MEF11.

5,SummerTerm2016,Lecture
4

30/05/2016

4. Sources of Innovation
M-EF_11.5
Innovation Management
Summer Term 2016

Prof. Dr. Oliver Serfling

Outline
The Innovation Theories gave us some
insights about the course and process of
Innovation. In this chapter we will examine
how the innovation process can commence
and what are the preferential conditions and
required sources for innovation:
Review of the innovation process
Distinguishing the different ways the
innovation process can commence
Analysis of diverse sources of innovation
(relative) importance of different sources
of innovation
recent changes in the (relative)
importance of particular sources

Reading:

Books:
Smith(2009),Ch.5
Tidd,Bessant (2009),Ch.5

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Insights and sources of innovation

In the following, the focus is
on the invention stage of
innovation.

There are sources that

trigger the creation of
insight:

Invention is started with

insight
Insight is the point where a
mental act goes beyond
the skill normally expected
from a person trained in
that field. (Usher 1954)

+ Employees

Patterns of Insight
Insight is the sudden (creative) moment of the birth of an idea
How does insight arise?
Patterns that form the basis of insight:
Association
Bringing together two unconnected ideas

Adaptation
Taking an existing solution and adapting it to another use

Analogy
Where a principle used in one context is used for a different
purpose

Serendipity
Chance, where random occurrences give rise to new insights

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Where do Innovations come from?

Source:Tidd/Bessant(2009),Figure5.1,p.230
5

Individuals
Schumpeter originally stressed the role of individual (lone
inventors) in innovation (Schumpeter Mark 1)
The garage model of innovation
i.e. start at home: 367 Addison Avenue, Palo Alto, California (HP)

Jewkes et al. (1969) showed that despite that only large firms
have the resources necessary to undertake technology-based
innovation, he source in more than half of innovation cases was a
single person
Why is the individual inventor still resilient?
Growth of small firm sector
New organisational arrangements e.g. strategic alliances
Small firms have greater knowledge of applications (which is also
important for innovation)
Availability of financial support e.g. business angels, venture capital
Powerful role model for would-be innovators

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Individuals and Innovations

Individual Product
Name
BillGore
GoreTex

Trevor
Baylis
James
Dyson
Dan
Bricklin

Linkto
innovation
Waterproof Work
fabric
experience
Product

Reference

Parsons&
Rose
(2003)
Baylis
Hobby
(1999)
Userandwork Dyson
experience
(1997)

Clockwork
Radio
DysonDual Bagless
vacuum
Cyclone
cleaner
Campbell
VisiCalc
Spreadsheet Userwho
spottedgapin Kelly
market
(2003)
n/a

Source:Smith(2009),Chapter5.

Corporations
In his later work, Schumpeter identified large business
corporations as the chief source of innovation (Schumpeter
mark 2)
Innovation became increasingly technology based
Requiring extensive research and development (R&D)

Famous examples of Corporate R&D Labs:

e.g. AT&Ts Bell Labs; Xeroxs PARC;
Aim is new discoveries that lead to new products

Part of an age of mass production

The era of large vertically integrated businesses
Still widely used but declining
Signs of a switch to Open Innovation

Large corporations now innovate sometimes with someone

elses technology rather with their own

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Reading: Users as Source of Innovation

The role of users was first identified by von Hippel in US in
1970s, focussing on the medical instruments industry

von Hippel, E. (1976), The dominant role of users in the

scientific instrument innovation process, Research Policy
(5)1976, pp. 212-239

Employees
Employees are a much under-estimated source of
innovation
Some companies operate suggestion schemes that
encourage and reward employees who come up with ideas
for
New products and services
Process improvements

Suggestion schemes in Japanese firms:

Participation rate is 70% of workers;
Adoption rate of suggestions is 87%;
Toyota > 2 million suggestions/ year, = 35 per worker;
Toshiba 4 million suggestions/year = 77 per worker;
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Suggestion Schemes
Suggestions per employee 1981-95
40
S
u
g 30
g
e
s 20
t
i
o 10
n
s
0
Year

(Source: Japanese Human Relations Association, 1996)

2013JohnWiley&SonsLtd.www.innovationportal.info

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Outsiders
are individuals which did not work in the field in which they
were to achieve success as innovators
are able to avoid pitfalls that industry insiders may run into
they provide a different perspective
are not held back by inhibitions or conventional wisdom
are not tied to (or not aware of) existing technological
paradigm (see Dosi 1982)
More willing to challenge existing assumptions
e.g. Dyson and the manufacturers who liked making bags for
vacuum cleaners

More likely to have broad range of external contacts

e.g. Aerospace contacts when McLaren made first composite F1
car

Circumvent not-inventedhere syndrome in corporations

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Outsiders as Innovators
Innovation
Photocopier
Personal
computer
Carbonfibre
F1racingcar
Internet
bookstore

Company
Haloid
Corporation
Apple
Computer
McLaren
International
Amazon.com

Innovator
Chester
Carlson
SteveJobs
&Steve
Wozniak
John
Barnard
JeffBezos

Date
1938
1977

1981
1995

Spill-overs
Research by one firm ends up benefiting others
Example of the VisiCalc spreadsheet
Positive External Effect leads to undersupply
Likely to occur when appropriability is problematic

May be associated with a region

e.g. Silicon Valley, Financial Centers

Often linked to staff mobility

The so-called staff churn and associated knowledge mobility

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Process needs
Sometimes the demands of the manufacturing process act
as a stimulus to innovation
Abernathy and Utterback (1978) note that this is most likely
to occur in industries which have reached a point of maturity
in terms of industry evolution
A bottleneck occurs
Intense pressure builds to cure the bottleneck
Very strong incentive for innovation
Often potential for massive cost reduction

Examples
Ford: Moving assembly line;
Pilkington: Float glass

Paradigm Shift towards Open Innovation?

Is there a paradigm shift from internal towards external
search for innovation?
Read the Article of
Giuliana Battisti, Jorge Gallego, Luis Rubalcaba & Paul
Windrum (2015), Open innovation in services: knowledge
sources, intellectual property rights and internationalization,
Economics of Innovation and New Technology, 24:3, 223247, DOI:10.1080/10438599.2014.924745
1.
2.
3.
4.

What are the four Hypotheses of the study?

How is data collected?
What are the main results?
Are the results in line with the general trend towards more
Open Innovation? Explain.
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Outlook
In the next chapter we will explore the
Process of Innovation by differentiating
commercialisation from invention and
distinguishing steps in the innovation
process.
commercialisation vs. invention
steps in the innovation process
activities associated with the process of
innovation
techniques available to facilitate the
process of innovation
models of the innovation process
open and closed forms of innovation

Reading:

Book:
Smith,D.(2009):
ExploringInnovation,2nd
ed.,Chapter6

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