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The Strategic Management
of Innovation
Mohsen El Shammaa, Ph.D.
2008

The Innovation Concept
 Product innovation:
a new product or a new service.


 Process innovation:
a new production method or process.


 Organizational innovation:
a new form of organization or management.


 Delivery innovation:
a new form of delivery or distribution.
The Innovation Concept (Cont’d)

 Market Innovation:
a new form of marketing a general market
behavior, including a different relationship with
the state and the other parts of the public
regularity system, or other of society’s
organizations or specific consumers.

 Raw material innovation:
use of a new raw material.
The Innovation Concept (Cont’d)
 The types of innovation result in:

1. Creation of a new product.

2. Establishing a new delivery system.

3. Giving advantage over the competition.

4. Increasing productivity
The Innovation Concept (Cont’d)
 Why innovation?

1. Market Saturation

 Many markets have become saturated
because people and firms have had most of
their needs fulfilled. This makes it more
difficult to introduce innovations in the
market, and firms are forced to focus on
many factors to develop more advanced
innovations that have a chance of
acceptance in the market.
The Innovation Concept (Cont’d)
2. Customer orientation
 The customer has become a central actor and
more sophisticated than ever before.

3. Increased importance of service
 Many firms add services to their
products/services that they provide to their
customers.

The Innovation Concept (Cont’d)
4. Flexibility and modularization:
 Production today has to be more flexible and
modularized. This further means that process
and organization innovations are becoming
increasingly necessary.

5. Changes in society
 New political and ethical waves in society
affect the consumers’ preferences.




The Innovation Concept (Cont’d)
6. Knowledge is more important

 Innovation are becoming more knowledge-
based even in services.

7. Technology is more important

 In services, technology, in particular
information and communication technology,
has become more important as an
innovation determinant.
The Innovation Concept (Cont’d)
 The driving forces behind service
Innovation

A. Trajectories
1.Technology trajectories
 Using technology which generally influence
products and production processes. Examples
are information and communication
technology the wave and more specifically the
internet, or the freezer and microwave oven
which together have created a new
distribution system within catering.
The Innovation Concept (Cont’d)
2. Service profession trajectories
 Methods, general knowledge and behavioral
rules (for example, ethics) that exist in the
various service professions (for example, law,
nursing, catering).

3. General management ideas or ideas for new
organizational forms such as motivational
systems, business process, reengineering, service
management and so on.

The Innovation Concept (Cont’d)
B. Actors
 “Persons, firms, or organizations whose
behavior is important to the firm’s ability to
sell products and services and thus to their
innovation activities.

 The actors define market possibilities and are
sometimes involved in the development of
innovations. They may also be obstacles to
innovation.
The Innovation Concept (Cont’d)

 Actors are:

1. Shareholders
2. Competitors
3. Customers
4. Public sector
5. Suppliers
The Innovation Concept (Cont’d)
 The decision to innovate strategy as a
modifying factor

 The driving forces don’t produce innovations.
They produce the conditions for innovations
and put pressure on the firm to innovate; but
the firm itself must decide to innovate before
innovations can be carried.
The Innovation Concept (Cont’d)
 Strategy has two aspects:

1. The market guides the firm’s development

2. Management must make the decision whether
to innovate or not and when to do it.
The Innovation Concept (Cont’d)
 In the decision-making situation,
management must look externally to see
the nature of the market, and it must
look internally to see the resources and
capabilities that the firm possesses.

The Innovation Concept (Cont’d)
A. External

1. External aspects of strategy
 The strategy expresses the market position
that the management wants the firm to
have in the future.
 The management does so on the basis of
knowledge of its environment:
a)Customers’ needs, preferences and
problems
b)Competitors’ behavior

The Innovation Concept (Cont’d)
2. Forms of strategy:

1. Offensive strategy
 Used when the firm decides to take a step
forward in growth and development such
as:

a. Product renewal, radical product
innovations and the introduction of new
quality standards.
b. Professionalization, recruitment of new
professionals
c. Opening new markets, finding markets
that never existed before.
The Innovation Concept (Cont’d)
2. Defensive strategy:
 Used when the firm is in a good market
position: it sells well, but the competition is
increasing. In that situation, the firm will
attempt to maintain its market position in the
following way:
a. Minor improvements of products,
processes, organizations…etc,
b. Price leadership, reducing costs and profits
to sell.
c. Merger and acquisition to create larger and
more efficient units.

The Innovation Concept (Cont’d)
B. Internal

 The principal internal factors related to
innovation management and constitute the scope
of the firm’s innovation behavior. They are the
basis for the managements decision as whether
or not to innovate.



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