Chapter 1: What Is Innovation – And Why Does It Matter?

Question 1

What is the origin of the word “innovation”?

Answer 1

The word “innovation” comes from the Latin word “innovare,” meaning change.

Question 2

How is innovation defined in terms of management?

Answer 2

In management terms, innovation is defined as the process of creating value from ideas.

Question 3

How does the case of Inditex exemplify innovation in the retail sector?

Answer 3

Inditex, through its retail outlets like Zara, pioneered a highly flexible and fast-turnaround clothing operation. It emphasizes close linkage between design, manufacture, and retailing, constantly gathering feedback from stores to generate new designs and experiment with new ideas directly on the public.

Question 4

How does innovation vary in terms of novelty?

Answer 4

Innovation varies in terms of novelty, ranging from minor incremental improvements to radical changes that transform the way we think and use products or services.

Examples include updating car styling versus introducing a completely new concept car with electric engines and new materials, or increasing lathe speed versus replacing it with a computer-controlled laser forming process.

Question 5

What is the analogy used to describe innovation’s impact on systems?

Answer 5

Innovation is likened to Russian dolls, where changes can occur at the level of components or the entire system.

For instance, changes in higher-level systems, like the shift from metal to plastic in car manufacturing, can have implications for lower-level components and processes.

Question 6

How is value defined in the context of innovation?

Answer 6

In the context of innovation, value is defined as creating a product or service that others find useful and are willing to pay for.

This economic underpinning provides the basis for innovation, where entrepreneurs use new ideas to create “value propositions” that customers in the marketplace find valuable enough to purchase.

Question 7

What are some examples of value propositions entrepreneurs use to drive innovation?

Answer 7

Entrepreneurs use value propositions such as cost-effectiveness, faster delivery, higher quality, and additional features to drive innovation and appeal to customers in the marketplace.

Question 8

How does innovation contribute to social value?

Answer 8

Innovation can contribute to social value by addressing societal needs and challenges.

For example, Dr. Venkataswamy, an eye surgeon in India, focused on bringing quality eye care, specifically cataract surgery, to millions of Indians who couldn’t afford it.

By developing alternative methods and reducing costs significantly, his efforts through the Aravind Eye Clinics transformed the lives of millions, illustrating social innovation.

Question 9

How does competition drive innovation in different sectors?

Answer 9

Competition drives innovation in various sectors by creating rivalry for markets or resources.

In the business sector, competition focuses on making products faster, cheaper, or with more features to gain a competitive edge.

In the public sector, competition involves challenges like providing high-quality healthcare or education without raising taxes.

Even in the third sector, including charities and humanitarian agencies, innovation is needed to address challenges like natural disasters or fundraising.

Question 10

How does the pattern of innovation typically unfold in a particular sector?

Answer 10

In a particular sector, innovation typically consists of a mixture of occasional radical changes and long periods of incremental improvements.

Radical changes involve doing something different, while incremental changes involve improving existing processes or products.

This pattern includes periods of high-risk experimentation followed by stabilized and improved variations.

Question 11

What is the significance of deliberate variation in innovation?

Answer 11

Innovation involves deliberate variation rather than random changes.

Organizations consciously experiment to cope with competitive and hostile environments, seeking opportunities or responding to threats.

This deliberate variation distinguishes innovation from random adaptation and is essential for driving progress and adaptation in various sectors.

Question 12

What is an entrepreneur, and what role do they play in innovation?

Answer 12

An entrepreneur is an individual or group that identifies an opportunity and takes the risk of exploiting it.

They play a crucial role in innovation by driving change, creating value, and pioneering new ideas or technologies.

Joseph Schumpeter emphasized the importance of entrepreneurship in driving innovation.

Question 13

How do entrepreneurs contribute to large established organizations?

Answer 13

Entrepreneurs within large established organizations propose and introduce changes to renew products, services, or operating processes.

While their names may not be as familiar, they work internally to innovate and rejuvenate the organization’s offerings.

Question 14

What is the central idea regarding entrepreneurship and innovation according to the book?

Answer 14

The central idea is that entrepreneurship drives innovation to create both social and commercial value across the lifecycle of organizations.

This involves individuals or groups exploiting new opportunities, growing businesses, sustaining innovation, and ultimately leading to radical innovation to move forward as something different.

Question 15

How does entrepreneurship vary in terms of motivation?

Answer 15

Entrepreneurial motivation varies, ranging from those primarily focused on creating commercial value to those driven by social concerns.

Social entrepreneurs, for example, are passionately concerned with improving or changing something in their immediate environment, while others may focus on exploiting new technologies or market opportunities for wealth creation.

Question 16

What is one indicator of the importance of knowledge in innovation?

Answer 16

One indicator of the importance of knowledge in innovation is the significant investment in research and development (R&D), which currently amounts to approximately $1500 billion per year.

This underscores the value organizations place on acquiring and leveraging knowledge for innovation.

Question 17

What is the challenge posed by the knowledge-rich world in terms of innovation?

Answer 17

In a knowledge-rich world, the challenge in innovation increasingly revolves around managing flows of knowledge within an increasingly global and networked space.

This challenge is often referred to as “open innovation,” highlighting the importance of collaboration and knowledge sharing across diverse networks for driving innovation.

Question 18

How do innovation leaders outperform their competitors, according to the survey by Innovaro?

Answer 18

Innovation leaders consistently outperform their competitors on a year-by-year basis, which has a marked effect on their share prices.

For example, between 2003 and 2013, they regularly outpaced the average share price index on the NASDAQ, Dow Jones, and FTSE markets, with average growth reaching 130% during periods of high market growth.

Question 19

According to economist William Baumol, what is the ultimate driver of economic growth?

Answer 19

According to economist William Baumol, virtually all economic growth since the eighteenth century is ultimately attributable to innovation. This highlights the critical role innovation plays in driving economic progress and prosperity.

Question 20

What is the risk associated with innovation for organizations?

Answer 20

The risk associated with innovation for organizations is that innovation involves a moving target.

Simply managing innovation effectively today is no guarantee of long-term success, as technologies, markets, regulations, and other factors are constantly changing.

Therefore, successful innovators must develop dynamic capabilities to adapt their approaches and keep pace with evolving trends and demands.

Question 21

Who are the key stakeholders for whom innovation matters?

Answer 21

Innovation matters to various stakeholders, including individuals, organizations, and policy agents.

These policy agents comprise governments (local and national), trade and sector bodies, and supply chain owners.

Each of these stakeholders has a vested interest in fostering innovation for economic growth, sector health, competitiveness, and supply chain efficiency

Question 22

What is the role of governments in fostering innovation?

Answer 22

Governments play a crucial role in fostering innovation by creating policies and environments conducive to innovation. T

his includes providing support, advice, funding, and implementing favorable tax policies to incentivize innovation, thereby promoting economic growth and job creation.

Question 23

Why do trade and sector bodies have an interest in stimulating innovation?

Answer 23

Trade and sector bodies aim to stimulate innovation to enhance sector health and competitiveness.

They recognize that innovation is essential for maintaining and improving the competitiveness of industries, promoting growth, and ensuring long-term sustainability.

Question 24

What is the importance of innovation for supply chain owners?

Answer 24

Innovation is crucial for supply chain owners as any supply network is only as strong as its weakest link. Therefore, firms seek to manage and upgrade their supply systems to remain competitive and ensure efficiency. Investing in innovation helps strengthen supply chains and enhances overall operational effectiveness.

Question 25

What are the two complementary directions in which innovation concerns lead?

Answer 25

Innovation concerns lead in two complementary directions: At the individual enterprise level, it's about organizing and managing the innovation process effectively. At the systems level, it's about fostering collaboration and coordination among different parts of the network, such as supply chains, regional clusters, and industrial sectors, to promote innovation and overall economic development.

Question 26

Why is innovation not easy, according to the text?

Answer 26

Innovation is not easy because while generating ideas may come naturally to humans, bringing those ideas to fruition is challenging. Evidence suggests that most new ideas and ventures fail, requiring a unique mix of energy, insight, belief, determination, and judgment to navigate the obstacles and uncertainties inherent in the innovation process.

Question 27

What are some challenges faced by both individual entrepreneurs and large established companies in the innovation process?

Answer 27

Both individual entrepreneurs and large established companies face challenges such as encountering roadblocks, hitting potholes, and navigating uncertainties. For large firms, their core competencies can sometimes hinder their ability to recognize the need for change, leading to missed opportunities and potential decline. Additionally, the pace of change may catch established players off guard, especially when innovations originate from outside their industry.

Question 28

What is the concept of "not invented here" syndrome, and how does it hinder innovation?

Answer 28

The "not invented here" syndrome refers to the reluctance of organizations to adopt external innovations, even when they recognize their value, because they were not developed internally. This mindset can hinder innovation by preventing organizations from capitalizing on potentially beneficial ideas and technologies, ultimately impeding their ability to adapt and stay competitive.

Question 29

How do external disruptions, such as technological advancements, impact established industries?

Answer 29

External disruptions, such as technological advancements, can overthrow established industries by introducing new ways of doing business and challenging existing norms and practices. For example, the ice harvesting industry was completely overthrown by the invention of refrigeration and the growth of the modern cold storage industry, leading to the demise of many old industry players who failed to respond quickly enough to the emerging signals.

Question 30

What is the difference between the Darwinian idea of survival of the fittest and how innovation works?

Answer 30

The Darwinian idea of survival of the fittest suggests that variation in organisms occurs randomly, and those with advantageous traits survive and reproduce. In contrast, innovation involves planned experimentation, where variation is intentionally designed and implemented in a purposive manner, leading to a sequence of planned actions aimed at achieving specific goals.

Question 31

What are the key components involved in managing the innovation process?

Answer 31

Managing the innovation process involves three main components: **searching for possible opportunities (generating variation), ** **selecting a particular opportunity (selection), ** **and implementing the chosen opportunity (propagation).** These components require a set of behaviors that become learned and embedded over time, shaping the way innovation is managed within organizations.

Question 32

How does the approach to managing innovation differ between small organizations and large corporations?

Answer 32

Small organizations typically have informal processes for managing innovation due to limited resources and structure. In contrast, large corporations require formal structures and procedures to coordinate innovation efforts effectively. Additionally, the focus of innovation may vary depending on the sector, with service sector businesses emphasizing customer collaboration, while high-tech firms prioritize formal scientific research and development (R&D) processes.

Question 33

What are some factors that influence the success of innovation efforts?

Answer 33

Success in innovation efforts depends not only on having good ideas and resources but also on possessing the capabilities to manage them effectively. These capabilities, which are crucial for success, include skills in identifying opportunities, allocating resources, managing projects, and adapting to changing circumstances. Obtaining these capabilities can be challenging but is essential for successful innovation management.

Question 34

What sources have contributed to our understanding of innovation management?

Answer 34

Our understanding of innovation management has been shaped by a wide range of studies, including **case examples, sector analyses, studies of entrepreneurs, and examinations of both successful and failed innovation initiatives. ** Insights from practicing entrepreneurs and innovation managers in various organizations have also contributed significantly to our knowledge of how to manage innovation effectively.

Question 35

Why is it important for organizations to innovate in the ways they approach managing the innovation process?

Answer 35

Organizations need to innovate in the ways they approach managing the innovation process because innovation itself takes place in a changing world. New technologies, markets, and societal norms emerge constantly, impacting how innovation happens. Therefore, organizations must adapt and develop new strategies and capabilities to effectively navigate these changes and remain competitive.

Question 36

What is dynamic capability in the context of innovation management?

Answer 36

Dynamic capability refers to an organization's ability to continuously learn, adapt, and build capabilities not only to organize and manage innovation but also to review and improve its innovation processes over time. It involves the capacity to recognize and respond to changes in the business environment, allowing organizations to stay agile and effective in managing innovation efforts.

Question 37

What are some challenges in the innovation context as outlined in Table 1.2?

Answer 37

Some challenges in the innovation context include the acceleration of knowledge production, the global distribution of knowledge production involving new players, market expansion into non-traditional areas, market fragmentation due to globalization, market virtualization with the emergence of large-scale social networks, the rise of active users as sources of innovation, growing concerns with sustainability issues, and the development of technological and social infrastructure facilitating alternative social networking possibilities.

Question 38

How does the rise of active users impact innovation?

Answer 38

The rise of active users blurs the line between consumers and creators, accelerating the ways in which innovation takes place. Platforms like Linux and YouTube, driven by user-led open community development, showcase how users actively contribute to innovation. This trend challenges traditional notions of innovation and emphasizes the importance of engaging users in the innovation process.

Question 39

What does market virtualization entail, and what challenges does it pose for innovation?

Answer 39

Market virtualization involves the emergence of large-scale social networks and online communities, creating challenges for traditional market research approaches. Platforms like Facebook and Second Life introduce new dynamics in understanding consumer behavior and preferences, requiring innovative approaches to market analysis and product development.

Question 40

4P's Framework

Answer 40

A framework that categorizes dimensions of innovation into four main areas: Product/service, Process, Position (Market), and Paradigm (Business model).

Question 41

Product/Service

Answer 41

In the context of the 4P's Framework, this dimension refers to changes in the actual offerings or goods/services provided by an organization.

Question 42

Process

Answer 42

In the context of the 4P's Framework, this dimension refers to changes in the methods, procedures, or systems used to create and deliver products/services within an organization.

Question 43

Position (Market)

Answer 43

In the context of the 4P's Framework, this dimension refers to changes in the context or environment into which products/services are introduced, including market positioning, target audience, and competitive landscape.

Question 44

Paradigm (Business Model)

Answer 44

In the context of the 4P's Framework, this dimension refers to changes in the fundamental mental models or frameworks that shape what the organization does, including its core business strategies, revenue models, and value proposition.