Chapter 1

Innovation: the clever country

 Learning objectives

1.1 understand the meaning of innovation, six aspects

of innovation, and innovation and entrepreneurship
1.2 explain the difficulties in managing what is an
uncertain and risky process
1.3 list some sources of innovation, both from within
companies or industries and in the social environment
1.4 discuss different innovation types
1.5 understand the key practices of successful
innovators and entrepreneurs
Introduction: where could Australia
genuinely innovate?
• Australia’s future prosperity cannot depend on
repeating the past because of the:
– decline in mining revenue
– elimination of manufacturing jobs
– climate-dependent uncertainties in agricultural
productivity.
 Australia’s strengths
• We live on the world’s largest solar collector. How can
we exploit that to
a) serve our energy needs and
b) develop a clean energy export industry?
 Australia’s strengths
• Strong record of innovation in the medical area
(e.g. Gardasil, ResMed sleep mask, Cochlear implants).
 A few of the many
Australian Entrepreneurs
Guess what they invented!
• Dr Cyril Callister – 1922
• Lance Hill – 1946
• Mervyn Victor Richardson – 1952
• Kerry Packer – 1977
• Bruce Thompson – 1980
• Bruce Macdonald - 1993
Check your answers- Try Googling!!
 Australia’s strengths
• Diverse population, dynamic market place,…etc.
 Finding the advantage
• What are our selective advantages as a nation?
How do we exploit them?
• Governments can help with innovation-friendly
legislation; however, ‘Genuine innovation depends
on the actions of smart, courageous and
determined entrepreneurs’.
You have every chance to be one of the many
Australian Entrepreneur!
 LO 1.1 – Meaning of Innovation
• The word ‘innovation’ comes from the Latin in and novare,
meaning ‘to make something new’.
• innovation is ‘the process of creating value from ideas’.
• Innovation is the successful implementation of creative ideas
within an organisation
• Entrepreneurship is the powerful mixture of energy, vision,
passion, commitment, judgement and risk-taking which
provides the motive power behind the innovation process.
 6 Aspects of Innovation
Six ways in which innovation can be viewed or
characterised as:
1- Identifying or creating opportunities e.g. Mobile
phones and tablets have revolutionised the way we
communicate
2- New ways of serving existing markets e.g. Coles,
Woolworth's online shopping
3- Growing new markets e.g. the auction market with
eBay
 6 Aspects of Innovation ………

4- Rethinking services e.g. Online banking and nor more

queues
5- Meeting social needs e.g. Facebook and LinkedIn as
social platforms
6- Improving operations e.g. using robotics in
manufacturing, mining and medicine
Innovation and entrepreneurship
• Innovation does matter, but it doesn’t happen
automatically! - Peter Drucker (Austrian-born American management
consultant, educator, and author):

Innovation is the specific tool of entrepreneurs, the means by which

they exploit change as an opportunity for a different business or
service. It is capable of being presented as a discipline, capable of being
learned, capable of being practised.
• Innovation is driven by Entrepreneurs: Passion, vision,
energy, enthusiasm, judgement & lots of hard work!
• Start up entrepreneur's, Intrapreneurs/corporate
entrepreneurs & Social Entrepreneurs: champions of social
causes
 Innovation and entrepreneurship
Table 1.1
Stage in life cycle Start-up Growth Sustain/scale Renew
of an organisation
Creating Individual Growing the business Building a portfolio of Returning to the
commercial value entrepreneur through adding new incremental and radical frame-
exploiting new products/services or radical innovation to breaking kind of
technology or market moving into new markets sustain the business innovation which
opportunity and/or spread its began the business
influence into new and enables it to
markets move forward as
something very
different

Creating social Social entrepreneur, Developing the ideas and Spreading the idea Changing the system
value e.g. Mission passionately engaging others in a widely, diffusing it to — and then acting as
Australia having a concerned to improve network for change — other communities of agent for next wave of
or change something perhaps in a region or social entrepreneurs, change
cafe that acts as in their immediate around a key issue engaging links with
training grounds environment mainstream players
fro the like public sector
unemployed agencies
 LO 1.2 Innovation isn’t easy
Barriers to innovation include:
• seeing innovation as ideas, not managing the whole
journey
• not recognising the need for change
• mindset and complacency — core competence
becomes core rigidity
• closed information network, insulated from new
ideas.
• Where is Kodak or Blockbuster Video?
 LO 1.3 Sources of innovation
Within a company or an industry
Peter Drucker identified four sources of
innovation:
1. Unexpected occurrences
2. Incongruities
3. Process needs
4. Industry and market changes
Sources of innovation ………
Within social and intellectual environment:
Outside a company or industry, three additional
sources of opportunities exist:
5. demographic changes
6. perceptual changes
7. new knowledge
 LO 1.4
Different types of Innovation
• Ideas are NOT enough for innovation!
• Innovation is a multidimensional concept, and it is
not necessary to reinvent the wheel to become an
entrepreneur.
• Innovation is the successful creation of valuewithin
an organisation
• Entrepreneurship can occur with little, if any,
innovation
Characteristics of Incremental &
Disruptive (radical) innovation
Table 1.2
 Types of incremental innovation
Incremental innovations make existing products or
services better
Table 1.3
 Disruptive (Radical) innovation
• Change the value proposition
• Cause fundamental changes in the marketplace
• ‘Innovators dilemma’ in large organisations can
enable more flexible, entrepreneurial companies
to capitalise on industry growth.
e.g. Uber disrupted the traditional taxi services
 Cost innovation
• Innovation which considers the ‘value for
money’ segment
• Cost innovation can be delivered in three
ways:
- Selling high end products at mass-market
prices
- Offering choice or customisation to value
customers
- Turning niches into mass markets
LO1.5 – What do successful innovators
and entrepreneurs do?
To manage the innovation and entrepreneurship
process, successful innovators/entrepreneurs do
the following:
1. Explore and understand the dimensions of
innovation
2. Manage innovation as a process
3. Develop innovation capability
4. Create innovation strategy
5. Build dynamic capability
1. Explore & understand the dimensions
of innovation: The 4P’s of Innovation
Table 1.5 Dimensions for innovation
Dimension Type of change
Changes in the things (products/services)
‘Product’ which an organisation offers.
Cars with GPS, auto reverse,…
Changes in the ways in which these
‘Process’ offerings are created and delivered
Macdonald’s – Crate your own taste
Changes in the context into which the
‘Position’ products/services are introduced
Lucozade – from illness recovery to
health drink
Changes in the underlying mental models
‘Paradigm’ which frame what the organisation does
Easing the fears of Online Banking
2. Manage innovation as a process
Figure 1.1 A model of the innovation and entrepreneurial process
The context to Innovation success
The innovation and entrepreneurship process doesn’t take place in a
vacuum; it is shaped and influenced by a variety of factors.

1- Clear strategic leadership and direction, plus the

commitment of resources to make this happen
2- An innovative organisation with a climate which enables
people to deploy their creativity and share their knowledge.
3- Proactive links across boundaries inside the organisation
and to external agencies who can play a part in the
innovation process: suppliers, customers, sources of finance,
skilled resources and of knowledge, etc.
 Creating the context for success
Figure 1.2 The resulting model: What we need to pay attention to if
we are going to manage innovation well
 3. Develop innovation capability
Table 1.6 The problem with partial models
If innovation is only seen as…
Strong R&D capability
The province of specialists in white
coats in the R&D laboratory
Meeting customer needs
Technological advances
The province of large firms
Breakthrough changes
Associated with key individuals
Internally generated
Externally generated
…the result can be
Technology which fails to meet user needs and may not be accepted:
‘the better mousetrap nobody wants’
Lack of involvement of others, and a lack of key knowledge and
experience input from other perspectives
Lack of technical progression, leading to inability to gain competitive
edge
Producing products the market does not want or designing processes
which do not meet the needs of the user and are opposed
Weak small firms with too high dependence on large customers
Neglect of the potential of incremental innovation. Also an inability to
secure and reinforce the gains from radical change because the
incremental performance ratchet is not working well
Failure to utilise the creativity of the remainder of employees, and to
secure their inputs and perspectives to improve innovation
The ‘not invented here’ effect, where good ideas from outside are
resisted or rejected
Innovation becomes simply a matter of filling a shopping list of needs
from outside and there is little internal learning or development of
technological competence
 4. Create Innovation strategy
We can think of strategy as a process of exploring
the 4 innovation types.
4.1 Strategic analysis: what could we do?

4.2 Strategic selection: what are we going to do, and
why?
4.3 Strategic implementation: how are we going to
make it happen?
 4.1 Strategic Analysis
Figure 1.3 Exploring innovation space
 4.2 Strategic selection
• What is our overall business strategy (where we
are trying to go as an organisation) and how will
innovation help us get there?

• Do we know anything about the direction we

want to go in — does it build on something we
have some competence in (or have access to)?
 4.3 Strategic implementation

Implementation issues to consider are:

• What resources do we need ?

• How do we obtain the resources?
• Who we may need to partner with?
• What likely roadblocks we could face?
 5. Build dynamic capability

Most of the time innovation takes place within

a set of rules of the game and involves players
trying to innovate by doing what they do
(product, process, position, paradigm) but better.
5. Build dynamic capability ……..

Occasionally something happens which

dislocates this framework and changes the
rules of the game. By definition, these are not
everyday events but have the capacity to
redefine the space and the boundary
conditions.
5. Build dynamic capability ……..

Dynamic capability is the ability to review and

reset the approach which the organisation
takes to managing innovation in the face of a
changing environment.
The end