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Definition Of Innovation And Its Importance Business Essay

Paper Type: Free Essay Subject: Business
Wordcount: 3996 words Published: 1st Jan 2015

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There is an increasing attention or support to Innovation, that innovation development is key to create/maintain/improve economic/organization competitive and secure organization sustainability growth. “Innovation is driven by the ability to see connections, to spot opportunities and to take advantage of them” [Tadd, Bessant, 2009, p1]. Most of organization or companies today face a fast pace of technology and market external change, and these external changes haves push organizations and even economic growth. Some organizations’ successful have few comments are they have ‘competencies, backgrounds, and networks of relationships compared to their competitors or previous incumbents’ [Birkinshaw, Bessant, Delbridge, 2007]. Innovation became even more vital for organizations towards new century. And driven by advance machinery and excellent labour resources, and these products produced by people’s innovative ideas to use external and internal resources and gain advantage and opportunities in the market than competitors. Management innovation and changes Therefore, innovation is increasingly seen as a powerful way of securing competitive advantage and a more secure approach to defending strategic positions, and success.

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In response to massive increase demand, the requirement of products or services increase and most of organization seek to use innovation methods to get strategic advantages. As innovation can helped organizations to better identify market opportunities and exploit them effectively and build a sustainable competitive advantage. For example, most of organizations have R&D department to combine market trend patterns with social and cultural observations on a daily basis, and provides innovative ideas and analysis to help organization hit upon the big ideas, setting products and services apart from competitors. Innovation usually from trial and error experimentation, ‘R&D plays a considerable role in the product innovation process. Indeed, there is often continual interaction with R&D throughout the development of the product’ [Trott, 2005, p305]. Innovation not only limited to manufactured products and also includes services.

Innovation contributes in several ways, like research evidence suggest a strong correlation between market performance and new products. In contrast, innovation refers to taking different new ideas and creativity is one of element of innovation process through which new ideas lead to new products, procedures, or services. Excellent performance of organization can indicates overall organization’s operation very well and sufficient and new products innovation can help capture and retain market shares and increase profitability over competition. Innovative not only involve generating new ideas and applying into production or management system. It is also involve opening new market, new products, new methods, new management system ect.

Innovation can influence individual enterprise and even to one countries economic growth. There are many new market for some companies in china, especially, china’s economic dramatically develop and have rich labor resources and nature resources as back up. Many firms and organizations approach to Chinese market through applied suitable strategies and also change and innovation the management style in china.

Innovation is important but the key is to making invention work technically and metrically. ‘Innovation is the successful exploitation of new ideas’ [Innovation unit, 2004]. Continuous improvement of the research development by organization and then can improve product quality and productivity through received innovation ideas about new products/ services, or management system, in order to gain sustainable development during the fierce competition.


Innovation and growth is not just about products or solutions, it is also about creating a transformational change in the way people live, work and play said by Joachimsthaler ( Hidden in plain sight, Chapter 26).

Innovation also has two aspects incremental and radical. Incremental innovation is a process day to day change to continuous improves quality and productivity through innovation. Like Telephone, electric lighting. They all depended upon the steady incremental improvement in a range of associated technologies like glass blowing, bacum pumping and so on. ‘Incremental innovation is essential to continued pharmaceutical discovery’ [the temple university report]. The vast majority of clinically important drugs developed over the last 50 years and have resulted from an incremental process, which involved multiple, small test, successive improvements within a pharmacological [Wertheimer, Levy, AND Connor, 1994]. The pharmaceutical industry must base on incremental innovation, due to incremental changes’ advantage and radical innovation’s potential risks. Therefore, most of drugs or medicines are considered to be incremental innovations.

Radical innovation is total change the ways we think about and use the products or produce new products compared to previous series. This is fundamentally different to incremental innovations and concerns on exploring new technology, it is one of another way to ‘open up new opportunities and challenge’ under the new conditions [Todd, Bessant, 2009, p29]. Radical innovation has a widespread impact on our lives and it carried out by many different individuals and organizations through accumulation small improvement innovation. Therefore radical innovation involves incremental innovation to an existing product, process system. So an apparently, improvement on small change on exiting precuts, process also can increase its impact to organization. It creates a significant change on the product / services that transforming from existing market or creates new products/ service.

There are four types of innovation such as: product innovation, process innovation, position innovation, and paradigm innovation. The following paragraph provides an introduction about four types of innovation:

Product innovation is to provide or offer to customer or business new products/ services. New product innovation or development is an important capability as the environment is constantly changing, therefore, organization need to improve or offer new products to consumers so as to keep advance in the market. However, competitors also may introduce new products and this can be a major threat to existing market position. Organizations need the capability to respond through new products or new services innovation. For example, since Starbucks launched Iced coffee in 2006, and create a new coffee refreshment segment of the ready-to-drink coffee. Organization can create significant value for the customers and superior profit for company as well through product innovation earlier than competitors and create competitive advantage. Innovative and exciting products offer by Starbucks helps to strengthen the brand and reinforce the reputation and commitment to innovation, like Frappuccino coffee (1996) Double shot Espresso drink (2002)[Business Wire, 2006]. The other example about Apple is that apple has combined many features including a watch face in its tiny new IPod NANO, Which has been dubbed as the Watch. [Mintel 2011]

Process innovation is about how to create and delivery new products/ services, which is an improvement in the organization and/ or method of manufacture that often leads to reduced supply costs. For example, after several years of production, the number of steps involved in producing computer had been reduced and the labor time also reduced. Not surprisingly the price of the computer also fell down than previous period. All these process innovation can lead to a dramatic fall in the production costs, and also include the sales price. Innovation and growth is not just a fuzzy process of screwing around vigorously but can be a systematic process.

Dell’s competitors never thought this innovation would work out and provided opportunities to increase market share by hitting the sales figures. Apple’s innovation involves in products and process. Apple has built an innovation factory one that harnesses unbridled creativity from its people, stimulating bold & enterprising new ideas, and launching successful, profitable new innovations. From Apple report 2010, it becomes one of the largest technological corporations in the world by revenue and also is a highly innovative company [Annual report, 2010]. Apple leverages its diverse ecosystem of employees, customers, suppliers, partners and global networks, proven innovation process, and also apple size the new opportunities in the marketplace and grow its businesses.

Position innovation is about what are target markets, consumers for the new products or services. For instance, Starbucks did not invent coffee; the company merely changed the perception of the product. The sonny play station phone, rumoured for release in April 2011, will be one of the key Smartphone developments this year. Leveraging the play station brand could prove a shrewd move for sonny, given that it could attract a high number of ‘gamers’ to the Smartphone market. The device could help boost sonny Erickson’s position in the Smartphone market which, thus far, has been hindered by an inability to differentiate its product range. [Mintel 2011]

Paradigm innovation is about how to frame the ways to expand into new markets for new products by a creative or innovation.

Innovation life cycle – different emphasis over time

Product innovation and Process innovation shows the difference over the time in the Innovation Life Cycle.

LG’S optimums 2x, due for release in March 2010, is being billed as the world’s first dual core android operated Smartphone. Higher computing power will allow for faster mobile internet speeds, further opening the door to live streaming of sport and TV shows, possibly proving attractive for more sophisticated mobile users. [Mintel 2011]

Another illustrative example is Swiss Watch industry. They changed from mechanical to digital watches; the industry was eventually re-vitalized by positioning the watch as a luxury good.

Resource base view:

[Barney & Clark, 2007]

In an increasingly globalizing knowledge-economy, competitiveness resource is derived from differentiated capabilities to innovate. Competition among product market position held by firm is another ways of competition among resource position held by firm. Most organization attempt to gain competitive advantage based on the resources and develops or acquired to implement product market strategy. In another world, this is about how to stand out of competition among resource controlled by different firms. ‘An enterprise has a competitive advantage if it is able to create more economic value than the marginal competitor in its product market’ said by Peterfaf and Barney {2003}. From Wernerfelt’s {1984} said that competition for resources among firms based on their resources profiles could have important implication for the ability of firms to gain advantage in implementing product market strategies. From Resource-based view theory, shows that competitive advantages created by organization or firms to provided a good services or products between competitors which are from organizations innovation ideas, and then they gains or perceived different level of benefits from that [Barney & Clark, 2007, p25].

According to the resource-based view, in order to develop a competitive advantage ‘the firm must have resources and capabilities that are superior to those of its competitors’ and use these resources with innovation ideas create more value than its rivals. Without this superiority, the competitors simply could replicate what the firm was doing and any advantage quickly would disappear.

If organizations or firms want to produce greater benefits which need to provided superior differentiation and /or lower costs. For instance, the same cost or the same benefits products or services sold lower prices through a lower cost, or produce high value or quality of products or services at similar prices.

Since 1990s, intangible resources became a key driver of innovation. Intangible resources include brand, reputation, knowledge, skill, and also can only be accumulated over a period of time. It provide

Slack resources can encourage innovation too.

New product development and innovation:

Innovation means everything from extending a familiar concept in an unlikely direction to creating a new category where non-existed before [Mintel, 2011].

As the number of consumers and the demand for innovative products grows, ‘a company’s ability to successfully identify and launch new products’ has become one of the significant key to success. ‘New Product success is vital to the growth and prosperity of the modern corporation’ [Cooper, 2009]. The development of new products and processes has enabled many organizations or firms to continue to grow. There is a wide strategy for organization to expand their business, new products development relies on innovations and resources and capabilities. Skype has had exceptionally since by developing and launching new products – Skype, as Skype offers desktop sharing and conferencing abilities at a fraction of the cost and its choice and video services are premium quality than competitors and most people choosing Skype. Especially like Some officer working and they can catch up face-to-face with more people at the same time on a group video call with Skype. These creates a lot convenience to those people who are not at the same country or same city but still can communicates or meet by simply use Skype. Due to more and more people start work at home or distance learning style, the demand for group meeting and conference call occurs and increases. Skype also have one more features is conference calls which is can talk to more than one person at once and also is free if you’re all on Skype [Skype home].

PESTLE Analysis:

PEST is one of Tool using to analyze the environment changes, this tool covering political, economical, social, and technological. In this Dynamism environment, many firms or people need to increase their capacity for discontinuous innovation in order to catch current state of environment. The following PEST examines how the external environment changes and how originations respond to that by using innovation.


Political change which means a change in government or in government policy also occurs and shapes the possibility to organizations. Political include government policies, legislation and foreign influences, particularly from the WTO. For instances, the improvement on the employment law like wages limited and working hours limited provides help to some low-paid workers and also help their more understand their own rights in the work. Such the immigration this policy changes in the UK have positive and negative for UK businesses and the economy [UNISON, Times].

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Economic changes relate to changes in the wider economy, a growing market economy cannot always stay in equilibrium due to change of economical and other factors. such as people’s living standards have risen and the demand to products and services also improve, the demand to new, good, quality products or services also growth. Such as luxuries products competitions between different organization or brand.


Social change link to changes in wider society such as changes in lifestyles, consumer’s behavior. it is not easy to As major social changes has been that many people are working from home today using Home Pc to communicates with their offices. This changes has been change the style of tranditional work way. This also has led to a reduction in demand for office let, transport, cause there are many people transport by rail, bus or private car. For example, Primary’s success business comes from meeting these customers needs by making clothes with popular design and sourcing products efficiently and sell these clothes in an ethical and fair way with reasonable prices [Primark, N.D].


Technological play complementary role in the process of innovation and change for organizational, improving management, producing high technology product or services Technological changes relate to the application of new inventions and ideas such as the development of the media (radio, TV, internet, Newspaper), as these are organizations tools to explore new areas. Rapid changes in these communication technologies have already made the world economy more interconnected than past history. Technology plays an essential role in enabling radical new options. The changes in Technology means that on some of organizations, consumers can see the development of high quality or performance goods and services, as pioneered for example like——

Through analysis the external environment changes by PEST and forecast the future trends. Then Organizations ability to respond these changes increased through applied innovations and become more confidence. However, the most successful innovations often come from technology this platform.


Technology is one of the main activities that will pull innovation and organizations growth. Existing product and market can benefit from technology innovation, and also can potential lead innovation across the organization. Several watch manufactures have incorporated technology into their designs. For example, Japanese watch vendor Tokyo flash has unveiled a USB rechargeable watch and Kempler & Strauss has launched a new GSM cell phone wristwatch featuring a touch screen that can been used to listen and store music, make calls, text, take photos and to store voice recordings, photos and videos.

“Importantly innovation and competitive success are not simply about high-technology companies”. Small or Medium size of companies also have successful example through innovation.

“The skill to spot opportunities and create new ways to exploit them is at the heart of the innovation process”


Apple’s competitive force is come from design and marketing. Compared to the other competitor’s competition, apple had very good product like MAC, ipad, and iphone. Apple gains innovation products ahead of other competitors and first appears in the market and attracts people’s attention and interested. Sonny and Toshiba, HP comes close after Apple’s new products upload in the market. However, apple has the best-designed hardware from an aesthetic point of view of any vendor, but the other competitors cannot copy it. For example, Toshiba have ever used many of the same components to design the computer but still fails.

How does other organization learn to disruptive innovation?

To identify customers organizations to learn disruptive innovation,

There are many ways of working within the operations process to improve one organizations’ performance which including quality, packaging, designing, delivering. ‘The quality of design and management within operations is thus seen as an essential part of innovation management’ [Trott, 2005, 137]. Innovation change is a key to continuous improve one organizations performance and work as a core in the business process. For example, Apple’s success has been based upon pioneering the design led adoption of disruptive technologies [datamonitor,.———-WRITE MORE—–DETAIL——-

PACKAGING DESIGN-JUICES- as an successful product packages will result from the exposure of

Advertising is one of the preference function for consumers to becomes endogenous part of a growing economy and it also changes continuously to adjust to evolving technical conditions in the society and at the same time influences consumers and organizations behavior. Ie Google, one of the companies that has become synonymous with the verb ‘search’, is an internet technology and advertising company. Google generates the great revenue through advertising. With Google’s immense resources and record of disruptive innovation, Google TV is being watched closely by all participants through Google’s advertising. [Datamonitor, 2011]

EBay was founded and set as a marketplace for the sale of goods and services for individuals. EBay build an online person-to-person trading community on the internet, using the World Wide Web, when online shopping started. EBay also applied the business Model similar to the reality; people can bit items on the internet. This model is against transitional innovation changes which creates new market and very successful.

From Data monitor’s survey of food and drinks carried out the packaging innovations linked to the health, convenience and green/ethical drivers organizations development [Raithatha, 2009].

Even innovations are very important to organizations, but entrepreneurs is necessary and important sources of innovation. As different kinds of situations and challenge call ———————————

There are some useful tools and techniques can be deployed to promote innovation and encourage constructive and appropriate change in organizations. ———-

There are a range of innovative technologies and formats being used by many organizations or companies to generate more value or profits to consumers and business.

Innovation Strategies:

Since that competition from the other mobile phone brand comes out and offer similar Smartphone brand using applications. However, high customer demand for Smartphone has helped Support Company up selling strategies, there are several examples about how mobile phone company using innovation strategies:

At the 2011 consumer Electronics show, Samsung demonstrated a flexible mobile design screen which can be bent into an arc or even rolled up. The development is indicative of the stylization of the market in recent years, with research for this report showing that about one in three customers want their mobile phone is fashionable. [Mintel, 2011]


Generally innovation offer progress, some complement existing ways of doing things and have a sustaining effect for a technology or an industry. Organizational innovation, that is obtaining competitive advantage through reconfiguring organization [Tidd, Bessant, Pavitt, p332]. It is very important to recognize that organizational innovation is not confined within the firm but is increasingly being applied to inter-enterprise relationships.

In order to succeed in the fierce competition, organizations need effective implementation mechanisms to move innovations from idea or opportunity through to reality. And Furthermore, innovation depends on having a supporting organizational context which creative ideas can emerge and be effectively deployed [Tidd, Bessant, Pavitt, p360]. Sometimes, some innovation can lead to significant changes in organizations and even in society.

There are three broad strategies approaches to innovation, which are create it, co-opt it and buy it.


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