Innovation and its Influence on Organisations
Innovation and its Influence on Organizations
Throughout this report, it will be explained, the different approaches organizations can take to encourage innovation and what factors will influence on organizations to achieve business success or not. The factors will be furthermore explained with the real life examples and it will illustrate the diversity of experience among organisations.
As examples, the present leader in consumer electronic industry the “Samsung Corporation” and the ex-leader of mobile phone industry “Nokia Corporation” are considered here.
What is innovation?
Innovation is an important concept in modern strategic management since it has a pervasive influence on the performances of the organisation. It also signifies how well the organisation adapts according to new market trends and the way it responds to its market rivals with superior innovations.
Furthermore innovation can be defined as
“Organisational innovation means the implementation of a new organisational method in the undertaking’s business practices, workplace organisation or external relations. Changes in business practices, workplace organisation or external relations that are based on organisational methods already in use in the undertaking, changes in management strategy, mergers and acquisitions, ceasing to use a process, simple capital replacement or extension, changes resulting purely from changes in factor prices, customisation, regular seasonal and other cyclical changes, trading of new or significantly improved products are not considered innovations.” (Official Journal of the European Union 2006)
According to Paul Trott, the definition of innovation can be expressed as follows. (Trott 2005)
Influences of Innovation on organizations
Now there are few additional questions which arise. Why does an organisation/business need to be innovative? Is it compulsory? Is it beneficial to the society and the organisation itself? “Yes” is the answer for all those questions and, same as other major factors the priority should be given to innovation too otherwise organisations don’t survive in the field. Innovation can be a facilitator for the development and success of any organisation. By being innovative in an organisation it does not imply success. Innovation could mean changing the business model and adapting to changes according to the environment to provide better products or services.
Types of Innovation
In ‘Innovation Management and New Product Development’ book Paul Trott has stated there are seven different types of innovations could be implemented in an organisation. (Trott 2005)
- Product Innovation
- Process innovation
- Organisational Innovation
- Management Innovation
- Production Innovation
- Commercial/Marketing Innovation
- Service Innovation
Samsung’s Innovative Approach
As the first example, Samsung’s successful and strong approach of innovation is explained here.
Since the beginning of the Samsung, the innovation has been core factor of its success. The history of Samsung goes back to when Byung-Chull Lee started a small business in Daegu called ‘Samsung’ in 1st of March 1938. It was primarily focused on exporting dried fish, fruits and vegetables to China. From its beginning as a small trading company, Samsung has developed to a world’s largest corporation with industries that including semiconductors, advance technology, building and plant construction, fashion, petrochemical, hotels, medicine, finance and more. Its inventions and discoveries breakthrough products have allowed them to be a forerunner in these fields, continuously pushing the industries forward. (Samsung 2015)
As a global company Samsung has approximately 490, 000 employees which more than Apple, Google and Microsoft combined. Samsung also operates in more than 80 countries worldwide. Samsung’s turnover in 2013 is â‚©228.692 trillion according to the Samsung Corporation’s Financial Statements. (Samsung Sustainability Report 2013)
According to Paul Trott’s seven types of innovations Samsung’s innovative approach has developed over the time can be described as follows.
Product innovation: How advanced it is technologically either in terms of its production, or its productive processes?
Samsung was founded 1938 as a small business which mainly targeted on fish and vegetable exporting. After seven decades it became the world largest consumer electronics manufacturer. Samsung has developed to a world’s largest corporation with industries that including semiconductors, advance technology, building and plant construction, fashion, petrochemical, hotels, medicine, finance and more. Samsung has manufacturing and assembly plants over 80 countries around the world. Samsung has a good reputation in consumer electronic products and recently became famous for its iconic designs of curved displays (4K UHD Curved TVs and Galaxy S6 Edge). Samsung’s new “Foundry Technological Development Centre” is focused on highly advanced technology development such as microchips, memory cards, solid state drives… etc. and its manufacturing plants have excellent manufacturing ability to supply products to the rapidly expanding IT market.
Figure 1: Foundry Technology Development Centre and Semiconductor R&D Centre (Source: www.samsung.com)
Organisational innovation: (a new division, new internal communication system, new accounting procedures)
Samsung has established an educational system for the whole organisation that covers on all aspects of the environment including its facilities and products. It also offers various educational opportunities to its employees, such as legal education, basic environmental awareness and job-specific education to support and make stronger the culture of Samsung. (Samsung 2015)
At the end of December, 2014, the total number of shares outstanding of Samsung Corporation is 170,132,764.The numbers of preferred shares outstanding and common shares outstanding are 22,833,427 (13.4%), 147,299,337 (86.6%) and respectively. (Samsung 2014)
Production Innovation: (Quality circles, JIT- Just-in-Time Manufacturing, MRPII – Manufacturing Resource Planning II)
Samsung follows a smart manufacturing procedure which is tried and tested through successful project implementation. Smart Manufacturing delivers end to end total services, including integrated construction based on manufacturing core values, systematic consulting on business innovation and continuous operation services which led Samsung to its success. (Samsung SDSC Europe 2015)
Figure 2: Smart Manufacturing Process of Samsung (Source: http://www.sdse-samsung.com)
Process innovation: (development of a new manufacturing or administrative process)
Behind the current successfulness of Samsung, there is a big turning point which is adapting Android operating system for smartphones. It was the main reason of Samsung to become the world largest smartphone manufacturer.
Management Innovation: (Managers and its strategic level decision takers have required experience to draw upon)
Throughout 2012, Samsung Corporation continued to improve its practice of sustainable management with responsible corporate governance. Additionally, to agree with national and international law and regulations, Samsung also adapted a set of ethical standards and values that guide its work procedures and decision making processes. Through a corporate governance structure that focuses on board of director engagement, Samsung works to ensure responsible, transparent and sustainable business management across all operations. (Samsung Sustainability Report 2013)
Dr. Oh-Hyun Kwon is the current vice chairman and CEO of Samsung. He joined to Samsung in 1985 and he has done a vital role inside Samsung Corporation which led to the company to rapid development in the semiconductor industry. Samsung is administrated by an independent board of directors who are devoted to serving Samsung’s key stakeholders with transparency and integrity. Mr. Choi has been with Samsung for more than 30 years, and he is the visionary leader of oversees Samsung’s North American companies. (Samsung 2015)
Service Innovation: (Internet-based financial services, ICT services…etc.)
The 21st century is a convergence era during which the offerings and services of divergent industries and technologies are fused and developed. Specially, Samsung foresees that a diverse and smart convergence “Intelligent Convergence” will flourish due to rapid innovation in ICT service technologies. The Samsung SDS, in sync with the intelligent convergence era, offers various solutions that support their customers’ business successes and improve an individual’s quality of life by leveraging accumulated ICT service capabilities.
Figure 3: Core values of Samsung’s Service innovation (Source: www.sdse-samsung.com)
Commercial/Marketing Innovation: (New financing, sales approach…etc.)
Throughout past few years Samsung has gained significant amount of reputation and attained highest customer satisfaction from smart phone users than other competitors due to its innovativeness. Furthermore, Fortune Magazine has analysed Samsung’s corporate culture by utilizing the confidence index and listed it under “The 100 Best Companies to Work For” since 1998.
Samsung has spent around $14 billion (Which is more than Iceland’s GDP) on marketing and promotion of its products and services in 2013, which is the biggest (as a percentage of its total revenue) advertising budget of any company ever. (Gilbert 2013) Also Samsung has been the Chelsea’s official shirt sponsor since 2005, Africa Cup of Nations 2010 in Angola and Africa Cup of Nations in Gabon and Equatorial Guinea in 2012. (Daryl 2010)
Moreover Samsung’s brand name value is $35 billion and it’s in the 8th place of world’s most valuable brands list.
Week Approaches of Samsung
The following example shows, how strong cultures of other competitors (Apple and Google) are affected on Samsung’s weak approach to a new operation system.
Samsung launched its first smartphone operating system called ‘Bada’, which was fully developed by Samsung in 2009. Samsung officially launched it in late 2010, under the ‘Wave’ brand name which is similar to their Android-powered devices which are branded under the “Galaxy” name. Samsung’s this announcement of new Bada OS was a confusing situation for to some people, but Samsung wanted market it under the slogan of “smartphones for everyone”.
At the beginning, Bada OS achieved huge success and at that time it was above the market share of Windows-Phone OS. Samsung helped to turning considerable amount of mobile users into smartphone owners, and Bada seems to be a big part of that.
But after few years, due to its lack of 3rd party application support like Whatsapp, Facebook, Skype… etc. people began to question that, does this Bada OS really a smartphone operating system? In 2012, most of third party developers of Bada, left it due to the dramatic decrement of consumers. In late 2012, Samsung announced that they are abandoning Bada OS and they redirected the project to a new operating system called ‘Tizen’ with collaboration of Intel Corporation.
Nokia’s Innovative Approach
Nokia’s history goes back to 1865, when Fredrik Idestam started his first wood pulp mill at the place called Tammerkoski in South-western Finland. After few years, he opened his second mill on the banks of the ‘Nokianvirta River’ which inspired the name of his company. After decades of development, In 1967, Nokia took its current form as Nokia Corporation as a result of the merging Nokia AB, Finnish Rubber Works which is a manufacturer of tires, rubber boots, and other rubber products founded in 1898, and Finnish Cable Works Ltd, a manufacturer of power and telephone cables founded in 1912. This new Nokia Corporation had five business fields which are rubber, power generation cable, forestry and electronics. (Nokia 2015)
Today, Nokia is mainly focusing on three strong businesses which are Nokia Networks (network infrastructure business) Nokia HERE (location intelligence business) and Nokia Technologies (technology development and intellectual property rights activities). From these businesses, Nokia has around 57,000 employees around the world. Nokia is also a major investor in resource and development, with investment through those three business fields more than EUR 2.5 billion in 2013. (Nokia Corporation 2015)
Until 2011, Nokia also was a major participant in the mobile devices manufacturing field. But Nokia refused to adapt Google Android operating system to their devices and since then Nokia began to losing its market share slowly. Finally Nokia announced an agreement with Microsoft in September 2013, whereby it would sell substantially all of its Devices & Services business to Microsoft and the transaction was completed on April 25, 2014. (Nokia Corporation 2015)
Turning point of Nokia
Nokia has been a pioneer in the smartphone market and they introduced smartphone trend to the consumers with its own Symbian Series 60 devices in 2002. For the next five-six years, Symbian phones kept the leadership position in the smartphone market. â€¬â€¬â€¬â€¬â€¬But in 2007, Apple announced iPhone with full touchscreen and application based operating system which is completely new experience to mobile phone users. With that great innovation, Apple Corporation gave a new definition to a smartphone and how it should be.â€¬
Nokia failed to respond this new iPhone with their innovation and they preferred to stick with their outdated mobile phone operating system and mobile phone designs. As the years passed, more consumers shifted to iPhone and the Symbian mobile platform aged, when compared to iOS and, later Android operating system. At the same time, the smartphones became the trend and more and more mobile phone users decided to use those Android and Apple smartphones instead of “feature” phones which only could calling, texting and WAP browsing.
Wayne Lam who is a senior analyst at HIS has stated “In hindsight, Nokia should have responded to the iPhone more quickly. They didn’t make the leap of faith onto Windows Phone until 2011. Now they are suffering from their slow response.” On the other hand, Samsung has progressed quickly into the smartphone market and it had the advantage of working from the beginning. However Nokia had a relatively successful smartphone market and platform therefore Nokia didn’t want to give up the exiting market share. (Chang 2012)
To sum up, Samsung is one of the top-performing businesses in present, and they have sustained high performances and experiences over many decades, and those can be recognised as their strategic methods that involve contribution in global associations, building the links between the top research centres and the industries with vendors. 99% of strategies of Samsung were successful compared to other rivals. Samsung is fully committed in inventing the technologies of future and results-oriented innovations which uplift the existing technologies.
After the tragic downfall of Nokia, it is now slowly rising with the acquisition of Microsoft. The current progress of Nokia has been slow, but steady. Nokia finally overtook Motorola in market share in the third quarter of 2013 In the US and became the fourth-largest smartphone vendor In the US.
Finally, these both companies went through a stage when their products and service weren’t successful how ever after new adaptations and modifications of strategies and innovations Samsung and Nokia were able to reach the path of success.
CHANG, Alexandra (2012). Why Nokia Lost Its Handset Sales. [online]. http://www.wired.com/2012/04/5-reasons-why-nokia-lost-its-handset-sales-lead-and-got-downgraded-to-junk/
DARYL (2010). The World’s Biggest Soccer Sponsors. [online]. http://soccerlens.com/the-worlds-biggest-soccer-sponsors/52174/
GILBERT, David (2013). International Business Times. [online]. http://www.ibtimes.co.uk/samsung-14bn-marketing-budget-biggest-history-525979
NOKIA CORPORATION (2015). Our company. [online]. http://company.nokia.com/en/about-us/our-company
NOKIA (2015). Our story. [online]. http://company.nokia.com/en/about-us/our-company/our-story
OFFICIAL JOURNAL OF THE EUROPEAN UNION (2006). COMMUNITY FRAMEWORK FOR STATE AID FOR RESEARCH AND DEVELOPMENT AND. [online]. http://www.innoviscop.com/definitions/organisational-innovation
SAMSUNG (2014). Samsung Ownership Structure. [online]. http://www.samsung.com/us/aboutsamsung/investor_relations/stock_info/ownership_structure.html
SAMSUNG (2015). Samsung’s Beginnings. [online]. http://www.samsung.com/uk/aboutsamsung/samsung/history_08.html
SAMSUNG SDSC EUROPE (2015). Smart Manufacturing. [online]. http://www.sdse-samsung.com/serviceline/SmartManufacturing.htm
TROTT, Paul (2005). Innovation Management and New Product Development.Order Now