Review of literature on economic innovation and Dell Case Study

Introduction:

Innovation is the process that renews or improves something that exists. It comes from the Latin innovationem, noun of action from innovare which relates to renewal or improvement. It is an important topic in various fields of study such as entrepreneurship, economics, business, design, technology, sociology and engineering. Generally, economists focus on the process itself which starts from the origination of an idea and then to its transformation into something and finally its implementation. Innovation is considered as the major driver of the economy. There are various factors that lead to innovation and those factors are considered to be critical to policy makers. In the organizational context, Innovation has a positive impact in terms of efficiency, productivity, quality, competitive positioning, market share, etc. These impacts thus lead to development of the organization. All organizations such as hospitals, universities, local governments can innovate. The study of Innovation extends in a variety of contexts which relates to technology, economic development, commerce, social systems, and policy construction. There has to be an occurrence of something more than the generation of a creative idea or insight for an innovation to happen. The innovation must make a genuine difference which should result in better or altered business processes within the organization and it should also make some positive changes in the products and services which are provided. Innovation is a management process that requires specific tools, rules, and discipline. For this emphasis is transferred from the introduction of specific useful ideas to the general organizational processes and procedures for generating and acting on such insights which leads to significant organizational improvements. Creativity is seen as the basis for innovation and Innovation is required for the successful implementation of creative ideas within an organization.

Review of Literature:

Innovation literature is rich in typologies and descriptions of innovation dynamics and is mostly focused on technology. There are various sources of innovation and many models have been made to demonstrate them. In the linear model of innovation, the source recognized is manufacturer innovation where an agent (person or business) innovates in order to sell the innovation (Freeman & Chris, 1984). Similarly, another source of innovation is end-user innovation where an agent (person or company) develops an innovation for their own use as the existing products do not meet their needs. Innovation does not happen within the industrial supply-side, or as a result of the articulation of user demand (Hesselbein, Frances, Goldsmith and Sommerville, 2002). It happens through a complex set of processes that links many different players together which not only includes developers and users, but a wide variety of intermediary organisations such as consultancies, standards bodies and many more. The social networks suggests that much of the innovation occurs at the boundaries of organisations and industries where the problems and needs of users and the potential of technologies can be linked together that usually challenges both (Hitcher & Waldo, 2006). A real world experimentation approach increases the chances of market success when an innovative idea requires a new business model or redesigns the delivery of value to focus on the customer Innovations may be spread from the innovator to other individuals and groups when it occurs (Chakravorti & Bhaskar, 2003). Failure is an obvious and inevitable part of innovation process. Most successful organizations factor in an appropriate level of risk because all organizations experience failure that many choose not to check regularly. Innovations that fail are potentially good ideas but are mostly rejected or postponed due to budgetary constraints, lack of skills or poor standards with current goals. The causes of failure of innovation are widely researched and they can vary considerably. The main motive of an innovation is to achieve the effective goal of the organization. The organizations should state explicitly what their goals which should be understandable to everyone involved in the innovation process (Chesbrough & William, 2003). The process of innovation mostly involves participation in teams which mostly refers to the behavior of individuals in and of teams. Each individual should have an allocated responsibility regarding their role in goals and actions and the payment and rewards systems that link them to goal attainment (Chakravorti & Bhaskar, 2003). Finally the effective monitoring of results requires the monitoring of all goals, actions and teams involved in the innovation process. Innovation mostly implies change and it can be counter to an organization’s orthodoxy. Innovation can also be measured. There are two fundamentally different types of measures for innovation that are the organizational level and the political level. At the organizational level, the measure of innovation relates to individuals, team-level assessments, and private companies from the smallest to the largest but at the political level, measures of innovation are more focused on a country or region (Fagerberg & Jan 2004). For innovation, public awareness is an important part of the innovation process. Innovation is no longer considered just desirable for organizations it is crucial to their survival. In an era of continual and rapid change, what is needed is a culture of innovation and continuous improvement (Cabral & Regis, 2003). Innovation is not limited to new products and services. It involves business processes, workplace culture, customer relationships and the opening of new markets. Innovation is important not only in products but in all activities of the organization. Ideas can come from many sources (Freeman & Chris, 1984). Ideas can come from consumers who ask directly for a new product or feature (more common in business to business) or be sparked by new product activities in other categories. People within the company also often have good suggestions. To attempt to maximize the number and quality of ideas an to get the new product development team to think laterally, companies may use different creative techniques to generate ideas. At the early stage of generating ideas even the craziest ideas should be viewed with an open mind.

Case study:

Dell Inc. is an American multinational information technology corporation which is based in Round Rock, Texas, United States. The corporation being the largest technological corporations in the world develops, sells and supports computers and related products and services which employs more than 96000 people. The company bears the name of its founder, Michael Dell. The company sells personal computers, servers, data storage devices, network switches, software, and computer peripherals. The company is also popular for its HDTVs, cameras, printers, MP3 players and other electronics built by other manufacturers. The company is well known for its innovations in supply chain management and electronic commerce. Dell’s tagline is ‘Yours is Here’ which is seen at their Mall of Asia branch Pasay City, Philippines. Their Business/Corporate class represent brand where the company advertises emphasizes long life-cycles, reliability, and serviceability. Such brands include Optiplex, Vostro, N Series, Latitude, Precision, Power Edge; Power vault etc. Their Home Office/Consumer class emphasizes value, performance, and expandability. These brands include Inspiron, Studio, XPS, Studio XPS, Alienware Adamo. Their Peripherals class is popular in market which includes USB keydrives, LCD televisions, and printers. Dell monitors includes LCD TVs, plasma TVs and projectors for HDTV and monitors. Their service and support brands include the Dell Solution Station , Dell Support Center, Dell Business Support, Dell Everdream Desktop Management and Your Tech Team . The general policy of the company to manufacture its products close to its customers so as to minimize the delay between purchase and delivery has been really beneficial for the company in terms of goodwill. This is done by implementing a just-in-time (JIT) manufacturing approach, which minimizes inventory costs. Another signature of the Dell business model which is a critical consideration in an industry where components depreciate very rapidly is Low inventory. The manufacturing process of the company covers assembly, software installation, functional testing, quality control and many more. Dell has proved be a great manufacturing company. It manufactures desktop machines in-house and then contracted out manufacturing of base notebooks for configuration in-house. Various innovation processes takes place in the company which proves to be efficient for the company. Dell Inc. brands its service agreements at five levels for their business customers. The first one being the Basic support which provides business-hours telephone support and next business-day on-site support/ Return-to-Base or Collect and Return Services which are based on contracts purchased at point of sale. Then is the Silver support which provides 24Ã-7 telephone support and 4-hour on-site support after telephone-based troubleshooting. The next being the Gold support which provides additional benefits over and above Silver support. The Platinum Plus support provides additional benefits to Gold Support. And the last but not the least is the two-hour on-site support. Another important is the Dell’s Consumer division which offers 24×7 phones based and online troubleshooting rather than only during business hours in certain markets. Dell has put together packages of options for each category of its customers be it small and medium-sized businesses, large businesses, government, education, and health-care- and life-sciences. There are various marketing strategies of the company which helps it to achieve its desired goals. Its marketing strategies include lowering prices at all times of the year and offering free bonus products. Another important strategy is offering free shipping in order to encourage more sales and to stave off competitors. The company has planned to expand its program to value-added resellers (VARs), giving it the official name of “Dell Partner Direct” and a new Website. This innovative idea would help the company to go a long way. Dell used to sell its products through Best Buy, Costco and Sam’s Club stores in the United States but then it stopped this practice because it cited low profit-margins on the business. The major competitors of the company are Apple, Hewlett-Packard (HP), Acer, Toshiba, Gateway, Sony, Asus, Lenovo, IBM, Samsung, and Sun Microsystems. Dell is a company that has pioneered the art of offering exactly the kind of machine needed and demanded. As a company that revolutionized the PC industry, Dell helps drive industry innovation through a time-tested process that puts the customer first. It is aimed at producing easy-to-use products, services and solutions that address needs. Innovation is central to Dell’s recently-announced ‘Simplify IT’ strategy. Committed to reducing complexity and costs for its customers, Dell looks to turn their IT investment into a significant business driver. In a typical IT spends, about 70 per cent goes into maintenance, and only 30 per cent is for innovation. Dell is committed to reversing this ratio not just driving innovation within Dell’s own products and services, but also facilitating innovation for customers with Dell solutions. Some of the other innovations include The H2C thermal transfer unit, the solid-state disk drive, The Blu ray optical disk drive, Display port cables and connectors. Dell based his strategy on obtaining high growth with integrity and achieving market share the old-fashioned way: one customer at a time. By selling customized products directly to end customers, Dell has empowered businesses and consumers to choose the best solutions for their computing needs. Now, direct from Dell comes Dell Insight, the new industry quarterly that addresses real-world business issues and provides real world solutions. Dell’s research and development (R&D) efforts now span the globe, driven by some of the industry’s foremost product designers and engineers. At the core of Dell’s innovation approach, however, remains an unwavering commitment to deliver new and better solutions that directly address customer needs. Many innovations begin in-house, led by a global team of top engineers, product designers and technical experts. Others begin as a team effort with Dell’s strategic partners. The mission is to deliver innovative and cost-effective solutions that meet today’s real-life customer challenges and work seamlessly in existing environments and with other products. Innovation is not only found in the products and services we deliver, it’s what Dell brings out in our customers. Dell is a disciplined, process-oriented company that packages technology like no one else. Dell provided guidance and best practices to consolidate the fast-growing IT infrastructure. IT staff has more time to further business objectives. Planned use of virtualization tools within the business continuity strategy reduces disaster recovery time from days to hours.Dell showed the industry a new way to do business in personal computers. It was revolutionary at the time and created a very large, very profitable franchise in computing. The market has also been changing while Dell has been catching up. The market has been moving increasingly toward mobile computing as the new locus of innovation and activity. Apple is the only computer company that saw this locus coming and it exploited it fully by introducing the iPhone. But Dell is not found exploiting this new innovation although they have made some noises about having their own branded device. It doesn’t appear that they are investing heavily in it which should be done in oder to gain more for their status in the market. It is not that there is no innovation at Dell its just that there is not nearly enough. The company has generated practical online communities which has leveraged social networks like Twitter.A one-trick pony is plenty when the trick is good enough. The trick is no longer unique in the business world. There is just no point in rehashing the misfortunes of Dell customer service and the legendary “Dell Hell” that was created for customers and users. Dell has made two fairly large acquisitions which has proved to be kind of loss for the company. First is the purchase of Perot which recognizes one clear fact in the enterprise market that is the professional services are required. IBM led the way here with IBM Global Services many years ago and even exited the PC business. Dell professional services were so bad once that the customers didn’t even use them when they were included at no additional charges. Perot addresses this weakness but merely follows market reality and is a somewhat lesser solution than what is already offered by the competition. Secondly, Dell also acquired EqualLogic. It doesn’t bring unique capabilities or a change in positioning for Dell although a very strong player in storage area networking. Most of the systems vendors like HP, IBM, and Microsystems have storage solutions. It has built a fairly good all-in-one computer to try and match the iMac. It has also designed a cool laptop called the Adamo. But these are all changes at the margin rather than being at the level of corporate identity and positioning. Dell has to do something deep, daring, daunting and potentially delightful in order to retain its position in the market. Dell being a hardware manufacturer is narrower than H-P, IBM and Sony and Hitachi. H-P and IBM have software expertise and knows to build its own OS and software application suites for business use. Sony makes consumer electronics and owns entertainment media. Hitachi makes consumer electronics and appliances. Dell has tightly concentrated itself on making PC before branching out into services but purchasing other firms.

Conclusion:

The company must rely heavily on others for software before it can develop software prowess to add value to its hardware. Dell was never a technology innovator. Dell was just a PC maker that hit on a business model that worked for a time. It never adapted, never looked forward and became complacent. Dell has tightly focused itself on making PC before branching out into services but purchasing other firms. Dell had a brilliant business model to build computers at the time of order to avoid stockpiling inventory. The company worked well until other manufacturing companies discovered cheaper and more innovative methods to cut costs. There is little to differentiate these companies besides price, quality, style, service and technology. Dell unfortunately lags behind all in all of these areas. Dell’s new innovation strategy is not just standards but to attract business customers. The company is unveiling a new Latitude business notebook computer but it’s a bit different from what Dell used to represent. Dell made a name for itself by focusing on standardized technology and the business model that allowed customers to pick and choose the extras for their own computer. Innovation was not an important word seen in Dell. Companies like HP and Sony were selling innovation back then when Dell was selling affordable PCs to the masses. Dell spurs innovation in this way which surely needs changes so as to deliver the best to their customers.