Innovation: Reinventing The Bottom Line

INNOVATION

RE-INVENTING THE BOTTOM LINE

Introduction

“Innovation” has become a contemporary buzz word. It is often used with great zeal by motivational gurus and business consultants, often in part, to justify exorbitant consulting and appearance fees. The greatest irony, as with many other buzz words, is that the term “innovation” is frequently used without specific or contextualised semantic value вЂ" without any real meaning. Despite this, most entrepreneurs know instinctively that innovation is crucial to finding a foothold and surviving in a globally competitive environment.

This paper will attempt to integrate the zeal of the of the gurus and the instincts of the entrepreneur through applying a logical theoretical framework that will assist the reader in understanding how to innovate in order to re-invent the bottom line towards greater profit.

1. What Is Innovation?

In order to understand and analyse a concept it is always useful to ensure that one moves from a point of departure where even the external reader is clear about the operative understanding of the concept employed in the discussion at hand. It is thus important to set the boundaries of the understanding, or definition, of innovation, as it will be understood within this paper.

Modern definitions of innovation abound but it is very useful to frame these modern definitions by one that is older, if only to show that humanity has been pondering the concept for more than just the recent past. Sir Francis Bacon (in Monopoli), who lived from 1561 to 1626, defined innovation thus:

“Innovation is something new and contrary to established customs, manners or rites”

Not that much has changed in the last three and a half centuries! In 1977, Zaltman and Duncan (1977) defined innovation thus:

“An innovation is any idea, practice or material artefact perceived to be new by the relevant unit of adoption”

Innovation is defined more recently and more simply as “the successful exploitation of new ideas” (Department of Trade and Industry, UK) and also as “change that creates a new dimension of performance” (Hesselbein, 2002).”

Burgleman (1984, 1991) in Rotenberg and Saloner (1998) also point out that innovation may occur in either a planned, or strategic fashion, or alternatively, in an evolutionary and unplanned manner. However innovation originates, Fagerberg (2004) points out that innovation may well be described as the first attempt to carry out an invention (of process or product).

Although this paper focuses on the aspects of positive innovation, it is also necessary to point out that innovation is not per se a positive. It is possible for innovation to have a negative impact and in some cases, innovation can destroy businesses. Mardle (2003) illustrates the point with an example from the digital revolution. KODAK generated most of its income, for most of its existence, from the sale of photographic film (a consumable). It remains to be seen whether Kodak will survive the invention of the digital camera (a durable good which replaced the consumable).

In the context of business management and economic gain, innovation must be qualified with the imperative qualifier that it must contribute to greater profit (Schumpeter, 1934).

It is important to contextualise the definition of innovation a little closer to our South African context as a developing economy. This is accomplished through the wide recognition given to the relationship between innovation and economic development, inter alia through the recognition of innovation as one of the three pillars of the Consolidated Science and Technology Plan of the African Union and NEPAD (New Partnership for Africa’s Development) (UNESCO, 2005.)

2. Why Is Innovation Necessary In Business?

In recent times there has been a pronounced focus on process methodologies (such as Six Sigma) as they key to increased profits. These processes are indeed important but Monopoli (2008) states that to focus on process only, on efficiency and cost, is no guarantee of long term success. Monopoli (2008) points out that it is innovation, which harnesses “the energy of passion” that is the most important engine for growth.

Innovation (as dealt with in this paper) is intrinsically linked to performance, improvements in rates of growth, greater levels of efficiency and productivity, improved quality and greater market share.

As Drucker (1985) observed: “All economic activity is by definition вЂ?high risk.’ And defending yesterday--that is, not innovating--is far more risky than making tomorrow.”

Drucker (1985) as many others conclude that enterprises that do not innovate, both in terms of product and systems, eventually will fail as the business of today will tomorrow be the business (and product) of yesterday. Demand is always a current concept and thus a business absolutely needs to stay current through innovation.

3. Primary Types of Innovation

Scholars differentiate between many different types of innovation. The more in depth one studies innovation, the more one might be able to differentiate different types of innovation.

For the purposes of this paper, the differentiated types of innovation identified by UNESCO (2005) for developing countries would be most relevant. These definitions are not unique and have been echoed by other authors but are at least specifically considered of developing economies.

Types of Innovation

3.1 Product innovation

This is where there is an introduction of a good or service that is new or substantively improved with respect to its features or intended uses. This includes where there are substantial improvements in technical specifications, components and materials, incorporated software, ergonomics of use or other functional characteristics.

3.2 Process innovation

Process innovation is the implementation of a new or substantively improved production or delivery method. This includes significant changes in techniques (how it is done), equipment (what it is done with) and/or information technology processes.

3.3 Marketing innovation

Marketing

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