Innovation Management. Structures and Processes of an Innovative Company

Term Paper, 2015

21 Pages


Table of Contents

List of Abbreviations

List of Figures

1 Introduction
1.1 Problem definition
1.2 Research question
1.3 Structure and methodology

2 Fundamentals of Innovation Management
2.1 Definition and identification
2.2 Significance of innovations
2.2.1 Economic significance
2.2.2 Company significance

3 Developing an innovation-friendly organization
3.1 Innovation willingness (want)
3.1.1 Corporate goals and strategies
3.1.2 Innovation strategies
3.1.3 Personnel structure
3.2 Innovation possibility (may)
3.2.1 Innovation culture
3.2.2 Innovation structure
3.3 Innovation capability (can)
3.4 Innovation process (do)

4 Conclusion
4.1 Summary
4.2 Answering the research question
4.3 Limitation of the research
4.4 Recommendation for further research

Publication bibliography

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

List of Figures

Figure 1: Market entry strategies in product life cycle

Figure 2: Central Innovation Management in the organisational structure

Figure 3: Internal structure of innovation management

Figure 4: Phasenmodell by Brockhoff 12

1 Introduction

Companies as social systems of our society can only survive if they create somethingwhich is in exchange with their environment of value. As the environment changesconstantly companies have to adapt their products, processes or even business model tothese changes. This is what we call innovation in the broader sense.1 If a company doesnot notice a change in the environment the company will get in trouble. The Finnishcompany Nokia is on one hand a really good example of a company that correctly earlyperceived and interpreted developments in their environment. This made Nokia one ofthe most famous companies in the world. On the other Nokia is a tragic examplebecause the company missed another big trend and thus slipped into red numbers. At thebeginning of the 20th century Nokia produced successfully rubber boots and bicycletires. However, the company realized that the future of the market for rubber productswill be dominated by Asia and looked around for new high-growth markets. In the 80s,the company introduced the first mobile phone and developed from rubber bootsmanufacturers over the years into a successful technology company. End of the 90s,Nokia was the world leader in the emerging market for mobile phones. But thedominance crumbled after Apple had introduced the iPhone in 2007. The Finnishmobile phone manufacturer reacted too late to the smartphones trend and within a fewyears Nokia slipped deep into the red numbers. In year 2014 the software manufacturer Microsoft bought the company.2

1.1 Problem definition

The example Nokia impressively demonstrates the need for innovation for the survivalof a company, the safeguarding of jobs and for the survival of capital from shareholders.Nokia missed the trend of smartphones and was taken over by a competitor even thoughthe company was short time before still world market leader. The increasinginternational competition and accelerated technological change characterize today themarkets in which companies operate and exist. This requires the ability for quickadaptation and continuous renewal of products, processes and business services.

Innovations represent more than ever the basis for competitiveness, profitability and long-term survivability. Therefore innovation is a decisive factor for the success of any company. Without innovation, a company cannot survive.

1.2 Research question

Innovations are not a stroke of luck. Most innovations result from a systematic process.Peter Drucker wrote of innovation management as a learnable, controllable andmanageable discipline.3 This statement can be seen that any company in any country, nomatter how large, in what industry, international or local can be innovative if itconsiders and implements certain rules. Innovation management deals with theseaspects. The objective of this work is to work out what structures and processes have toexist within a company in order to become and remain an innovative company.

1.3 Structure and methodology

This work is divided into different parts. The first part Fundamentals of innovationmanagement” introduces the definition of the term innovation and the relationshipbetween ideas and innovations. Furthermore the first part presents briefly theimportance of innovation. The second section “Developing an innovation-friendlyorganization” demonstrates that the innovation activity of the entire company is affectedby four individual factors. These four factors the innovation willingness, innovationpossibility, innovation capability and the innovation process are closely considered inthis part. The last section “Conclusion” will complete and limit the entire work and willgive recommendation for further research.

For that work no primary data was gathered, the entire work is based on secondary dataas the scope of this assignment does not allow for any explorative approaches,interviews or surveys. The necessary information for the work that were previouslyscattered published or accessible will be arranged, analyzed and interpreted. Thesources of secondary data are gathered form books, magazines and sources in theworldwide-web

2 Fundamentals of Innovation Management

This section attempts to answer the question what is meant by the term "innovation". What characterizes an innovation and when becomes an idea an innovation? Furthermore, this section shows the importance of innovation and clarifies the relationship between profitability and innovation.

2.1 Definition and identification

The inexact and inflationary use of the term innovation has led to wrong ideas and understanding of the term. Therefore here is a definition.

The word "innovation" is derived from the Latin words novus (new or novel) andinnovatio (something newly created). Innovation means an identifiable new quality andmarks a clear difference with previous solutions and practices. Innovation is much morethan a simple improvement and is not confined to innovative technical solutions.4 Amore simplified definition offers Gustav Bergmann. He understands innovation as“ideas, which are recognized as new and useful by a particular group”.5 This definitionincludes a new but important point. Crucial to an innovation is besides the novelty alsothe successful implementation into the market. When an idea is not implementedsuccessfully, it is not called an innovation. Therefore the meaning of innovation can putinto the formula:6

Abbildung in dieser Leseprobe nicht enthalten

An innovation is marked by three characteristics. First an innovation offers a clear benefit to their users. Second it shows originality that means, the user experiences the innovation as novel and third an innovation is characterized by its features, in which case is meant the content and the style of the innovation.7

2.2 Significance of innovations

2.2.1 Economic significance

Today, there is no denying that there is a strong positive correlation between innovation and overall economic growth. Of great meaning is the fact that innovations are often associated with extensive investments. The intensive use of capital within the innovation processes allows, for example, the acquisition of modern machinery and procedures as well as the hiring of additional personnel. This has a positive effect on suppliers and trade. All this leads to more added value, growth and prosperity.8 Therefore, it is not surprising that national and international rankings compare the innovative capacity of firms and also of entire countries.

2.2.2 Company significance

The competitiveness of every company depends largely on the ability to generateinnovations. By the increasing globalization and the consequent increasing competitivepressure as well as shortened life cycles companies are forced to develop new productsmore quickly and implement them effectively in the market. The time factor has becomea decisive competitive factor that significantly affects profitability of a company. Thosecompanies that are not in a position to bring innovative products to the market and tooptimize their processes continuously cannot prevail against their competitors in themedium and long perspective.9

This part introduces the significant factors that influencing the innovation activities andinnovation performance and demonstrates the relationship between them. Furthermorethis part tries to answer the question what are the prerequisites for a successfulimplementation of the first ideas to innovation and which organization promotesinnovations?

3.1 Innovation willingness (want)

As already indicated all innovations start with an idea and ideas arise in the heads of employees. Therefore the willingness of employees and management to improve the current situation by new ideas is the requirement for the successful implementation of innovation management.

3.1.1 Corporate goals and strategies

If the management is willingness to change things in order to get more innovative it isadvisable to express the innovation willingness in a clear formulation of companyobjectives and strategy. Objectives are the basis for any systematic corporategovernance and the rational control of all operational processes.10 Therefore, allinnovation activities have to be aligned to the strategic goals and company's strategy.11 Furthermore the writing down of innovation willingness in the corporate targetsunderlines the seriousness by the management. Only if the employees are convinced ofthe innovation willingness of the management, the management can promote thenecessary changes to the employees. A target system that has clear guidelines in termsof improvements and necessary developments motivates the employees to participate inthe target achievement.12

3.1.2 Innovation strategies

The innovation strategy is part of the overall strategy and is important for the future positioning of a company in the market. The vision and mission form the principles and the framework for the formulation of the innovation strategy.13 The innovation strategy dictates how the strategic behavior of the company has to look in relation to innovation.14 According to Ansoff and Stewart there are four typologies of innovation strategies based on the market entry (see figure 1).15

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Market entry strategies in product life cycle. 16

By the strategy first-to-market a.k.a. pioneer strategy, companies attempt to gain acompetitive advantage by early market launch. The at least temporary technologicalmonopoly position allows the company to recover a large part of consumers and buildor improve their image in an attractive market segment. The strategic aim is thetechnology leadership, but this is associated with very high R&D costs. In addition thetechnology leadership requires a good cooperation between product planning andmanufacturing.17

When a market participant enters the market a short time after the pioneer with comparable services it is called early followers or second-to-market. The costumeroriented strategy targets also on competitive advantages by reduced risk and a less need for investment as a result of the later market entry. Since the market is still in an early phase of the life cycle, it still offers significant competitive advantages to the early followers yet compared to the so-called late follower.18

The late followers occur only in the market when the market trends and buyer behaviorhave stabilized and the further development can be estimated relatively safe.


1 cf. Williamson (1975).

2 cf. Handelsblatt (2011).

3 cf. Drucker (1998), p. 3.

4 cf. Fichtner (2014), p. 12.

5 cf. Bergmann (2000), p. 19.

6 cf. Müller-Prothmann, Dörr (2011), p. 7.

7 cf. Disselkamp (2012), p. 18.

8 cf. Vahs, Brem (2013), p. 4-5.

9 cf. Vahs, Brem (2013), p. 8-10.

10 cf. Disselkamp (2012), p. 63.

11 cf. Lawson, Samson (2001), p. 389f.

12 cf. Disselkamp (2012), p. 64.

13 cf. Vahs, Brem (2013), p. 100, 104.

14 cf. Pepels (1999), p. 71.

15 cf. Ansoff, Stewart (1967), p. 71-83.

16 Own graphic based on Vahs, Brem (2013) p. 108.

17 cf. Corsten et al. (2006), p. 256.

18 cf. Disselkamp (2012), p. 67.

Excerpt out of 21 pages


Innovation Management. Structures and Processes of an Innovative Company
University of applied sciences, Nürnberg
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ISBN (Book)
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Innovationen, Strategie, Kultur
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Master of Business Administration (MBA) Martin Pruschkowski (Author), 2015, Innovation Management. Structures and Processes of an Innovative Company, Munich, GRIN Verlag,


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