What’s Organizational Innovation?
Organizational innovation is the organizational change that occurs due to a shift in a company’s underlying assumptions. It either renovates or redesigns an organization’s previous practices and provides new ways of creating internal and public value.
Why is Organizational Innovation Important?
Let’s start by looking at why it’s so important for an organization to adopt organizational innovation for long term success.
We hear the phrase innovation used a lot and often we associate it with new ideas or discoveries but there is much more to it.
It’s important that we don’t just look at it as a new idea or method or a new physical thing but that we also look at innovation as a process of discovering new ways to do things, but how do businesses utilize this?
It’s crucial that new innovation within an organizational structure is easy to replicate and at the same time resolve that area of need. It is vital in workplaces because it can give your company a competitive edge and get you into that market quicker leading to more opportunities.
4Ps of Innovation
Let’s start by looking at the 4Ps of Innovation which was coined by Tidd & Bessant in 2005:
- Product – conveys the changes in things (such as products and services)
- Process – refers to changes in the way things are created or done
- Position – change to the context in which the product or service is introduced
- Paradigm – the change in the underlying models which frame what the business does
There are different types of innovation too. Hopefully this next section of the article will help to clarify this.
Different forms of organizational innovation
Before we look at the specific four variations to innovation, it is important that we start treating innovation like any other business disciplines – look at it as a set of tools that are designed to accomplish specific objectives.
Just like you wouldn’t solely rely on one single marketing tactic, you need to build up a portfolio of innovation strategies to use that work for specific tasks.
Four types of organizational innovation
- Sustaining innovation – most innovation actually happens here, because it’s what we are seeking to get better at from what we’re already doing. For example, wanting to improve our current capabilities in existing markets. We understand the problems that need solving but we are needing to understand the skill domains required to solve them.
- Breakthrough innovation – when we have problems that seem really hard to solve, we need to explore untraditional skill domains to help which we call a breakthrough.
- Disruptive innovation – this is when things change within businesses, for example new technologies or changes in the marketplace, which can cause companies to face disruption. This is when companies need to look at innovating their business model, not just their product or service.
- Basic research – all companies need to undergo research if they want to innovate successfully. Large companies will have the resources and budgets to invest in this, but smaller companies need to find savvy ways to do this. It is about finding the best solution to fit your current problem at the end of the day.
What is Product Innovation?
In business there are so many terms used that we actually forget what they truly mean or why they matter. Although we might think we understand what is meant by the term ‘product innovation’ this might actually be more meaningless to you than it should be.
The definition of product innovation is defined as being the development and market introduction of a new, redesigned or substantially improved product or service. It’s important that we get to why this truly matters though.
Here are four reasons that businesses typically look to innovate:
- Expansion – a successful innovation = more innovation, enabling your business to scale and grow
- Competition – the unique solution will help you differentiate your business from the competition, giving your business that boost of revenue but also nudging yourselves in a positive direction
- Customer retention – innovation helps you to ensure that your product or service doesn’t become irrelevant or useless to your customer. You are still meeting their needs
- Talent acquisition – looking for those top tier employees? They don’t want to work for businesses that aren’t at the forefront of the industry, and through innovation you can be.
What are the stages of innovation?
Often defined as the ‘innovation process’, it consists of four steps: insight, identifying the problem, creating a solution, and the innovation management process.
Looking into each of these four parts:
Understanding your industry is essential when facilitating organizational innovation. Two parts of this being questioning, within the industry and secondly, networking.
Networking is crucial, as you can see different peoples perspectives, and gain new ideas.
It creates the opportunity for exposure to these different ideas.
When it comes to questioning, this allows you to take different industry views with varying perspectives and business angles which leads to unique insights and ideas.
This is very much like what our summits set out to achieve, offering the unique insights from our various delegates in different industries, but with the same challenge at hand.
- Identifying problems
Observation is very important when it comes to identifying problems in the market or in a business. Innovation becomes much easier when we really understand the problems at hand.
- Creating the solution
It is easy to jump to a solution quickly, but how can you be sure it’s the right one? It’s important to consider a range of solutions and a workable solution that works best for the product or service.
- The innovation management process
Firstly let’s look at what exactly innovation management is. This is the process of capturing and managing an organisational innovation and how to manage it moving forward.
This has traditionally been the job of research and development teams but today companies need to make this business-wide. These days, it is recognised that innovation is essential for driving any form of business growth as well as to remain competitive.
The beauty of innovation is that it can come from anyone within the business, and organisations should be promoting this.
To have effective innovation management you need three things:
- Defined process model
- Focus on innovation
- The right tools to get it done
You should be wary of not controlling this too much however, as this breeds hierarchical chain of command instead of allowing individuals to feel they can direct that change.
Great ideas don’t always come from brainstorming sessions, it can come from anywhere at any time. This is where it’s crucial your business can capture this from all employees.
Innovation Management Tools
Innovation management also includes a set of tools that then allows managers and all employees to corporate with a common understanding of processes and goals. But using these tools it can then deploy creative capabilities within your workforce and help a continuous development of the business.
Examples of the types of tools that may be used include:
- Product lifecycle management
- Project management
- Portfolio management
Innovation management (IM) was based on the ideas that the Austrian economist put forward, Joseph Schumpeter.
He actually wrote a book called ‘Capitalism, Socialism and Democracy’ which developed the concept of creative destruction and how you can actually be helping your organization more to produce new ideas, processes or products and services.
There are several ways that organizations can implement this innovation. Here are some:
- Giving workers freedom
- Providing your team with resource to implement innovative ideas
- Invest time in creative nourishment
- Don’t just focus on research & development
- Allow your employees the chance to fail
- Develop an accommodating leadership style
- Don’t look down on your employees
- Acknowledge their contribution
Think of innovation as a long term strategy that demands an investment of the time and efforts of your business so you need to ensure your organisation continues to benefit from these positive outcomes of innovation.
The Three Types of Organizational Innovation
We’ve outlined how companies can implement innovation, but what are the three types of innovation? These are:
- process and
- business model.
In order for businesses to stay relevant, however big or small, you’ll need each of those types of innovation at some stage.
Product Innovation – this tends to be the most well known form of innovation relating to either a completely new product or a new feature within an existing product or service, for example introducing a new form of virtual networking with an events provider. Often it’s a result of new technology or insights about customer needs.
Process Innovation – this is about how a product or service is produced or delivered to a client. There could be a number of methods and capabilities to produce, market and then deliver it. Of course, there are hundreds of ways you could improve a process but it’s what the customer really sees as additional value.
Business Model Innovation – the third and final type of innovation is not about incremental change but instead about a holistic and business-wide transformation.
Read More: Microsoft’s Digital Transformation Journey
This can impact anything from your product marketing to your pricing strategy. It is more commonly seen in startups that don’t have an established business structure yet and need to experiment in how they operate.
Take Amazon for example, they transformed their business model and essentially created a new industry. They found a way to reach their customers all online, without going through the conventional retail distribution route.
In conclusion, no business can succeed without innovation. It’s at the heart of everything, especially in the world of technology.
In order to breed a company that thrives off innovation, it’s clear you need to allow your employees to share their thoughts and have an open forum for this.
Hopefully the article outlines how you can and should include innovation within all your strategies moving forward, or if you were already, how you could think even deeper about the process.
GDS Group hosts experts to help experts. We strive to provide an atmosphere for our attendees that enables them to confidently lead their companies through major transformation projects. For information on upcoming events, view our view our Digital Summits. To remain current on our activities, visit GDS Group on LinkedIn | Facebook | Twitter.