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Importance of Innovation in Today's Business World

Today’s business world is dynamic and has brought various new challenges for the businesses. Now, firms have to deal not only with the price and quantity of the product but also with satisfying individual customised demands (Kohl & Depner 2010). In order to sustain in the competition every business needs to bring some or the other innovation at frequent intervals, even if it is not the game changer for the industry (Amit & Zott 2010).  In a global innovation survey by McKinsey 94% of the managers were dissatisfied with their company’s performance regarding innovation (McKinsey 2012). The above facts show that innovation is important as well as a challenging task for every business.  Business leaders today are one’s who make constant innovations in their companies. Although there is no one best way to do so but various efforts are required according to time and situation. Effective innovation management is must for today’s business firms. In order to innovate research and development activities are an important factor. This also helps in stating persuasive statements concerning innovation. In this assignment we will analyse is it really impossible to make any persuasive statement regarding the promotion of innovation and the development of an innovative organisation.

This new era of fast growing technology brought about changes in the in the business environment and the way business functions. Though, businesses are growing in size but the activities are now becoming more demanding and complex. The dynamic business environment has introduced various challenges to the business world; some of those challenges are as follows:

In today’s business world, everyone is a participant of a rat race. Everyone wants to be more successful than the competitor. In order to win they feel a little stealing, cheating, lying etc. as a part of business. Thus, major challenge that lies today for business world is to maintain their integrity (Conner 2013).

Rising expansion, growth and completion has also given rise to various kinds of risks. These risks include financial risk, foreign investment risk, operational risk etc. Risk cannot be ignored but needs to be effectively managed by the organisation. Proper risk management department is necessary to face the challenges of rising risk (Spedding & Rose 2007).

Today there are lot of choices available to the customer. Thus to remain in the competition firm must implement innovative marketing strategies and customer loyalty programmes. These programmes help businesses in cross selling and a big data on customers for future efforts. (Yuping Liu 2007).

Challenges Faced by Businesses in Today's Dynamic Environment

 According to (Kanola 2015) Resource management can be described as effective and efficient development of organisation’s resources these resources include human resource, financial resource, inventory, fixed assets, information technology etc. Challenges associated with resource management of business are acquiring appropriate resources, optimum resource utilisation, resource capacity planning etc. These challenges have increased to a significant level in the dynamic business environment.

Today we are living in a world which comprises of 3 categories ‘ known- knowns’, ‘known- unknowns’ and ‘unknown- unknowns’. Growth of last category brings new challenges for businesses (Syrett & Devine 2012). Uncertainty today is much more prominent than past. The business environment keeps changing constantly thus organisations have a greater difficulty in decision making.

Globalisation has resulted in increased competitive pressure ( Ocloo, Akaba.& Worwui-Brown 2014). Now there are various options available for a single commodity. The challenge is more for smaller and medium sized business to sustain in the competitive environment. There is a need to formulate and implement appropriate competitive strategies to remain in the market.

Corporate social responsibility can be described as a concept where companies unite environmental and social affairs to their businesses and their stake holders on voluntary basis (Crowther & Aras 2008). As today’s society is becoming more aware and updated the CSR challenges are becoming greater for the companies.

Regulatory compliances are viewed as a headache for the business firms. They involve much time, cost and legal procedures. According to dimensiondata (n.d.) this is one of the biggest challenges that business faces today. For entering any emerging market it is very important to be updated about the rules and regulations of that country.

Cash is the most important factor of any business there are chances that balance sheet shows a higher profit but that cash is drained by higher capital expenditure. Thus efficient fund management should be the key concern for the business. Though every business requires managing all types of resources but cash is most important among all because cash has the capacity to buy all other resources (Tennet 2012).

Innovation can be defined as a process of introducing and implementing a unique idea to develop national economy, and generate more profits for the business (Dodgson & Gann 2010). It is not only about a new product it involves various other things new ad campaign, new website, new strategies, new processes, new designs , new solutions to the prevailing problems and a lot more. Innovation in business requires much more than creativity it needs a support from team members and managers to effectively implement the creative idea (Hiam 2010). 

Different Types of Innovation

Innovation is not only about a unique idea is about how the idea is implemented so that it brings more profits.

Depending upon 2 dimensions technology and market innovation can be classified into 4 types:                                      Incremental innovation- It is type of innovation which uses existing technology and brings about new changes in product or service in the existing market. It involves adding or removing new features to the product or services with the use of existing technology.

Example- Coca-Cola, ha innovated by introducing line innovation by offering extensions like coke cherry, coke life etc. (Coca-Cola 2017).

 Disruptive innovation- In this type of business new technology is applied in existing market to create changes in product or service or bringing out a new product or service. This involves a higher cost and a greater risk.

Example- Netflix, bought about the revolution in the video market

Architectural innovation- This involves entering a new market with existing technology. It involves applying lessons and overall technology to the new market. It is less risky as the technology has already been tested.

Example- Godiva captured international markets by its standard Belgian chocolate.

Radical innovation- Radical innovation is bringing out a completely new revolution. It ends up creating a new industry or obsoleting and existing industry. It is the most creative type of innovation and also very risky.

Example- Amazon’s dash button, it is a Wi-Fi connected device that enables user to reorder daily necessity house hold products like washing powder, soaps, razors etc. at a click of button (businessinsider, 2016).

These types of innovations can be applied to businesses differently depending upon the life cycle and size of business at the beginning usually radical innovation is required. Gradually the innovation needs of the company changes according to time.                                           

According to (Khorakian 2011) Innovation is not a one time-event it is a continuous process which involves a series of activities related to each other. Steps in innovation are as follows-

Idea generation- This step is the initial steps and involves the creation of new idea.

Idea Screening- The next step is screening i.e., checking the feasibility of the idea.

Concept development and testing- This is implementing the idea and testing it on a smaller segment.

Commercialisation- This is involves creating market value for the innovation that is being implemented.

Steps Involved in the Innovation Process

Diffusion and implementation- This involves creating acceptance for the new idea in the company and implementing the idea.

This is today’s most trending innovation concept. It involves participation of various members from business as well as outside the business. It involves mutual benefit of everyone involved. Young players get access resources and established players gain flexibility and speed in their process (WEF 2015). Some entrepreneurs may consider collaborative innovation as a waste of time and resources but in real sense it is a great advantage to business.

Innovation needs to be measured to identify its effectiveness and what else to do in coming future. But the next question arises is that, how innovation can be measured. There is no specific way to measure innovation but first we need to understand the objective of innovation. The objective will give the basic idea to measure innovation. A balanced scorecard needs to be designed by company in accordance with the goals to effectively measure the innovation. Measuring innovation is beneficial for the organisation as it enables diagnosis, orientation and motivation.

Arguments to agree there is no ‘recipe’ or ‘one best way’ to promote and sustain innovation.

Innovation is a force that cannot be forced in an organisation but the right efforts help to find imaginative solutions. Creativity should be cultivated in an organisation to encourage innovation, although there is no recipe or best way to promote and sustain innovation. There is a famous saying ‘the shoe that fits the one, bits the other’. In the same way, one recipe can work for a certain company in a specific situation but can be useless for the other or can turn useless for the same company at a different situation. Top market players like Apple, Google, Microsoft, Amazon etc. who are amongst the most successful and innovative companies of the world, also do not have any specific recipe to promote and sustain innovation in their organisation. They also change according to changes in their business environment. According to OECD (2007) research no single approach for innovation can be implemented in firms at different times and situations. The reason for the same is the challenges of dynamic business environment. Everything is changing at a much faster pace, thus companies cannot find one best way to innovate. The companies should also keep in pace with the dynamic environment to promote and sustain innovation. Despite of the fact that there is no best way to promote and sustain innovation there are various ways which can turn useful in different scenarios. Companies just have to learn the suitable implementation of those ways.

Collaborative Innovation

Some of the recommendations regarding innovation failed, but this does not means that it is impossible to say anything regarding innovation. Though it is not easy to make recommendations concerning innovation, few companies that are ranked amongst most successful and innovative companies of the world have done it right. Examples of their statements are given below:

Nike- Nike organised an innovation 2016 event in New York City. Where Mark Parker, President & CEO, NIKE, Inc., made announcement about the company's new “Era of Personalized Performance” and unveiled an unprecedented breadth of innovation (Nike 2016).

Google- According to The Economic Times (2016) the Google CEO Sundar Pichai stated that best innovations come from surprising places.

 Microsoft- According to Gadgets(2014)   in a 4 day’s conference Microsoft CEO Satya Nadella stated that “The day I took on my new role I said that our industry does not respect tradition — it only respects innovation. I also said that in order to accelerate our innovation, we must rediscover our soul — our unique core”.

General electric- General electric CEO in its annual report (2016) declared that the company is going to invest in disruptive innovation. They have already established two new businesses- GE Digital and GE Additive Manufacturing                                                

Amazon- According to Amazon’s Annual Report (2016) CEO Jeff Bezos said that their job is to create new options that are beyond everybody’s thought and see if that is liked by the customer.

Factors that affect firm’s ability to innovate are listed below:

Firm’s size and structure

Firm’s size and structure are the important factors that determine the firm’s ability to innovate. Some researchers’ state that there is positive relationship between the size of the firm and its structure on the other hand some researchers argue that there is a negative relationship between firm size and innovation (Vieites & Calvo 2011). When it comes to the structure the sub factors include communication, centralisation, formal guidelines etc.

Financial resources of the firm determine the expenditure that can be done on research and development. They also determine how much amount the will be able to spend in implementing any new idea. A firm with more financial resources is more generally have more ability to innovate (Fulford 2011).

Technological resources involve the machinery that company has, information technology, technical kills etc. Whereas, organisational resources include all other resources like human recourse, inventory, production resources, physical resources etc. All the resources play a vital role in determining firm’s innovation capacity. Firm’s only go for big innovations when they have surplus resources.

Measuring Innovation

Research and development activities serve as a tool for effective innovation. Every firm’s research and development activities can be classified into two types- external R&D activities and internal R&D activities. These activities contribute positively to the innovation but this does not means that it is a need or prerequisite for innovation.

Information and knowledge management incudes organisations learning, its knowledge about the external environment, time to time updating of information and how organisation utilises that information in order to motivate.

Organisational culture involves communication within the organisation, reaction to change, cooperation amongst various departments etc. Organisation culture depicts how people will react to the innovation.

Every company makes some or the other mistake regarding innovation. But the companies that are successful are the one who not only just avoid the mistakes but also learn from them. Example- Microsoft, it kept on improving its product version 1.0 until it was dominant in market. Every time it felt something was wrong it made efforts to improve. Same way the other companies should also take the lessons from their mistakes and take corrective actions (Davila, Epstein & Shelton 2012).

Here is a list of common innovation mistakes that most of the companies make:

Only focusing on being disruptive

Some companies believe that they can innovate only by being disruptive that is by adding a new technology in there sphere. But in the real sense being disruptive is not the only option available to companies. Innovation can be brought by various other ways.

Sometimes unique ideas may also lead to failure. Companies that follow a policy of punishment for the failure of idea, discourages the innovation. As people have fear of punishment in their mind they generally do not give any innovative idea. This practise should be stopped if company wants to innovate.

Thinking that innovation comes from top

Some companies formulate a view that innovation can only from the top level employees. But in the real sense this is not true. There are equal chances of getting an innovative idea from all the levels. Thus opinions and ideas of all the employees must be welcomed by the company.

Confusing creativity with innovation

Creativity and innovation both are distinct terms. Creativity refers to creating new ideas or bringing a new perspective to look upon things. Innovation is the process of converting that idea into an effective product or service. Companies usually invest more efforts and resources in creating, rather than the process of innovation this leads to a failure in innovation.

Cultivating Creativity for Innovation

Believing innovation is too costly

Some companies consider innovation as a costly affair. But they do not consider the fact that innovation can bring higher results once you effectively implement it. Although the cost is incurred in the beginning but it can be later recovered in the form of profits.

Waiting to get bigger

Small companies usually wait for getting bigger in size to innovate. But small businesses are more capable of innovating. They can motivate much faster than large companies. They are more flexible than well established companies. Therefore companies should never wait for expansion before innovation.

Thinking that innovation is not relevant in their industry

Some companies perceive that innovation is not necessary for their company. They believe that innovation is only for the technical industries but it is not so. Innovation is essential for every industry in long run. No industry can survive without innovation.

Initiatives, measures, policies and considerations in order to promote and maintain innovation

According to Wunker (2015) Cultivating the culture for innovation is the most important affair for the companies in current scenario. Few strategies to promote and maintain innovation are listed below:

Understand the different types of innovation that you’re trying to foster

Companies motivate employees only to develop new product. They do not give equal importance to 4p’s profit models, products, policies and possesses. Therefore employees who are not in direct touch with the customer fail to understand the customers’ needs and are not able to give innovative ideas. Microsoft is an example in this field it encourages its employees to innovate in other three P’s also.

Establish a clear sense of direction     

Organisation’s mission should be clearly stated to the employees. So that they know in which area they have to work. A clear set of direction speeds up the process in the organisation. It gives an idea about the purpose of the organisation.

There should be open communication in an organisation to maintain free flow of ideas within the organisation. When there is free flow of information between management and employees a more trusted culture is created in the organisation. This culture is helpful in promoting and sustaining innovation.

Create safe space for experimentation

Businesses should create safe space for experimentation. Any new idea must be tried on a smaller scale before implementing it at company level. Company should make sure that employees get proper set up for testing any new idea.

Small organisations are less bureaucratic thus here innovation takes place at much faster place. Fast implementation encourages more inventive thinking in an organisation. Bureaucracy slows down the pace of innovation in the company. Thus it is recommended even to larger organisations to maintain lower level of bureaucracy in their systems.

Conclusion

Companies must build a feeling of ownership among their employees. This feeling acts as a motivating power for the employees to involve in innovative thinking. This gives employees a reason to think extra beyond their job responsibilities.

Make sure recognition and rewards are consistent

Financial benefits should be linked with the innovation. This motivates the employee to think beyond the boundaries and provide some innovative input to the company. It also creates a competitive atmosphere in the organisation thus more people come up. Also the people who come up with fruitful ideas should be recognised and appreciated in front of all the employees.

A tolerance for risk and failure

Innovations are always risky. It has equal opportunities for both success and failure. Thu companies should be prepared for both. A flexible working structure should be provided to employees so that they can easily take the risk. Failures should be taken as lessons.

Eliminate projects and processes that don’t work

Peter Ducker introduced a practice called “creative abandonment.”  This aims at casting off the process and ideas that are no more working and creating more space for new ideas and processes. Organisations should not waste valuable resources on useless processes and apply them to try out some new idea or processes.

Conclusion

We have analysed various aspects of innovation and it can be concluded that today business works in a much more challenging environment than past. The credit for this can be given to the fast upgrading technology and globalisation. This calls for innovation at frequent intervals to gain a competitive edge. Innovation walks parallel with development. Also the statement that ‘enterprises and the challenges they face are so different that it is impossible to make any recommendations concerning innovation’   cannot be absolutely upheld true.  It is really tough and challenging task but examples from business leaders prove that it is not impossible. Also studies support the fact that there is no one best way or recipe to innovate it requires constant effort from both employee and manger. This study gives examples of various statements made by top business leaders regarding innovation in their companies. It also gives an idea about the common mistakes that companies make regarding innovation. Such mistakes should be identified and corrected in order to make an innovative organisation. Various ways, plans, strategies etc. are suggested which are helpful in order to implement, promote and sustain innovation. They should be brought into practice in the day to day working of the organisation. Innovation need not always ne revolutionary even a small innovation can bring about a change. A firm must be aware what type of innovation is required, at what age of lifecycle. Also it should provide constant direction to employees so that they know what all is the firm’s innovation requirement. In today’s era every firm should cultivate a culture of innovation and trust in an organisation to face the challenges that lie ahead.

 References

Amazon, 2016, Annual Report 2016, viewed on 22 June 2017, from
https://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_AMZN_2016.pdf

Amit, R. and Zott, C., 2010, ‘Business model innovation: Creating value in times of change’, IESE Business School, working paper, WP-870.

Businessinsider, 2016, Amazon Dash Button orders are through the roof, viewed on 22 June 2017, from https://www.businessinsider.com/amazon-dash-button-orders-rise-400-2016-10?IR=T

Coca-Cola, 2017, Innovation, viewed on 22 June 2017, from https://www.coca-colacompany.com/innovation

Conner, C., 2013, ‘The '8 Great' Challenges Every Business Faces’. Forbes, March 2013. Retrieved from: https://www.forbes.com/sites/cherylsnappconner/2013/03/04/the-8-great-challenges-every-business-faces-and-how-to-master-them-all/#4c8861223891

Crowther, D. & Aras, G., 2008, Corporate social responsibility, Ventus Publishig aps, Denmark.

Davila,T., Epstein,M., & Shelton,R., 2012, Making Innovation Work: How to Manage It, Measure It, and Profit from It, FT Press, USA.

Dimensiondata n.d., Global and International Business Brochure, viewed on 22 June 2017, from https://www.dimensiondata.com/Global/Downloadable%20Documents/Global%20and%20International%20Business%20Brochure.pdf

Dodgson, M. & Gann, D., Innovation: A Very Short Introduction Very Short Introductions, OUP Oxford, UK.

driving growth, viewed on 22 June 2017, from https://www3.weforum.org/docs/WEF_Collaborative_Innovation_report_2015.pdf

Fullford, H 2011, 6th European Conference on Innovation and Entrepreneurship, Academic Conferences Limited, UK.

Gadgetsnow, 2014, Microsoft CEO Satya Nadella: Our industry only respects innovation, viewed on 22 June 2017, from https://www.gadgetsnow.com/tech-news/Microsoft-CEO-Satya-Nadella-Our-industry-only-respects-innovation/articleshow/38412221.cms

General Electric, 2016, Annual Report 2016, viewed on 22 June 2017, from https://www.ge.com/ar2016/assets/pdf/GE_AR16.pdf

Hiam, A., 2010, Business Innovation for Dummies, John Wiley & Sons, US.

Kantola, J., 2015, Organizational Resource Management: Theories, Methodologies, and Applications, CRC Press, USA.

Khorakian, A., 2011, ‘Developing a conceptual framework for integrating risk management in the innovation project’, University of Stirling, viewed on 22 June 2017, from https://dspace.stir.ac.uk/bitstream/1893/3036/1/Final%20Thesis-%20A.%20Kh.pdf

Kohl, H & Depner, H 2010, ‘The Implementation of an Organizational Innovation’, Journal of Industrial Engineering and Management ,vol. 3, no.3, pp. 85- 95.

McKinsey 2012, Growth and innovation, viewed on 22 June 2017, https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/how-we-help-clients/growth-and-innovation

Nike, 2016, Nike innovation 2016 products, viewed on 22 June 2017, from https://news.nike.com/news/innovation-2016-event-photo

 Ocloo, C.E.,  Akaba,  S. & Worwui-Brown, D.K., 2014, ‘Globalization and Competitiveness’  Journal of Business and Social Science, vol.5, no.4, pp. 287- 296.

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Spedding, L.S. & Rose, A., 2007, Business Risk Management Handbook: A sustainable approach, Elsevier, Netherlands.

Syrett, M. & Devine, M., 2012, Managing Uncertainty, Profile books, London.

Tennet, J., 2012, A guide to cash management, Profile books, London.

The Economic Times, 2016, Best innovations come from the most surprising places: Sundar Pichai, viewed on 22 June 2017, from https://economictimes.indiatimes.com/tech/internet/best-innovations-come-from-the-most-surprising-places-sundar-pichai/articleshow/54755129.cms

Vieites, A.G. & Calvo, J.L., 2011, ‘A Study on the Factors That Influence Innovation’, Department of Economic Analysis I, Universidad Nacional de Educación a Distancia, Madrid, Spain. Retrieved from https://file.scirp.org/pdf/TI20110100005_29095212.pdf

World Economic Forum (WEF), 2015, Collaborative innovation transforming business

Wunker, S., 2015, ‘5 Strategies Big Businesses Use To Build A Culture of Innovation’. Forbes. July 2015. Retrieved from https://www.forbes.com/sites/stephenwunker/2015/07/29/5-strategic-big-businesses-use-to-build-a-culture-of-innovation/#1a1039d6740e

Yuping Liu 2007, ‘The long-term impact of loyalty programs on consumer purchase behaviour and loyalty’, Journal of Marketing, vol.71, pp.19-35.

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