Saturday, October 23, 2010

Dissertation on Innovation

Dissertation on Innovation

Innovation is a major responsibility of modern management, particularly in commercial organisations. This is because both technology and society are developing extremely rapidly, as new products must be matched with new market opportunities if businesses are to survive and prosper.

One of the sources of innovation is increased delegation. In itself, delegation has great value, namely morale and performance are improved. Top management are freed for strategic planning and decisions are made by those ‘on the ground’and therefore more ‘in the know’. Most importantly the organisation benefits from the imagination and thinking of its high flyers(top calibre staff).

Whilst innovation lies within the employees, they must understand and that ultimately they are accountable for their own actions.

To encourage innovation the objective for management should be to create a more outward looking organisation. People should be encouraged to use their initiative to look for new products, markets, processes, designs and ways to improve productivity.

Thomas Attword suggests the following steps to encourage innovation:
  • Ensure management and staff know what innovation is and how it happens.
  • Ensure that senior managers welcome, and are seen to welcome, changes for the better.
  • Stimulate and motivate management and staff to think and act innovatively.
  • Understand people in the organisation and their needs
  • Recognise and encourage potential ‘entrepreneurs’
Small companies appear to produce a disportionate number of innovations because the sheer number of attempts by small-scale entrepreneurs means that some ventures will survive. The 90 – 99% that fail are distributed widely throughout society and receive little attention.


Large companies must absorb all potential costs, even if an innovation is successful. The organisation may face costs that newcomers do not have to bear, like converting current operations and customer profiles to the new solution.

Small organisations and innovation

The research suggests that the following factors are crucial to the success of innovative small organisations.

Need orientation – Lacking resources, successful small entrepreneurs soon find that it pays to approach potential customers early, test their solutions in the user’s hands, learn from their reactions and adapt their designs rapidly.

Experts and fanatics – Commitment allows the entrepreneur to preserve despite the frustrations, ambiguities and setbacks that always accompany major innovations.

Long-term horizons – Time horizons for radical innovations make them essentially ‘irrational’ from a present-value viewpoint. Delays between invention and commercial production/ success can range from 3 to 25 years.

Low early costs – Innovators incur few overheads as possible, their limited resources doing directly in their projects. They borrow whatever they can and invent cheap equipment or processes, often improving on what is available in the marketplace.

Multiple approaches – Committed entrepreneurs will tolerate the chaos of random advances in technology, adopting solutions where they can be found, unencumbered by formal plans that would limit the range of their imaginations.

Flexibility and quickness – Undeterred by committees, the need for board approvals and other bureaucratic delays, the inventor/entrepreneur can experiment, recycle and try again with little time lost. They quickly adjust their entry strategies to market feedback.

Incentives – Tangle personal rewards are foreseen if success is achieved and the prospect of these rewards (which may not be principally of a monetary nature) is a powerful driver.

Large organisations and innovation

Within large organisations, the following barriers to innovation and creativity may be typically encountered.

Top management isolation – Financially focused top managers are likely to perceive technological innovation as more problematic than, for example acquisitions or organic growth.

Intolerance of fanatics – Big companies often view entrepreneurial fanatics as embarrassments or troublemakers.

Short time horizons – The perceived corporate need to report a continuous steam of upward moving, quarterly profits conflicts with the long time spans that major innovations normally require.

Accounting practices – A project in a big company can quickly become an exposed political target, its potential net present value may sink unacceptably and an entry into small markets may not justify its sunk costs (i.e. its already incurred expenses).

Excessive rationalism – Managers in large organisation often seek orderly advance through early market research studies through systematic project planning.

Excessive bureaucracy – Bureaucratic structure require many approvals that cause delays. The interactive feedback that fosters innovation is lost, important time windows can be missed and real costs and risks rise for the operation.

Inappropriate incentives – When control systems neither penalise opportunities misses nor reward risks taken, the results are predictable.

Successful large organisations have developed techniques that emulate or improve on the approaches used in small, fleet-of foot companies (i.e.!!!)

Atmosphere and vision – Continuous innovation occurs largely because top managers appreciate innovation and atmosphere in order to support it. They project clear long-term vision for the organisation that go beyond simple economics measures.

Orientation to the market – Within innovative organisations, manager’s focus primarily on seeking to anticipate and solve customers emerging problems.

Small, flat hierarchies – Development teams in large organisations normally include only 6 to 7 key people, operating divisions and total technical units are kept below 400 people.

Multiple approaches – Where possible, several prototype programmes are encouraged to proceed in parallel. Such redundancy helps the organisation to cope with uncertainties in development, motivates people through competition and improves the amount and quality of information available for making final choices on scale-ups or new product/service introductions.

Development shoot-outs – the most difficult problem in management of competing projects lies in re-integrating the members of the losing team. For the innovative system to work continuously, managers must create a climate that honours high quality performance whether a project wins or loses, reinvolves people quickly in their technical specialities or in other projects and accepts rotation among tasks and groups.

Skunk works - This is a name given to the system in which small teams of engineers, technicians, designers and model makers are placed together with no intervening organisation or physical barriers, to develop a new product from idea to prototype stage. This approach eliminates bureaucratic controls, allows fast unfettered communications, permits rapid turnaround times for experiments and instils a high level of group identity and commitment.

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