THE BASIC NOTIONS OF INNOVATION: THREE DOMINANT TYPES OF INNOVATION

Product Innovation: the concept of product innovation has been of paramount interest to firms (Kotabe and Swan, 1995; Schmidt and Calantone, 1998) and is generating more interest among business organizations than ever before. Several important factors are responsible for the recent drive towards product innovation. First is the deregulation of various productive industries coupled with the relaxation of various market control instruments. Second is increased competition arising from the deregulation of markets and third is the desire to satisfy the ever changing needs of customers (Slattery and Nellis, 2005). Fourth, many business organizations in the late 1980’s and the 1990s faced an untold amount of pressure, which had a profound effect on organizational performance and market share. Put another way, marketplace dynamics moved at top speed making it difficult if not impossible for business organizations to identify and track changing customer needs (Shepperd and Pervaiz, 2000). In addition, as market competition on the international scale became fierce; many business organizations resorted to the use of product innovation (Zhang and Doll, 2001; Kessler and Chakranarti, 1996; Cooper and Kleinschmidt, 1994). Bank-customer

Today many business organizations have become system-builders adapting to new structures of production and operations. In many cases business organizations have created change given their desire to become historical figures in their industries. Many innovative products came into being given organizational ability to adapt to turbulent business environment through activities of trial and error and risk-taking (Fuglsang and Sundbo, 2005). Consequently, the ever changing business environment has forced business organizations to rethink their product innovation processes. Unlike several decades ago when innovation was deemed to emanate from senior management, modern business organizations now adopt the use of cross-functional teams that deliver development projects more efficiently (Drew and Coulson-Thomas, 1996; Hershock et al., 1994). There is now an emergence of project-based organizations where teams are created to deliver development projects and then disbanded to create new teams for new projects (Hobday, 2000). There is evidence in theoretical literature to suggest that this new approach which is being deployed by many business organizations is successful (see McDonough, 2000; Donnellon, 1993; Sethi, 2000; Hitt et al., 1996).

Innovation is critical to the success of any product (Zirger, 1997; Sethi et al., 2001). It is a critical mechanism through which firms secure a place in the competitive world of the future (Van de Ven, 1986) and an essential process for firm success (Brown and Eisenhardt, 1995). Product innovation is increasingly recognised as a vital component of organizational competitive strength, the survival strategy of most industries (Edquist, 2000; Laborde and Sanvido, 1994) and the sustainability of any organization depends largely on it (Henard and Szymanski, 2001). The introduction of new and innovative businesses and products present organizations with an unimaginable and unquantifiable opportunity to grow, expand into other areas of business, raise market or customer share and dominate the market. The development of new innovative products is central to the growth and prosperity of modern organizations (Sheperd and Pervaiz, 2000). Product innovation relates to the novelty and meaningfulness of new products (Slattery and Nellis, 2005). It is regarded as the perceived newness, novelty, originality, or uniqueness (Henard and Szymanski, 2001) of products.

Business organizations have pursued several types of product innovations but most notable are the routine and radical innovation systems, Nord and Tucker (1987). Under the routine innovation system, business organizations introduce products that are new but similar to products previously developed by the organization. Radical innovation, commonly regarded as breakthrough (Deschamps, 2005) business organizations add new products that are completely different from existing product lines. Breakthroughs rarely occur but when they do they emanate unexpectedly through an unplanned bottom-up production process. For instance, 3M’s ‘Post-It’ pads as well as Searle’s ‘Aspartame’ (Anonymous, 2006) emanated accidentally through such a process. Furthermore, radical innovation refers to changes in technology that facilitate significant improvements in the delivery of products (Foster, 1986; McKee, 1992). Baker and Sinkula (2002) argued that the movement towards radical innovation has in many business organizations rendered state of the art technology obsolete.

Time or timing is important to product innovation processes. As such organizations are now driven to implement production and operations changes that speed products through development and improvement processes (Griffin, 1997). Today’s organizations speedily investigate existing opportunities competing for limited resources (no matter how large they are) and ensure they can be efficiently prioritised – leading to improved sales volume and improved profit making for organizations. Recent research by Pavar et al. (1994), indicating a strong correlation between product innovation and organizational health, supports this view. Product innovation has increasingly become one of the most important functions of successful business organizations (Trygg, 1993). Furthermore, many organizations have recognized not only the need to develop innovative products but also sustainable innovative products as well. Anthony et al. (1992) argued sustainability holds the key to achieving product innovation success. Consequently, many business organizations are approaching product innovation as a source of achieving competitive advantage (Bowen et al., 1996).

Technological innovation: refers to the invention of new technology and the introduction of products, processes or services based on new technologies (Betz, 1998). Pavit (1994) identified four characteristics of technological innovation. First is continuous and intensive collaboration and interaction among functionally and specialized groups. Second is that intensive collaboration and interaction often remains profoundly uncertain. Third, they are cumulative involving the development and testing of prototypes and pilot plants and fourth, they are highly differentiated based on specific technological skills required in the innovation process. These characteristics help us to understand the meaning of technological innovation. Technology has made immeasurable contributions to changes witnessed in society (Twiss, 1993) and has played a crucial role in organizational development. All business organizations, without exception, owe their origin and continued existence to the successful application of technology in the development of new products and improved manufacturing processes.