Innovation Management in Mature Business Organisations

Term Paper , 2004 , 15 Pages , Grade: A

Business economics - Business Management, Corporate Governance

Innovation and Entrepreneurship is not only an important issue for new start- up companies but also within well-established big companies and ¯rms. Without invention and innovation, every company will die sooner or later when younger corporations take over markets with better, cheaper or substitutive products and services. Thus, innovation management, understood as being the set of activities that ¯rms undertake in order to yield new solutions within products, production, and administration, is an essential task for matured companies in order to keep their competitiveness. This leads to the question: What determinants of orga- nizational culture have an in°uence on stimulating and promoting innovation in organizations? The main contribution of the proposed paper is a discussion based on topical literature on how a general framework for e®ective innovation management, cus- tomizeable to individual situations and di®erent ¯rms, can look like. Besides the cultural and organizational aspects of innovation management in established ¯rms, the proposed paper will particularly focus on the analysis and evaluation of the concept of innovation networks.

Contents

1 Introduction

2 What is Innovation Management?

3 Organizational Culture and Innovation Management
3.1 Leadership Principles for Innovation Management
3.2 Establishing Behavioral Norms that Encourage Innovation
3.3 Communication
3.4 Support Mechanisms for Innovation Management
3.5 Organizational Structures
3.6 Innovation Networks
3.6.1 Functions and Impacts of Innovation Networks
3.6.2 Forms of Innovation Networks

4 Conclusion

References

1 Introduction

In times of hyper-competition and difficult market environments, the need for firms to inno- vate has probably never been greater. According to Drucker (1985), innovation means the skill to create purposefully changes on an “enterprise’s economic or social potential”. Thus, inno- vation can be understood as the implementation of a new and possibly problem-solving and marketable idea, practice or material artifact (e.g. a product) which is regarded as new by the relevant unit of adoption and through which change is invoked. Drucker differentiates between seven sources of innovation in the main part of his article: (a) Unexpected occurrences, (b) incongruities, (c) process needs, (d) industry and market changes, (e) demographic changes, (f) changes in perception, and (g) new knowledge.

Innovation needs to be directed at products, processes, markets, production competencies as well as administrative competencies. Although nobody can be forced to be innovative or creative, there are different approaches of innovation management, which are able to encourage innovational behavior in organizations.

2 What is Innovation Management?

According to Drejer (2002), innovation management consists of five core activities and properties that together define it:

a) Technological integration: This activity refers to the integration between technologies and the product-markets of the firm and emphasizes the aspect of customer satisfaction with the innovations of any firm. This means, that technology development needs to be integrated with the development of marketable and customized products.
b) The process of innovation: This strategic level issue refers to the cross-functional business process of activities that create innovations across the departments of the firm. No single department can be responsible for innovation and, thus, cross-functional are a necessary prerequisite for creating innovation innovations. Resource allocation to innovational projects is necessary to let ideas and innovations grow.
c) Strategic technology planning: This activity refers to the planning of technology and/or competence projects with the aim of maintaining a portfolio of technologies and compe- tencies within the organization.
d) Organizational culture and change: Innovation is closely related to organizational change. Independently from the size of the organization, innovation will affect the organization and its environment with needs for new knowledge, new markets, new employees etc. Organizational and strategic change has to accompany upcoming innovation.
e) Business and strategy development: Innovation should be seen as a means for creating new and improved business for the company. That is innovation can both drive and be driven by business and strategy development as a critical element of innovation manage- ment.

3 Organizational Culture and Innovation Management

According to Tushman and O’Reilly (1997), organizational culture lies at the heart of organi- zation innovation. Organizational culture is defined in many different ways in the literature. We will use the definition of Martins (2003), defining organizational culture “as the deeply seated (often subconscious) values and beliefs shared by personnel in an organization.” By this, organizational culture is manifested in the typical characteristics of a company or any other organization. All implicit and explicit assumptions, rules, and norms which are forming these characteristics are maintained in the continuous process of human interaction (which manifests itself in attitudes and behavior). Furnham and Gunter (1993) summarize the func- tions of organizational culture as internal integration (for example, socializing of new members in the organization, creating the boundaries of the organization, the feeling of identity among personnel and commitment to the organization) and coordination (for example, developing new competence and strategies within the organization).

Organizational culture that supports creativity and innovation can be associated in the following ways with certain environmental circumstances, strategic approaches, the values and actions of top management, organizational structure and technological cycles, which determine the following described dimensions of organizational culture (Martins 2003):

a) Mission and vision: This dimension constitutes a framework for collective goals and ob- jectives determines how these can be transformed into individual and team goals and objectives.
b) External environment: This dimension determines the degree of focus on external and internal customers and also employees’ perception of the effectiveness of community involvement. It enforces reaction to critical incidents outside and within the organization, which is reflected in the strategy (e.g. innovation strategy) of the organization. For example, a competitive market and economy situation encourages continual changes in products, technology and customer preferences.
c) Means to achieve objectives: This dimension determines the way in which organizational structure and support mechanisms contribute to the effectiveness of the organization.
d) Image of the organization: This dimension focuses on the image of the organization to the outside world Typical elements are for example public relation principles.
e) Organizational structure and management processes: The static structure (e.g. flexible structure characterized by decentralization) of an organization determines in turn how the management is allowed to reach organizational goals. Thus, this dimension focuses also on the approach in which management executes it processes within the organization and is closely related to the next item.
f) Leadership: This dimension focuses on the leadership style and on how specific leadership methods, as perceived by personnel, are implemented and executed within the orga- nization. It includes aspects such as for example shared decision making, formulating goals, innovation processes, control processes, communication and all applied manage- ment techniques. It reflects the managers’ values and beliefs such as free exchange of information, open questioning, support for change, diversity of beliefs.
g) Employee needs and objectives: This dimension focuses on how the organization cares about the integration of employees needs and objectives perceived during his work in the organization.
h) Interpersonal relationships: This dimension focuses on the relationship between managers and personnel, on the management of conflict, and on the relationship of other groups of employees.
i) Technology: This aspect includes knowledge of individuals and availability of facilities (e.g. computers, Internet) to support the creative and innovative process.

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Fig. 1 illustrates how the basic elements of organizational culture are categorized and related to innovation. In particular, they influence creativity and innovation in two ways:

1. Socialization processes in organizations teach individuals implicitly which behavior is acceptable and how activities should be performed. In accordance with shared norms, individuals will make assumptions about whether creative and innovative behavior forms part of the way in which the organization operates.

2. The basic cultural values, assumptions and beliefs become enacted in established forms of behaviors and activity and are reflected as structures, policy, practices, management practices and procedures. These impact directly on creativity in the workplace, for

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Fig. 1: Creativity and Innovation in Organizations (Martins et al. 2003)

example, by providing support with innovational management. In this way, individuals in organizations come to perceive what is considered valuable and how they should act in the workplace.

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• College: University of Massachusetts - Amherst (Isenberg School of Mangement)
• Grade: A
• Author: Malte Sunderkötter (Author)
• Publication Year: 2004
• Pages: 15
• Catalog Number: V29631
• ISBN (eBook): 9783638310987
• Language: German
• Tags: Innovation, Management, Mature, Business, Organisations