Planning for Innovation

Objectives of
the Lesson
• This chapter addresses the issues involved with
internal innovation.
• It focuses on how to lay the foundation for
internal innovation efforts through planning.
• It addresses both product and process
innovations as well as the following specific
issues:

• The pros and cons of internal innovation

• Product innovation and process innovation
• The basic steps in the planning process for
innovation
• The technology stages and their possibilities
for innovation
• The development of a climate for internal
innovation

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 Discussion Questions

When it comes to innovation, what is the biggest challenge that you see
organizations facing?

Why do many companies not actively engage in open innovation?

If you were to change one thing about our educational system to better
prepare students to contribute in the innovation workforce of tomorrow,
what would it be?

If a new product is purchased, it is almost immediately available to the

firm. However, if it is developed internally, the process may take years to
develop the new processes and to market the new product.
 Two Approaches of
Innovation
•Innovation is how firms create new technology, products,
or processes.

1. Innovation, which occurs internally (Internal

Innovation: simply put, this means change within
your organization.
• This might be small or large change
• Something structural within a team
• A change in the production process to
increase efficiency
• Or something financial with regards to your
budget. )

2. Externally from situations in which the firm obtains

a new technology or process from outside the firm.

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 Two Approaches to
Innovation
• The creation of new technology is
impacted by firms’ efforts to
encourage creativity and teamwork
across various disciplines.

• It takes time to develop a new

product - a disadvantage if there
are already competing products
in the market or if other firms
are close to entering the market.
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• If the firm purchases technology from

a firm that is already in the market, or
that is close to entering the market, a
firm can obtain the new technology
quickly.
 Sources of
Innovation

• The two approaches to

technology and its
management have their
respective benefits and
drawbacks

LET’S SUMMARIZE SOME

OF THOSE BENEFITS AND
DRAWBACKS TOGETHER! This Photo by Unknown Author is licensed under CC BY
 Planning: A
Complex Process
• Planning for innovation is a complex
process in which a wide range of
issues must be examined.

• Example: 3M Promotes internal

innovation & relies heavily on
internal innovation
• Heavily focus on R&D
investment
• Continuous commitment to This Photo by Unknown Author is licensed under CC BY

innovation & new product

development
• One of every $18 of revenue
went to research &
development despite the
recession of 2008/2009
 Planning: A
Complex Process
• 3M Promotes internal innovation. The
company continued its innovation due to
the following organizational elements:

• set stretch targets that push the firm

to be innovative to meet the new
sales and product development
targets
• allocate time, space, and resources
for employees to explore new ideas
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• provide stage resources so that ideas
that come forward can receive
funding to move to the next stage of
development (Pixar animation studio)
• encourage cross-functional teams to
develop new ideas
 Planning: A
Complex Process
• 3M has built an
environment that
encourages innovation
and accepts failure,
while having a clear
plan for the movement
of innovations from
development to the
market.

• The result of this total

set of activities is the
creation of one of the
most innovative firms in
the world.

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 •To innovate or not to innovate is the 1st concern of
innovation planning
To Innovate or •The innovation strategy has both benefits and
Not to drawbacks, and managers / firms should be aware of
this
Innovate •Thus, the firm & its managers need to examine the
potential benefits & drawbacks realistically.
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To Innovate or Not to Innovate

Factors Greater control of the

that favor
innovation
Benefits: process and the
outcomes

strategy
Greater
understanding of the
technology produced Result of
and how to apply it
creative
process
Greater ability to
potentially develop associated
the next generation of with
technology
innovation
Greater profit
potential as a first
mover
Externally
focused
 To Innovate or
Not to Innovate
Factors that discourage innovation

Drawbacks:
1. The time required for an internal
development strategy is greater.
2. If a new product is purchased, it is almost
immediately available to the firm. However,
if it is developed internally, the process may
take years to develop the new processes
and to market the new product.
3. There is a greater risk of failure to develop
the right product at the right time.
4. Keeping a pipeline of new products and/or
processes is difficult at best. There is always
the danger that another firm will enter the
market first.
 Types of
Innovation
Product Innovations are the center
of most organizations ‘ Research &
Development (R&D) efforts

• Basic: pure research and

development
• Applied: new product
development
• Systems integration: product
improvement or market
expansion

A firm may have any or all of these

different types going on at any
given time.
 Types of Innovation
Product Innovations are the center of most
organizations ‘ Research & Development (R&D)
efforts

Basic research involves the creation of new

knowledge

This knowledge can be new to the firm, or it can

be an innovation that was unknown before this
effort.

Is fundamentally risky, but it has the potential

to provide great rewards such as leading to new
products or ways of doing business.
• The goal of an innovation strategy is to create value for the
firm and its customers.
• Academic institutions, government agencies, and specialized
research labs typically focus on basic research because value
creation for these entities is typically not determined by
monetary profit
 Types of
Innovation
Applied Research: New Product Development

• Utilizes the new knowledge developed by

the basic research to create new products.
• The new product development can then
lead to the firm changing its strategic
position in the industry - measure of
competitive advantage.
• Adds value to the firm and its customers in
the marketplace.
• Ex: To continue our illustration of laser
physics
• The applications that have emerged from
that technology are numerous and familiar
to many laser printers, compact discs, laser
knives used in surgery, barcode scanners,
and laser lightshows.

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 Systems Integration: Product Improvement
• is the most incremental in nature

• is aimed at supporting existing business

improvements in established products or
opening new markets with an existing
product.
Types of
• Many firms call this type of innovation
Innovation tweaking because it involves adjusting the
ways the firm organizes its existing
knowledge to increase its leverage.

• Systems integration is most concerned with

the fit among parts of the organization and
how to improve the fit with existing
knowledge bases.
 Types of
Innovation

Thus, medical imaging was applied research that flowed from the basic research on
particle physics. Systems integration research occurred, followed by tweaking. This
process has led to better laser printers, more spectacular light shows, and better
laser knives for surgery.
 Types of Innovation

2. Process Innovation
 The firm should match the type of research it wishes to pursue
to its needs and capabilities

 Determine what the firm’s competitors are doing – strategic

positioning

 Strategic position - what is occurring in the industry now and

what will occur in the industry in the future the analysis is aided
by closely monitoring the competition.
 Most common actions that
address process innovation

New Product Development

Restructuring
• A major reorganization
of a firm.
Types of • It involves substantive
changes in
Innovation communication and
coordination patterns
within the organization.
• Periodically, the
organization needs to
undertake a major
review of what it does
and why.
 Types of Innovation
Most common actions that address process innovation

• Restructuring

- Downsizing: one of the most common restructuring

activities in today’s organizations
- A type of restructuring that occurs when a firm either
sells some of its units or lays off employees

- Many firms that downsize have experienced negative

results. Survivors of the downsizing often feel
overworked and are uncertain if they might be laid off
next.

- As a result, the expected financial benefits of the

restructuring are often not met.

- The planning for and the goals of downsizing should be

extensive and clear.
 Types of Innovation
Most common actions that address process innovation

• Reengineering
Requires fundamental rethinking and radical
redesign of work processes due to agedness
and no longer relevant.
Reengineering requires the firm to think about
each step in their work processes and why does
the firm do things the way it does.

Reengineering has five specific goals:

• increasing productivity
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• optimizing value to shareholders

• achieving quantum results
• consolidating functions
• eliminating unnecessary levels and work
 Types of Innovation
Most common actions that address process innovation
• Reengineering
In pursing reengineering the firms should ask several relevant
questions. These include:

1. Why is work (your work) performed the way it is?

2. What value is added by this process?

3. How can this work be done better?

From these questions reengineering can help identify

processes within the organization that create no value for the
firm.

These processes may have created value once but are now
conducted more from habit than from careful analysis. *
 Innovation
Planning Process
Fundamental Dimensions of Internal
Innovations

•The firm must acknowledge that the

goal of internal innovation is for the
firm to outperform its competition.
•Innovation is not a goal in and of itself
but is part of the firm’s total strategic
effort.
•Internal innovation is a process that
involves many individuals, capabilities
and resources.
•Resources are critical to the innovation
process. The way resources are
managed and allocated determines the
types of innovation actions the
organization is capable of undertaking.
 Innovation Planning
Process
Five Specific Activities of a firm as part of
Innovation Planning Process

•1. Determine the Vision

• A vision summarizes where a business
wants to go and includes an
understanding of how technology
supports the firm’s vision.
• The vision helps the firm focus its
efforts more clearly on what the
innovation plan wishes to accomplish.
• The vision statement makes the focus
of the business clear.

Ex. Federal Express, the vision is that

familiar statement:
• When a package positively, absolutely
has to be there overnight – a radical
innovation
 Innovation
Planning Process
Five Specific Activities as part of Innovation
Planning Process

2. Set the Mission

• Once there is a clear vision of what the
organization is and the role of technology, the
firm then develops its mission.
• This brief statement, usually fewer than sixty
words, builds on the firm’s vision to specify
what it does and how.
• Thus, a firm’s mission is more specific than its
vision.
• The mission is typically developed with far
greater involvement of the firm s employees –
not only to understand but also buy into that
statement and fulfill it.
• The mission statement helps the firm stay
focused on what it is attempting to accomplish
and how.
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 Innovation Planning Process
Five Specific Activities as part of Innovation Planning
Process
2. Set the Mission
• A mission statement provides the written purpose to fulfill the
strategic intent expressed in the vision.
• The mission statement helps the firm stay focused as it begins to
plan and implement its goals and objectives.

Ex. Google
Our mission is to organize the world’s information and make it
universally accessible and useful. We believe that the most effective,
and ultimately the most profitable, way to accomplish our mission is
to put the needs of our users first. We have found that offering a
high-quality user experience leads to increased traffic and strong
word of- mouth promotion.
 Innovation
Planning Process

Five Specific Activities as part of

Innovation Planning Process

3. Establish Goals and Objectives

• These set how the firm will carry out
its mission which is particularly
important for an internal innovation
strategy.
• Specify what innovations, among
other things, the firm wishes to
accomplish over the short and long
term.
• Therefore, if the firm wishes to
develop a new product or process,
the goals and objectives of the firm
should specify that.
• These goals and objectives put into
action the mission of the firm.
 Innovation Planning Process

Five Specific Activities as part of Innovation Planning

Process

4. Set Strategy
• A firm needs a strategy
to achieve those goals
and objectives.

• There are specific goals

and objectives for the
different levels of the
organization.
 Innovation Planning Process

Five Specific Activities as part of Innovation Planning

Process
5. Specific Tactics and Actions
• These are the actual activities of individuals within the
organization necessary to achieve those goals

• Everyone in the firm should be acting in a way that helps the

firm reach its goals; its goals should fulfill the mission, and the
mission should support the vision.

• The best set of goals and objectives is useless without a plan of

action. It is through operational actions, often called tactical
activities, that strategic plans come to life and operational
effectiveness is gained
Steps in Planning for
Innovation
 Technology Stages and Planning

Developing a Climate for Innovation