Economics / 14. Economic theory
Cand.
Sc. (Econ.) Tkachuk L.M.,
Karpinskiy Y.V.
What are inovations in fact
Nothing is in place in the modern economy, the development of each of its
links is constantly subjected to change. New conditions require innovations to accommodate
to them. So companies have to review their
strategy and structure, change and update their processes. Change of specific strategies
related to the organization only of a certain phase of the firm, usually is not
so difficult. But companies quite often have some difficulties with large-scale
innovation. To improve skills in innovation shere it is important to collect some
of the elements of the innovation process in a coherent picture.
The hardest
goal is to introduce innovations systematically, from project to project, to ensure
sustainable high performance. For most companies this appears to be too hard to
perform. Many of them manage to implement certain innovations successfully from
time to time but it is too difficult to maintain constant innovation and get a
high return.
The concept
of innovation is interpreted quite differently. So first of all lets give the definition of this category. Innovation
is a way of introduction and combination of information, tangible and intangible
assets, existing facilities to create innovations in the production process, personnel
management, advertising programs and in all other spheres of organization to improve the quality of all the
problems that lead to creation of higher value and to obtain better economic results.
Innovation
can also be interpreted as an open process where each stage is connected with the
previous and following ones.The stages of the first application usually have a significant
impact on the process of birth and refinement.It is often difficult to separate
the stages of innovation from each outher. For example, quality management system
can be significantly modified due to the specific businesses and new, innovative
uses of information [1].
In terms
of the principles cited not only radical changes associated with new solutions
can be interpreted as innovation, but also as implemented step by step actions arising
from the experience of the organization and implementation of decisions approved
in this market segment [1].
In fact,
we must agree that some of companies can achieve greater successes in product development
and innovation than others. It turns out, that the answer to this question is always
on the surface. The success of companies in innovative activity depends on the level
of involvement (or, more precisely, non-involvement)
of top management in the process. It may seem strange fore somebody, but the secret
of successful innovations is to prevent top-level managers from them [2].
The
research Organization The Nielsen Company analyzed innovation processes in 30 large
companies involved in consumer goods in the U.S. They found out that companies where
top management was not involved in thedevelopment of new products, managed to achieve
by 80% greater financial returns from new products than those in which top management
was actively involved in innovation.
Moreover,
companies that in addition, have used other innovative best practices showed by
six times more revenue growth from new products than others.
Taking
into account the survey data, even the production location near central office is able to reduce the generation
of new breakthrough ideas. Essentially, it means that it is better not to have a
special team that will be engage ininnovation than to have it in the central office.
The companies where innovative team were established and worked outside the central
office, showed 5.7% of revenue from new products in comparison with the general
interest. The companies in which there were no innovation teams, at all showed 4,8%
of profits from new products compared with the general interest. While the companies,
which innovative teams worked in the office, had tha figure of only 2,7% [2].
"One
of the key aspects of the creation of innovation is a lack of tough management",
explains Tom Agan, Managing Director of The Nielsen Company. "We did not question
the strengths of top managers and their orientation to development, they are
still often too quick in their conclusions, especially when innovations are not
able to show immediate positive results for the company. As a result, they "rush"
any new initiatives in the bud [2].
The question
of removal from innovation sounds pretty rough, but it has become a fact hat this
system works. It is interesting that these facts have already been found in the
functioning of the Ukrainian enterprises.[3]
There are
many other points of view regarding the essence of innovation.
As an entrepreneur,
the author of the article "What is innovation really?" [4] Bob Donnelly
spent much of his life doing start ups, as well as the development and sale of businesses.
He also tried his hand at management positions
of companies such as IBM, Pfizer and Exxon. Today, Bob talks about innovation,
calling them "concept, which is often wrongly perceived" and tries to
explain what innovation actually is.
"George
Foreman, one of my favorite innovators had
invented grill , the main purpose of which was saving fat. His simple innovation
has led to one hundred million sale of grills from the moment they had been introduced
in 1995".
Another
confusion associated with innovation, concerns its connection to the business. We can say that all entrepreneurs are innovators in their
nature.
In addition,
innovations are to associated with "breakthrough technology". However,
this technology does not need to be "high-tech".
Apple with
a help of Steve Jobs, due to his creativity and vision, has become an icon of innovation.
Apple Stores are overwhelmed with consumers, who are happy to talk to the same fans,
and waiting for their turn to consultants, test capabilities of the new laptop,
which is installed nearby. This new laptop doesn’t differ from many other brands
by its hardware.
So we can
mace a conclusion that in reality innovation is just the ability of entrepreneurs
to find and implement better, cheaper and faster solution of their own problems.
But the most talented innovators solve the problem before the consumers has it [4].
The final
result of innovation is the development and implementation of innovative programs
and projects to do with not necessarily bulky, - "the program" may be
just a simple administrative decision, which will radically change the
company’s success in the market. Innovation imblementation which is related to the
search for technological solutions, such as finding new materials, building management
systems, etc. in any industries needs financial costs. Therefore, as in all other
investment situations, we deal with risk. So, there is another issue, - assessment
of innovation effectiveness, which is becoming increasingly popular especially today.
The next
step to overcome problems of innovation may be searching for ways to reduce risk.
Irving Wladawsky-Berger - honorary chairman of IBM Academy of Technology offers
one of these ways: "community effect plays an important role in becoming centers
of innovation. The more talented people gather in one place, the stronger the mutual
influence of their thoughts and actions and the more powerful incentive to design
innovation the entire community gets as a whole. Availability of human resources
is necessary for the formation of the innovation center. It is not less
important to provide stable development of culture, for which the diversity of
ideas and experience will be the primary value…[5] ".
It appears
that today we are dealing with a number of factors that influence the accuracy of
an effective choice of the introduction of various innovative solutions. Therefore,
in terms of market reforms we need coherent model for evaluating the effectiveness
of innovation that would provide an opportunity to review this performance from
different sides:
-
Meeting the interests of consumers. Innovative
projects should be popular among buyers.
- Competitiveness. It
means the marketing analyses of competitive companies and their goods, which
perhaps are not identical, but we shouldn’t forget about substitutes.
- Risk assessment. It is necessary to anticipate and
predict the possible economic effects of innovation, whether it will be acceptable
enough whether there are any other alternative ideas, - more profitable for the
company.
- The issue of control
of innovative project creation. It is freedom of personnel actions to generate all
possible ideas.
According
to the experience many companies feel constrained by their inability to achieve
long-term growth through innovation. Their competitive advantage if they managed
to get it, can not be maintained at the proper level, since it was created only
for instant needs, but without adequate attention to innovation, capable to support
further growth.
These companies
are generally in excellent financial niche, sales work perfectly. In terms of conventional logic - they are successful. But from the perspective
of future value, even the most powerful companies sometimes do not look the best.
Business
leaders recognize that the future success of their business depends on innovation.
And even in time of economic instability, and maybe, just at this time, innovations
remain the most important factor that determines the differences between economically
successful market participants and the others. And for the right implementation
of innovations there is need in additional indicators and analysis tools to ensure
successful strategic investments in innovation, which, in turn, can accelerate growth.
The analysis of future values may determine the probability that the company will
work better or worse than its colleagues and competitors.
Literature:
1. Innovative
practices of Polish companies. - www.management.com.ua/cases/case017_3
2. News from
www.management-issues.com
3. O.V. Moroz, L.M.
Tkachuk "Organizational and economic factors of quality management at the
enretprises". - Monography, Kyiv
2005.
4. By "Innovation
is one of the most misunderstood concepts; time to clear things up", Chief
Executive. - http://www.management.com.ua/notes/what-is-innovation
5. André
Andonian, Christophe Luz, Luis Pires “Journal
of McKinsey “. - www.management.com.ua/strategy/str203
6. By "Future
Value and Innovation: How to Sustain Profitable Growth", Outlook Journal.
- www.management.com.ua