Creativity

INNOVATION

In the organisational context, innovation may be linked to performance and growth through improvements in efficiency, productivity, quality, competitive positioning, market share, etc. All organisations can innovate, including for example hospitals, universities, and local governments.

While innovation typically adds value, innovation may also have a negative or destructive effect as new developments clear away or change old organisational forms and practices. Organisations that do not innovate effectively may be destroyed by those that do. Hence innovation typically involves risk. A key challenge in innovation is maintaining a balance between process and product innovations where process innovations tend to involve a business model which may develop shareholder satisfaction through improved efficiencies while product innovations develop customer support however at the risk of costly R&D that can erode shareholder return.

Innovation has been studied in a variety of contexts, including in relation to technology, commerce, social systems, economic development, and policy construction. There are, therefore, naturally a wide range of approaches to conceptualising innovation in the scholarly literature. See, e.g., Fagerberg et al. (2004).

Fortunately, however, a consistent theme may be identified: innovation is typically understood as the successful introduction of something new and useful, for example introducing new methods, techniques, or practices or new or altered products and services.

"An important distinction is normally made between invention and innovation. Invention is the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out into practice" (Fagerberg, 2004: 4)

It is useful, when conceptualizing innovation, to consider whether other words suffice. Invention - the creation of new forms, compositions of matter, or processes - is often confused with innovation. An improvement on an existing form, composition or processes might be an invention, an innovation, both or neither if it is not substantial enough. It can be difficult to differentiate change from innovation. According to business literature, an idea, a change or an improvement is only an innovation when it is put to use and effectively causes a social or commercial reorganization.

Innovation occurs when someone uses an invention or an idea to change how the world works, how people organize themselves, or how they conduct their lives. In this view innovation occurs whether or not the act of innovating succeeds in generating value for its champions. Innovation is distinct from improvement in that it permeates society and can cause reorganization. It is distinct from problem solving and may cause problems. Thus, in this view, innovation occurs whether it has positive or negative results.

"Innovation . . . is generally understood as the successful introduction of a new thing or method . . . Innovation is the embodiment, combination, or synthesis of knowledge in original, relevant, valued new products, processes, or services.

Innovation typically involves creativity, but is not identical to it: innovation involves acting on the creative ideas to make some specific and tangible difference in the domain in which the innovation occurs. For example, Amabile et al (1996) propose:

"All innovation begins with creative ideas . . . We define innovation as the successful implementation of creative ideas within an organization. In this view, creativity by individuals and teams is a starting point for innovation; the first is necessary but not sufficient condition for the second".

For innovation to occur, something more than the generation of a creative idea or insight is required: the insight must be put into action to make a genuine difference, resulting for example in new or altered business processes within the organisation, or changes in the products and services provided.

A further characterization of innovation is as an organizational or management process. For example, Davila et al (2006), write:

"Innovation, like many business functions, is a management process that requires specific tools, rules, and discipline."

From this point of view the emphasis is moved from the introduction of specific novel and useful ideas to the general organizational processes and procedures for generating, considering, and acting on such insights leading to significant organizational improvements in terms of improved or new business products, services, or internal processes.

Through these varieties of viewpoints, creativity is typically seen as the basis for innovation, and innovation as the successful implementation of creative ideas within an organization (c.f. Amabile et al 1996 p.1155). From this point of view, creativity may be displayed by individuals, but innovation occurs in the organizational context only.

"Often, in common parlance, the words creativity and innovation are used interchangeably. They shouldn't be, because while creativity implies coming up with ideas, it's the "bringing ideas to life" . . . that makes innovation the distinct undertaking it is."

The distinctions between creativity and innovation discussed above are by no means fixed or universal in the innovation literature. They are however observed by a considerable number of scholars in innovation studies.

Joseph Schumpeter defined economic innovation in The Theory of Economic Development, 1934, Harvard University Press, Boston.

1. The introduction of a new good — that is one with which consumers are not yet familiar — or of a new quality of a good.
2. The introduction of a new method of production, which need by no means be founded upon a discovery scientifically new, and can also exist in a new way of handling a commodity commercially.
3. The opening of a new market, that is a market into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before.
4. The conquest of a new source of supply of raw materials or half-manufactured goods, again irrespective of whether this source already exists or whether it has first to be created.
5. The carrying out of the new organization of any industry, like the creation of a monopoly position (for example through trustification) or the breaking up of a monopoly position

Schumpeter's focus on innovation is reflected in Neo-Schumpeterian economics, developed by such scholars as Christopher Freeman and Giovanni Dosi .

Innovation is also studied by economists in a variety of contexts, for example in theories of entrepreneurship or in Paul Romer's New Growth Theory.

Market outcome from innovation can be studied from different lenses. The industrial organizational approach of market characterization according to the degree of competitive pressure and the consequent modelling of firm behaviour often using sophisticated game theoretic tools, while permitting mathematical modelling, has shifted the ground away from an intuitive understanding of markets. The earlier visual framework in economics, of market demand and supply along price and quantity dimensions, has given way to powerful mathematical models which though intellectually satisfying has led policy makers and managers groping for more intuitive and less theoretical analyses to which they can relate to at a practical level. Non quantifiable variables find little place in these models, and when they do, mathematical gymnastics (such as the use of different demand elasticities for differentiated products) embrace many of these qualitative variables, but in an intuitively unsatisfactory way.

In the management (strategy) literature on the other hand, there is a vast array of relatively simple and intuitive models for both managers and consultants to choose from. Most of these models provide insights to the manager which help in crafting a strategic plan consistent with the desired aims. Indeed most strategy models are generally simple, wherein lie their virtue. In the process however, these models often fail to offer insights into situations beyond that for which they are designed, often due to the adoption of frameworks seldom analytical, seldom rigorous. The situational analyses of these models often tend to be descriptive and seldom robust and rarely present behavioural relationship between variables under study.

From an academic point of view, there is often a divorce between industrial organisation theory and strategic management models. While many economists view management models as being too simplistic, strategic management consultants perceive academic economists as being too theoretical, and the analytical tools that they devise as too complex for managers to understand.

Innovation literature while rich in typologies and descriptions of innovation dynamics is mostly technology focused. Most research on innovation has been devoted to the process (technological) of innovation, or has otherwise taken a how to (innovate) approach. The integrated innovation model of Soumodip Sarkar goes some way to providing the academic, the manager and the consultant an intuitive understanding of the innovation – market linkages in a simple yet rigorous framework in his book , Innovation, Market Archetypes and Outcome- An Integrated Framework.

The integrated model presents a new framework for understanding firm and market dynamics, as it relates to innovation. The model is enriched by the different strands of literature - industrial organization, management and innovation. The integrated approach that allows the academic, the management consultant and the manager alike to understand where a product (or a single product firm) is located in an integrated innovation space, why it is so located and which then provides valuable clues as to what to do while designing strategy. The integration of the important determinant variables in one visual framework with a robust and an internally consistent theoretical basis is an important step towards devising comprehensive firm strategy. The integrated framework provides vital clues towards framing a what to guide for managers and consultants. Furthermore, the model permits metrics and consequently diagnostics of both the firm and the sector and this set of assessment tools provide a valuable guide for devising strategy.

Once innovation occurs, innovations may be spread from the innovator to other individuals and groups. This process has been studied extensively in the scholarly literature from a variety of viewpoints, most notably in Everett Rogers' classic book, The Diffusion of Innovations. However, this 'linear model' of innovation has been substantinally challenged by scholars in the last 20 years, and much research has shown that the simple invention-innovation-diffusion model does not do justice to the multilevel, non-linear processes that firms, entrepreneurs and users participate in to create successful and sustainable innovations.

Rogers proposed that the life cycle of innovations can be described using the ‘s-curve’ or diffusion curve. The s-curve maps growth of revenue or productivity against time. In the early stage of a particular innovation, growth is relatively slow as the new product establishes itself. At some point customers begin to demand and the product growth increases more rapidly. New incremental innovations or changes to the product allow growth to continue. Towards the end of its life cycle growth slows and may even begin to decline. In the later stages, no amount of new investment in that product will yield a normal rate of return.

The s-curve is derived from half of a normal distribution curve. There is an assumption that new products are likely to have "product Life". i.e. a start-up phase, a rapid increase in revenue and eventual decline. In fact the great majority of innovations never get off the bottom of the curve, and never produce normal returns.

Innovative companies will typically be working on new innovations that will eventually replace older ones. Successive s-curves will come along to replace older ones and continue to drive growth upwards. In the figure above the first curve shows a current technology. The second shows an emerging technology that current yields lower growth but will eventually overtake current technology and lead to even greater levels of growth. The length of life will depend on many factors.

Programs of organizational innovation are typically tightly linked to organizational goals and objectives, to the business plan, and to market competitive positioning.

For example, one driver for innovation programs in corporations is to achieve growth objectives. As Davila et al (2006) note,

"Companies cannot grow through cost reduction and reengineering alone . . . Innovation is the key element in providing aggressive top-line growth, and for increasing bottom-line results" (p.6)

In general, business organisations spend a significant amount of their turnover on innovation i.e. making changes to their established products, processes and services. The amount of investment can vary from as low as a half a percent of turnover for organisations with a low rate of change to anything over twenty percent of turnover for organisations with a high rate of change.

The average investment across all types of organizations is four percent. For an organisation with a turnover of say one billion currency units, this represents an investment of forty million units. This budget will typically be spread across various functions including marketing, product design, information systems, manufacturing systems and quality assurance.

One survey across a large number of manufacturing and services organisations found, ranked in decreasing order of popularity, that systematic programs of organizational innovation are most frequently driven by:

1. Improved quality
2. Creation of new markets
3. Extension of the product range
4. Reduced labour costs
5. Improved production processes
6. Reduced materials
7. Reduced environmental damage
8. Replacement of products/services
9. Reduced energy consumption
10. Conformance to regulations

These goals vary between improvements to products, processes and services and dispel a popular myth that innovation deals mainly with new product development. Most of the goals could apply to any organisation be it a manufacturing facility, marketing firm, hospital or local government.

Research findings vary, ranging from fifty to ninety percent of innovation projects judged to have made little or no contribution to organizational goals. One survey regarding product innovation quotes that out of three thousand ideas for new products, only one becomes a success in the marketplace.  Failure is an inevitable part of the innovation process, and most successful organisations factor in an appropriate level of risk. Perhaps it is because all organisations experience failure that many choose not to monitor the level of failure very closely. The impact of failure goes beyond the simple loss of investment. Failure can also lead to loss of morale among employees, an increase in cynicism and even higher resistance to change in the future.

Innovations that fail are often potentially ‘good’ ideas but have been rejected or ‘shelved’ due to budgetary constraints, lack of skills or poor fit with current goals. Failures should be identified and screened out as early in the process as possible. Early screening avoids unsuitable ideas devouring scarce resources that are needed to progress more beneficial ones. Organizations can learn how to avoid failure when it is openly discussed and debated. The lessons learned from failure often reside longer in the organisational consciousness than lessons learned from success. While learning is important, high failure rates throughout the innovation process are wasteful and a threat to the organisation's future.

The causes of failure have been widely researched and can vary considerably. Some causes will be external to the organisation and outside its influence of control. Others will be internal and ultimately within the control of the organisation. Internal causes of failure can be divided into causes associated with the cultural infrastructure and causes associated with the innovation process itself. Failure in the cultural infrastructure varies between organisations but the following are common across all organisations at some stage in their life cycle (O'Sullivan, 2002):

1. Poor Leadership
2. Poor Organisation
3. Poor Communication
4. Poor Empowerment
5. Poor Knowledge Management

Common causes of failure within the innovation process in most organisations can be distilled into five types:

1. Poor goal definition
2. Poor alignment of actions to goals
3. Poor participation in teams
4. Poor monitoring of results
5. Poor communication and access to information

Effective goal definition requires that organisations state explicitly what their goals are in terms understandable to everyone involved in the innovation process. This often involves stating goals in a number of ways. Effective alignment of actions to goals should link explicit actions such as ideas and projects to specific goals. It also implies effective management of action portfolios. Participation in teams refers to the behaviour of individuals in and of teams, and each individual should have an explicitly allocated responsibility regarding their role in goals and actions and the payment and rewards systems that link them to goal attainment. Finally, effective monitoring of results requires the monitoring of all goals, actions and teams involved in the innovation process.

Innovation can fail if seen as an organisational process whose success stems from a mechanistic approach i.e. 'pull lever obtain result'. While 'driving' change has an emphasis on control, enforcement and structure it is only a partial truth in achieving innovation. Organisational gatekeepers frame the organisational environment that "Enables" innovation; however innovation is "Enacted" - recognised, developed, applied and adopted - through individuals.

Individuals are the 'atom' of the organisation close to the minutiae of daily activities. Within individuals gritty appreciation of the small detail combines with a sense of desired organisational objectives to deliver (and innovate for) a product/service offer.

From this perspective innovation succeeds from strategic structures that engage the individual to the organisation's benefit. Innovation pivots on intrinsically motivated individuals, within a supportive culture, informed by a broad sense of the future.

Innovation, implies change, and can be counter to an organisation's orthodoxy. Space for fair hearing of innovative ideas is required to balance the potential autoimmune exclusion that quells an infant innovative culture.

The source of information is Wikipedia website.
Please visit http://en.wikipedia.org/wiki/Innovation for complete information.

Creativity