Innovations
Gautam Ahuja and PuayKhoon Toh
Technological innovations are commercialized inventions, where inventions refer to the development of a new idea or an act of creation (Hitt, Hoskisson, and Nixon, 1993). Innovations can take the form of new products, new uses for existing products, and new devices, designs, ser vices, methods of production, or systems of arrangements. Technological innovations can thus come in many different forms: a new computer chip (device), a new ergonomic design for chairs (design), allowing for issue of electronic air tickets through Internet websites (service), a new desalination technology to obtain fresh water (methods of production), and a new arrangement of the production line that improves quality control (system of arrangements). Be cause innovations are end products of successful inventions, the two constructs (‘‘innovations’’ and ‘‘inventions’’) are often perceived to be syn onymous. However, one should recognize that the same invention could be commercialized in different forms, hence appearing as different innovations. For example, a new invention in the art of coffee making can be embodied in the form of a new coffee maker machine that incorporates this new principle, or it can be a new procedure for making the coffee – a specific and explicit method of combining coffee beans and hot water, leading to the transformation of such raw materials into the beverage, without a specific product that incorporates this procedure.
The key component to an innovation is the ‘‘newness’’ or novelty in the underlying invention, the improvement(s) that it entails over the existing pool of knowledge in its field. It is through the ability to improve on current know ledge and better satisfy consumer needs that an invention creates value, and hence justifies its commercialization. The value of the innovation represents the extent of the improvement and the value that users of the innovation place on such improvements. Hence, while the extent of ‘‘newness’’ in the invention might be high, such novelty does not necessarily translate into a high value innovation, unless this novelty adds commensurate value to users.
Innovations can also refer to novelties in organization design or practice. For instance, M form and matrix structures are illustrations of organizational design innovations. Similarly, total quality management is an illustration of an organizational practice innovation.
There are various dimensions along which innovations have been classified, namely: (1) radical vs. incremental (Abernathy and Utterback, 1978) (see radical innovations); (2) competence destroying vs. competence enhancing (Tushman and Anderson, innovations 155 1986); (3) architectural vs. modular (Henderson and Clark, 1990); (4) disruptive vs. sustaining (Christensen, 1997; Adner, 2002) (see disruptive innovations); and (5) product vs. process. Most of the above innovation types have been studied in the realm of technologies. Classifications (1), (2), and (4) are based on the effects of innovations, whereas classifications (3) and (5) are based on the nature of the innovations.
The various typologies are discussed briefly below:
A radical innovation is one where the extent of novelty is high, in terms of either performance on a set of attributes (or price performance) or if it represents a major change or a breakaway from the previous technological trajectory. It is often associated with terms like ‘‘breakthrough inventions’’ (Ahuja and Lampert, 2001) and discontinuous innovation (Tushman and Anderson, 1986).
To the extent that the radical innovation creates a discontinuity in the original technological trajectory, it can also be competence destroying, if it renders previous know how irrelevant as it pushes the techno logical frontier towards one defined along a new trajectory. For example, the arrival of PC technology in effect reduces the value of word processor and typewriter technologies and makes irrelevant the production competencies that typewriter producers built up over the years. On the other hand, an incremental innovation is one that represents minor improvements over existing technologies and know how. The novelty embedded in such innovation is less. Such innovation often tends to enhance or preserve the value of existing knowledge and products (hence it may be competence enhancing), and does not create a major breakthrough; nor does it cause any large discontinuities in the existing technological trajectory.
The architectural/modular dimension of in novation represents an almost orthogonal dimension to that of radical/incremental, and draws on the concept of recombination. To the extent that innovations arise from the recombination of existing knowledge com ponents, architectural innovations can have ‘‘radical’’ effects despite not using any radically new knowledge components. Architectural innovations embody mainly the knowledge of how to recombine existing elements, and a radical architectural innovation is one that is radical in its method of recombining existing elements. Modular innovations, on the other hand, represent improvements in the knowledge embedded in the individual components. Henderson and Clark (1990) give the example of the room fan: the modular components are the blade, the motor, the blade guard, and control system, etc., and the architectural knowledge is the know how of putting the various com ponents together to create moving air.
An innovation is disruptive if it disrupts the original technological trajectory and dis places the mainstream technology – oddly, not with a superior technology, but rather with what is at least initially an inferior one (Christensen, 1997). The disruptive innovation, while having poorer performance on some dimensions, is able to satisfy the main needs of the mainstream consumers at lower cost and hence takes over the market, while the original technology is too focused on the needs of the most sophisticated consumers and misses the chance of meeting the growing demand for a product with a different value proposition.
Innovations can also be classified according to the nature or form in which the innovation resides. Innovations taking the form of a new object, device, design, or service are called product innovations, and innovations taking the form of a new arrangement or method are called process innovations. An alternate distinction between product and process innovations has also been suggested (Scherer, 1984; Cohen and Klepper, 1996). Process innovations are those that are used in the industry in which they are created, while product inventions are those that are used in an industry different from the one in which they are created.
Innovations are often measured using counts of patents, new products, or new processes. A patent, by definition, represents a unique and novel element of knowledge, and gives the inventor the exclusive rights to the invention. 156 innovations Such legal protection of intellectual property rights provides an incentive for inventors to file patents for their patentable inventions. If the value of the invention exceeds the cost of patenting, then the inventor will prefer to file for a patent. Hence, patents are perceived as good indicators of innovations of at least some economic significance. However, patents are naturally not complete measures of all innovations, as some inventors might choose to keep the invention secret (and hence not file for a patent), or some innovations may not be patent able (e.g., when the novelty of the innovation cannot be made explicit). Finally, patents vary considerably in their economic value, and many patents have very little economic value. Indus tries also differ considerably in the efficacy of patents at protecting innovations and hence are characterized by widely varying propensities to patent inventions.
Similarly, product and process count measures of innovation present some strengths. They represent a more ‘‘advanced’’ indicator of innovation in that the innovation has been extended from the patent stage to a market or usage stage. However, such data are generally difficult to collect and demarcating new products and processes can be complex.
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