Managing Innovation and Entrepreneurship - Assignment Example

Name : xxxxxxxxxxx Institution : xxxxxxxxxxx Title : Managing Innovation and Entrepreneurship Tutor : xxxxxxxxxxx Course : xxxxxxxxxxx @2011 Question 1 The notion that barriers to imitation are always needed if you are a good entrepreneur and have the ability to appropriate value from an innovation is a statement that I consent with. This is because if imitations are left unchecked without barriers being enforced, the imitators will target the firm’s customers through strategies such as cutting down costs and offering free products, which may further drive down the firm’s profits. In the long run the competitive environment caused by imitators can continue up to a level whereby actually no profits are left for the firm (Baron & Shane, 2005). Barriers to imitation are also essential because they prevent the imitators from trying to obtain the resources required to exploit the firm’s business ideas. In many incidences having imitations results to a rise in the cost of resources due to the fact that the demand for the resources becomes high therefore prices for resources are increased by the resource suppliers (Baron & Shane, 2005). And if the prices of resources are increased the aftermath implication is that the profits of the firm will be undermined. Innovations and the Barriers Used Two major broad categories of innovation exist. One of the innovation types is the incremental innovation which involves improvements that are made on the products, services and processes (including, financial organizational and commercial) of an enterprise. The second category of innovation is the radical innovation which entails coming up with new ideas, new ways of undertaking business and also adopting or developing new technologies. Various types of barriers are used by entrepreneurs to protect the innovations adopted. One of the barriers adopted by entrepreneurs is that of obtaining control of resources. This particular barrier is applied on incremental innovations such as the product innovation. Products are most cases developed from resource, which are basically tangible. Services on the other hand require intangible resources such as the skills of employees and service lines. In order to develop a barrier against imitation entrepreneurs have ensured that they gain control over the key resources that are needed to come up with the new product or the service (Baron & Shane, 2005). For instance if an entrepreneur comes up with an idea of selling lunch to the staff of a certain company , in order to prevent competition from imitators the entrepreneur can acquire a contract from the company’s management in order to continue with the business. The contract therefore becomes a key resource for exploiting this particular venture. As a result the entrepreneur will be able to stop other individuals who may have a similar motive. Obtaining legal monopoly is another type of barrier that entrepreneurs have used to protect their innovations. Government patents act as a significant category of legal monopolies that can be utilized to protect the process, produce or service type of innovation. A patent can be defined as a right given by the government to be the only entity that can make use of an invention for a certain specified time period. The government grants a single business an exclusive right to produce a certain product or service at a specified time period. Once the patent is obtained the entrepreneur has nothing to worry about based on the fact that if any other competitor exploits the process, or produces the product, they will be acting against the law (Baron & Shane, 2005). Entrepreneurs have also used the strategy of developing a reputation as a type of barrier to prevent imitation. Building a reputation is mainly a strategy that is directed to the customers. As a result it can best be applicable in the product and the service type of innovations which mainly target customers. Entrepreneurs create good will to their customers in order to prevent their customers from shifting to competitive producers or service providers. For instance an entrepreneur can increase the intensity of its advertising which may make the customers reluctant when it comes in switching to another brand. Innovation is another barrier that has been used by entrepreneurs. Innovation can be applied both in the incremental and radical innovation. In the context of the incremental innovation the entrepreneur focuses on initiatives that are able to keep the service and the product of the business ahead of those provided by competitors. This involves transforming aspects that have attributes of customer dimension such as cost, quality and speed. Innovation is also applied within the context of the radical innovation whereby the entrepreneur develops a competitive advantage through coming up with new ideas, new ways of undertaking business and also adopting or developing new technologies that have not been adopted by any other business(Baron & Shane, 2005). Selected Innovation; the Service innovation The service innovation is one essential innovation. One type of barrier that has been enforced within the context of the service innovation is that of obtaining a legal monopoly. Through obtaining permits service innovations have been protected from the treat of imitation (Baron & Shane, 2005). For instance many cities usually limit the number of stores that sell liquor in a particular geographical region. As a result by obtaining a permit in order to put up a liquor store an entrepreneur is able to ascertain that no other person has the ability to compete in the area. Barriers are evidently very necessary because as highlighted by this case, they eliminate unwarranted competition. Question 2 One of key issues in the concept of innovation is the aspect of managing innovation (Tidd et al , 2005). In order to attain commercial success in an entrepreneurial organization it is essential for an entrepreneur to put into consideration the aspect of managing its innovation. Many businesses come up with new innovations however when it comes to managing the newly developed innovations, a challenge arises. One of the main challenges linked to managing innovation is that it is difficult for entrepreneurs to make sense of uncertain and complex risks that may occur after the innovation. In addition problems such as adopting the new innovation to the existing processes and products also arise .Another challenge is that many innovations are usually messy, in the sense that as the innovation is presented it may display false starts or even dead ends which are setbacks which frequently arise when implementing an innovation( Markham , 2002) . Furthermore the challenge of convincing customers and the staff to accept the new innovation also frequently arises. Markham (2002) highlights that the value of understanding innovation as a process is based on the fact that is shapes the approach in which entrepreneurs try to manage it. One of the strategies of managing innovation to facilitate the success of an entrepreneurial organization is acquiring, developing managerial capabilities and technological resources through consulting customers and other organizations. This will therefore enhance continues improvement of the innovation on basis of customer and the ideas that competitions have. Tidd et al , (2005) argue that there are business that have well developed capability in managing innovation but they fail due to the fact that they lack the ability to incorporate the external environment . For instance many entrepreneurs acknowledge the importance of technological innovation and R&D research and development, however with the lack of capability to relate or link these innovations with the end users and market place. As a result consultation with customers and other firms is essential in order to facilitate continues improvement of the innovation. It is essential for entrepreneurs to ensure that they align their business strategies and their innovations. Morris and Kuratko (2002) highlight that enterprisers have faced the challenge of inability to link the innovations with their business strategies .For instance an entrepreneur may invest on a certain type of technology which may not fit the business strategies adopted by the business. It is essential for an entrepreneur to ensure that there is a fit between the business strategies and the proposed innovation not just due to the fact that it is fashionable but rather to develop successful implementation of the innovation. Improving and building effective routines is also another essential aspect of ensuring the success of an innovation. Routines can be described as a sequence of actions that are undertaken by organizations. Markham (2002) highlights that routines make one business different from another. The essential point is to adopt a routine that can work best with the newly developed innovation. Markham (2002) also propose that it is also essential to enhance a learning process .This is undertaken through developing the ability reflect upon and evaluate the innovation process in order to identify areas of improvement. The innovation process The Coca Cola Company has a rich tradition and history of innovating iconic brands. The company is proud of the fact that for many years, it has been a leading innovator within the soft drinks industry. In addition the company has been able to meet customer demands and the changing lifestyles of customers. In the year 2009, the company initiated a new product known as Coca Cola Zero (Coke Zero), which is currently among the core Coca Cola family drinks; the Diet Coke and Classic Coke (Lindegaard , 2009). The Coca-Cola's design chief revealed that the innovation of the new drink brand followed a variety of steps. According to Tidd et al, (2005) the first phase of the innovation process is the search phase . This phase involves detecting of environmental signals concerning the potential change. Gorchels, (2003) on the other hand highlights that the idea generation is the first stage of innovation the step entails evaluating various ideas from different sources both within the external and internal environment of the organization .Ideas may be derived from strategic thinking, competitive analysis, consumer research techniques and investigative analysis. After the idea is generated it is then screened, before it moves to the next stage. The Coca Cola Company undertook the search phase by evaluating changing market requirements, new opportunities associated to consumer demand and change in lifestyle and not forgetting competitor action. The company found out that there is a trend in lifestyle whereby people want to live more healthy lives. As a result the new brand of drink would be suited for this need (Lindegaard , 2009). The second stage according to Gorchels, (2003) is that of concept development. Having selected a selected a suitable environmental signal and a strategic decision that can assist in pursuing the idea, the next step entails turning the identified potential ideas into actual reality , or into a service or a product. This involves the converting raw data into a newly developed product. At this particular stage the Coca Cola Company used the ideas attained search phase to generate their next brand Coca Cola Zero (Coke Zero), which had features of having no calories (Lindegaard , 2009). The third step is that of acquiring knowledge resources. This stage entails the combination of the existing knowledge and the new knowledge. Coco Cola basically adopted an incremental modification of the already existing brands. The third step according to Gorchels, (2003) is that of concept testing and evaluation which involves evaluating the viability of the new innovations. The Coco Cola Company combined the newly innovated idea of providing a healthier drink with the attributes available in the already existing brands. The fourth step according to Tidd et al, (2005) is that of implementation. This involves transforming the potential idea into the actual product. The Coca Cola Company developed its brand new product Coca Cola Zero (Coke Zero) that has no calories. Execution of the project is the finally step which involves introducing the innovation to the market. The Coca Cola Company released the Coca Cola Zero brand to the market in February 2009(Lindegaard , 2009). Question 4 Key factors that explain the success of the Incremental innovation The incremental innovation involves improvements that are made on the products and the processes (including, financial organizational and commercial) of an enterprise. One the key factors that explain the success of the incremental innovation is if the innovation meets the real or perceived needs of the customers. For instance when examining one category of incremental innovation, the product innovation. It is essential for the managers to first all identify the actual needs of the consumers in terms of their tastes , preference ,value and also pricing. Leonard and Rayport (2002) argue that even before coming up with a new product it is essential for entrepreneurs to get close to the consumers and listen to what they have to say. In order to identify the needs of the consumer managers should undertake extensive market research for instance through watching consumers use the products and interviewing the customers about their needs. Once the needs of the consumers are identified, the product developer then incorporates these ideas into the new product design. Another key factor that influences the success of the incremental innovation is prevention of imitators. As mentioned earlier in question one, imitation is usually a great challenge to a new innovation. This is because it poses challenges such as loss of customers, loss of resources and competitive advantage (Tidd et al, 2005). It is against this backdrop that managers should enforce barriers to prevent imitation. For instance in the context of product innovation, if the Nokia mobile company has come up with a new brand of mobile phone, and customers agreed that the new mobile phone brand was excellent and many wanted to purchase it. The challenge that would arise is that other companies would imitate the mobile phone design and therefore pose a challenge to the Nokia Company. In order for the Nokia Company to keep its customers from going to the other companies that imitated the design, the company can create a barrier such as developing an excellent customer service reputation. Creating the reputation would enhance the competitive advantage of the company and therefore making Nokia’s brand better than that of other Companies that imitated the brand. Therefore in order to promote the success of the product innovation it essential to establish barriers that can prevent imitators from taking up the company’s market or imitating the product. Incremental innovation also greatly requires, Total Quality Management (TQM) as a factor of enhancing the success of the innovation. Principles of Total quality management such as; continues improvement are very essential in determining the success of innovations products, service and the processes. Australian Institute of Management, (2001) argues that in order to maintain the success and competitive advantage of innovation it is essential to maintain the quality of the innovation. Many leading innovators have taken up distinctive approaches of maintaining the quality of their incremental innovation and continuous improvement is one of the effective ways. For instance when an entrepreneur comes up with a new product, it vital to not leave the innovation at the same state of its original development but the rather the entrepreneur should find ways of improving the quality of the product through research and development R& D. Five most important entrepreneurial lessons One of the important entrepreneurial lessons that can be learnt from the above analysis is that in order for an innovation to be successful it is vital to utilize total quality management as a strategy of maintaining the viability of the innovation .Innovation is a continuous process it does not just stop there. For instance when evaluating successful Australian Companies such as Flight Cenlre, Bunnlng and Harvey Norman, what mostly contributes to their outstanding performance is continuous improvement on their business models. These companies do not increase the number of the products they offer but rather they make continuous improvements on the existing innovations in order to meet the needs of the consumers. A second essential lesson that can be learnt from the above analysis is entrepreneurs should not strive to come up with new ideas or products without being well informed about the needs of the consumers. Innovation has the basic objective of ensuring targeting the consumers, it is therefore vital for entrepreneurs to identify consumer needs. Another essential entrepreneurial lesson is that entrepreneurship is about risk taking (Morris& Kuratko, 2002 ) .The lesson that can be learnt from the above analysis is that in order for an innovation to be successful risk taking entails the willingness to pursue ventures that have the probability of success or also ventures that may produce losses. As a result a common aspect about entrepreneurship is that making decisions is not done recklessly but rather it requires realistic awareness. Also another lesson is that being innovative is about being unique and not offering products or services that are fairly standard. The attribute of being unique will facilitate more customer demand for the new product. The last lesson is that innovation requires planning. Without proper and effective planning, it will be difficult to eliminate imitators and also capture the market with the new innovation. Reference Australian Institute of Management, 2001, ‘’How Creative Does Our Innovation Need to be’’, Australian Institute of Management. Baron & Shane, 2005, Entrepreneurship: a process perspective, Strategy ; Planning for Competitive Advantage . Gorchels, L,2003, Concept and Development of New product , New York, McGraw- Hill ,. Leonard , D& Rayport, F, 2002, Spark Innovation Through Empathic Design Lindegaard , S, 2009, Product Innovation of Coca Cola . Morris, M and Kuratko, D , 2002, Corporate entrepreneurship entrepreneurial development within organizations. Fort Worth: Harcourt College Publishers. Pd I, 2 . . Markham , S, 2002, Moving technologies from lab to market, Research Technology Management, 45(6), p31 Tidd, J, Bessant, J and Pavitt, K, 2005, Managing innovation : integrating technological, market and (3rd ed.). Hoboken: Wiley. Organizational change. 5 Read More