal, 14, 451-478. Retrieved April 27, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=5207188&site=ehost-live

Suggested Reading

Schroeder, R., Van de Ven, A., Scudder, G., & Polley, D. (1986). Managing innovation and change processes: Findings from the Minnesota Innovation Research Program. Agribusiness, 2, 501-523. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=5138889&site=ehost-live

Tvaronaviciene, M., & Korsakiene, R. (2007). The role of government in implementation of innovation. Business: Theory & Practice, 8, 9-13. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=24656092&site=ehost-live

Voelpel, S., Leibold, M., & Streb, C. (2005). The innovation meme: Managing innovation replicators for organizational fitness. Journal of Change Management, 5, 57-69. Retrieved June 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=16968319&site=ehost-live