Value Innovation PDF
Value Innovation PDF
Value Innovation PDF
Vivekanand B. Khanapuri
Parul Soni
Shruti Sharma
Muskan Soni
vbkhanapuri@gmail.com
soni.87.parul@gmail.com
shruti.sks@gmail.com
soni.muskan12@gmail.com
National Institute of Industrial Engineering (NITIE), Mumbai
Chetan Shah
chetanr1shah@gmail.com
IBM, Pune
Innovation can be triggered on account of various organizational aspects like technology, strategy, marketing,
product, procedures etc. nevertheless for a company life giving innovation and life sustaining organization
(order) need to go hand in hand. Innovation is the result of complex interactions between many individuals and
their operating environment. There are many drivers that foster innovation like openness, collaboration,
customization, experiential learning.
A study has been done to assess the value innovation potential of Indian organizations and a framework
designed to measure ability of management on different parameters like meaningful work, risk taking culture
etc.
1. Introduction
Need for Innovation?
In the 20th century, scale and efficiency became key sources of economic value. Companies spent a lot on
R&D, standardized and automated the rest of their operations, constraining opportunities for creativity outside
the lab. As competition intensified, companies squeezed their R&D budgets in the quest for cost savings, while
still looking for the "silver bullet" that would insulate them from competitive pressures. But if we shift our
attention from invention to innovation, we begin to see a much broader horizon. Innovation -- the ability to
create and capture economic value from invention -- is what really drives both the economic prosperity of
nations and the shareholder value of corporations. Harvard economist M.E Porter (1990) suggests that it is no
accident that Japan leads in exporting electronics and computer-controlled machinery, Italy in fabrics and home
furnishings, and the U.S. in software, medical equipment and movies. In each of the 10 countries that the author
and his international research team investigated, clusters of firms gained a global competitive edge by
capitalizing on innovation, raising productivity, and drawing on unique elements of their country's history and
character.
Innovation is required for the improvement of products and services by finding new ways to solve a problem,
retaining existing customers and increasing customer base, enhancing jobs by making tasks easier faster and
more enjoyable which in turn helps in achieving great results. This entire ends up in increasing ability to get
promoted.
The speed and efficiency of the diffusion of innovation through the economy is critical to productivity and
economic growth. Leaders in technology development are not necessarily leaders in technology adoption.
Robertson (1974) It is only the first enterprise to adopt the change that executes innovation; subsequent
adopters are imitators not innovators. However it is important to note that the most important economic
contribution does not necessarily come from the "early adopter" but from the "fast follower" who adopts the
innovative design that captures the international market.
What is Innovation?
The word innovation includes the concept of successful commercialization. Brian S. Cumming (1998)
discusses the three basic steps to be considered for innovation viz., (1) idea generation; (2) the successful
development of that idea into a useable concept; and finally (3) the successful application of that concept.
Furthermore the author has listed down various factors that have a positive effect on each of these stages.
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Innovation is probably a result of the increases in business competitiveness, and the developing customer
focus, that have occurred in the last 30 years.
Innovation means bringing into effect new and more effective products, services, or approaches.
Zuckerman Committee (1968) defined innovation as a series of technical, industrial and commercial steps.
Types of Innovation
As Chris Grannell (2007) said, "there are many different types of innovation, but there are also many different
ways of talking about it with the result that there is little consistency across academic texts on the subject. For
instance, Clayton Christensen contrasts disruptive with sustaining innovation, while Gary Hamel talks about
the distinction between breakthrough and incremental innovation. Other observers such as Geoffrey Moor
prefer to think in terms of discontinuous versus continuous (or continuing) innovation, while other
practitioners present another slant with other descriptions. Jennifer Rowley (2011) has identified from literature
the unique types of innovation from previous frameworks as: Product, service, hybrid, technical, administrative,
organizational structure, organizational, management, production, businesses system and commercial/marketing.
Francis and Bessant (2005) view innovation from the perspective of the change that comes with innovation.
On this basis, Bessant and Tidd (2007) propose the following four categories of innovation:
Product Innovation: Changes in the things (products/services) which an organization offers. This
might include improvements in functional characteristics, technical abilities, ease of use, or any other
dimension. Tata Nano portrays a classic example for product innovation. With its compact size, it
addresses the issue of urban congestion, and with its decent fuel consumption, it addresses the issue of
oil at a hundred dollars a barrel.
Process Innovation: Changes in the way in which things (products/services) are created and delivered.
For example, Tata Engineers found that door handle had 70 percent less parts than one of the cheapest
European cars. Another major component is steering shaft. Hollow steering shafts reduced further costs
and weight. MRF, a leading tyre manufacturer, redesigned the tyre to bear extra weight on the rear
wheels. Thus, at every stage the goal was to cut costs by reducing the number of parts that went into
each component
Position Innovation: Position innovation refers to the creation of value by changing the customers
perception of a product, that is, changes in the context in which products / services are introduced. For
instance, Starbucks did not invent coffee; the company merely changed the perception of the product.
Another illustrative example would be the Swiss watch industry. While it struggled in the transition
from mechanical to digital watches, the industry was eventually re-vitalized by positioning the watch as
a luxury good.
Paradigm Innovation: Changes in the underlying mental models which frame what the organization
do. For example, during the time of the expensive mainframe, Bill Gates and others aimed to provide a
home computer for everyone.
Phil McKinney (head of innovation at HP and author of the Killer Innovations podcast) chooses to focus on
what he calls killer innovation useful because it captures the sense of a killer app: something which is both
different and impactful to what is around it. As introduced by Geoffrey A. Moore, Penguin (2005), the
innovation types fall under four clusters given in figure 1.
Source Chapter 4: Types of Innovation, Dealing with Darwin: How Great Companies Innovate at Every Phase of their
Evolution, Volume 23, Issue 9
Figure 1
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In addition to above types, innovation is often divided into the following types:
Technology Innovation: Introduction of technology or machines, equipment falls under technology
innovation. For example: Tatas Nano is composed out of several well-known technological solutions,
such as the usage of plastic instead of metal, identical and modular components and is supplying a
share of up to 40% of the cars components via internet auctions. All together these factors could
constitute a successful innovation strategy.
Marketing Innovation: Introduction of new marketing methods with improvement in product design
or packaging, product promotion or pricing. For example: Tata Motors have come up with an idea of
converting their distributors into entrepreneurs. The plan is to develop an assembly kit for distributors
who would stock completely knocked-down (CKD) kits of the car at warehouses and assemble them on
site. Transporting car in a CKD condition is much less expensive than a fully assembled car.
Organizational Innovation: Also referred to as social innovation, involves the creation of new
organizations, business practices, and ways of running organizations or new organizational behavior.
In Tata Nano, the Chairman of the Tata group Ratan Tata had shown direct and personal interest all
along. It is no small wonder that it was able to weather many storms not the least being managing
stakeholders while locating the plant. This supports the well known doctrine identified by various
studies and surveys that for a project to succeed executive support is of utmost importance.
Business Model Innovation (Strategy Innovation): Introduction of changes business is done in
terms of capturing value. For example: The Tatas realized that for a poor country like India, there was
a need of an ultra low-cost product and they offered it by leveraging the power of technology. The
volumes are all there in India, one only needed to overlook the thin margins but invest in world class
technologies to offer an affordable good product to the market.
Technological Changes: They can be Disruptive or Incremental. These can open up new possibilities
for commercial exploitation if Disruptive or can instead advances that edge forward the existing stock
of knowledge without fundamentally altering rules. The four aspects that underpin technological
change are: firstly, the quickening pace of innovation; secondly, the move to open standards; thirdly,
engineering derived productivity gains; and fourthly the advent of demand led investment. They play a
significant in shaping the future course of technological development. For example: in mobile phone
industry everyday a new phone is launched with different features. The companies are fighting on the
technological edge with each other.
Organizational Changes: Industries have witnessed a substantial rise in merger and acquisition
(M&A) activity in recent years. Although a whole host of motives are driving this reorganization
activity, generic explanations are the desire to achieve scale economies, the wish to gain control of
(additional) distribution channels, to expand into new markets / product areas and, to acquire assets
(including programming content) that is perceived to be of long-term strategic value. Reorganization is
driven by the desire of companies to increase their competitiveness. These changes in organizational
structure have been implemented along both operational as well as geographical lines. For example:
HSBC has chosen innovation as a focus area. It has strongly communicated to staff the importance of
innovation, and workshops are used to create ideas for new and improved customer services. Also, it
has developed fast processes for implementing innovative ideas.
Environment Changes: The changes in the economic, political or social environment have been
contributing to innovation. For example: For example changes in custom duties can make the
competition fierce for domestic market, hence innovation will be needed in domestic market to cut
competition. Political stability is also important as foreign investment occurs after keeping in mind the
political stability of country.
by innovation (Joan Caruso, Managing Director of Organizational Effectiveness Consulting at The Ayers
Group).
Though each company needs to find its own balance between life-giving innovation and life- sustaining
organization but if a company doesnt emphasize towards innovation that company can become dead as
innovation is like cell renewal in a body known as organization (Joan Caruso, Managing Director of
Organizational Effectiveness Consulting at The Ayers Group).
Importance of Innovation can be seen in Global Competitiveness Report, where Innovation is quoted as the
12th pillar for global competitiveness. It has been said there that all factors like macroeconomic conditions,
labor efficiency, capital all start giving diminishing results but organization must strive on innovation.
Currently India ranked 51 on global competitive index 2010-11 with individual ranking of 42 among 138
countries at innovation driven competitiveness. This shows that Indian organizations have very high potential
of innovation and thus have very high competitiveness in terms of innovation.
Drivers of Innovation
As from the previous section it has been seen that changes in business environment leads to Innovation, it is
imperative to understand the different factors of business environment which drive Innovation in any
organization.
The drivers of innovation identified are outlined below:
Technological Advances: As technology is accelerating at a fast pace so there are a need for handling
the inventions happening. Technology is equally important for both service as well as for
manufacturing firms and R&D have a major impact on the business of service Companies. For
example, banks are developing technologies that will help them to provide customized solutions for
each of their customer; retail industry has reduced queuing time by implementing barcodes.
Speed of Innovation: The pace at which new products and services are introduced into the
marketplace. Incremental innovations are introduced more often into the marketplace than disruptive
innovations. Incremental innovations build upon changes in prior existing products or technologies. In
contrast disruptive innovations are less frequent and result in technological jumps, and the widespread
alteration of commercial activities within the sector or industry.
Efficiency: The amount of output per unit of input such as labor or capital. The effect of efficiency
gains is felt in two different ways: firstly, allowing the same task to be undertaken and completed using
fewer inputs. Secondly, by producing a higher level of output from the same amount of input.
Innovation helps in increasing efficiency as it create new products and processes with higher efficiency
as well as improvise existing products and processes.
Customization: The degree to which goods and services are specifically tailored to meet the needs of
their customers. Customization is brought to effect by innovation. Innovation comprehends
customization in two ways. Firstly, when the underlying technology / knowledge embodied in the
product or service is customized. Secondly, when the packaging of the good or service is altered to
meet the customers requirement but the underlying technology remains the same. Unsurprisingly, the
former of these requires significantly more effort on the part of the firm than the latter.
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Intensified Competition Scenario: It involves nature and sources of competition emerging in markets.
Source of competition can be foreign markets as it can offer high services with competitive price in
domestic markets. Also industries which are foreign to a segment can enter it and become a source of
competition for existing companies.
Open Markets: Globalization has led to circulation of goods and services from a point of world to
another point. This puts great pressure on domestic markets as they need to fight foreign markets to
maintain their market share. Also it leads to imposing copyrights and patents on innovation made.
Collaboration: Industries often collaborate to utilize core competency of each other and become the
market leaders for the innovation. Collaboration between firms may involve the development and
delivery of goods and services, or the setting of industry wide standards and agreements. Whilst
technological standards may remain the property of a single firm they may also be widely available for
use by others. The firm gains advantages through one of three ways. Firstly, by being the developer of
the standard and the firm to whom others turn for its further development. Secondly, through being the
original developer of a standard often results in the company being the one that customers turn to when
they encounter problems. Both of these enable the company to build a strong market position. Thirdly,
by being used by a large number of actors in the market the company is able to charge a small sum for
the use of its technology, which when aggregated over the entire market is often considerable.
Changing Laws and Regulation: Worldwide markets are becoming open and thus impact of laws and
regulations had a great impact on companies. For example changes in custom duties can make foreign
goods cheaper and the competition can become fierce for domestic market. Hence innovation needs to
done to cut competition.
Driver Interaction
In the previous section eight drivers of innovation were identified. The aim of this section is to move the
discussion forward through focusing on how these interact with one another. The table below (Table 1) offers a
first impression as to how the drivers of innovation interact with one another.
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out. The best ideas are chosen and are worked out by a team, called as conceptualization of idea. The concepts
are being made over time. During course, some concepts are filtered out and the best ones are implemented. The
concept turns into projects. Implementation takes lot of time. Many a times while a company is implementing a
concept, the same concept is rolled out in market by some other company or the needs of customer change
resulting in termination on project. The success of a project depends on the speed of implementation and the
extent to which it caters needs, needs can be latent or existing. The projects that are implemented within
stipulated time are turned into successful innovation.
Until recently innovation has been seen principally as the means to turn research results into commercially
successful products, but not all research leads to innovation and not all innovation is research-based. Innovation
is systemic. It arises from complex interactions between many individuals, organizations and their operating
environment. Firms which are successful in realizing the full returns from their technologies and innovations are
able to match their technological developments with complementary expertise in other areas of their business,
such as manufacturing, distribution, human resources, marketing, and customer service. Thus innovation now no
more restricted to technology.
Evidentially Stage Gate Approach, figure 5, is one Business processes implemented to manage New product
development and Innovation in a most careful and systematic manner. . Pioneered and developed by Dr. Robert
G. Cooper, it is the worlds most widely implemented and trusted product innovation process.
Source http://www.stage-gate.com/knowledge_pipwhat.php
Figure 5
Stage-Gate Process is a conceptual and operational roadmap for moving a new-product project from idea to
launch. Stage-Gate divides the effort into distinct stages separated by management decision gates. Cross-
functional teams must successfully complete a prescribed set of related cross-functional tasks in each stage prior
to obtaining management approval to proceed to the next stage of product development.
The process was implemented by P&G to manage its new product innovations. This process was named as
SIMPL Successful Initiative and Product Launch. The results were phenomenal it not only ensured early and
ongoing direction for innovation but also mitigated risks and maximizes profits.
The above example clearly shows that different Stake holders of an organization need to contribute towards
Innovation. All the employees within an organization are building blocks and their contribution towards
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culture that how much it encourages employees to risk trying new ideas and how much adaptable
organization is to new situations. It also incorporates the degree encouragement of diversity of thoughts
in the organization.
Customer Orientation: This means identifying the needs and wants of both established and potential
markets, and delivering value products and services that satisfy these needs. Customer orientation
implies not only new products and customer services but also being open to exploring new business
models and market creation. Employees along any point of an organization's value chain can help the
organization innovate in ways that grant competitive advantage and deliver value to customers. In a
Value Innovation organization, all employees can innovate and create value. In the framework, we tried
to access how frequently organization re-examine the target customers and superior values provided to
them. It also examines that how much organization is encourages towards thinking of total customer
solutions and additional services to be provided to them.
Agile Decision-making: Decision-making has several different dimensions, including the depth and
breadth of the ideas and analysis used, who is empowered to make decisions, and how rapidly the
organization can make decisions. Research on decision making shows that gathering and using various
levels of information, and involving diverse people, leads to better decisions. It amplifies innovation by
taking together everyone by some degree to business planning. It measures how quickly an
organization responds to the changes in business environment.
Business Intelligence: This refers to an organization' scalability to detect the market and business
trends and understand the strategic issues by scanning the environment and understanding competitors.
This factor balances out the organization's practice of customer orientation. For Value Innovation,
people in the organization need to know what is going on with both their customers and their
competitors. It keeps track of competitors actions and keeps them as the benchmark for organization.
It also measures how quickly an organization responds to the action of their competitor.
Open Communication: Supporting change and feeling that it is acceptable to challenge practices that
don't seem to add values are ways that all employees can add to Value Innovation. The degree of open
communication completely relies upon the culture of organization. The employees should have power
to speak out their minds and to bring changes to add value to innovation process of organization.
Empowerment: One aspect of culture is how empowered employees are independently identifying
and addressing problems. It concerns the individual empowerment for the work field respective
individuals are assigned to. Research has shown that an organization in which skilled people have
ownership to innovate in their area is one in which people will have more potential to innovate.
Business Planning: Processes and techniques are needed to ask and answer "what if questions when
developing plans on how to develop value for business customers. One of the pieces of information you
will get from the Value Innovation assessment process is how widespread these practices are, and
whether or not a broad spectrum of employees recognize the process of planning as part of their work
lives. It also estimate that whether risks are being identified at every step of a business plan.
Learning Organization: Learning organization is one in which employees share knowledge,
especially about customers. This helps create a deeper understanding and a more thorough approach to
Value Innovation. As a result, the organization is able to grow and change in keeping with its
environment. The degree of identifying with ways the customer use the organizations products
measures potential of the organization to bring innovation in place.
Step 1
Development of questionnaire to assess the innovation potential based on the different basic parameters and
check for content validity and reliability
In this study the research is focused on the understanding the concepts, framework, drivers and their
interaction and subsequently use the framework designed by Lynda to collect the data. Since the questionnaire is
content valid and reliable as mentioned by the author, the data has been sought based on the sample as per the
research design.
Step 2
Collection of data from the senior management and different Functional department heads of different
organizations through Questionnaire.
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As per the sample design, questionnaire was sent senior management and heads of Functional departments in
an organization. The questionnaire was sent to 12 companies ranging from Manufacturing, Automobile,
Chemicals, Pharmaceuticals, Switchgear, FMCG etc. Out of 12 companies, we got responses from 5 companies,
out of which two belongs to Casting Manufacturing, two from Automobile proprietary and one from paint
industries. The questionnaire was filled by different functional heads (like R & D, Operations, Quality,
Procurement etc.) or by employees at Senior Manager & above level and if possible one questionnaire by the
head of the organization.
Step 3
Normalization is done for the responses collected by above activity and preliminary analysis is given.
We tried to find out the VALUE INNOVATION POTENTIAL of the responding companies by taking
arithmetic mean of all the nine parameters listed.
Thus, the Casting Company C2 scores maximum, indicating that value innovation potential is maximum
against the companies those who participated in the survey.
Step 4
To calculate Standard deviation of the responses and data collected.
Analysis of Variations observed within the companies and across companies is tabulated below in table 3.
Table 3
Standard Deviation
Co. No. MW RTC CO ADM BI C E BP LO
Across Organizations 1.129 1.060 1.012 1.052 0.979 0.901 1.029 0.967 0.996
MW - Meaningful Work, RTC - Risk Taking Culture, ADM- Agile Decision Making, BI- Business Intelligence,
C-Communication, E-Empowerment, BP- Business Planning, LO- Learning Organization
Step 5
Observations and findings based on the Statistical analysis.
Our Findings
Within Companies
C1: It can be seen from the analysis that employees within C1 considerably differ in accepting that work they do
is meaningful. However, not much difference is observed in the communication parameter, indicating that, C1
scores consistent in communication.
C2: For C2 almost all the parameters show considerably variation, indicating that company needs to work to
eliminate the variation in order to enhance value innovation potential.
Similarly conclusion for remaining company can be drawn based on the table.
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Across Companies It can be seen that variation across companies is more for Meaningful parameter, indicating
that employees differ a lot in understanding the work.
Similarly, when it comes to business planning, not much difference is observed across organization. Also it is
very difficult to judge business planning as a parameter since business planning depends on the environment in
which business is carried out.
6. Conclusion
As discussed in the paper, innovation is essential for enhancing the competitiveness of organizations and the
economy, also important to understand the different types of innovation and it should be realized that innovation
applies across the entire value stream of any organization. Innovation for any organization is like a cell
renewable to a body without which stagnation and even extinction may occur. The changes in Business
environment are inevitable however there are different factors that foster innovation. These factors / nine
parameters act as drivers of Innovation. The interaction amongst the Drivers and their impact on Innovations
potential of an organization has been presented. Exploring the importance of Innovation in every sphere it is
important for every organization to assess its Innovation Potential. An attempt has been made to assess the
innovation potential assessment of Indian Organizations based on framework given by Lynda (2005). A
framework has been proposed to assess an organization Innovation Potential.
According to the findings of this research, it is found that every parameter shows a considerable amount of
variation within an organization and across organizations. This variation shows difference in opinions of the
employees. Major difference was observed in Meaningful work parameter indicating that employees differ a lot
when it comes to work understanding and thus effects the companies bottom-line.
7. References
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3. Chris Grannell (2007),Innovative marketing, Mar, pg 1.
4. D.Majumdar, J. Kupitz, H.Rogner, T. Shea, F. Niehaus and K.Fukuda (2000), The need for
innovation, pp 5, IAEA BULLETIN.
5. Frances Horibe (2001) Creating the innovation culture: leveraging visionaries, dissenters and other
useful troublemakers in your organization, pp 1-5, 2nd edition, published by John Wiley and Sons.
6. Francis, D. and Bessant, J. (2005), Targeting innovation and implications for capability development,
Technovation, Vol. 25 No. 3, pp. 171-83.
7. Geoffrey A. Moore, Penguin (2005), Dealing with Darwin: How Great Companies Innovate at Every
Phase of their Evolution, Volume 23, Issue 9, 281 pp. Reviewer: Brian Leavy, Dublin City University
Business School.
8. Global competitiveness report (2010-11)-world economic forum, pp 15-16.
9. Jennifer Rowley (2011) Towards an innovation-type mapping tool Management Decision, Vol. 49
edition 1, pp. 73-86.
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organization's potential for value innovation, Industrial Research Institute, pg 5.
12. Michael E. Porter (1990), Competitive Advantage of Nations, March-April, HBR.
13. Michael Mills, Manager Corporate New Initiative Delivery, Implementing a Stage-Gate Process at
Procter & Gamble.
14. William Buxton (2005), Point of View, Rotman Magazine Fall.
15. Wikipedia.org, Stage gate model.
16. Kal Bishop, Types of Innovation, http://ezinearticles.com/?Types-of-Innovation&id=38384.
17. http://www.ayers.com/web/global/ayers/pages/whatisinnovation.html
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