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Chapter 1
Innovation in the Twenty-First Century
John Bessant
University of Exeter Business School, UK
1.1 Introduction
It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change
(Charles Darwin)
Darwin was right. His famous comment underlines one of the key challenges facing organizationsâunless they are prepared to change what they offer the world and the ways they create and deliver those offerings they could be in trouble. The challenge is not whether or not to innovate, but how? This makes building the capability to deliver a steady stream of innovation a strategic imperative, not just for commercial organizations, but for any enterprise dealing with the turbulent conditions of the early twenty-first century. Public services struggling to balance rising demand and expectations of high quality delivery against the rising costs of provision need to seek new ways of meeting social needs. Third sector organizations concerned with improving social conditions recognize the importance of thinking and working in new directions if they are to gain attention and acquire the resources they need to carry through their agenda.
Innovation is about change and this can take place along a spectrum of increasing novelty, from simple incremental improvementsââdoing what we do, but betterââthrough to radical, new to the world changes. The risks involved vary, as do the benefits,but it is clear that even sustaining growth through incremental innovation is not going to happen by accident. Any organization might get lucky once but in order to be able to repeat the trick there is a need for some kind of organized, structured approach to managing the process. This needs to find answers to two key questions:
and
The trouble is that innovation involves trying to hit a moving target. Environments constantly shift and pose new threatsânew technologies appear, new markets emerge, the regulatory framework changesâand unless organizations have the capacity to innovate their approaches to innovation they may not survive in the long term. History is clear about thisâvery few organizations are long-term survivors and those which have managed to stick around for over 100 years have made some major changes to what they do and how they do it (Francis et al., 2003).
Sometimes the changes are pretty dramatic, challenging the roots of where the company began and overturning a lot in the process. TUI, for example, is the largest European travel and tourism services company, owning (amongst others) Thomson Holidays, Britannia Airways, and Lunn Poly travel agents. Its origins, however, go back to 1917 where it began as the Prussian state-owned lead mining and smelting company! Nokia's key role as a leader in mobile telephony hides its origins as a diverse timber products conglomerate with interests as wide as rubber boots and toilet paper! One of the oldest companies in the world is the Stora company in Sweden, which was founded in the twelfth century as a timber cutting and processing operation. It is still thriving todayâalbeit in the very different areas of food processing and electronics.
A key dimension when exploring innovation lies in the concept of responsibility. Clearly, not all innovations are necessarily good things. Others may start out offering positive benefits, but later turn out to have unintended negative consequences. The famous example of DDT is a case in pointâoriginally hailed as a breakthrough innovation in the field of pesticides it later turned out to have significant negative impacts. Other examples include the pharmaceutical thalidomide, nuclear power, and chlorofluorocarbons (CFCs) used as refrigerants and propellants.
The key issue is around how far we explore and consider innovation in its early stages in terms of the potential impacts it might have, and how far we are able and prepared to modify, ameliorate, or possibly abandon, projects which have the potential for negative effectsâwhat Owen et al. (Chapter 2) describe as the dimension of responsiveness. It is this dimension and others (anticipation, reflection, and deliberation) which together underpin the concept of responsible innovation. The ways in which this can be conceptualized and operationalized in the face of uncertainty form the core theme of this book. Interestingly, much of the academic and policy-oriented innovation research tradition evolved around such concerns, riding on the back of the science and society movement in the 1970s. This led to key institutes (like the Science Policy Research unit at Sussex University) being established (Cole et al., 1973). While a sophisticated toolkit of approaches and resources emerged from much of this pioneering work, its use has often been limited and considerations of âresponsible innovationâ have often been marginalized in strategic management thinking (although there have been some high profile exceptions, such as the long-running debate around genetically modified foodâsee Von Schomberg (Chapter 3).
The key themes and content of responsible innovation will be explored in detail in later chapters in this book. The purpose of this chapter is to look at how the twenty-first century environment is changing and the challenges this poses for innovating organizations: important context for the discussions of responsible innovation that follow. In the face of some radical technological, market, social, and political shifts, how should they be thinking in terms of adapting and configuring their innovation processes? What are the strategic options open to them and how could they best explore the innovation space? Of the bundle of learned behavior patterns which they make use of, which ones should they be doing more of, reinforcing and strengthening? Which ones should they be doing less of, or even stoppingâthings which worked in the past but may no longer be suitable approaches? And which new behaviors are they going to need to learn and practice to take advantage of the newlyâemerging context in which they are operating?
Before we move to the challenges it is worth spending a little time looking at two core questions around where and how organizations could innovate.
1.2 How Can We Innovate?âInnovation as a Process
Unlike the cartoon image, innovation requires a little more than just a light-bulb moment as an idea flashes above someone's head. In reality it involves a journey, growing and shaping the original trigger idea into something which can spread across a population and create value. As Figure 1.1 shows, traveling along this road means finding answers to some key questions:
No organization starts with a perfect model of the innovation process. Instead it is something they build up through a learning process, trying out new behaviors and hanging on to those which work. Eventually these patterns of repeated and learned behaviorsââroutinesââbecome embedded in âthe way we do things around hereâ and take shape in the form of policies, procedures, and rules (Nelson and Winter, 1982; Zollo and Winter, 2002). They will vary between organizationsâeveryone finds their own particular way of answering the basic questions and some recipes work better than others. This is useful, since it allows us to learn not only through experience but also by watching how others manage the innovation task and grafting on useful new approaches and ideas.
However, we should also recognize that learning to manage innovation is not just a matter of building capability to deal with the questions of searching, selecting, implementing, and so on. Environments are unpredictable and complex, so we don't know what will emerge in the way of new threats or opportunities. So the key to long-term innovation management success is to build âdynamic capabilityââto be able to step back and review our innovation process and reconfigure it on a continuing basis (Teece et al., 1997). This is as much about letting go of old routines as it is about developing new ones.
1.3 Where Could We Innovate?âInnovation Strategy
Innovation can take many different formsâas Figure 1.2 suggests, there is plenty of space to explore (Francis and Bessant, 2005). We can think of four core dimensions:
- âproduct innovationââchanges in the things (products/services) which an organization offers;
- âprocess innovationââchanges in the ways in which products and services are created and delivered;
- âposition innovationââchanges in the context in which the products/services are introduced;
- âparadigm innovationââchanges in the underlying mental models which frame what the organization does.
Table 1.1 gives some examples of these. In reality, of course, various combinations of incremental and radical innovation across these fields are possible. The key issue for any organization is to ensure that it explores its options thoroughlyâit may choose not to pursue every idea but it is important to avoid being surprised!
Table 1.1 Potential directions for innovation strategy
| Productâwhat we offer the world | Windows 7ÂŽ and Windows 8ÂŽ replacing VistaÂŽ and XPÂŽâessentially improving on an existing software idea | New to the world softwareâfor example, the first speech recognition program |
| New versions of established car modelsâfor example, the VW Golf essentially improving on established car design | Toyota Priusâbringing a new conceptâhybrid engines. Teslaâhigh performance electric car. |
| Improved performance incandescent light bulbs | LED-based lighting, using completely different and more energy efficient principles |
| CDs replacing vinyl recordsâessentially improving on the storage technology | SpotifyÂŽ and other music streaming servicesâchanging the pattern from owning your own collection to renting a vast library of music |
| Processâhow we create and deliver that offering | Improved fixed line telephone services | SkypeÂŽ and similar systems |
| Extended range of stock broking services | On-line share trading |
| Improved auction house operations | eBayÂŽ |
| Improved factory operations efficiency through upgraded equipment | Toyota Production SystemÂŽ and other âleanâ approaches |
| Improved range of banking services delivered at branch banks | Online banking and now mobile banking in Kenya, Philippinesâusing phones as an alternative to banking systems |
| Improved retailing logistics | On line shopping |
| Positionâwhere we target that offering and the story we tell about it | Häagen-DazÂŽ changing the target market for ice cream, from children to consenting adults | Addressing underserved marketsâfor example, the Tata Nano aimed at the emerging but relatively poor Indian market with cars priced around $2000 |
| Airlines segmenting service offering for different passenger groupsâVirgin Upper Class, BA Premium Economy, and so on | Low cost airlines opening up air travel to those previously unable to afford itâcreate new markets and also disrupt existing ones |
| DellÂŽ and others segmenting and customizing computer configuration for individual users | Variations on the âOne laptop per childâ projectâfor example, Indian government $20 computer for schools |
| On line support for traditional higher education courses | University of Phoenix and others, building large education b... |
