Innovation and creativity 07 managing innovation

Introduction to:
Innovation and Creativity
BY KAMAL M. AL MASRI
Course code: ::::.BEAD4312..::::
Israa University Gaza
Faculty of Managerial and Financial Sciences
Departmentof Management
Chapter 07: Managing
Innovation

Innovation and Creativity By Kamal AL MASRI
2
ILO’s
 List main topics of managing innovation.
 Discuss the importance of innovation strategies.
 Explain how innovation strategies are made.
 Explain the role or senior management in innovation strategies.
 List and explain some types of innovation strategies.
 List the methods of financing innovation.
 Explain and contrast methods of financing innovation.
 Contrast the methods of financing innovation.

3
Introduction
 Organizations invest a proportion of turnover to
innovate.
 Particular goals should be achieved.
 A very large percentage of innovations fail to meet these
goals.
 Organizations need to work at the main ingredients for
success at managing innovation and apply themselves to
the five hallmarks listed (last chapter).

4
Concretely, managing innovation
means:
 Dealing with the external factors,
 Establishing strategies,
 Detecting opportunities,
 …
 Enhancing the internal environment:
 Funding processes,
 Leading people,
 Organizing work activities,
 Planning and setting goals,
 …

5
The best way to manage innovation?
While there is general agreement on the
imperatives for organizations to adapt to
turbulent environments there is
considerable disagreement on how best to
understand and manage these processes.
We need an effective management ...

6
Abundance of models and
frameworks…
In reality, there is no clear solutions to complex
problems, to the ambiguities and inconsistencies in
theories and practice,
but we may also find certain approaches that
resonate more than others in shedding insight and
offering explanation.
There is an abundance of models and frameworks
that purport to provide answers…

7
Three pillars/categories of innovation
management:
1. Strategy & Management
2. People & Culture
3. Processes, Tools & Metrics
 https://www.bearingpoint.com/ecomaXL/files/Innovation_High_Res.pdf page 27

8
1- Strategy & Management
 Vision: Vision for Innovation needs to be defined,
communicated and reacted/realized.
 Strategic Planning: Broadly defining scope of impact of
Innovation in line with business strategy.
 Funding & Resource: Allocation Broader funding and
appropriate allocation of resources based on prioritisation.
 Portfolio Management: Visualizing Innovation activities within
the life-cycle for decision making.

9
2- People & Culture
 Management Leadership: Visibility of the direction how to drive Innovation and
the support from leadership.
 Acceptance of Risk Taking: Level of attitude towards taking creative risks.
 Collaboration: Level and the scope of collaboration at the employee level.
 Capability Development: Skill development and performance management of
individual employees.
 Roles & Responsibilities: Penetration of Innovation activities as everyday work
at the employee level.
 Rewards & Recognition: Scheme of rewarding people based on contribution to
Innovation.

10
3- Processes, Tools & Metrics
 Innovation Processes: Integration of the processes
within the whole life-cycle of Innovation.
 Innovation Frameworks: Sharing and leveraging
methodologies and tools for Innovation.
 Measurement of Impact: Measurement of impact from
Innovation.
 Communication of Value: Communication of impact
from Innovation.

11
Vision and Strategy
 Despite massive investments of management time and money, innovation
remains a frustrating pursuit in many companies (cf. the cases last chapter).
 Innovation initiatives frequently fail, and successful innovators have a hard
time sustaining their performance (Polaroid, Nokia, Sun Microsystems,
Yahoo…).
 Why is it so hard to build and maintain the capacity to innovate?
 The reasons go much deeper than the commonly cited
cause: a failure to execute.
 https://hbr.org/2015/06/you-need-an-innovation-strategy
We need an effective management ...

12
Why strategy is important?
 Without an innovation strategy, the impact of innovation best practices and
efforts (decentralized autonomous teams, corporate venture-capital arms,
external alliances, open innovation, crowdsourcing, collaborating with
customers, and implementing rapid prototyping, …) can easily be wiped:
 The capacity for innovation stems from an innovation system:
 “a coherent set of interdependent processes and structures that dictates how the
organization searches for novel problems and solutions, synthesizes ideas into a business
concept and product designs, and selects which projects get funded.”

13
Why strategy is important? (cont.)
Individual best practices involve trade-offs.
Adopting a specific practice generally requires
a host of complementary changes to the rest
of the
organization’s innovation system.

14
Why strategy is important? (cont.)
A company without an innovation strategy
won’t be able to make trade-off decisions and
choose all the elements of the innovation
system.
Strategy tells about the way an organization
perceives innovation, the focus, the resources,
the place of value, …

15
Concretely, innovation strategy
determines:
The level of innovation (type),
the focus,
the resources,
the method,
the place in the market …

16
Specificity of innovation strategies
Innovation strategies are different from many
business strategies.
Because of the difficulty of predicting the steps,
time and impact of the innovation.

17
It’s an explicit roadmap for desired
future…
Innovation strategy isn’t about innovation tactics,
such as setting up an idea challenge, but more
about mapping organization’s mission, vision and
value proposition for defined customer markets.
It sets boundaries to innovation performance
expectations by simplifying and structuring
innovation work to achieve the best possible
outcome.
Innovation strategy can be described as an
explicit roadmap for desired future.

18
Recall: benefits of innovation strategy…
 It guides decisions on how resources are to be used to meet a business's
objectives for innovation, deliver value and build competitive advantage:
 Consistent action,
 Managing Trade-Offs,
 How much to invest?
 How to begin?
 When to stop?
 How will innovation create value for potential customers?
 How will the company capture a share of the value its innovations generate?
 What types of innovations will allow the company to create and capture value, and what
resources should each type receive?

19
Developing an innovation strategy
An innovation strategy doesn't come from zero
…
Strategies should include:
 an analysis of a business's competitive and technological
environment,
 its external challenges and opportunities,
 its distinctive advantages.
 This guide describes how to approach the development of your innovation strategy (HERE).

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Developing an innovation strategy
(cont.)
There are many different types of innovation, and
the type of innovation will be determined by the
innovation strategy.
The strategy will be influenced by:
 the stage the company has reached,
 where it is heading, and
 the desired outcome of the innovation.

21
5 Steps for Developing Your Innovation
Strategy (https://www.viima.com/blog/innovation-strategy)
 1. Determine objectives and strategic approach to
innovation.
 2. Know Your Market: Customers and Competitors.
 3. Define Your Value Proposition.
 The blue ocean strategy (see later)
 https://youtu.be/2N3XqyuOwIM
 4. Assess and Develop Your Core Capabilities.
 5. Establish Your Innovation Techniques and Systems.

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Determine your desired outcome
 Your innovation strategy should reflect what you want to
achieve from the innovation process, for example:
 Develop a new product - you may see an opportunity for a radical change in
the type of products offered on the market.
 Protect market share - in a dynamic global environment, continuous
innovation is required in many instances just to maintain market share.
 Expand market share - for example, offering existing products in a different
market.
 Sell or licence to another organisation - you may be looking at an exit
strategy, once the innovation is developed you can sell or licence the
innovation.

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(cont.)
Retain more staff - a commitment to innovation can
motivate and retain skilled staff by providing a challenging and
creative environment.
Improve operational efficiency - you may wish to reduce
costs through streamlining your operations.
Increased recognition in the marketplace - you may
wish to increase your profile in the marketplace through an
innovative marketing strategy.

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(cont.)
The type of innovation and the level of risk you attribute to
that innovation will vary depending on whether you are
seeking to expand your business or maintain your current
revenue or profit.
Your company may pursue multiple outcomes and therefore
will require multiple strategies.
Once you have determined your intended outcome and how
this fits within your company, think about the type of
innovation strategy that will best achieve your outcome.

25
Types of innovation strategies
Many classifications.
For examples, innovation strategies can be
classed according to:
 1- Timing of reaction: Proactive, active, reactive and passive
(Dodgson et al. 2008).
 2- Type of competition: Blue ocean vs. Red Ocean,
 3- Focus on technological innovation: Disruptive, routine,
architectural, radical … (HBR, here)
 …

26
Proactive Innovation strategies:
 Tendance to have strong research orientation and first-mover advantage,
and be a technology market leader.
 Access knowledge from a broad range of sources and take big bets/high
risks.
 Examples include: Dupont, Apple and Singapore Airlines.
 The types of technological innovation used in a proactive innovation
strategy are:
 radical - breakthroughs that change the nature of products and services
 incremental - the constant technological or process changes that lead to improved performance of
products and services.

27
Active innovation strategies
 Defending existing technologies and markets while being
prepared to respond quickly once markets and technologies
are proven.
 A broad sources of knowledge and medium-to-low risk
exposure; they tend to hedge their bets (careful).
 Examples include Microsoft, Dell and British Airways.
 These companies use mainly incremental innovation with
in-house applied research and development.

28
Reactive innovation strategies
Used by companies which are followers. They:
 have a focus on operations,
 take a wait-and-see approach look for low-risk opportunities,
 copy proven innovation and use entirely incremental innovators.
An example is Ryanair, a budget airline which has
successfully copied the no-frills service model of
Southwest Airlines.

29
Passive innovation strategies
Wait until their customers demand a change in
their products or services.
Examples include automotive supply companies as
they wait for their customers to demand changes
to specification before implementing these. (not
necessarily true for Valeo and Bosch for example).

30
Comparison …
Passive innovation
strategy
Reactive
strategy
Active innovation
strategy
Proactive innovation
strategy
Criteria/aspect
????/10Position in
the market
Levels of risk
Sources of
knowledge
Main type of
innovation
Resources
needed

31
Blue vs. Red Ocean Strategy (see here)
 Blue ocean strategy: the simultaneous pursuit of differentiation
and low cost to open up a new market space and create new
demand.
 Red oceans concerns the industries in existence today – the known
market space.
 industry boundaries are defined and accepted,
 and the competitive rules of the game are known,
 profits and growth are reduced.
 products become commodities, leading to cutthroat or ‘bloody’ competition (red
oceans).

32
Blue vs. Red Ocean Strategy (see here)

33
The innovation landscape map
This matrix considers how a potential
innovation fits with a company’s existing
business model and technical capabilities.
It can help to select a suitable innovation
strategy …

34
The Leadership Challenge (link here)
 Creating a capacity to innovate starts with strategy.
 The question then arises, Whose job is it to set this strategy?
 The answer is simple: the most senior leaders of the organization.
 Innovation cuts across just about every function.
 Only senior leaders can orchestrate such a complex system.
 They must take prime responsibility for the processes, structures,
talent, and behaviors that shape how an organization searches for
innovation opportunities, synthesizes ideas into concepts and product
designs, and selects what to do.

35
Four essential tasks in creating and
implementing an innovation strategy:
 1- to answer the question “How are we expecting innovation
to create value for customers and for our company?” and
then explain that to the organization.
 2- to create a high-level plan for allocating resources to the
different kinds of innovation.
 3- to manage trade-offs (what is best for the best for the
whole organization).
 4- to recognize that innovation strategies must evolve.

36
The Leadership Challenge (cont.)
Any strategy represents a hypothesis that is tested
against the unfolding realities of markets, technologies,
regulations, and competitors.
Just as product designs must evolve to stay
competitive, so too must innovation strategies.
Like the process of innovation itself, an innovation
strategy involves continual experimentation,
learning, and adaptation.

37
A quotation …
Managing innovation is a ‘challenge
to management... especially top
management and a touchstone of its
competence’ Peter Drucker

38
Pedagogy
Innovation needs a lot of pedagogy,
We have many tools:
 Lean Launch Pad,
 I-Corps,
 Case-studies,
 Mentors,
 …

39
Lean Launch Pad
 Lean LaunchPad is an entrepreneurship methodology created by Steve Blank to test and
develop business models based on querying and learning from customers.
 It is based on the scientific method and combines experiential learning with the three
building blocks of a successful lean startup: Alexander Osterwalder's "Business Model
Canvas", Steve Blank's "Customer Development Model, and Agile Engineering.
 Students of Lean LaunchPad propose and immediately test business hypotheses.
 They get out of the building to talk with prospective customers and partners, using this
customer feedback acquired in these interviews to refine their product or service; ensure
their product or service meets a customer need or solves a customer problem; and
validate that they have created a repeatable, scalable business model.
just for
reading

40
Financing innovation
Innovation activities (either for existing or for new
enterprises) need to be financed.
Some traditional ways are not able to respond to
needs.
Innovation activities are characterized by a high level of
risk.
We can be innovative in funding our business !!!

41
How to finance innovation?
Traditional ways of funding (own savings or bank
loans) can be useful, but not always!
Organizations need to find more innovative ways
to finance new businesses.
There are many different ways of funding.
Organizations may use one or many of them.

42
Many sources of finance:
 Personal financing (own savings, family loans, etc.).
 Traditional bank loans (interest, Riba).
 Microloans (or micro-financing).
 Venture capitalists (VC, Corporate VC.)
 Angel investors.
 Crowd funding.
 Mergers & Acquisitions.
 Grants and Development funds.
 Business Incubators (see Chapter 07a).
 …
Each type of
funding has its
advantages and
disadvantages: for
both sides of the
operation (of
funding).

43
For example, from the point of view of
innovators:
 Personal loans cannot cover serious projects.
 Traditional loans are risky.
 Microloans are very expensive.
 Angel seed funds are not easy to get.
 Grants and development funds are not sustainable.
 For detailed landscape of funding tools, see Nesta (here), page 6 and more.

44
What Is a Venture Capitalist (VC)? (investopedia)
 A private equity investor that provides capital to companies exhibiting
high growth potential in exchange for an equity stake.
 This could be funding startup ventures or supporting small companies that
wish to expand but do not have access to equities markets.
 Venture capitalists are willing to risk investing in such companies because
they can earn a massive return on their investments if these companies
are a success.
 VCs experience high rates of failure due to the uncertainty that is
involved with new and unproven companies.

45
What is an Angel Investor? (Investopedia)
 An angel investor (also known as a private investor, seed investor
or angel funder) is a high net worth individual who provides
financial backing for small startups or entrepreneurs, typically in
exchange for ownership equity in the company.
 Often, angel investors are found among an entrepreneur's family
and friends.
 The funds that angel investors provide may be a one-time
investment to help the business get off the ground or an ongoing
injection to support and carry the company through its difficult
early stages.

46
What is Crowdfunding? (investopedia)
 The use of small amounts of capital from a large number of
individuals to finance a new business venture.
 Crowdfunding makes use of the easy accessibility of vast networks
of people through social media and crowdfunding websites to
bring investors and entrepreneurs together, with the potential to
increase entrepreneurship by expanding the pool of investors
beyond the traditional circle of owners, relatives and venture
capitalists.
 See (8 Crowdfunding Sites here)

47
Other innovative funding methods …
Merchant cash advances and Equipment
loans, see link (here).
Specific innovation funds, see “the GIF”
(here)
Research article (here).

48
Compare, avaluate and choose!
OthersCrowd fundingAngel
Investor
Venture
Capitalist
Traditional
Bank Loans
Family and
private loans
Criteria/
aspect
…??? /10Cost
Levels of risk
Availability/a
cessibility
Sustainability
Volume
…
All depends on the
context…

49
13 methods for innovation…
 There are many ways to help bring good ideas to life (NESTA).
 Have a look (here).
 These techniques, tools and processes are collectively known as innovation
methods. (NESTA)
8. Innovation mapping
9. People Powered Results: the 100 day
challenge
10. Prototyping
11. Public and social innovation labs
12. Scaling grants for social innovations
13. Standards of Evidence
1. Accelerator programmes
2. Anticipatory regulation
3. Challenge prizes
4. Crowdfunding
5. Experimentation
6. Futures
7. Impact investment
Will be discussed
separately

50
Topics for further reading (Dawson, &
Andriopoulos, 2017: 292)
 Change Management Practice: Choices, Lessons Learned and Key Considerations
Introduction
 Reasons for change: context, drivers and choices
 The role of government in driving change: electricity in New Zealand and the politics
of privatization
 Environmental determinism and strategic choice
 Scale and type of organizational change
 The practice of managing change: guidelines, lessons and perspectives
 Reflective exercise: how leaders spark and sustain change
 The practice of managing innovation and change: success and failure

51
References
 Essentials of the Management of Creativity and Innovation in Education,
Business, and Engineering, Christian H. Werner and Min Tang, 2017. in
Handbook of the management of creativity and innovation: Theory and
practice, World Scientific Press, 2017.
 Dodgson, Mark, Gann, David and Salter, Ammon. 2008. The Management
of Technological Innovation: Strategy and Practice. Completely rev. and
updated. Oxford: Oxford University Press.
 Patrick Dawson, Constantine Andriopoulos, 2017, Managing Change,
Creativity & Innovation, Sage, 2017, London.
 HBR, here.

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