As mentioned earlier in section 2.5.1, innovation needs to be viewed as a management process of a series activities rather than a singular event; it is the result of a combination of various inputs, processes and occurrences. Among various functions in an organisation, Trott (2008) concluded that three main functions which influentially affect innovation are
marketing, research and manufacturing, and business planning. He added that the effective
process of innovation development is a result of an internal recursive process focusing on
Chapter 2 - K now ledge m anagement an d innovation
three main areas and interacting with external inputs (Figure 2.8). As part of this process, organisations need to deal with internal and external factors, even those which are beyond their control. Regarding this reality, effective management of both internal and external relevant resources becomes a necessity for innovation.
Figure 2.8; Triangular dimension of organisational functions
E x t e r n a l I n p u t s : m a c r o f a c t o r s ; c o m p e t i t i o n ; p r o f i t ; g r o w t h ; d i v e r s i f i c a t i o n ; c o s t s a n d I n p u t p r o c e s s ; p o l i t i c a l I n f l u e n c e s E x t e r n a l I n p u t s : s c i e n t i f i c a n d t e c h n o l o g i c a l d e v e l o p m e n t ; c o m p e t i t o r s ; s u p p l i e r s ; c u s t o m e r s ; u n i v e r s i t y d e p a r t m e n t s
Finance and business leadership
p r o d u c t / s e r v i c e d e v e l o p m e n t E x t e r n a l I n p u t s : s o c i e t a l n e e d s ; c o m p e t i t o r s ; s u p p l i e r s p a r t n e r s h i p s ; d i s t r i b u t o r s ; c u s t o m e r s ; s t r a t e g i c a l l i a n c e s Source; Trott (2008: p. 26) Business strategy
Smith (2006) mentioned that typically, in most organisations, three types of strategy,
business, functional and product, are incorporated in a hierarchical manner. Being
positioned at the top as a steering strategy, the business strategy is a long-term strategy regarding the future of the whole business. At the medium level, the functional strategy is a suite of strategies required for achieving the business strategy. It may correspond to various functions of the business, e.g. technology and marketing strategies. At the bottom of the hierarchy, are a number of product strategies that deal with various aspects of product development to deliver successful products. From another viewpoint, Trott (2008) proposed the concept of new product strategy. The concept highlights that the decision making process directing the new product strategy is a dynamic process to control both internal and external inputs, with consistency amongst three main strategies: corporate
C hapter 2 - K now ledge m anagement an d innovation
Many tools for describing the business strategy have been introduced in the past; one of the best known is AnsofTs matrix (1968). The matrix regards business strategy in terms of levels of novelty in two crucial aspects: market and product. The combination of market- product opportunities provides four possible strategies, each of which has an appropriate course of sub-strategies. Similarly, the matrix of Autio (1995) presents a typology of technical entrepreneurship by using technology and market aspects. Four types of technical entrepreneur are described: application innovators, technology innovators, market
innovators and paradigm innovators. These four labels can be compared to the four
possibilities addressed in Pearson's uncertainty map. Pearson (1991) proposed the map of uncertainty dividing uncertainty into two separate dimensions: end and means. While ‘end’ represents the ultimate target of the activity, ‘means ’ represents the process to achieve such a target. In particular, uncertainty about the eventual target is used for presenting how well potential products or markets are identified. On the other hand, uncertainty about process is used for determining the availability of the requisite tools of fulfilment. Usage o f the uncertainty map helps to identify the extent of uncertainty and the type o f activity undertaken.
Figure 2.9: Two-dimensional matrices for business strategy
Product or service Present N ew M arket penetration strategy Product developm ent strategy M arket developm ent strategy Diversification strategy (a) Ansoff's m atrix (1 96 8 )
Technology
Established Breakthrough
Uncertainty about process ■g Application Technology
r.
innovators Innovators Ill1
M arket Paradigm F innovators innovators HI (b) Autio's taxonom y (1 99 5 ) Low High High 3 1 Applications Exploratory engineering research 4 M arket 2 opportunities + D evelopm enttechnical engineering capabilities
(c) Pearson's uncertainty m ap (1 99 1 )
These matrices give us insights into the possible business strategies which an organisation might deploy for achieving its long-term vision. To be successful in business and sustain
.1.
an organisation’s competitiveness in the long run, medium-level strategies or functional strategies, such as marketing, financial, human resource management and technology strategies, are conceived for managing each functional unit of the organisation.
Chapter 2 - K now ledge m anagement an d innovation
Organisational knowledge base
Teece and Pisano (1994) argued that the direetion of a company in the future depends on its own capabilities: level o f technology, skills developed, intellectual property, managerial
processes and its routines. This means the current position and knowledge base of a
company strongly influence its future opportunities and the future activities of a company are constrained by its previous activities and what it has learned (Tidd, 2000).
Adler and Shenhar (1990) suggested that an organisation’s knowledge base is made up of five dimensions: individual assets, technological assets, administration assets, external
assets and projects. The individual assets are the set of skills and knowledge of the
personnel and the technological assets are the set of tangible or visible elements of the teehnologieal base, whereas administration assets are other specific resources that enable the development and deployment of the individual and technological assets, e.g. organisational structure, business strategies and managerial practices. These three assets together form the internal assets that influence organisation success (Figure 2.10). External relationships with suppliers, customers, potential business allies and rivals, and local communities are considered the external assets that the company also needs to establish and consolidate. Additionally, new deployment or transformation of technological, organisational and external assets can be learned through the projects; hence, they should be considered part of the knowledge base.
Figure 2.10: Knowledge base of an organisation
External environment
Qrganisations External
assets
Individual assets
Administration assets Projects Technology assets
Chapter 2 - K now ledge m anagement an d innovation
As presented in Figure 2.10, this more realistic assessment of an organisation’s knowledge base shows the interrelationship between various components of an organisation. The effective assimilation and application of this accumulated knowledge serve to differentiate innovative companies from their less successful counterparts. This capability is popularly referred to as organisational learning.