Innovation Concepts

2 MIN READ Hermas Kornelius  |   2 MIN READ January 6, 2021

The global economy's challenges and the rapidly changing business environment force companies to continuously innovate to survive and win the competition. The company continues to learn and innovate to respond to political, economical, social, cultural, lawful, environmental, and technological changes.   Innovation is believed to be the key for a company to succeed in achieving its goals, both in the short and long term. Innovation is the practical implementation of a new idea that is different into a product (goods and services) or a process, as a result of the introduction, learning, and application of knowledge within the organization which can be obtained from individuals, companies, universities, government agencies and non-governmental organizations. This essay discusses several innovative concepts that can lead an organization to success in the current scenario of business hyper-competition.

OECD (2005) divides innovation into four main categories, namely product innovation, process innovation, marketing innovation, and organizational innovation. Product innovation includes goods or services that are new or have improved characteristics or uses, including technical specifications, materials, and components, ease of use, and other characteristic functions. 

Process innovation relates to new things in the production process, product quality, or the way and speed of delivery, including in hardware or software. 

Marketing innovation includes the introduction of new marketing methods such as new packaging, promotion methods, location, placement, and pricing, to suit customer needs, opening new market segments or new product positions in the market, to increase sales. 

Organizational innovation includes the adoption of new business methods, new organizations, new administration aimed at increasing organizational productivity and reducing production costs.

Schilling (2017) adds that the types of innovation commonly found in business activities are: product innovation versus process innovation, radical innovation versus incremental innovation, architectural innovation versus component innovation, and competency-strengthening innovations versus competency destroyer innovations. Product innovation is found in company output, both in the form of goods and services, while process innovation is how companies run their business, how they produce products, or how they market their products. Radical innovation shows something new and is very different from the previous product or method, while Incremental innovation is a minor change from an existing product or activity. Innovation can also strengthen competence if it is obtained from existing knowledge or weaken competence when new technologies emerge that make current competencies obsolete. 

According to Rajapathirana and Hui (2018), innovation will only be successful with companies that can innovate as a combination of company assets, resources, and competencies to achieve long-term competitive advantage. The innovation capability has four capacities consisting of: the capacity to produce new products that can meet market demand, the capacity to apply new technological processes in production activities, the capacity to select and develop technology for future needs, and the capacity to respond to technological changes produced by competitors. One of the benchmarks of a company's innovation capability according to the ability to use knowledge from various sources is a company culture that supports a climate of innovation by involving all organizational lines from top management to the lowest ranking employees, marked by the speed in producing original new products.

Furthermore, according to Mátyás, Lowy, and Salgado (2019), there are five company levels from the point of view of innovation capabilities:

• level 1: not innovative (non-innovative),

• level 2: a new development in the company (novel to the company),

• level 3: new company products (new to the company),

• level 4: new output (breakout),

• level 5: breakthrough.

References  

Mátyás, B., Lowy, D. A. and Salgado, J. P. (2019) ‘A Measure of Enterprises’ Innovative Activity for Microfirms and Startups’, Academy of Strategic Management Journal, 18(6).

OECD (2005) Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data. 3rd editio. OECD Publishing. doi: 10.4337/9781786438935.00024.

Rajapathirana, R. P. J. and Hui, Y. (2018) ‘Relationship between innovation capability, innovation type, and firm performance’, Journal of Innovation & Knowledge. Journal of Innovation & Knowledge, 3(1), pp. 44–55. doi: 10.1016/j.jik.2017.06.002.

Schilling, M. A. (2017) Strategic Management of Technological Innovation. McGraw-Hill Education.
 

Hermas-Kornelius

 

Hermas Kornelius
Managing Director
Dinamika Teknik Persada
Indonesia

MBA 2020 Batch

 

 

 

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