Academic journal article Research-Technology Management

Innovation for Business Growth

Academic journal article Research-Technology Management

Innovation for Business Growth

Article excerpt

A fourth generation of innovation management broadens the scope of innovation to produce not just new products and processes but also candidates for new dominant designs. Are you developing a chief innovation officer?

OVERVIEW: Profitable business growth that creates shareholder value is restricted by core barriers and gaps in the third generation (3G) of innovation management currently practiced by most industrial organizations. The barriers and gaps are: (1) the basic, principles of current innovation management which limit its scope and strategy; (2) the current organizational capability and architecture for innovation; (3) current "best practices" which restrict innovation, including marketing and R&D, to what the customer perceives is needed. Twelve new principles and practices define a 4G management that helps overcome these limitations in current practice.

The most important issue facing business leaders who wish to maximize shareholder value is how to achieve sustained profitable business growth (1). Indeed, "managing R&D for business growth" has for several years been at or near the top of the list of "biggest problems facing technology leaders" in the Industrial Research Institute's annual poll of its members.

Management's ability to generate profits has been undergoing an evolutionary change over the past 10 years, from the so-called third generation, in which R&D focused mainly on product and process innovation, to a fourth generation of innovation and R&D (2). In this new "4G" model, industry structure is presumed to be more dynamic, and the scope of innovation management is broadened to include not just products and processes but business and market models that encompass the management of knowledge, technology, and market/industry infrastructure.

Even companies with world-class third-generation R&D organizations like Gillette, Lucent Technologies (3) and Xerox have recently had difficulty producing sustained business growth because of the core barriers and gaps inherent in 3G innovation management. These barriers and gaps are:

* Current principles of innovation management that limit the scope and strategy of innovation and focus strategic planning, marketing, R&D, and investment inside models which are the current dominant designs for "best practices," products and services, businesses, industries, and markets.

* Current organizational capability and architecture for innovation management that restricts leadership, organization, business processes, collaborative learning with customers and other suppliers, partnerships, funding and other resources, incentives, and cultural transformation.

* Current "best practices" of innovation management that create the classic innovator's dilemma (4) and restrict innovation, including marketing and R&D, to what the customer perceives is needed. These practices also create a collaborative knowing-doing gap (5) that prevents marketing and R&D in a group of suppliers from learning effectively with customers through iterative experience about what's possible and mutually valued as a new scalable, sustainable and competitive capability and architecture targeted to becoming a new dominant design.

As Clayton Christensen has said, "It's no wonder that innovation is so difficult for established firms. They employ highly capable people--and then set them to work within processes and business models that doom them to failure" (6).

To a great extent, 4G management overcomes the core barriers and fills gaps in today's business system by relying on the 12 basic principles and practices outlined in the remainder of this article.

1. A Broader Definition and Scope of Innovation Is Required for Effective, Sustained Growth in Business Value.

Sustained profitable growth is a primary factor in determining business valuation. With competitive markets in developed countries becoming saturated and driven by weak demographics, growth in business value ultimately depends more on creating and delivering the new customer value propositions that transform and form new markets than on increasing market share, improving branded product performance, reducing cycle time, or cutting costs. …

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