Module MC030

Management of Innovation


Module author

Hiro Izushi

Aston University

Learning objectives

After you have completed this module, you will be able to:

  • Express what we actually mean by the term "innovation" and choose indicators with which to measure innovation.

  • Assess the stage of the industry in which your business operates and draw its implications for innovation management.

  • Demonstrate a good grasp of the key principles used in resource allocation for innovation.

  • Appreciate boundary-spanning communication as a source of creativity and analyze the structure of a business organization through the lens.

  • Effectively apply the concepts of open innovation and user-led innovation and manage knowledge flows from external sources.

  • Identify different types of intellectual properties and formulate a strategy for their protection.

Chapter 1: What is innovation? Setting the scene
1.1 What we mean by innovation in this study material
1.2 Measurement of innovation
1.3 Risky nature of innovation

Chapter 2: Innovation and industry dynamics
2.1 The case of the vacuum cleaner industry
2.2 Industry lifecycle
2.3 Failures of incumbent firms
2.4 Management implications

Chapter 3: Innovation strategy: Project selection and resource allocation
3.1 Key questions of innovation strategy
3.2 Limitations of the financial indicator
3.3 Principles for portfolio design

Chapter 4: Promoting creativity within the organization
4.1 The case of project team performance
4.2 Prediction by analogy and boundary-spanning communication
4.3 Corporate structure as an influencer of boundary spanning
4.4 Cross-functional teams

Chapter 5: Opening up the innovation process
5.1 From closed innovation to open innovation
5.2 User-led innovation
5.3 Managing external sources of knowledge

Chapter 6: Controlling intellectual property
6.1 Generic methods of protecting proprietary knowledge
6.2 Legal rights of intellectual property
6.3 Managing intellectual property in practice

Workload units 2
Read Module Excerpt Management of Innovation


Why Open School of Management believes that innovation is crucial

What is management of innovation? How does one even manage something as abstract as the concept of innovation? No matter what industry or field you work in, innovation is something that is critical to the enhancement of your work. Although innovation seems immeasurable or out of reach, it's the kind of thing that can be encouraged among professionals with proper management training.

Management of innovation is a topic that is relevant to all fields including the economic environment. The way that innovation affects our economic climate is by creating new ideas which leads to new jobs and a more stimulated economy. It not only enhances economic progress but takes humanity and social progress to another level.

Innovation isn't something that is especially measured by the typical dollars and cents. It's more a matter of getting employees to think outside of the box, leaving room for creativity and newer approaches to current products and systems. If the workplace provides basic resources and room for innovative growth on the management level, the outcome of it will be newer approaches to the standards between consumer and products. With that said, the outcome of innovation management is still a risk. There is no traditional way to measure innovation or project its outcomes on a convenient pie chart. Managing innovation is a matter of taking risks and waiting out some great ideas through projects, experiments, betas, prototypes, new patents, and many, many meetings.


Chapter 1: What is innovation?

The basic definition of "innovation" according to the New Oxford American Dictionary is "a new method, idea, product, etc." It's basically anything that brings forth some sort of enhancement or improvement of whatever came before that thing. Innovation indicates a step towards progress and envisions the reward of an improved lifestyle or quality of living.

The amazing thing about innovation is that it can be applied anywhere. You can apply the concept of innovation to the way you study but simply adjusting your seat, or getting a sharper pencil, or making flash card out of index cards to help you study better. What's innovative about these examples is that they all introduce a new addition to your standard study mode in order to improve the quality of your experience. In this way, innovation is a valued concept in our society.

What we mean by innovation in this module

Innovation, in this module, refers to any resource, activity, management style or technique that introduces a new idea or mode of doing things to produce a better product for the improved lifestyle or quality of living for consumers.

Measurement of innovation

In order to measure innovation, you must first identify what kind of innovation you're trying to analyze. What is the field you are in? What is that your business does as a function? Do you design and create new products? Or do you provide alternative products to a market that already has that product but offering a better version of it, or a product that has options or functions that don't exist in the original? The way you can measure innovation is by first analyzing the structure of your organization, its process and business model then imagine a new kind of value for either originality, improved quality or as a whole new item. From that point on, you can try to project what kinds of financial gain or returns these innovations will lead to.

Risky nature of innovation

What's most risky about innovation is time. You can't snap your fingers and expect an innovative idea or result to materialize. There's no way to force creativity. This is true not only in the business world but in the creative world, too, e.g. the film, visual art, writing a novel, etc. What makes waiting on innovation to happen or bring on financial return risky is that it takes time, and as we all know, time equals money.

What also makes innovation risky is, as mentioned earlier, its difficult way to measure it. But by implementing effective policies in order to keep track of the step-by-step process in bringing on innovation to your business will at the very least provide a perspective for you and your team members to see its impact at a micro level. Pretty soon, over time, you'll notice the small changes, and hopefully, the financial returns as a result of those changes.


Chapter 2: Innovation and industry dynamics

The way innovation affects industry dynamics is a part of analyzing and measuring innovation. There are many examples of how innovation management has affected the dynamics of an industry or at the very least a business or organization.

The case of the vacuum cleaner industry

In the case with the vacuum cleaner industry, innovators were able to ask the right questions to bring on the right innovative qualities to improve consumer experience, which earned the industry a top 10 product innovation title. With vacuums, innovative management led to backpack designs, batter power (to avoid cords), HEPA filtration technology, lighter weight and compact sizing. In an economy where nearly every household keeps a vacuum cleaner, these innovative changes gave consumers a reason to shop for a newer and better vacuum, boosting sales.

Industry lifecycle

The significance of innovation in industry lifecycles is that it provides determining variables over the many stages of an industry's lifecycle. This is one way to measure innovative management as well/ It can provide details to the industry's investment's in innovation, its growth, size, industry's maturity, and international trade options in case it begins to decline in the home base.

Failures of incumbent firms

Although incumbent firms have the resources that would make them an ideal leader for innovation, the truth of the matter is that success can cause complacency. As everyone knows, complacency is the death to any innovative mentality. It also causes laziness or too much hubris. This might lead to failure to seek out-of-the-box ideas. This is why many incumbent firms seek innovative ideas from outside sources.

Management implications

A way to manage innovation is to create a spark for change in various departments. Encourage brainstorming sessions at meetings and try some different management techniques for a change. For instance, if the weather's nice, consider taking the office out for a lunch outdoors. Sometimes something as simple as a walk outdoors can cause the brain to work in a new way. Offering incentives at the workplace can also give employees a reason to seek new ideas. Google is one successful company that encourages innovation through incentives.


Chapter 3: Innovation strategy: Project selection and resource allocation

The trick to finding the right project for allocating resources into that idea is something that relies on even more abstract concepts like intuition and belief.

Key questions of innovation strategy

A way to question innovation strategy is to first ask how practical the changes are. Also ask yourselves what the type of innovation is: is it drastic or subtle? Will it be implemented incrementally or radically?

You can also ask yourself if this kind of innovation will impact areas beyond just your business or organization. Will it have any affect on public policy or society? These questions can help you gauge the innovation in terms of scale.

Limitations of the financial indicator

The limitations of the financial indicator is part of what makes innovative management so risky. As a business person, it is important for companies to take those risks beyond the fact that innovative management is difficult to measure. Part of being an entrepreneur and avoiding complacency is taking risks like this. If the right idea gets the financial backing it needs, it can benefit the company in many ways.

Principles for portfolio design

Your portfolio should illustrate the strategies you've integrated in the past to make innovative management effective in your track record. Make sure it shows the short term, mid term and long term strategies. Make sure to include the resource allocation. It should also include an operational element, revealing how the resource allocation was used. Then show its execution and results with numbers and press, if any.


Chapter 4: Promoting creativity within the organization

There is nothing more important than promoting creativity as an innovation manager.

The case of project team performance

In order to avoid any innovation project failures, set certain standards and rules to regulate the team during innovation management. Set practical goals, select a good team with a diverse set of skills, pick one leader to bring the group forward, make sure that the team can identify any market gaps, and support the team with any outside ideas that they might not be thinking about. Be sure to keep track of progress so as not to waste time, money or resources on an ineffective idea.

Prediction by analogy and boundary-spanning communication

First off, expand your prospect of gathering the most information through boundary-spanning communication. This simply means you link outside networks to your innovation system. You can create prediction by analogy by comparing your current ideas with a model of a similar idea that was widely covered in the past.

Corporate structure as an influencer of boundary spanning

A corporate structure can influence boundary spanning by providing access to its network of contacts, and linking the innovation team with associate organizations. The best thing about a corporation is its access to quality resources.

Cross-functional teams

Having multiple teams on one major project or assignment can be beneficial to the goal of innovation. Cross-functional teams work well because they require minimal supervision and take on initiatives. Having a diverse group of team members allows for better innovation because of the ideas that different people can inspire in one another.


Chapter 5: Opening up the innovation process

There are many ways to open up the innovation process. This is preferred over closed innovation.

From closed innovation to open innovation

An example of closed innovation is like the incumbent business folk who regard innovation management with a condescending tone. Often times, closed innovation believes that it will achieve any target market first, and win no matter what. It believes it has full control of its own intellectual property and that no other competitor will achieve what it does. An open innovation believes that no one is too smart for its company. It believes in external resources and believes that proper research is important to avoid law suits for intellectual property damages. It believes that achieving improvements to an existing business model is less risky and therefore preferable over trying to win a market as fast as it can. It also believes in sharing its innovation with other businesses for the progress dedicated to the bigger picture.

User-led innovation

User-led innovation is a mixed bag. On the one hand, consumers do have a say and an opinion on the products they purchase. Their feedback is significant. However, part of the innovation team's job is to predict a consumer's opinions in advance. If a strong innovation team can envision the consumer's reaction before releasing the product, it will save more time and money. Innovation teams that are solely driven by demand risk more costly and unstable business practices.

Managing external sources of knowledge

Innovation management is closely linked to external sources. Business is all about relationships. If you find a good external resource, keep a strong relationship with it to keep the lines of communication open. This is the best way to manage external sources.


Chapter 6: Controlling intellectual property

Intellectual property is a tricky factor but important in America business practice. If you don't have an attorney yet, it is important to consider getting one.

Generic methods of protecting proprietary knowledge

Generally protecting proprietary knowledge is by hiring the right team of law professionals and making sure that patents and copyright documents are in order. Also, a dedicated research team to make sure that whatever innovative ideas your team produces are original and not encroaching on another's is important to avoid unwanted law suits.

Legal rights of intellectual property

The basics of intellectual property are copyrights, patents and trademarks. Be sure to have a dedicated team of law professionals to make sure that these documents are processed in order to protect any original ideas your team produces.

Managing intellectual property in practice

There are various online resources that can provide you with basic copyright documentation, as well as softwares to produce them. Be sure to have internal and external members sign a confidentiality agreement to further protect your business' intellectual property.


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