This article provides a practical explanation of innovation management. After reading, you’ll understand the basics of this powerful innovation tool.
What is innovation management?
Innovation management refers to the active organising, monitoring, and carrying out of activities, processes, and policy which leads to creating substantial new value for the company and its customers. This is done by creatively changing one or more dimensions of the company system.
Innovation is a very popular term that is used both appropriately and inappropriately, depending on the situation. This article discusses what innovation management exactly entails. The term innovation is derived from the Latin word innovare, which translates as renewal. From an economic perspective, innovation is something new that offers advantages or value for an organisation, or for society. The term management is often used in business and represents the controlling of tasks and process, and the coordination of activities to achieve objectives. Together, innovation management can be defined as follows: the systematic promotion of renewal and innovation in an organisation through planning, organising, management, and monitoring.
In practice this can be the development of new products (Philip Kotler’s Five Product Levels) and services to gain new or existing market share. Drastically updating existing products and services in order to distinguish these from what the competition offers is also innovation. At a smaller, internal company scale, innovation means the improving of internal processes to strengthen the company or lower costs, and the development of new business models in order to create and exploit revenue streams (Nadler-Tushman Congruence Model).
Types of innovation
Because innovation takes place in varying industries and fields, innovation management often looks different as well. This article about the innovation matrix has more information about different types of innovation. In addition to this article, we’ll explain a few more types of innovation below.
We already explained how innovation can refer to the development of new services and products on the market for the public, which answer needs that aren’t being met yet or solve problems that hadn’t been identified before. Technological innovation is only aimed at the technological aspects of a product or service, rather than the whole product or business model.
However, it’s important to note that innovation isn’t just driven by technological developments, although technology does often play an important role in innovation.
In business administration, a disruptive innovation is an innovation that stimulates a new value and market network, causing established and leading businesses, products, and alliances to be replaced. This term was first proposed by the American scientist Clayton M. Christensen.
Not all innovations are disruptive, even if they are in fact revolutionary. For instance, the introduction of the car was not disruptive for the transport industry at first because cars were a luxury, and the market for horse-drawn carriages wasn’t immediately disrupted.
Social innovations are innovations that are intended to respond to changing social needs in society. These innovations are made with the goal to help general society. Examples include open source methods and innovations with a social purpose, such as microloans or remote learning.
Innovation management and its organisational innovation aspects
It can be quite challenging to understand what innovation management means for organisations in reality. In order to clarify this, the section below divides innovation management into four aspects that generally apply to innovations in the private sector.
Capacity in relation to innovation is a term that’s used in order to describe the capacities and means that an organisation needs to create and manage innovations. Innovation is highly dependent on people, so capacities mainly refer to the human side of innovations. It primarily refers to the skills of both teams and individuals, unique insights, knowledge, and practical skills of the people working at the organisation. However, it also includes areas such as information capital and tacit knowledge, as well as financial capital. All these aspects are needed to create innovations.
The difference between structure and capacities is that structure enables the effective use of the capacities. In practice this generally relates to the organisational structure, internal and external processes, and the infrastructure within the organisation. Innovation management can only be implemented effectively if the organisation is set up correctly, for instance regarding the flow of capital and information. It’s also important that decision-making authority is assigned to the right players. This is crucial to not fall behind compared to the competition due to decisions taking too long because of a slow hierarchy.
Another important part of innovation management within an organisation is the organisational culture. Structures make the effective use of capacities possible; the company culture makes it possible to recruit the right capacities in terms of people.
With the right open and pro-innovation culture, chances are better that the organisation will be able to attract and retain talented employees. A pro-innovation culture encourages specific beneficial behaviour and discourages unwanted behaviour. Some aspects of an open and pro-innovation culture are:
- emphasising the necessity of constantly coming up with new ways to become better, faster, or more effective
- appreciating speed, learning, and experimentation
- seeing failure as a normal part of business operations to create something new. There shouldn’t be any fear of making mistakes
- Encourage freedom and responsibility
Innovation management and strategy are closely related because innovation is simply one of the ways in which strategic objectives can be achieved. Naturally, there are also examples of innovations happening by accident, but these are rare. It’s more common for innovations to be a goal and based on the strategy. In practice, organisations should allow for sufficient freedom to innovate, but also keep in mind practical limitations such as strategic focus and available resources.
Innovation networks and key players
Innovations aren’t just made by a single organisation, which might be interpreted from the section above. Countless parties work together in order to innovate. One of the reasons is that different parties can have a significant interest in a specific innovation. Different players working together for innovation is also called collaborative innovation.
Pros of innovation networks
Businesses that work together to be able to innovate more effectively benefit from that collaboration because they gain access to new capacities and additional knowledge, making them more competitive. This speeds up the innovation process. Partnerships enable small business such as startups to work together with other, major players that complement them. That way they can benefit from the different perspectives and levels of experience. Larger companies benefit from collaborations with smaller organisations because it speeds up their innovation process, shortens the time needed to enter the market with new innovations, and overcomes the negative aspects of bureaucracy and inflexible procedures.
To summarise innovation management
Innovation is a popular phrase that’s used for many things, not always correctly. The explanation that most closely defines the essence of the word is: the systematic promotion of renewal and innovation in an organisation through planning, organising, management, and monitoring. Gurus like Philip Kotler and Nadler and Tushman are big names in the field of innovation.
There are different types of innovations. The most familiar ones tend to come from technological industries. That’s because these innovations are broadly used. Technological innovations can also be disruptive. That happens when new innovations put existing companies and products out of business. Social innovations also tend to be well known. They resolve a social issue or encourage social growth.
Different companies are often working on innovations in so-called innovation networks. Companies collaborate on innovations because they have a shared interest or can complement each other. Collaboration with a bigger innovator can be particularly valuable for smaller businesses. In turn, large companies can avoid long bureaucratic processes and shorten the time needed to enter the market.
Now it’s your turn
What do you think? Do you recognise the explanation of innovation management? Which innovation tools are you familiar with? Are you actively working on innovation? Or do you perhaps have an interest in technological developments? Do you have any tips or additional comments? Read more here.
Share your experience and knowledge in the comments box below.
- Afuah, A., & Afuah, A. (2003). Innovation management: strategies, implementation and profits.
- Map, I. (1999). Innovation journey.
- Trott, P. (2008). Innovation management and new product development. Pearson education.
- Tushman, M. L., & Moore, W. L. (1988). Readings in the Management of Innovation. Ballinger Publishing Co/Harper & Row Publishers.
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