Learn: The Basics about innovation

Engage with conceptions of innovation

Parent innovation program: 

• Basics of Business innovation.

Parent Program Goals & Benefits:

Learning outcome:

• LO1: Explain why firms and other organisations innovate and why it is so difficult to innovate.
• LO2: Identify concepts and more precise language for talking and thinking about innovation.
• LO3: Distinguish between product and services, business model, and system-level innovation.
• LO4: Investigate innovation as a specific, routine capacity and strategy of a business.
• LO5: Analyse the nature, importance, and types of innovation in an organisation.

Objectives:

• Engage with the concepts of innovation.

Learning Hall:

•  Self-assessment Capability
•  Course availability
•  Certification availability
•  Forum: Discussion Forum

Practice Hall:

•  Scenario availability
•  Industry & Pilots specific
•  Resource Requirement model availability
•  Financial Model availability
•  Program Planning

Innovation Hall:

•  Innovation Program ready to Execute within our environment 
•  Related Scenarios ready to Execute within our environment 

Exchange Hall:

•  InnovMates Experts
•  Partners availability

1.  Engage with conceptions of innovation

LO1: Explain why firms and other organisations innovate and why it is so difficult to innovate.

Innovation is how firms develop solutions to meet old and new challenges. The work of innovation involves recombining available and novel elements to serve new purposes, often in new contexts. This work includes building and leading organisations that make full use of their resources today, while also exploring possibilities for future success.

In Module 1, the focus is on conceptualising innovation, examining the different types of innovation, and exploring innovation as a routine capacity. 

In Video 1, Programme Director Marc Ventresca challenges you to test your beliefs and assumptions about innovation. You have an opportunity to reflect on the insights you gain from the video and to note your thoughts in the section that follows.

Having watched Video 1, write a short reflection in response to the following questions:

• What is an example of innovation in the organisation you work for? How did this innovation change or reorganise the prior arrangements?
• When you see “innovation” as a kind of work and management, rather than an “outcome”, what changes in your thinking?
• What is the work needed to make innovation occur?

In 150 to 200 words, write your thoughts on the above questions in the submission box below. Note that these submissions will not be graded. The purpose of these journal reflections is to encourage critical thinking before starting the module content.

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2. The innovation framework

LO2: Identify concepts and more precise language for talking and thinking about innovation.

 

1.0 Introduction

Why is it important to talk about innovation? You may look at successful businesses and note that they continue to be successful despite operating in mostly the same way, with some incremental improvements, over time.

However, what if such businesses encounter future conditions that differs significantly from the present or the past? In light of this, how will a business remain successful if the past continues to inform its incremental improvements? This is where innovation and building the capacity for innovation become important.

One challenge, however, is the language used when discussing innovation. When speaking about innovation, how do you know whether everyone is using the word “innovation” in the same way? A better understanding of and more precise language for the word and the work involved sets the foundation for organisations to realise innovation.

Technology improvements and developments are often used as a proxy for innovation. This lesson recognises the importance of emerging technologies and argues against technology as the only or primary focus for innovation. 

Instead, we propose other drivers and the critical role of complementary assets to realise the potential of any new technology development. This approach provides a more actionable understanding of innovation as the recombination of existing and new elements to serve a new purpose, often in a new context. As you engage with the content, consider your own views on innovation.

 

 2.0 Innovation overview

Innovation is about more than ideas, technology, and new products and services. 

Innovation in practice is understood as a process of routines that organisations need to build, staff and manage in order to create new forms of value, regularly and over time. 

This lesson examines how innovation creates value in an organisation, in part related operations and strategy. Value creation was previously linked to increasing revenue through economies of scale, i.e. improved efficiencies and mass production (Hughes, 2013). This programme explores how means of creating value through innovation today compares to the historic way of creating value.

2.1 Defining innovation

Your definition of innovation may differ from that of your colleagues and peers. Listen to Podcasts 1 and 2, where various guest speakers explain their understanding of innovation, as well as how the concept is used in their context. These differences are important and may well reflect your training, expertise, and experiences. This variety is useful and once recognised, can be harnessed for a common purpose.

Podcast 1 – Catalina Cernica is the Head of Innovation UK for LEO Innovation Lab. LEO Innovation Lab focuses on building digital solutions to empower patients and enhance their healthcare experiences. In Podcast 1, Cernica shares some insights into innovation from her own experiences.

 

Podcast 2: Joyeeta Das is the CEO and co-founder of Gyana. Gyana is a data science application that empowers users by giving them access to AI, without requiring coding knowledge. In Podcast 2, Das discusses the challenges she faced when she started the company, and how she manages complex relationships.

Podcast 1 and 2 demonstrate that there are similarities and differences in how individuals view and talk about innovation. Some of these differences are demonstrated by the different explanations for why innovation occurs.

How firms build capacity for innovation

2.2 How firms build capacity for innovation

Firms innovate for a wide variety of reasons. The following three drivers of innovation are key to understanding innovation and why it occurs.

Driver 1: Firms are competing in new ways

For many years, the prevailing approach to competition was based on the assumption that industries were stable and had clear boundaries. Within this consistent environment, organisations could develop their business models, serve customers, and defend themselves in order to capture value.

However, these assumptions may not hold today, which changes analysis and action, as the context of business changes in new ways and at new rates. Customer preferences are shifting, threats of new entrants come from different industries, and technology offers opportunities to reconfigure relations with suppliers and competitors. The rise of platforms like Airbnb, Alibaba, Amazon, and Uber are evidence of new scenarios for commerce. Innovation is the mix of insight, activity, and practice that allows firms to compete in this unsettled, fast-paced environment.

Driver 2: Firms are launching new business models

The focus on innovation is too often limited to the role of technology. While technology plays an important role in the innovation process, it alone is not sufficient as a means to create value. It should always be considered in conjunction with business model innovation. Therefore, in the case of start-ups, a new business model should be designed that integrates the strategic use of technology to create and capture value. In the case of incumbent organisations, business models should be reconfigured to better leverage the use of new technologies.

Driver 3: Firms are imagining a wider space for value creation

The rise of platforms and their prominence in today’s economy is forcing many firms to rethink their value creation process. Platforms are hubs that build complex systems of activities and orchestrate different providers of products and services to deliver value to customers, and then extract part of the value created. 

For example, Airbnb coordinates providers of accommodation and tourist experiences, and manages relations with regulators, to allow customers to rent accommodation with a simple click. While platforms are per se an innovative business model, their emergence is forcing firms that are part of their ecosystem to innovate.

What worked yesterday may no longer work today; the conditions have changed. The realisation that the nature of commercial activity is different has substantial implications for organisations and for the work of leaders and managers. Therefore, organisations are seeking new ways to create and capture value. Building organisational capacity will be covered in more detail in Module 2.

2.3 Idea generation

 

Innovation may start with an idea. The idea itself is not the innovation; rather, innovation is the process of developing ideas through impact, then managing how to create and to capture value (e.g. the stories from Xerox PARC facilities, including the mouse technology that was later commercialised by Apple, and the full-sized photocopier that was reassembled by Ricoh into a compact photocopier). You will learn more about the Xerox PARC case study in Module 2.

 

Explore further:

 

In his TED Talk “Where good ideas come from”, innovation expert Steven Johnson introduces the claim that ideas are typically incomplete, and that social context and interactions improve those initial ideas. He uses the case of the 18th century coffee shop in the UK as one of those illustrative social contexts where ideas grow, and discusses examples from science, technology, and other contexts. Johnson also gives a detailed example of the origins of the global positioning system (GPS) in Cold War competitions and how, over time, that was bundled in the toolkit known as a smartphone – which you now use to find the nearest coffee shop.

 

Watch the video to learn about how innovation happens when ideas connect in physical spaces during conversations or reflections.

 

These examples demonstrate that the technology component of innovation is not the only source of success. Technology always interacts with social, cultural, and institutional context – and with people. The mouse, for example, required additional design and business model development around it. For the GPS to become a success, it required complementary infrastructure such as the availability of internet, geo-mapping and then the rise of location-based services and internet advertising.

 

Pause and reflect:

 

Businesses innovate for different reasons. Some use innovation to compete and others to survive. Other businesses innovate to do something new, or to create an original product or service.

 

Watch the video by Carrie Lomas, on the risks of failing to innovate and reflect on the video’s examples. Consider what you have learnt so far, and ask why the firms in the video had difficulty noticing the warning signs in their external and internal business environments. Then, answer the following question:

 

Consider a recent innovation effort in your organisation. What do you think worked and what would you have done differently?

3. Exploit–explore ratio

 

Organisations may innovate to gain a competitive advantage, or to launch a new business model. In addition, organisations may innovate after realising that they are not yet built for innovation. The previous section explained different reasons why firms innovate: as a new way of competing in the market, to monetise the opportunities offered by technology, and to engage in emerging platform ecosystems. This section discusses the exploit–explore ratio, as an overarching framework to understand why organisations innovate.

 

Successful businesses focus on pursuing growth by exploiting their existing capabilities; they do so through routine improvements and operational excellence (Ventresca, n.d.). Historically, in stable economic contexts, businesses could often be successful by maximising the value generated by their resources and pursuing operational efficiencies over time; this is called the exploit mode. However, to be successful in the current commercial environment, businesses must develop an understanding of how to transition from today’s successes to identify the opportunities of tomorrow; this is called the explore mode.

 

If a business focuses only on exploiting available resources, it may only achieve better financial results if the context that enabled this success in the past remains the same in the future. This ratio of exploit and explore becomes an important conversation with leadership and other stakeholders. ‘How much of the work of today (attention, resources, focus) is about today, and how much of today needs to be about tomorrow? This point addresses the question we opened with: What implications for a successful venture or agency, when the context conditions change around it and ‘yesterday’s’ routines for success may no longer be effective?

 

In order to be successful in the long term, businesses need to explore new ideas and forms of value creation, while also exploiting their existing capabilities. This balanced approach is referred to as the exploit–explore ratio; the aim is to identify an equilibrium between the capacity required to make money today, and the capacity required to generate money tomorrow. Figure 1 illustrates the balance between exploit and explore, both in any one moment and over time when the explorations of today become the basis of exploit tomorrow.

 

 

 

 

Exploit–explore ratio (cont.)

 

Summary

1. Types: Incremental, Disruptive, and Radical Innovation.

2. Prediction: Leverage trends, weak signals, and S-curve analysis to forecast innovation.

3. Tools: Use frameworks like JTBD, scenario planning, and design thinking to harness disruption and position your business for growth.

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