The process of generating innovation
The best way to exploit the potential of different innovation activities is through structured planning and control of innovation activities from the initial idea to successful market entry. Based on experiences in innovation consulting, A.T. Kearney developed the “House of Innovation”. In Figure 6 the slightly modified model of successful innovation management including important elements in shown. Although the “House of Innovation” primarily concentrates on the individual operational level, the components can be used for any type of innovation process (also for network management on the network level).
Figure 6: “House of Innovation” (modified after European Communities, 2008; furthermore based on Bruns et al., 2008; Menrad, 2004; Rosenfeld and Servo, 1991; Rothwell, 1994; Schlicksupp, 1992; Schroeder et al., 1986; Trommsdorff, 1990)
The roof of the “House of Innovation” is the innovation strategy, a planning process, which clearly defines which company and network goals require innovations. Besides the innovation strategy, an innovation-oriented company or network should include these goals in the organisation and company / network culture. In this way innovative impulses can be strengthened and promoted. An existing strategy and innovation culture makes the innovation process easier. The innovation process encompasses activities from the generation of ideas to the implementation of new developments and introduction to the market. Innovation processes are made possible through the presence of resources and management structures. An innovation process is initiated by changing conditions and environmental influences. It can be roughly divided into three main phases: initiation, implementation and utilisation (see Figure 6). Even when innovation processes are depicted as linear processes it normal for some process steps to be repeated. Since some parts of the innovation process are at a high risk (for example, new development), corrections are possible or alternative solution approaches need to be tried. In accordance with this an innovation process can be understood as an iterative process or a learning loop.
Innovations are based on different innovation activities like scientific, technological, organisational, financial and commercial steps (OECD, 2002). In individual innovation activities it can also be a matter, for example, of a self-contained R&D project or a project dealing with entering the market or commercialisation. An innovation activity does not necessarily create an innovation (commercial successful implementation of something new). It might be one step in the whole innovation process. Through the combination of several innovation activities the overall goal of an innovation can be reached. Hereby it is firstly a matter of an innovation when commercial success on the market or the performance of market participants has been increased based on the implementation of the innovation (European Commission, 2004; Hauschildt, 2004; Rogers, 1998).
Innovation process phase “Initiation”
The identification and description of problems supply a basis for innovation activities. The earlier actors recognise internal as well as external changes emerging, the earlier they can face the challenges resulting from it. Thus it is a significant competitive advantage when actors are in the position to already look ahead and see market changes approaching as opposed to having to react to them ad hoc. The identification of new and future demands on companies, production chains, networks, or whole sectors is also called “foresight and diagnostics” (Howells, 2006). Such a step should be carried out regularly on the company and network levels. On this basis short, medium and long-term strategies can be developed.
Once the problem has been recognised and described, a central challenge for a successful innovation process follows – finding and bringing forth ideas for new products, processes or services. The generation of ideas can take place through exchanges with customers and suppliers within the framework of exhibitions, on location appointments, conferences etc. (Kausch, 2007).
Idea generation is a very creative part of the innovation process. It consists of the excessive search for the best possible solution approaches. Methods can be applied hereby to initiate or promote creativity. However creativity cannot be forced. But it is more likely to develop in a certain innovative atmosphere (characterised by open exchange, trust, tolerance of mistakes, reward etc.) and a living innovation culture (Ekvall, 1991).
After the creative generation of ideas the analytical assessment and selection of ideas takes place. While the first assessment of innovation ideas only aims at getting a rough grid and timeline of the respective approach, the analysis of feasibility and potential aims as much as possible at getting reliable statements about possible products. Internal knowledge can be supplemented by market analysis, surveys, comparative analysis etc. In this way final statements on the four following parameters should be obtained:
1. Technical feasibility (incl. the necessary / existing know-how)
2. Financial feasibility (incl. the resources available for this purpose)
3. Market volume and return of investment (for every participating actor)
4. Probability of success and risk (incl. consequences of worst case scenarios)
Based on these parameters, which can be detailed and made to suit any individual case, a prioritisation of the projects to be executed should take place.
At the end of the initiation phase a coherent project plan is developed, which describes the goal of the project and its potential. Furthermore the project gives information on the timeline (work and milestone planning) and resource planning (budget, equipment, personnel) etc. Fundamental goals are to be structured into action-oriented sub-goals, which simplify the processing of the problem (DGQ 2000; Pleschak and Sabisch, 1996). In addition, in this step it should be checked which additional external resources (partner, subsidies) are needed and how they can be acquired. Often the elaboration described offers a renewed opportunity to check the project idea thoroughly since logical gaps, erroneous assumptions and insufficient information are quickly revealed during the systematic presentation. In the detailing of the project it is important always to keep the market situation in mind in order to bring forth market-oriented and thereby successful innovations. Since the internal elaboration already exhibits all the characteristics of a funding application, the sketch can also be used respectively for the acquisition of financial resources.
Innovation process phase “R&D realisation”
The development of the project plan is the transition to the project realisation phase. The implementation of projects is a central step for the innovation project. In this phase innovation management is supplemented with the classic functions of project management. Project management is necessary for the smooth progress of the planned project. Accompanying project management in particular is an essential component in the innovation process phase in which individual, self-contained projects are defined, such as during the implementation of R&D or introduction to the market, for example. Through planning, supervision, and control in terms of a closed control circuit, those areas which present shortages for achieving the project goal will be identified. If problems arise in the implementation of the project, which are recognised by project controlling, then the project plan can be adjusted to the new situation (DGQ, 2000).
It should, however, be noted hereby that project management in innovation processes can differ from usual project management. The development of innovations holds unpredictable challenges. Especially when the innovation is of a radical nature, the implementation process is difficult to plan. Research and development work can lead to a dead end. For example, when a solution approach turns out to be unsuitable. The work can be characterised by trial and error situations making the timeline and financial dimension of such projects difficult to estimate. In addition, the timeline of technology development can deviate in relation to the development of the market situation. At the end of the development period it is possible that the market demand determined at the start is no longer present to the same extent and / or has changed. Thus project plans should observe the necessary scope for development. Nonetheless elements of classic project management should be integrated into risky innovation projects.
Project management is responsible for the correct use of subsidies and resources as well as for achieving milestones and goals. Regular controlling is indispensable for the inspection of project implementation and observance of planning. Such a tool cannot be supported by numerical values alone; parameters in regard to content must also be considered to make a continuation, termination, adaptation or alternative implementation of the project possible. Progress reports in regard to content, in combination with number based controlling (based on the financial and timeline dimension), supply information for decision makers, so that control points are built in during the implementation of the project, in order to make strategic decisions based on this information as to whether the work should be continued or whether the costs are skyrocketing and thus exceeding the expecting benefit (Cooper et al., 1999, Fortuin et al., 2007).
Innovation process step “Exploitation”
In the exploitation phases the commercial benefit of innovations is prepared. If commercialisation is absent then it is not an innovation. Within the framework of the exploitation phase, new developments, new knowledge and discoveries, for example, can be made publicly known. This path is often taken by scientific institutions through the publication of research results in professional journals. Another possibility, which is more likely to be used by companies but increasingly by research institutions, is endeavouring to obtain commercial protective measures for new developments (for example, applying for patents). The owner of a certain protective measure has the right to hinder the imitation and use of the new development (for a certain period of time) or to determine the conditions for its use. It is hereby made possible to generate profit and compensate more than just the research and development costs (Gold et al., 2007).
As has already been indicated, the innovation process is an iterative process or a learning loop. This statement can be illustrated clearly in this phase: if, for example, the results from a research project are used on a specific company or production chain or a company buys technology concepts, an adaptation of the developed technology or results, which exist on a general or conceptual level, is often necessary in order to get a practical “fit” (Bessant and Rush, 1995). In this case, further demand for R&D planning can result in order to adapt the general concept or existing technology to specific problems (see also further models under “Importance of technology adaptation for the agrifood industry”, see above). In accordance with this the exploitation phase can be defined as a new self-contained project (incl. objectives contained, tasks, timeline and budget planning).