Innovation, Change and Enterprise in the UK
1 (a) Critically evaluate why innovation and enterprise is so important for the UK and global economy and what can be done to encourage it?
Developing an innovation strategy requires a clear definition of what is meant by ‘innovation’. Innovation is the effective commercial utilisation of new ideas. It refers to the scientific, technological, organisational, financial, and business accomplishments that lead to the introduction of new or substantially improved products, practices, services or entire business models.
Innovation can be incremental or extreme. It ranges from small improvements in existing products, processes and services at one end of the spectrum to extreme changes associated with breakthrough products, disruptive change and brand new ideas at the other end. A great deal of innovation takes place in the middle of the scale where organisations develop and produce new products, processes and services for existing markets and consumers. Innovation is not always determined by new technology. An organisation can develop completely new products – such as Apple’s iTunes and iPad platform – using recognised technologies. Innovation involves varying degrees of risk and needs different resources and processes for its successful implementation. Incremental innovation encourages less risky enhancements by extending existing processes, products or services. Innovation almost always involves change.
The word enterprise describes the actions of someone who shows some initiative by taking a risk by setting up, investing in and running a business. ().
This person can seem to be willing to take a risk and making things happen. The person will show initiative by seeing a potential business opportunity and tries to make it work. This can be seen as a bold or risky move for example investing in an opportunity with the potential of losing the investment should it all go wrong.
Most of the time it will be a decisive person that shows enterprise.
There is a need to innovate especially in UK/Global public service organisations due to their importance and size in developed countries. In the past century public service organisation have grown at a great pace. Such organisations as the NHS and American Education for example have grown and to survive it’s vital that they take the lead in innovation. Drucker (2007) expresses that pubic service institutions face similar situations, the knowledge is there and the need to innovate is clear. They now have to learn how to build the entrepreneurship and innovation into their own system. Otherwise they will find themselves superseded by outsiders who will create competing entrepreneur public service institutions and so render the existing one obsolete Drucker (2007)
There is an increasing attention or support to Innovation, that innovation development is key to create/maintain/improve economic/organisation competitive advantage and secure organisation sustainability growth. “Innovation is driven by the ability to see connections, to spot opportunities and to take advantage of them” Tadd, Bessant (2009, p1).
The key link between Innovation, Entrepreneurship and Change is that you cant really do one without involving the other is some form.An Innovation is the main source for an entrepeuneur, and its usally an innovation or entrepenuer that forces change within an organisation.
Importance of Innovation and Enterprise
Drucker (2007) refers to innovation and enterprise as a venture that can result in the creation of new wealth from making effective use of existing resources. Innovation commences with analysing opportunities, systematically reviewing these and exploiting these to gain maximum economic returns for organisations. Drucker (2007) has identified seven sources of opportunity that can lead to innovation. These include the enterprises own unexpected successes and failures and of its competition, incongruities (particularly in a process, for instance, production, distribution, or incongruities in customer behaviour), process needs, changes in industry and market structures, demographic changes, changes in meaning and perception and new knowledge (Drucker, 2007).
Schumpeter (1934, 1939) classified innovation into five types; new products, new manufacturing processes, new sources of supply, exploration of new markets and new methods of organising business activities. Product innovation is the invention and commercialisation of completely new products and services. Process innovation involves bringing considerable improvements in the way products are made. Process innovation takes place by adopting new technologies (Schumpeter (1934, 1939).
Inauen and Schenker-Wicki (2012) innovation has become essential for companies as it is resulting in the availability of knowledge, is facilitating technology transfer and fusion and is reducing innovation cycles. It is helping organisations in developing and maintaining their competitiveness and achieving success. It is assisting companies in exploring and exploiting new opportunities for commercialization. Innovation is a critical driver of economic change (Inauen and Schenker-Wicki, 2012).
The views of Inauen and Schenker-Wicki (2012) are consistent with Joly et al (2010). According to Joly et al (2010) innovation is essential for organisations as it helps them in the creation of new products that can solve their customers everyday life problems. Innovation creates wealth and is a major driver of economic growth and development. Von Schomberg (2011) research also states that innovation is the key driver for organisational improvement and success. Niu et al (2013) believes that innovation and enterprise helps organisations in effectively exploiting new opportunities and using their resources to transform innovative ideas into successful outcomes (Niu et al, 2013).
Whilst there is no doubt that innovation and enterprise is important for the growth of companies, national and international economies, yet it does suffer from some risks. The key risks of innovation and enterprise are that it requires considerable investment in financial and human resources. There is the risk that innovation can be copied by competitors. Innovation can be risky and lead to uncertain commercial returns (Hayes, 2014).
Innovation and enterprise can be encouraged by understanding and applying the principles of change management in organisations. Furthermore, using open innovation, understanding national cultures, customers’ needs, crowdsourcing, user innovation, recruiting and training people, developing leaders can greatly assist organisations in effectively encouraging innovation. To compete effectively in intensely competitive business environments, organisations need to treat innovation as an essential part of their corporate strategy and not as a one off event. Continuous and consistent innovation is the key to organisational success in the global economy.
Change Management
Change Management is key to effective innovation and enterprise. It can be used to help employees go through the transition of accepting and implementing change within an organisation. Successful change management enables employees to understand the reasons for change. Part 2 of this essay goes into depths of why Change management is so important.
Types of Change
Harvard Business School (2003) states that businesses respond to challenges of new technology, new markets new competitors and consumer demand with four programs to overcome these obstacles. These four categories of change are:
Structural Change – Where the business is treated as a machine style model that are set up of different functions. During this change high level managements usually with the help of external consultants attempt to change these functions so they are able to accomplish a greater overall performance. Examples of previous endeavours for structural change have involved company mergers, acquisitions of other businesses and closure/reduction of operating units.
Cost Cutting – The main motivation for this type of change is the removal of areas of the business where there are less important activities and functions of a business where the company can squeeze extra cost out of operations. This may involve in department closures, redundancies or cuts in budgets when companies are going through tough times.
Process Change – The aim of this change is fundamentally a way of making operating processes quicker, more effective, more reliable and less costly, so basically an emphasis on changing how things get done in the business.
Cultural Change – This change concentrates on the ‘human’ aspect of the business, where an organisation focuses on the relationship between the management and employees and look at the methods of how they do business. A shift from command and control management to participative management is an example of cultural change. Harvard Business School (2003)
Process of Change
Kurt Lewin a German-American psychologist introduced a straight forward model of process change which involves three stages that helps to understand the change process.
The first stage is unfreezing which includes helping an organisation and its employees accept that change is required. Examining old processes, systems, employees and ways of thinking can show employees how important it is that the organisation changes. Communication in this part of the process is extremely important as it allows the business to inform the employees of the reasons for change, how it will benefit them and when the change will go ahead.
The second stage is the Change Step, the transition period, where the implementation of the change takes place. This will be the point in the change process where reality hits the organisation that change is definitely happening, this is where it is key to continue clear communication as people will struggle to adapt to the idea of change, from this there will be resistance, panic and uncertainty.
The final stage of Lewin’s model is Re-Freezing. This is the stage where the organisation looks for reinforcement and stabilisation after the implementation of change. This step was highlighted by Lewin as particularly important after Implementation to ensure that people do not revert back to previous ways of thinking or doing. The organisation has to attempt to guarantee the change is not lost and is reinforced into the Culture of and thinking of the organisation moving forward.
Theories of Change
The theory of change is a method that can help organisations in successfully achieving their change objectives and outcomes. The theory states that every change proposal needs to be carefully planned, requires the participation of others and needs to be evaluated to ensure that the planned activities are achieved. The theory states the long term goals of change and then maps these backwards to identify required preconditions (Brest, 2010). Organisations can successfully innovate through careful planning, seeking the participation and engagement of their employees and evaluating the degree to which innovation has been effective in improving organisational performance.
Recognise and diagnosing the need for change.
Recognising and diagnosing the need for change can be done by analysing the types of change, the context of change, using the cultural web model and forcefield analysis (Johnson et al, 2010).
Encouraging Innovation and Enterprise
Conclusion
Innovation and enterprise is very important for the growth, development and survival of organisations in the UK and in the global economy. Innovation and enterprise enhance organisations competitive advantages and improve performance and productivity. However, innovation and enterprise suffers from the risks that it requires considerable financial investment and generate uncertain commercial returns.
For businesses, innovation means sustained or improved growth. The innovative company or organisation delivers higher profits for its owners and investors. For employees, innovation means new and more interesting work, better skills and higher wages. Equally, an absence of innovation can lead to business stagnation and a loss of jobs. For the economy as a whole innovation is the key to higher productivity and greater prosperity for all.
Innovation and enterprise can be encouraged by understanding and applying the principles of change management in organisations. Furthermore, using open innovation, understanding national cultures, customers’ needs, crowdsourcing, user innovation, recruiting and training people, developing leaders can greatly assist organisations in effectively encouraging innovation. To compete effectively in intensely competitive business environments, organisations need to treat innovation as an essential part of their corporate strategy and not as a one off event. Continuous and consistent innovation is the key to organisational success in the global economy.
1(b) Using relevant examples consider why innovation and change is often difficult to manage within organisations and how this can be overcome?
In today’s competitive business world change is the most critical factor in business. With heavy competition, technology and demographical forces pushing towards business change. There are not many businesses that can escape from change. The reasons for a business to adopt change is to maintain employee engagement, increase productivity and improve their performance to new levels. Sometimes change can be implemented due to a change in strategic direction.
Change is brought in to make a difference from the past to the present. Change in the organisation can also mean embedding new technologies and creating new work practices into sections of the business. Technological change and new work practices in the organisation shows an impact on the way the business going.
If a Business decides on implementing change within the organisation, they will need a team of members to encourage and manage the change.
Charles Darwin once said “It is not the strongest species that survive, nor the most intelligent, but the ones who are most responsive to change”
The Change process can be a very complex problem and managing it is equally as complex. This is why change is a process that must be carefully planned and executed.
So, why is it difficult to manage? Well you can start with the fact that Change can sometimes arrive unexpectedly. A business may not be ready for change.
One way of overcoming difficulties when managing change is by having effective Leadership during the change process.
The leadership approach has to be focused towards increased and continuous communication.