Business Innovation

A Case Study Approach

Vijay Pandiarajan

• Publisher: Routledge
• Year: 2022
• eBook ISBN: 9781000538243
• Topic: Negocios y empresa
• Subtopic: Negocios en general

This book provides an understanding of innovation models and why they are important in the business context, and considers sources of innovation and how to apply business frameworks using real-world examples of innovation-led businesses.

After providing a solid background to the key concepts related to innovation models, the book looks at why innovation takes place and where the sources of innovation lie, from corporate research to crowd-sourced and government-funded initiatives. Innovation models across manufacturing, services and government are explored, as well as measuring innovation, and the impact of design thinking and lean enterprise principles on innovation and sustainability-driven imperatives.

Offering a truly comprehensive and global approach, Business Innovation should be core or recommended reading for advanced undergraduate, postgraduate, MBA and Executive Education students studying Innovation Management, Strategic Management and Entrepreneurship.

Part I “What” – Introduction to innovation

DOI: 10.4324/9781003190837-1

1. Chapter 1 Innovation – General background
2. Chapter 2 Models of innovation
3. Chapter 3 Challenges embracing innovation

1 Innovation – General background

DOI: 10.4324/9781003190837-2

1.1 Introduction

The term innovation has been around for nearly a century; however, it is widely recognized to be derived from its predecessor term invention. Invention is still a popular term and is used in many contexts but is quite different from innovation.

Merriam-Webster defines innovation as “1: A new idea, method, or device: NOVELTY 2: The introduction of something new.”

Oxford Learner’s Dictionary defines innovation as “1. innovation (in something) the introduction of new things, ideas, or ways of doing something. 2. innovation (in something) a new idea, way of doing something, etc. that has been introduced or discovered.”

Although there is some minor difference in the way the term innovation is defined, there is a general agreement in terms of the newness. For practical purposes, we define innovation as “application or use of newness or invention in a practical or business context to impact the society while generating significant value.” Often, innovation utilizes or leverages multiple inventions or innovations [1–4] that exist in different functional or technical domains that are either bundled or combined or integrated to make an impact on the scope and scale of the value realized. The value could be either personal or business and can be either quantified (tangible) or felt (in tangible), or both. At the end of the day, innovation is all about generating value either as a product, service, or process, for which there is a customer who is willing to pay. If there is no perceived value and no one is ready to pay for it, it is hard to justify it as an innovation. It could very well be an invention, and perhaps need some additional work to solve a problem for a use-case scenario so that such inventions demonstrate value for a potential customer. Invention is static without possible application, whereas innovation is taking the invention and applying it to solve a problem, which is action-based in nature.

For practical purposes, we define innovation as “application or use of newness or invention in a practical or business context to impact the society while generating significant value.”

1.2 Invention vs innovation

It is interesting to note that Austrian economist Joseph Schumpeter in 1939 was perhaps the first person who tried to differentiate invention from innovation by stating the following: “Invention is an act of intellectual creativity undertaken without any thought to economic impact, whereas innovation happens when organizations apply inventions to their business to realize economic benefits [5].”

To differentiate invention from innovation, let us look at an example. André-Marie Ampère, a French physicist, from the 19th century (January 20, 1775–June 10, 1836), founded the science of electrodynamics, now known as electromagnetism. Michael Faraday, an English scientist from the 19th century (September 22, 1791–August 25, 1867), built on the above work and further contributed to the study of electromagnetism, particularly the principles underlying electromagnetic induction. Understanding and theorizing of electromagnetism and electromagnetic induction after a significant number of experiments resulted in invention, of course, with no real-use case or application well thought through at that time. Presumably, there was no innovation per se in the minds of André-Marie Ampère or Michael Faraday when they explored and theorized electromagnetism and induction. However, now use of electromagnetism in our commonly used electric motors and power generators is considered an innovation, leverages and integrates inventions from other disciplines such as material science, manufacturing methods, thermal science, control engineering, and power network management.

Another interesting example is the World Wide Web (WWW) invention that everyone can relate to. Berners-Lee first attended Oxford and then worked at the European Organization for Nuclear Research (CERN). Later, around 1989, he began working on an internal technology platform called “Internet” at the US government, which was used by multiple US government agencies such as the Internal Revenue Service, Department of Agriculture, Department of Defense, etc. for over 30 years. His main contribution was in developing a computer program to allow data sharing across intra-government agencies seamlessly with proper access control, which was an issue at that time. Berners-Lee recognized significant value if converted to an open and democratic platform for all and decided to make the program free for everyone to use. The public release of the programming code suddenly took off and resulted in what we know now as the WWW invention [6]. Since then, the WWW has grown in many different directions and it is being leveraged by many businesses, government agencies, communities, academia, and private individuals to support their individual needs. Many businesses such as Google, Amazon, Airbnb, Uber, Facebook, Apple, Microsoft, Netflix, Tesla, Uber, to name a few, have built their business models based on the WWW being at the core. The WWW usage and business dependency on it have become very pervasive and it is experiencing an exponential growth. It can now legitimately be called an innovation, although the value that one receives and the risks associated with it may differ significantly from each other.

1.3 Historical perspectives of innovation

Canadian historian Benoît Godin, who has done extensive research into the origins of the word innovation, states that the term “novation” initially appeared in the 13th century in law journals to refer to contracts with the meaning of “newness.” In the 17th century, the term innovator was used to signify a “change agent,” which could have someone’s ears cut off with lifetime imprisonment as many religious institutions considered use of such words disrespectful and perhaps could instigate mutiny [7, 8].

Given its unpopular and punishing characterization, the word innovation had to wait until the beginning of 19th century to find a new appeal in society. Recognizing the importance of science and technology spearheaded by the second industrial revolution, various resourceful government agencies in countries such as the US, UK, Japan, and some of the European nations, sponsored and provided research grants to foster inventions and facilitated the deployment or commercialization of such inventions through what is called “innovation efforts” to benefit society in general.

Godin observes that innovation has been considered a structured process for more than three decades since the beginning of 1950. The process involved following three waterfall steps: Step 1: Theoretical research, i.e., invention, in labs; Step 2: Development of applications of that research; and Step 3: Leveraging the development of the application to seek economic outcome (value) through commercialization of the invention as usable products or services. Innovation was assumed to have a predictable research outcome tightly coupled to real-world applications and problems, which appealed to corporations and government agencies alike as value became the key driver. James Thompson, who in 1956 founded Administrative Science Quarterly, an interdisciplinary journal publishing theoretical and empirical work that advances the study of organizational behavior and theory, published an article that examines the relationship between conditions in bureaucratic structure and conditions identified by psychologists for creativity. Interestingly, contrary to the then-prevailing faith in the structured process for innovation, he concluded that the focus of productivity and organization control found in the bureaucratic structure is not consistent with the needs of innovative behaviors. He suggests that to foster innovation and its output, one needs to have a looser organizational structure, open communication without fear of reprimands, job rotation, increased group processes such as teamwork, continuous restructuring and team realignment, balanced incentives, and changes to conventional management practices [9]. This observation has become the cornerstone of many areas of organizational design and enterprise culture research in the subsequent decades and the findings are being adapted by many industry leaders to advance innovation. The discipline of design thinking and lean startups for innovation, which will be discussed in later chapters, have benefited significantly from James Thompson’s work.

1.4 Is innovation limited to products?

Innovation is often hypothesized to be product focused, which is not true. Innovation is not limited to products alone. There is process innovation and business model innovation as well.

The Organization for Economic Co-operation and Development (OECD)/Eurostat Oslo Manual, frequently cited for a common language or understanding of innovation as used for business analysis and planning, identifies innovation as follows:

• Product innovation refers to “a new or improved good or service that differs significantly from the firm’s previous goods or services and that has been introduced on the market. This includes significant improvements to one or more characteristics or performance specifications, such as quality, technical specifications, user friendliness or usability [10].”
• Business process innovation refers to “a new or improved business process for one or more business functions that differs significantly from the firm’s previous business processes and that has been brought into use in the firm.” This includes the various functions within a firm, such as the production of goods or services, distribution and logistics, marketing and sales, information and communication systems, and administration and management [10].

For example, traditionally manually intensive warehouse inventory processes can be automated leveraging sophisticated radio-frequency identification (RFID) scanners and related computer applications. The inventory process efficiency gains in these RFID-enabled processes are significant. Instead of counting inventories manually by single unit or box at a time, a large incoming shipment sitting on a master pallet, which may contain multiple individual pallets and/or boxes, can be bulk received and put away with relative ease into the warehouse bins or staging units just by scanning the master pallet RFID tag in an RFID tunnel. The labor savings are substantial and, in addition to efficiency gains, the process accuracy is far superior to the error-prone manual methods.

Innovation also could involve a business model itself in terms of new cost structure, pricing models including subscription plans, customer acquisition techniques, product and service delivery methods, post-sale warranty/support framework, market selection, etc. Business model innovation could leverage existing products or service innovations to deliver value to customers. Business model innovations are mushrooming in many industry verticals. For example, in the hospitality industry, Airbnb’s business model leverages self-serving on-demand technology platform innovations to seamlessly connect the rental property owners and the paying guests, cutting out the expensive reservation agents. Similarly, Uber Transportation Network Company’s business model thrives on leveraging intuitive mobile applications, cloud infrastructure, and sophisticated machine learning algorithms to connect car owners/drivers and passengers to facilitate customer rides at affordable cost.

Neither Airbnb nor Uber owns significant rental property or taxies but can compete with asset-rich dinosaurs such as Hilton and Yellow Cabs, respectively. The asset-light business models are built on dynamic commission-based revenue streams that leverage partnerships and special arrangements with the property or taxi owners. These new emerging business models not only break entry barriers for new entrants, but also allow traditional consumers to become non-traditional business owners in the form of an independent gig economy workforce who leverage their personal property, either apartment or personal cars, for a flexible work-life balanc...

Table of contents

• Cover
• Endorsement
• Half-Title Page
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of Figures
• List of Tables
• List of Exhibits
• Preface
• Acknowledgments
• Part I “What” – Introduction to innovation
• Part II “Why” – Innovation imperatives
• Part III “Where” – Sources of innovation
• Part IV “How” – Approach to advance innovation
• Part V Innovations in industry verticals
• Part VI Economics of innovation
• Part VII Special topics on innovation
• Part VIII Case studies
• Glossary
• Index