Republic of the Philippines

CAVITE STATE UNIVERSITY

(CvSU)
Don Severino de las Alas Campus
Indang, Cavite
 (046) 415-0010 / 415-0011  (046) 415-0012
www.cvsu.edu.ph

JEANNETH CULLANO
PhD in MANAGEMENT
MNGT 360- ADVANCED OPERATION MNGT
DR. TITA LOPEZ

INNOVATION-MANAGING THE RENEWAL OF BUSINESS

PURPOSE OF THIS CHAPTER

1. Understand the strategic importance of innovation.
2. Realize that operations management can play a central and important role in the
innovation process.
3. Appreciate how operations “lines up” within the innovation process.
 The firms need to innovate to change what they offer and how they produce that offering
to survive. New business is created by new ideas, by the process of creating competitive
advantage in what a firm can offer.

Innovation today no longer sees it as an occasional event, but a core part of what
organizations do to survive. It is the heart of what organizations do to renew themselves in terms
of what they offer and how they create and deliver that offering.
WHAT IS INNOVATION?
Innovation can take in many forms. It could be in the equipment used to produce the
product or service, or it could be in the way in which the process is organized and structured, in
the repositioning of an existing idea- established product in a new product and it can involve a
complete reframing of the way in which we see the world.
 Innovation depends on attitudes to change. Whenever form it takes, innovation is at least
a survival imperative, and it can also offer real opportunities for growth. The choice to innovate
or not depends at the level of the individual enterprise.
1. Rewriting the rules of the game- by technological and market changes that have turned
the industry upside down. Firms that don’t recognize the need to change simply
disappear, while those that recognize that “we must change” can use this to build new
and growing businesses.
2. We have to change- basically you need to change the way you think and act, every hour
of every day for the rest of your career.
 Example. Online banking instead of the traditional way of doing transaction in the bank.

INNOVATION AS A PROCESS
Invention is just the first step along an extended process of translating ideas into reality
and the central concern in operations management.
Innovation can be represented as a process- a sequence of activities which lead to an
outcome. In the organization it is a core process concerned with renewal- translating ideas and
resources into new products and processes that will underpin the future of the business.
 It is a process triggered by many things, but these stimuli can be resolved into two
components- push and pull.
The “push” comes from the gradual accumulation of ideas through technological research
and development; these creates a range of opportunities that might be exploited in new or
improved products or processes.
The “pull” comes from the influence of different kinds of demand (market, social,
regulatory, etc) that bring new responses- essentially the “necessity is the mother of invention”
model.

INNOVATION AND OPERATIONS MANAGEMENT

Innovation is a risky and uncertain process, but it can be managed. At its heart it is about
disposing resources and controlling activities- in other words, it’s about operations management.
Mainstream operations management is often pre-occupied with capacity, with production flow
and control, and other themes- but managing innovation is fundamentally about the same set of
challenges- of coordination and disposition.
One reason why innovation is often poorly managed in organizations is precisely because
of a lack of an integrated operations management perspective.
 Strategic, integrated and systematic approach is needed in successful innovation
management. We need to remind ourselves on what has to be managed before looking on how
to achieve a successful innovation. In process terms, we need to look at the structure of the
process itself, the inputs/outputs that are involved and the factors that can influence in positive
or negative fashion the workings of the process.

One of the key areas of dialogue in the innovation process is between operations and
marketing personnel, and the areas of interface between the two.
TYPES OF INNOVATION
The challenge for effective management of innovation begins with an understanding of
the whole range of innovation types and the need to manage them in different ways.
1. Recognize that innovation can take place in terms of what a firm offers or how it creates
that offering- traditionally, these are termed ‘process” and ‘product’ innovation. It can be
referred as process and output innovation.
Innovation does not take place in a vacuum; it involves taking an idea (invention) and
developing it to the point where it is adopted and used by others. This could be a new
product in the marketplace, or a new way of working being adopted and used by the
workforce inside an office. So, we need to consider innovation in terms of the context
into which it is applied, an old idea in a new context is still an innovation.
2. The degree of novelty involved in an innovation- tiny, incremental changes which take
place every day and which represent minor improvements- “doing what we’ve always
done a little bit better”. But at the end of the spectrum we have innovations which are
major changes, often representing significant shifts in what we offer or how we create
that.
 The line between incremental and radical innovation is hard to fix not least because
novelty is in the eye of the beholder. Innovation is some firms maybe simple and logical next step
in an incremental process of improvement. But for others it may represent a major shift.
 It is important to think the different types of innovation because of the need different
ways of managing. An incremental change in process in a familiar context is not a high risk and
can probably be managed in day-to-day fashion. While radical change in product, process and
context may offer the chance to change the rules of the business game- but it will need very
careful and focused management.
Example, The Tivoli Sports Edition- instead of using the key to start the engine, press start button
was provided. We are one of the few brands with diesel engine in all model.
THE INNOVATION PROCESS
Innovation process involves.
1. Scanning the environment (internal and external) for and processing relevant signals
about threats and opportunities for change.
2. Deciding (based on a strategic view of how the enterprise can best develop) which of
these signals to respond to.
3. Obtaining the resources to enable the response (through creating something new
through R & D, acquiring something from elsewhere via technology transfer, etc.);
4. Implementing the project (developing the technology and the internal or external
market) to respond effectively.

Enterprises can learn from progressing through this cycle so that they can build their
knowledge base and can improve the ways in which the process is managed. There is
no right answer, but each firm needs to aim for the most appropriate solution for its
circumstances.
Key activities in innovation management

Stage in the process Critical activities

Scanning Scanning the environment for signals about
triggers for innovation-market research,
competitor analysis, technology scanning etc.
Strategy Strategic analysis of what could be done in
response to the trigger signals
Strategic choice- what will we do, given our
previous experience, costs and benefits of
particular choices.
Strategic planning- how are we going to turn
the idea into the reality of an innovation
Resourcing Where and how we will obtain the key
knowledge resources to make an innovation
happen?
Implementation How will we manage the project?
How will we manage the technological and
market development leading up to launch?
Learning Having launched the innovation, how we can
learn from the process?
Technological knowledge
Managerial knowledge
Continuous improvement- how can we make
it better?
A formal, systematic approach to innovation is likely to be adopted when.
1. A new product, with a major process impact, is being developed.
2. A number of interrelated innovations are being developed simultaneously.
3. The product’s life cycle is long- it can be protected by patent or license.
4. The innovations are original or new to the world.
5. Competitors are unlikely to enter the market with a similar product.
MANAGING INNOVATION
Firms develop their own ways of doing things-sometimes called “firm specific routines’-
and some work better than others. They can do and learn to manage the process for success by
consciously building and developing their firm-specific routines.
Any organization can get lucky once, but the real skill in innovation management is being
able to repeat the trick. There are no guarantees, there is plenty of evidence to suggest that firms
can and do learn to manage the process for success- by consciously building and developing their
firm-specific routines. One important feature about firm-specific behavior of this kind is that it
can’t be copied easily- it must be learned the hard way, through experience, trial and error.
The particular bundle of structures, policies, procedures and other ways of working-
essentially the organization’s behavioral routines- which define the ‘way we manage innovation’
in a particular firm can be called its’ innovation capability’.

Strategic Operations Managers need to consider in tackling the problem of managing

innovation. The task is one of developing capability so that the organization has appropriate and
effective structures and procedures for making the process work.
Capabilities in innovation management
1. Recognizing- searching the environment for technical and economic clues to trigger the
process of change.
2. Aligning- ensuring a good fit between the overall business strategy and the proposed
change- not innovating because it’s fashionable or as a knee-jerk response to a
competitor.
3. Acquiring- recognizing the limitations of the company’s own technology base and being
able to connect to external sources of knowledge, information, equipment, etc.
Transferring technology from various outside sources and connecting it to the relevant
internal points in the organization.
4. Generating- having the ability to create some aspects of technology in-house- through R
& D, internal engineering groups, etc
5. Choosing- exploring and selecting the most suitable response to the environmental
triggers that fit the strategy and the internal resource base/external technology network.
6. Executing- managing development projects for new products or processes from initial
idea through to final launch. Monitoring and controlling such projects.
7. Learning-having the ability to evaluate and reflect upon the innovation process and
identify lessons for improvement in the management routines.
8. Implementing- managing the introduction of change- technical and otherwise- in the
organization to ensure acceptance and effective use of innovation.
9. Developing the organization- putting those new routines in place- in structures,
processes, underlying behavior ,etc.
FOUR KEY AREAS IN INNOVATION
1. Strategic focus and direction- inspiring visionary leadership, targeting key strategic areas,
making strategy, communicating and deploying strategy.
2. Implementation- managing projects, managing risk, developing technology and market
in parallel, cross-functional working.
3. Innovative people and organization- structuring, teamworking, managing knowledge,
participating in continuous improvement, empowering.
4. Effective linkages- active networking, involving customers and suppliers.
MANAGING DISCONTINUOUS INNOVATION
Innovation involves some change in either the thing that is offered (product innovation)
or the ways in which that offering is created and delivered (process innovation). Change in these
takes place mostly in a continuing, incremental way, but sometimes in a radical and
discontinuous jump.
Doing what you do better may not always work- sometimes you must look to do different
things.
Two important themes for our interest in managing innovation.
1. Firms do not survive because of their scale or their physical assets. The things that
enable them to survive is a deep knowledge base- a core competence that defines
what they’re distinctively good at and that others find hard to match.
2. What separates the survivors from the rest is not just they have core competence, but
they actively manage this side of their business. A key feature in such management is
knowing when you have to build it.
HOW TO MANAGE DISCONTINUOUS INNOVATION?
1. Making sure firms understand the nature of the changes coming at them.
2. If they are competence enhancing, the innovation management questions are around
how best to build on this new opportunity, how to acquire complementary and new
competence, and to merge these with what already exists.
3. But if the technology is competence destroying, the challenge is how to let go of
redundant competencies and move quickly into the new era.

The idea of looking at technologies in terms of whether they are likely to enhance or
destroy our existing competencies has a lot of power. Firms need to develop the ability to see
which parts of their activities are affected by technological change and to react accordingly.
Major technological changes do not necessarily destroy the whole business- they may only affect
one part of it.
In managing discontinuous changes, we need to learn not only to assess whether or not
they are competence enhancing or destroying, but also which parts of our business are affected
in which ways.
Firms need to develop the ability to see which parts of their activity are affected by
technological change and to react accordingly.
Change at the component level opens new opportunities.
DON’T FORGET THE DEMAND SIDE!
The danger in spending all our time looking at technological discontinuities is that we
forget the key point about innovation- that it always arises out of a combination of needs and
means. Sometimes the main focus comes from the opportunities created by a new technological
discovery, but sometimes it will be the emergence of strong signals about demand. Under this
circumstances, necessity becomes the mother of invention.
 Christensen’s two useful concepts- sustaining and disrupting technologies. Sustaining
technologies enable continuous progress within an existing set of market relationships and it is
here staying close to the customer works well as a recipe for continuing successful innovation.
While disrupting technologies threaten to change the rules of the games and to open
opportunities for new markets to emerge.
Sticking close to the customer remains a good prescription, but innovation managers
need to complement it with additional structures or mechanisms that also allow the possibility
of disruptive technology.

KEY COMPONENTS OF INNOVATION

KNOWLEDGE MANAGEMENT
Three themes to consider;
1. Need to recognize that innovation is always a race. Finding something that confers
sustainable and protectable competitive advantage is a key challenge.
 2. Think of competitive advantage as lying fundamentally in knowledge- in what we
know about and can deploy in new products or processes.
3. Recognize that innovation is essentially a knowledge creating and deploying process.
Developing the capacity to learn becomes central to strategic operations management.

INVOLVEMENT
People have been central to the creation of all the radical innovations because innovation
is primarily the application of a fundamental human skill- that of creative problem-solving.
The challenge of strategic operations management is making high involvement a reality.
The difficulty in finding ways to mobilize such involvement and to sustain it in the long term.
SUSTAINABILITY
This is the final area in which there are significant future challenges for the strategic
operations manager in managing the innovation process lies in the concept of sustainability. The
implicit problem in innovation is that it assumes anything is possible, that there is always
something new in product or process.
Thinking about more sustainable products and forms of consumption is becoming
increasingly important and affecting many aspects of operations management. The challenge in
the context of innovation is to harness the creativity within the organization to find product and
process ideas that contribute to sustainability whilst also preserving and developing business
opportunities.

EXAMPLE:
Below is the Road Map of one electronic company in Sta Rosa, Laguna.
1. Marketing will advise all concerned about the product requirements of their customer.
Product specification and availability will be discussed to their team.
2. Then the Product Development Team will do the brainstorming on how the specific
product will be created and improved the soonest possible based on the needs and wants
of their customers. They need to submit the products to the customer because of their
competitors.
3. The finish product will be presented to the customer for feasibility study and testing. Once
it passed to the qualification of the customer, volume production until high volume will
be done for releasing to the market.
REFERENCES
Robbins, Stephen/Judge, Timothy (2011) Organizational Behavior 15th Edition