Innovation management

Innovation management (IM) is based on some of the ideas put forth by the Austrian economist Joseph Schumpeter, working during the 1930s, who identified innovation as a significant factor in economic growth.[7] His book “Capitalism, Socialism and Democracy” first fully developed the concept of creative destruction.

Innovation management helps an organization grasp an opportunity and use it to create and introduce new ideas, processes, or products industriously.[2] Creativity is the basis of innovation management; the end goal is a change in services or business process. Innovative ideas are the result of two consecutive steps, imitation and invention.[8]

By utilizing innovation management tools, management can trigger and deploy the creative capabilities of the work force for the continuous development of an organization.[3] Common tools include brainstorming, prototyping, product lifecycle management, ideation, TRIZ, Phase–gate model, project management, product line planning and portfolio management. The process can be viewed as an evolutionary integration of organization, technology, and market, by iterating series of activities: search, select, implement and capture.[5]

Innovation processes can either be pushed or pulled through development. A pushed process is based on existing or newly invented technology that the organization has access to. The goal is to find profitable applications for the already-existing technology. A pulled process, by contrast, is based on finding areas where customers' needs are not met and finding solutions to those needs.[6] To succeed with either method, an understanding of both the market and the problems are needed. By creating multi-functional development teams, containing both workers or users plus marketers, both dimensions can be solved.[9]

Innovation, although not sufficient alone, is a necessary prerequisite for the continued survival and development of enterprises.[10] The most direct way of business innovation is through technological innovation, disruptive innovation or social innovation. Management of innovation, however, plays a significant role in promoting technological and institutional innovation.

The goal of innovation management within an organization is to cultivate a suitable environment to encourage innovation.[11] The suitable environment would help the organizations get more cooperation projects, even ‘the take-off platform for business ventures’.[11]^: 57 Senior management's support is crucial to successful innovation; clear direction, endorsement, and support are essential to innovation pursuits.[12]

Innovation is often a technological change that outperforms a previous practice. To lead or sustain with innovations, managers need to concentrate heavily on the innovation network, which requires deep understanding of the complexity of innovation. Collaboration is an important source of innovation. Innovations are increasingly brought to the market by networks of organizations, selected according to their comparative advantages, and operating in a coordinated manner.

When a technology goes through a major transformation phase and yields a successful innovation, it becomes a great learning experience, not only for the parent industry but other industries as well. Big innovations are generally the outcome of intra- and interdisciplinary networking among technological sectors, along with combination of implicit and explicit knowledge. Networking is required, but network integration is the key to success for complex innovation. Social economic zones, technology corridors, free trade agreements, and technology clusters are some of the ways to encourage organizational networking and cross-functional innovations.

Antonio Hidalgo and Jose Albor proposed the use of typologies as an innovation management tool.[13] The study conducted at a European level used 10 typologies for knowledge-driven Innovation Management Tools. These typologies were found by looking at 32 characteristics[14] that classify Innovation Management Tools. Hidalgo and Albors were able to narrow the list down to 8 criteria (knowledge-driven focus, strategic impact, degree of availability, level of documentation, practical usefulness, age of the IMT, required resources for implementation, measurability), that are especially relevant for IMTs in the knowledge-driven economy (knowledge economy). The advantage of using typologies is the easy integration of new methods and the availability of a broader scope of tools.

Criteria for selection of tools: IMTs that were sufficiently developed and standardized, that aimed to improve the competitiveness of firms by focusing on knowledge and that were freely accessible on the market and not subject to any copyright or licensing agreement.[14]

In economic theory, the management of innovation has been studied by Philippe Aghion and Jean Tirole (1994).[15][16] Their work is based on the Grossman-Hart-Moore property rights approach to the theory of the firm. According to this theory, the optimal allocation of property rights helps to alleviate the hold-up problem (an underinvestment problem that occurs when investments are non-contractible). In the work of Oliver Hart and his co-authors, the parties agree on the ownership structure that maximizes the parties’ expected total surplus (which they can divide with suitable up-front transfer payments according to their ex ante bargaining power). In contrast, Aghion and Tirole argue that in the relationship between a research unit and a customer the parties might not agree on the optimal ownership structure, since research units are often cash-constrained and thus cannot make up-front payments to customers. The model is also known as “the R&D game” (Tirole, 1999).[17] Laboratory research using the methods of experimental economics has found support for the theory.[18]

• Collaborative innovation network – a social construct used to describe innovative teams
• Design strategy
• Diffusion of innovations – a theory that seeks to explain how, why, and at what rate new ideas and technology spread through cultures
• Frugal innovation – process of reducing the complexity and cost of a good and its production
• Ideas bank – shared resource, usually a website, where people post, exchange, discuss, and polish new ideas
• Open innovation – a paradigm that assumes that organizations can and should use external ideas as well as internal ideas
• Pro-innovation bias – the belief that an innovation should be adopted by whole society without the need of its alteration
• Technology forecasting – the prediction of future characteristics of useful technological machines, procedures or techniques
• Technology scouting – a method of technology forecasting

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