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AAMINA SULEMAN

BS29 2367

INNOVATION IS THE KEY TO SUCCESS In the contemporary world, where social, economic, political and technological changes are occurring, it is essential to have an innovative approach to management, in order to find success in a business. A businesss real asset is its ideas. Creativity is the development of novel ideas while innovation is the process of commercializing those ideas.

There are areas to asses which organisational and management structures and practices best lead to innovative capability for the business: Managing creative and innovative people, developing peoples innovative capability, developing a culture of innovation, applying performance management to innovation, using competency approaches with innovation, taking advantage of creative ideas, understanding forces that stifle innovation, responding to workplace trends affecting innovation, exploiting the many sources of innovation, measuring innovation at a strategic level.

Executives now firmly believe that innovation is central to a company's strategy and performance, but getting it right is as hard as ever, according to a McKinsey Global Survey. Some 70 per cent of corporate leaders say innovation is among their top three priorities for driving growth (2007). This is because there are many advantages to being innovative. First, innovating firms benefit from early involvement in new technologies or business opportunities. Innovation allows companies to sense developments in a wide range of externally developed inventions by buying minority stakes in (high-tech) startups, participating in venture capital funds, or by providing educational investments in

PRINCIPLES OF MANAGEMENT

AAMINA SULEMAN

BS29 2367

promising projects at universities or research labs. The advantage of this strategy is that companies learn early on about new technologies: at that stage investments are small and reversible. Nokia or Apple, for instance, is continuously identifying opportunities in its own ventures organization; it systematically scans emerging trends and changes from the perspectives of technology, business and users. Secondly, innovating firms also benefit from delayed entry or delayed financial commitment. Open innovation practices offer firms more flexibility about when to start the internal portion of the innovation process: a company can start exploring the commercial possibilities of a technology outside initially, via relationships with universities, SMEs and other innovation sources. The ability to delay the investment in internal innovation activity enables the firm to consider a broader portfolio of entry options at the beginning, and also supports more ways to develop growth opportunities from a technology. Third, open innovation offers firms the advantage of an early exit, and the ability to realize some value from projects that do not go forward internally. Open innovation is characterized by the possibility that innovating firms can always license or sell technologies or spin-off ventures that are not promising enough and/or that do not fit with their business model or core competencies. Thus, a project that is determined to be unpromising as a business (but might be valuable as a complement to another part of the business) could be spun off to a supplier, a complementor, or other third party. More over, innovative firms do not depend on the needs of people so much, these firm do not adapt culture in to their products instead they produce products or services that reshape the particular culture. Customer today have become highly materialistic, they not only want comfort but also quality and style. The

PRINCIPLES OF MANAGEMENT

AAMINA SULEMAN

BS29 2367

reason behind the success of companies can be their innovative approach towards products, customer experience, and processes. The worlds top 10 innovative companies:

Rank 2008

Company

HQ Country

HQ Continent

1 2 3 4 5 6 7 8 9 10

APPLE GOOGLE TOYOTA MOTOR GEBERAL ELECTRIC MICROSOFT TATA GROUP NINTENDO PROCTER & GAMBLE SONY NOKIA

USA USA JAPAN USA USA INDIA JAPAN USA JAPAN FINLAND

NORTH AMERICA NORTH AMERICA ASIA NORTH AMERICA NORTH AMERICA ASIA ASIA NORTH AMERICA ASIA EUROPE

Rev enue Gro wth 2004 -07 (%) 47 73 12 9 16 NA 37 16 8 20

Margin Growth 200407 (%) 69 5 1 1 8 NA 4 4 13 2

Stock Returns 200407 (%) 83 53 15 3 12 NA 77 12 17 35

Most Known for its Innovation in areas (%)

Products (52) Customer Experience (26) Processes (36) Processes (43) Products (26) Products (58) Products (63) Processes (30) Products (56) Products (36)

Hence, to work effectively, firms that adapt to the open innovation approach have to develop new competences and routines to become highly effective and to exploit the most benefits that can be obtained by the real options underlying the open innovation approach. And firms that are successful in doing so are able to lead the market, have a larger market, have a unique selling proposition and have the key to sustain themselves in times of changes and competition.

PRINCIPLES OF MANAGEMENT