Module 1: Course Introduction

Module Introduction
Innovation is talked about a great deal these days. It seems scholars, business professionals,
public sector leaders and non-profit organization managers all talk about the need to innovate
in order to succeed. This is because innovation is important. Survival across time requires
organizations to innovate and evolve – or risk becoming obsolete.
This module introduces innovation. It provides useful information to help you appreciate key
concepts. It provides the foundation from which additional learning through the term can
occur.

Learning Objectives
By the end of this module, you should be able to:
1. Define innovation;
2. Describe the link between innovation and competitive success;
3. Indicate how innovation impacts society – both positively and negatively;
4. Outline the importance of strategy and management in enabling innovation;
5. Understand the link between creativity and innovation; and
6. Recognize the roles played by various players contributing to innovation.

1. How do you define Innovation?

Innovation can be defined in different ways. One interesting definition is provided by Professor Bill
Aulet of MIT. He defines innovation as invention x commercialization, meaning effort needs to be made
to bring new ideas out to the world and make it valuable. He lays this idea out in short video; a link to
this video sits below. https://youtu.be/oD7X3KvJAVk

Another definition of innovation is the “art, science or process of developing better solutions from
existing ideas” and often connects the dots between different views and perspectives. This definition is
furnished – and further elaborated – by CPI, an independent technology innovation centre. More on
this definition is available here by accessing this link: https://youtu.be/rdeGkwnueaM

While these and other definitions are interesting, a very strong definition of innovation – and the one
we will use for this course – is given by Schilling. It states that technological innovation is “the act of
introducing a new device method of material for application to commercial or practical purposes
(Schilling, p. 1).

2. What is the link between innovation and competitive success?

Across industries, innovation “is now the single most important driver of competitive success” (Schilling,
p. 1). Many companies rely on products developed within the prior five years for a large portion of
their sales and profits. In high-tech industries, this five-year period may be even shorter. Indeed, for
companies in the computer, software, telecommunications and other industries, the period may be
under three years (Schilling, p.2).

Innovation often enables enhanced efficiency – improving the way products are produced or brought to
market. Organizations that do no evolve by constantly improving their sourcing, production and
distribution run the risk of falling behind their competitors. Innovation contributes to – and expresses –
competition and competitive success.

It is useful to note that globalization has contributed to innovation. Amy Karen provides some useful
thoughts on this phenomenon in a TEDx talk. This is available by accessing the following link:
https://youtu.be/HIuzw1kIgpo

Advances in information technology have also helped accelerate the pace of innovation. Stronger,
faster computers provide a strong enabling capacity to buoy innovation. Better and more timely
information has helped shorten product development life-cycles – and helped bring products to market
faster than in previous times.

3. How does innovation impact society?

Positive Impacts

Innovation improves the range of goods and services available. It also enables greater efficiency and
efficacy in creating and providing these goods and services. Indeed, it has “made the production of
food and other necessities more efficient, yielded medical treatments that improve health conditions
and enabled people to travel to and communicate with almost every part of the world” (Schilling, p. 2).

How has GDP (Gross Domestic Product) been impacted by innovation? GDP has increased steadily over
the last 50 years. While labour and capital have contributed to some of this growth – not all growth is
due to labour and capital. The Solow residual refers to the growth in GDP represented by what is not
due to labour and capital – what Solow contended was due to technological change (Schilling, p. 2). A
short video provides more information on the Solow residual. A link to this video is located here; feel
free to watch in (and do not worry about the complex equations expressed in it – just listen for and
observe the key ideas): https://youtu.be/jmK8n5fA-J0

Negative Impacts

It is important to note that technological innovation may sometimes produce negative by-products or
“negative externalities.” (More information on negative externalities is given by Professor Paul Hanly in
the video attached to this link: https://youtu.be/JXsrqr6wjsg). Negative externalities from innovation
might include pollution or environmental damage. Or it might include unintended consequences – like
“antibiotic resistant strains of bacteria” arising from new medical technologies.

Innovation may impact social inequality. Technology may dislocate workers and while new jobs may be
created, those losing jobs may not be qualified or able to secure new jobs. The attached PBS video
provides some useful thoughts on this. https://youtu.be/MEoRz58er8A

4. Why is strategy and management important to innovation?

As Schilling rightly notes, “successful innovators have clearly defined innovation strategies and
management processes” (Schilling, p. 4). A strong strategy allows for clarity of goals – and management
activities can work to ensure that the strategies are effectively interpreted and executed. Strong
strategies and management allow for a greater success – more new products and shorter development
cycles.

New Product Development & The Innovation Funnel

How long does new product development take? Well, that depends. Incremental improvements take
less time than big, substantial changes – or next generation improvements. Brand new, never been
seen before products or technologies typically take the longest amount of time.

When thinking about new product development, it is useful to think of a funnel – an Innovation Funnel.
The Innovation Funnel depicts many new ideas going in the wide end and ending with very few projects
making it through the whole process – going through the entire funnel – and being successful
introduced and sold.
Effective Management

A company’s innovation projects should align with its resources and objectives, leverage its core
competencies and should help the firm realize its strategic intent (Schilling, p. 6). A company’s
organizational structure and control systems should enable the creation, management and execution of
new ideas. A company’s new product development processes should be structured to maximize the
technical and commercial success of each project. To achieve these goals, a firm needs the following
(per Schilling, p. 6): (a) an in-depth understanding of the dynamics of innovation; (b) a well-crafted
innovation strategy; and (c) a well-designed processes for implementing the innovation strategy.

5. What is the link between creativity and innovation?

Creativity refers to the ability to produce work that is useful and novel (Schilling, p. 20). Novel denotes
work “that is different from work that has been previously produced and surprising in that it is not
simply the next logical step in a series of known solutions” (Schilling p. 20). Note that the “most creative
works are novel at the individual producer level, the local audience level, and the broader societal level”
(Schilling, p. 20). An interesting video is attached to the link below – outlining the connection between
creativity and innovation. https://youtu.be/FXJUDyqobbM

Individual Creativity vs Organizational Creativity

Individual creativity is a function of several factors - intellectual abilities, knowledge, personality,

motivation, and environment (Schilling, p, 20). Some research suggests that the most important
capability related to individual creativity is the ability to look at problems in unconventional ways
(Schilling, pp. 20-22).

Organizational creativity “is a function of creativity of the individuals within the organization and a
variety of social processes and contextual factors that shape the way those individuals interact and
behave” (Schilling, p. 22). Organizations can amplify and harness individual creativity – or they can work
to stifle and squander individual creativity. An organization’s culture, structure, processes, routines and
incentives work to either amplify and harness or stifle and squander individual creativity.

Idea collection is important. Idea collection systems - such a suggestion boxes - are only an important
first step with innovation. Managers need to be coached to signal to employees that their ideas are
valued and respected. Employees can also be trained to use useful tools to help foster and enable
creativity. An excellent video on how Google helps foster innovation is attached to this link:
https://youtu.be/deDncBTgy5I I encourage you to watch it.

6. Who are the various players contributing to innovation?

An inventor is an important source of innovation. Are inventors born or are they made? This question
has been the focus of much study – and there is some disagreement on the answer. Note that, as
Schilling indicates, the qualities that make an individual inventive do not necessarily make that individual
entrepreneurial (Schilling p. 26). Schilling also lays out some important characteristics of inventors.
Inventors (a) have mastered the basic tools and operations of the field in which they invent, but typically
have not specialized solely in that field; (b) are curious, often more interested in problems than
solutions; (c) question previous assumptions made in the field; (d) have a sense that all knowledge is
unified, are generalists by nature and seek global not local solutions (Schilling pp. 24-25).

Users are a key source of innovation. Users are aware of needs that have gone unmet and might often –
because of necessity – have a strong motivation to find ways to meet those needs. The video attached
to this link provides some examples. https://youtu.be/EdHKNsoAiM4

Companies are a very important driver of innovation. Through their research and development efforts,
firms enable important new ideas to bear fruit. Many firms invest in “applied research” – research to
serve a specific commercial objective. Some firms invest in “basic research” – though this is more often
research done by universities or think-tanks. Basic research refers to research that does not have an
immediate commercial objective in mind.

Collaboration around innovation can occur across a wide-range of relationships. “The most frequent
collaborations are between firms and their customers, suppliers and local universities” (Schilling, p. 28).
Companies may also collaborate with competitors. Microsoft both competes with – and collaborates
with – Rockstar Games (Schilling, p. 29). Many NGOs compete with each other for domestic fundraising
– but innovate through new collaborative undertakings with government grants and/or program
approaches and implementation.

Companies may also collaborate with complementors. Complementors are producers of

complementary goods or services. Intel and Microsoft are complementors – in that Microsoft products
rely on intel chips embedded in the sale of products using Microsoft operating system software.
Companies invest in their own innovation which tends to complement research done by external
sources. Doing in-house research helps grow an organization’s absorptive capacity. Absorptive capacity
denotes the ability of an organization to appreciate and employ new knowledge (Schilling, p. 28).

Other important players include universities, governments (through their labs and research funding) and
private non-profit organizations. Each of these make contributions to research, development and
innovation.

Collaborative Networks

Collaborative research and development networks are important to successful innovation. There are
many types of these network arrangements – and include joint ventures, licensing and second-sourcing
agreements, research associations, government -sponsored joint research programs, value-added
networks for technical and scientific interchange, and informal networks that sometimes arise (Schilling,
p. 32). The flow of information and level of interaction and collaboration is a function of the structure
of the network – how the network is set up. The size and density of the network can influence the
innovation that comes from that network.

Companies in close geographic proximity are more likely to collaborate. An example would be Silicon
Valley’s semiconductor firm collaboration (Schilling, p. 33). “Technology clusters are regional clusters of
firms that have a connection to a common technology and may engage in buyer, supplier and
complementor relationships as well as research and collaboration” (Schilling, p. 33). Technology clusters
may be across a wide range of geographic areas – as small as a city or region within a province or across
a group of neighboring countries. Proximity helps enable knowledge transfer (Schilling, p. 34). The
transfer may be both complex knowledge (knowledge with several components) and tacit knowledge
(knowledge that cannot easily be codified).

Technological Spillovers

Technological spillover refers to the situation wherein benefits from the research activities of one entity
provide a benefit to other entities. The speed at which technology spillovers will occur is a function of
how well the originating entity protects the benefit and the nature of the underlying knowledge
(Schilling, pp. 36-37).
Module Summary
You should now be able to:
1. Define innovation;
2. Describe the link between innovation and competitive success;
3. Indicate how innovation impacts society – both positively and negatively;
4. Outline the importance of strategy and management in enabling innovation;
5. Understand the link between creativity and innovation; and
6. Recognize the roles played by various players contributing to innovation.

References

Aulet, Bill. (April 16, 2014). What is Innovation? YouTube https://youtu.be/oD7X3KvJAVk

Baird, Anna. (August 17, 2020). Google’s Principles of Innovation. YouTube

https://youtu.be/deDncBTgy5I

CPI. (July 30, 2019). What is Innovation? YouTube https://youtu.be/rdeGkwnueaM

Everything Econ. (June 10, 2020). The Solow Residual. YouTube https://youtu.be/jmK8n5fA-J0

Hanley, Paul. (October 8, 2018). Positive and Negative Externalities. YouTube

https://youtu.be/JXsrqr6wjsg

Karen, Amy. (June 16, 2017). Innovation & Globalization: Why We Need to Adapt? YouTube
https://youtu.be/HIuzw1kIgpo

Louel, Sean. (December 5, 2013). Creativity and Innovation. YouTube https://youtu.be/FXJUDyqobbM

NOVA TV. (June 26, 2020). Necessity is the Mother of Invention. YouTube
https://youtu.be/EdHKNsoAiM4

PBS. (November 28, 2018). How Technological Innovation Could Amplify Income Inequality. YouTube
https://youtu.be/MEoRz58er8A

Schilling, Melissa. Strategic Management of Technological Innovation (6th edition). (New York: McGraw
Hill, 2020)