4.1 Innovation business strategy and ICT
Print this pageFrom a business perspective, innovation is the means by which businesses exploit areas of external and internal change that offer commercial opportunities (Drucker 1985; Howard 2001, 2004a; Miller and Morris 1999; Schumpeter 1989). Often it begins with an idea that is transformed into a concept that includes some new combination of what is already known and can be implemented to serve some commercial purpose. Innovation is essentially a human activity and nurturing innovation is an essential function of management and a key responsibility of managers.
It is not possible to define a list of attributes, or traits of an innovative manager. There have been numerous studies that attempt to link business success to management traits, the latest being Joyce, William and Nitin Nohira. 2004. What Really Works: The 4+2 Formula for Sustained Business Success. In all this work, innovation is, however, recognised as a core management responsibility, along with leadership, knowledge of technologies and business acumen.
Many companies committed to innovation adopt a strategy based on generation of new ideas, support for experiments flowing from ideas and commitment to new ventures flowing from successful experiments (Baghai, Coley, et al. 1996, 1999; Cooper 2001; Hamel 2000). Decisions to allocate resources to nurture ideas, conduct experiments and enter into new ventures are generally approached on the basis of a capital expenditure/investment appraisal decision, and on a project-by-project basis, using a business management model.
Consistent with this investment approach, the internal research and development (R&D) divisions in some firms now charge user divisions for the innovation results produced. These R&D divisions are also being market tested against independent research laboratories, including publicly funded research organisations and universities, and against opportunities to acquire innovation from start-up companies (Kurtzman 1998). This pattern reflects the spread of open innovation strategies among manufacturing companies.
Historically, strong R&D capability in large industrial enterprises provided a barrier to entry in many manufacturing sectors. However, changes in the way R&D is performed, particularly in relation to information and communication technologies, means that internal R&D capability is no longer regarded in this way. An emerging model of open innovation is becoming apparent where companies source innovation capability externally through acquisition of technologies developed in research organisations and smaller technology-based companies (Chesbrough 2003b; Linder, Jarvenpaa, et al. 2003a, 2003b).
Companies have also become much more active in trading their patent portfolios and universities and publicly funded research organisations are giving more attention to recognition, licensing and/or sale of their intellectual property. Much of this intellectual property is ICT related (Howard 2003, 2004b).
An important aspect of industrial innovation is now based on companies, universities and publicly funded research organisations creating spin-off companies to develop and market new discoveries and inventions to end-users. These users may be a final consumer but are more likely to be established corporations. This feature of industrial innovation is particularly apparent in the life sciences and in industries that utilise ICT applications as a basis for innovation. The trend in venture capital financing is towards support for start-up companies that have developed technology solutions that enable innovation in established industry sectors (Howard 2002b, 2002c; Howard Partners and Australian Venture Capital Journal 2002).
This study provides some evidence to support contemporary management research which suggests that larger corporations that use ICT and other enabling technologies in taking new products and services to market are tending now to invest less in internal R&D and more in scouting and acquiring technology through licensing and investments in spin-off companies (Chesbrough 2003a, 2003b). Alternatively, they enter into meaningful strategic alliances with small and medium sized companies whose business model is to increase the value of the technology/discovery and sell it on quickly. This trend may be one of the factors that underlies decreases in the measured R&D in the manufacturing sector in recent years.
More generally, outside perspectives and competencies that are important for innovation flow into and out of organisations through many routes:
- Partnerships with universities.
- Alliances and acquisitions.
- External venture investments.
- Recruiting and hiring.
- Customers and suppliers.
- Relationships and curiosity of individual employees.
These sources of external influence have played pivotal roles in all aspects of corporate innovation (Wolpert 2002). In this respect, the application , adoption and use of ICT in ‘non-ICT’ manufacturing industries reflects the capacities of managers and staff to envision how people, ideas and objects can contribute to change in processes, products, services and the operation of the business itself. It also depends on their ability to acquire or develop the know-how needed to affect these changes from within or, increasingly, outside the company. In this way, innovation is as much about people as it is about technology.
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- Last modified: 5 February 2008, 10:30am