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Joe Tidd is a physicist with subsequent degrees in technology policy and business administration. He is Professor of technology andinnovationmanagementatSPRU(Science&TechnologyPolicy Research), University of Sussex, UK and visiting Professor at University College London, Cass Business School, Copenhagen Business School, and Rotterdam School of Management. He was previously Head of the Management of Innovation Specialisation andDirectoroftheExecutiveMBAProgrammeatImperialCollege, and Deputy Director and Director of Studies at SPRU (www.sussex.ac.uk/spru/jtidd).
He has worked as policy adviser to the CBI (Confederation of British Industry), and as a researcher for the International Motor Vehicle Program attheMassachusettsInstituteofTechnology(MIT), which identified lean production. He has worked on research and consultancy projects for consultants Arthur D. Little, CAP Gemini and McKinsey, and technology-based firms, including American Express Technology, Applied Materials, ASML, BOC Edwards, BT, Marconi, National Power, NKT, Nortel Networks, Petrobras and Pfizer,andinternationalagenciessuchasUNESCO.Heisthewinner of the Price Waterhouse Urwick Medal for contribution to management teaching and research, and the Epton Prize from the R&D Society. He is a director of MBA Authors Ltd, an academic
services and licensing company. He is also Managing Editor of the International Journal of Innovation Management (www.worldscinet.com/ijim/ijim.shtml), the official journal of the International Society of Professional Innovation Management (ISPIM)–www.ispim.org/index.php. He has written eight books and more than 60 papers on the management of technology and innovation: scholar.google.com/citations?
user=he2j1ugAAAAJ&hl=en.
John Bessant, who was originally a chemical engineer, has been active in the field of research and consultancy in technology and innovation management for over 25 years. He currently holds the ChairinInnovationandEntrepreneurshipattheUniversityofExeter and has visiting appointments at the universities of Luxembourg, Erlangen-Nuremburg, Queensland University of Technology and the National University of Ireland. In 2003 he was elected a Fellow of the British Academy of Management and served as a Panel Member in the 2001 and 2008 Research Assessment Exercises in the UK. He holds Fellowships from the Advanced Institute for Management Research in the UK and the Schoeller Foundation in Germany and has acted as advisor to various national governments and international bodies including the United Nations, The World Bank andtheOECD.
He is the author of 15 books and many articles on the topic and has lectured and consulted widely around the world. Clients have included Toyota, Novo-Nordisk, Lego, Morgan Stanley, Coloplast, Corus, Danfoss, GSK, Grundfos, Hewlett-Packard and Kumba Resources.
Acknowledgements
We would like to thank all those colleagues and students at SPRU, CENTRIM, Exeter and elsewhere, who have provided feedback on ourwork.Wearealsogratefulforthemoreformalinputprovidedby various anonymous reviewers whose comments and suggestions helped develop this new edition, and the experience and expertise shared by the participants in the professional faculty workshops held inLondon,Manchester,RotterdamandBarcelona.
Thanks are also due to Emma Taylor, Dave Francis, Stefan Kohn, Philip Cullimore, Fabian Schlage, Helle-Vibeke Carstensen, Francisco Pinhero, Melissa Clark-Reynolds, Armin Rau, Catherina van Delden, Simon Tucker, Girish Prabhu, Richard Philpott, David
Simoes-Brown, Alastair Ross, Suzana Moreira, Michael Bartl, Roy Sandbach, Lynne Maher, Helen King, Patrick McLaughlin, David Overton, Michelle Lowe, Gerard Harkin, Dorothea Seebode, John Thesmer, Tim Craft, Bettina von Stamm and Kathrin Moeslein for their help in creating case studies and podcast/video material for the text and website. Particular thanks are due to Anna Trifilova for her help in background research and assembling many of the web-based cases.
As always we're really grateful for the help and support of the extended team at John Wiley & Sons, Ltd, who have practised what we preach with their seamless cross-functional working, especially
Steve Hardman, Deb Egleton, Mark Styles, Sarah Booth, Peter Hudson,JulietBooker,JoelBalbinandLynetteWoodward.
PrefacetotheFifthEdition
Innovative firms grow twice as fast, both in employment and sales, as firms that fail to innovate. We know that those organizations that are consistently successful at managing innovation out-perform their peers in terms of growth, financial performance, and employment, and that the broader social benefits of innovation are even greater. However, managing innovation is not easy or automatic. It requires skills and knowledge which are significantly different to the standard management toolkit and experience, because most management training and advice is aimed to maintain stability, hence the most sought after degree is an MBA – Master of Business Administration. As a result, most organizations either simply do not formally manage the innovation process, or manage it in an ad hoc way. Studies confirm that only around 12% of organizations successfullymanageinnovation,andonlyhalfoftheseorganizations dosoconsistentlyacrosstime.
Since the first edition of Managing Innovation was published in 1997 we have argued that successful innovation management is much more than managing a single aspect, such as creativity, research and development or product development. Our companion texts deal with such issues more fully, but here we continue to promote an integrated approach, which deals with the interactions between changes in markets, technology and organization. In this
fifth edition, we have tried to continue our tradition of differentiating ourworkfromthatofothersbydevelopingitsuniquecharacteristics:
Strong evidence-based approach to the understanding and practice of managing innovation, drawing upon thousands of research projects, and ‘Research Notes’ on the very latest research findings. In June 2012 Managing Innovation had more than 1100 citations in the Thomson Web of Knowledge, and over 3700 in Google Scholar;
Practical, experience-tested processes, models and tools, including new to this edition ‘Views from the Front Line’, first-person accounts from practicing managers on the challenges they face managing innovation;
Real illustrations and case examples of innovation in action, in manufacturing and services, private and public sectors, including in-text exhibits, and from the Innovation Portal (www.innovation-portal.info), full-case studies, video and audio pod casts;
Supported by extensive, growing web resources, at www.innovation-portal.info, featuring a comprehensive range of innovation tools, interactive exercises and tests to help apply the learning.
Our understanding of innovation continues to grow, by systematic research, experimentation and the ultimate test of management
practice and experience. Innovation management has grown to become a mainstream field of academic research and management practice: in 2012, at EURAM (European Academy of Management) the innovation track was the largest with almost 200 research papers; and the ISPIM (International Society of Professional Innovation Management) attracted 500 member delegates. As a result it is a challenge for all of us interested in innovation to keep abreast of this fast-developing and multi-disciplinary field. In the general field of business research, the 200 or so active research centres worldwide produce some 5000 papers each year, many relevant to managing innovation. In the more specialist fields of technology and innovation management, the 120 research centres worldwide publish several hundreds of papers each year. One goal of this book is to help make sense and navigate through this mass of material. Another is to encourage action. As we declared in the first edition, and still believe strongly, this book is designed to encourage and support practice, and organization-specific experimentation and learning, and nottosubstituteforit.
We would like to acknowledge the extensive feedback, support and contributions from users of the previous editions, our own colleagues and students, the team at John Wiley & Sons, and the growing community of innovation scholars and professionals who have contributed directly to this fifth edition, in particular the generous participants in the workshops we ran in London, Manchester,RotterdamandBarcelona.
Mason, G., Bishop, K. and Robinson, C. (2009) Business Growth and Innovation NESTA, London 6 7 1
JoeTiddandJohnBessant May 2013
Tidd, J. (2012) From Knowledge Management to Strategic Competence, 3rd edn. Imperial College Press.
Jaruzelski, B., Loehr, J. and Holman, R. (2011) ‘The Global Innovation 1000: Why Culture Is Key’, Strategy + Business, issue 65. Booz and Company.
Eagar, R., van Oene, F., Boulton, C., Roos, D. and Dekeyser, C. (2011) ‘The Future of Innovation Management: The Next 10 Years’, Prism, issue 2011/1. Arthur D. Little.
Bessant, J. and J. Tidd (2011) Innovation and Entrepreneurship, 2nd edn. John Wiley & Sons, Ltd; Isaksen, S. and J. Tidd (2006) Meeting the Innovation Challenge: Leadership for Transformation and Growth. John Wiley & Son, Ltd; Bessant, J. (2003) High Involvement Innovation. John Wiley & Sons, Ltd.
Mangematin, V. and Baden Fuller, C. (2008) ‘Global contests in the production of business knowledge’, Long Range Planning, 41(1), 117–139.
Fagerberg, J., Fosaas, M. and Sapprasert, K. (2012) ‘Innovation: Exploring the Knowledge-base’, Research Policy, 41, 1132–1153.
HowtoUseThisBook FeaturesintheBook
WebResources
INNOVATION PORTAL
TheInnovationPortal at www.innovation-portal.info houses all the online resources for the book. This fully searchable resource containsawealthofmaterialincludingacompletecompendiumof videos,cases,activities and a fully searchable innovationtoolkit, and is an essential resource for anyone wishing to deepen their understanding of innovation concepts. Links to this material can befoundintherelevantbookchaptersasshownbelow:
If there is too much freedom you may observe people going off in their own independent directions. They have an unbalanced concern weighted toward themselves rather than the work group or organization. People may do things that demonstrate little or no concern for important policies/procedures, performing tasks differently and independently redefining how they are done each time. The Innovation Portal gives a case study on radical innovation culture at Cerulean together with an audio interview with the CEO,PatrickMcLaughlin.
INTERACTIVE E-BOOK
An interactive e-book is included with every copy of the book (via the access code inside the front cover and through the Innovation Portal at www.innovation-portal.info). The e-book
has embedded media including cases, videos, audio, activities, tools and quizzes that are found in the text right where they are needed, helping readers to absorb key concept, test their understanding and bring the book to life. The reader can also personalize their e-book by making notes and voice annotations, creating links to the text or to websites and by highlighting key sections.
Look for these icons in the text to show where media has been embedded:
AdditionalResourcesforInstructors
The authorshave compiled anextensive range ofresources tohelp lecturers teach their innovation courses including a teaching guide and course outline that provides a template for courses, seminars and assessments built around specific themes, together with linked media such as lecture slides, seminar exercises, cases, tools and assessments. There is also a comprehensive test bank and shorter quizzes to help test student understanding. All this material can also be accessed via the Innovation Portal at www.innovationportal.info.
PARTI ManagingInnovation
Chapter1
Innovation–Whatitisand WhyitMatters
‘A slow sort of country’ said the Red Queen. ‘Now here, you see, it takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twiceasfastasthat!’
–
LewisCarroll, Alice Through the Looking Glass
Go online to access your interactive e-book and additional resourcesforthischapteratwww.innovation-portal.info
1.1Introduction
‘We always eat elephants …’ is a surprising claim made by Carlos Broens, founder and head of a successful toolmaking and precision engineering firm in Australia with an enviable growth record. Broens Industries is a small/medium-sized company of 130 employees which survives in a highly competitive world by exporting over 70% of its products and services to technologically demanding firms in aerospace, medical and other advanced markets. The quote doesn't refer to strange dietary habits but to their confidence in ‘taking on the challenges normally seen as impossible forfirmsofoursize’–acapabilitywhichisgroundedinacultureof innovationinproductsandtheprocesseswhichgotoproducethem.
At the other end of the scale Kumba Resources is a large South African mining company which makes another dramatic claim – ‘We move mountains’. In their case the mountains contain iron ore and their huge operations require large-scale excavation – and restitution of the landscape afterwards. Much of their business involves complex large-scale machinery – and their ability to keep it running and productive depends on a workforce able to contribute their innovative ideas on a continuing basis. The Innovation Portal provides a case study describing Kumba Resources' high involvementinnovationactivities.
Innovation is driven by the ability to see connections, to spot opportunities and to take advantage of them. When the Tasman Bridge collapsed in Hobart, Tasmania, in 1975, Robert Clifford was running a small ferry company and saw an opportunity to capitalize 1
on the increased demand for ferries – and to differentiate his offering by selling drinks to thirsty cross-city commuters. The same entrepreneurial flair later helped him build a company – Incat –which pioneered the wave-piercing design which helped them capture over half the world market for fast catamaran ferries. Continuinginvestmentininnovationhashelpedthiscompanyfroma relatively isolated island build a key niche in highly competitive internationalmilitaryandcivilianmarkets(www.incat.com.au/).
But innovation is not just about opening up new markets – it can also offer new ways of serving established and mature ones. Despite a global shift in textile and clothing manufacture towards developing countries the Spanish company, Inditex (through its retail outlets under various names including Zara) have pioneered a highly flexible, fast turnaround clothing operation with over 2000 outlets in 52 countries. It was founded by Amancio Ortega Gaona who set up a small operation in the west of Spain in La Coruna – a region not previously noted for textile production – and the first store opened there in 1975. They now have over 5000 stores worldwide and are now the biggest clothing retailer; significantly, they are also the only manufacturer to offer specific collections for northern and southern hemisphere markets. Central to the Inditex philosophy is close linkagebetweendesign,manufacture andretailing, andtheirnetwork of stores constantly feeds back information about trends which are used to generate new designs. They also experiment with new ideas directly on the public, trying samples of cloth or design and quickly getting back indications of what is going to catch on. Despite their global orientation, most manufacturing is still done in Spain, and
they have managed to reduce the turnaround time between a trigger signalforaninnovationandrespondingtoittoaround15days.
Case Study on Zara is available in your interactive e-book at www.innovation-portal.info
Of course, technology often plays a key role in enabling radical new options. Magink is a company set up in 2000 by a group of Israeli engineers and now part of the giant Mitsubishi concern. Its business is in exploiting the emerging field of digital ink technology – essentially enabling paper-like display technology for indoor and outdoor displays. These have a number of advantages over other displays such as liquid crystal – low-cost, high viewing angles and high visibility even in full sunlight. One of their major new lines of development is in advertising billboards – a market worth $5bn in the USA alone – where the prospect of ‘programmable hoardings’ is now opened up. Magink enables high resolution images which can be changed much more frequently than conventional paper advertising, and permit billboard site owners to offer variable price timeslots,muchastelevisiondoesatpresent.
At the other end of the technological scale there is scope for improvement on an old product, often using old technologies in new ways. People have always needed artificial limbs and the demand has, sadly, significantly increased as a result of high technology weaponry such as mines. The problem is compounded by the fact
that many of those requiring new limbs are also in the poorest regions of the world and unable to afford expensive prosthetics. The chance meeting of a young surgeon, Dr Pramod Karan Sethi, and a sculptor Ram Chandra in the hospital in Jaipur, India, has led to the development of a solution to this problem – the Jaipur foot. This artificial limb was developed using Chandra's skill as a sculptor and Sethi's expertise and is so effective that those who wear it can run, climb trees and pedal bicycles. It was designed to make use of low tech materials and be simple to assemble – for example, in Afghanistan craftsmen hammer the foot together out of spent artillery shells whilst in Cambodia part of the foot's rubber components are scavenged from truck tyres. Perhaps the greatest achievement has been to do all of this for a low cost – the Jaipur foot costs only $28 in India. Since 1975, nearly 1 million people worldwide have been fitted for the Jaipur limb and the design is being developed and refined – for example, using advanced new materials.
Innovation is of course not confined to manufactured products; plenty of examples of growth through innovation can be found in services. (In fact the world's first business computer was used to support bakery planning and logistics for the UK catering services company J. Lyons and Co). In banking the UK First Direct organization became the most competitive bank, attracting around 10 000 new customers each month by offering a telephone banking service backed up by sophisticated IT – a model which eventually became the industry standard. A similar approach to the insurance business – Direct Line – radically changed the basis of that market and led to widespread imitation by all the major players in the 3 4–6
sector. Internet-based retailers such as Amazon.com have changed the ways in which products as diverse as books, music and travel are sold, whilst firms like eBay have brought the auction house into manylivingrooms.
Public services like healthcare, education and social security may not generate profits but they do affect the quality of life for millions of people. Bright ideas well-implemented can lead to valued new services and the efficient delivery of existing ones – at a time when pressure on national purse strings is becoming ever tighter. New ideas–whetherwind-upradiosinTanzaniaormicro-credit financing schemes in Bangladesh – have the potential to change the quality of life and the availability of opportunity for people in some of the poorest regions of the world. There's plenty of scope for innovation and entrepreneurship – and at the limit we are talking here about real matters of life and death. For example, the Karolinska Hospital in Stockholm has managed to make radical improvements in the speed, qualityandeffectivenessofitscareservices–suchascuttingwaiting lists by 75% and cancellations by 80% – through innovation. Similar dramatic gains have been made in a variety of Indian healthcare operations. Public sector innovations have included the postage stamp, the National Health Service in the UK, and much of the early development work behind technologies like fibre optics, radarandtheInternet. 1.2WhyInnovationMatters
Box 1.1 highlights some quotes about innovation. What these organizations have in common is that their success derives in large
measure from innovation. Whilst competitive advantage can come from size, or possession of assets, and so on, the pattern is increasingly coming to favour those organizations which can mobilize knowledge and technological skills and experience to create novelty in their offerings (product/service) and the ways in whichtheycreateanddeliverthoseofferings.
Innovation matters, not only at the level of the individual enterprise, but increasingly as the wellspring for national economic growth. The economist William Baumol pointed out that ‘virtually all of the economic growth that has occurred since the eighteenth century is ultimately attributable to innovation’. In their regular survey of ‘innovation leaders’ in 25 sectors of the economy, the consultancy Innovaro report that these companies not only outpace their competitors on a year by year basis but also that this has a marked effect on their share price. Over the past 10 years they have regularly outperformed the average share price index on the NASDAQ, Dow Jones and FTSE markets and in 2009, when other companies' share prices grew on average by between 40 and 70%, the Innovation Leaders average growth was 130%. (Source: Innovation Briefing, ‘Innovation Leaders 2008’, www.innovaro.com). Tim Jones and colleagues have made an extensive study of the practices in such companies and their book and associated website – www.growthagenda.org – contains cases of leading innovative businesses from around the world, including newcomers like Tata and Narayana Hospitals alongside Apple, Google,AmazonandRolls-Royce. 11 12
Importantly, innovation and competitive success is not simply about high technology companies; for example, the German firm of Wurth is the largest maker of screws (and other fastenings such as nuts and bolts) in the world with a turnover of £7.5bn. Despite low costcompetitionfromChinathecompanyhasmanagedtostayahead through an emphasis on product and process innovation across a supplier network similar to the model used by Dell in computers (Financial Times, 5/3/2008). In similar fashion the UK Dairy Crest business has built up a turnover of nearly £250m through offering a stream of product innovations including resealable packaging, novel formats and new varieties of cheese and related dairy products, supported by manufacturing and logistics process innovations (The Times,26/9/2011).
Innovation is becoming a central plank in national economic policy – for example, the UK Office of Science and Innovation sees itas‘themotorofthemoderneconomy,turningideasandknowledge
