The Impact Of Innovation

In this assignment, the importance of innovation and the impact that it has in successful companies will be discussed. Theories and examples of innovation will be shown as well as relevant information about apple’s history and detailed product information. Also it will be debated the importance that Innovation have had in Apple company. A SWOT analysis of Apple will be presented as additional information.

Topics as Leadership and Change management are included due to its high relationship with the performance of a company and its direction in a long term, in this case is Apple the chosen company.

Literature review

1. INTRODUCTION

Throughout history the concept of innovation has been debated. Since the time of classical economists this issue has been present, even in the current age. Also important authors have highlighted innovation as essential for the socio-economic that is why it is relevant to study this phenomenon. Innovation is one of the key factors for companies that want to compete in an increasingly international and global market. But to qualify for that capacity, companies must invest in knowledge, structure, research and a good strategy to enable them to decide, from the beginning, who they want to become. There are many definitions about the term innovation and numerous theoretical contributions around this phenomenon.

The term innovate comes from the Latin etymology innovare that mean change or alter things by introducing new features (Medina Salgado Espindola and Espinosa 1994).

Innovation is the production, assimilation and successful exploitation of novelty in the economic and social environment

1.2 DEFINITIONS OF INNOVATION

“Innovation is the process of integrating existing technology and inventions to create or improve a product, a process or a system.

Innovation in an economic sense is the consolidation of a new

product, process or system improvement” (Freeman, C., 1982)

“Innovation is the specific tool of entrepreneurs” (Peter Drucker 1985)

“The act that endows resources with a new capacity to create wealth” (Peter Drucker 1985).

“Innovation distinguishes between a leader and a follower” (Steve Jobs 2005)

Joseph Schumpeter defined innovation in a general sense, took into account different cases of change to be considered as a innovation. These are: the market introduction of a new good or new class of goods, the use of a new source of raw materials (both product innovation), the incorporation of a new production method not experienced in a particular sector or a new way of dealing commercially a new product (process innovation), or market innovation which is the establishment of a new market structure (Joseph Schumpeter 1935)

2. TYPES OF INNOVATION

There are three main types of innovation

Product Innovation

It is the market introduction of a new technology product (whose technological characteristics differ significantly from previous products) or significantly improved

(previously existing whose performance has been improved or greatly improved)

Process Innovation

Is the adoption of new production methods or significantly improved. Can be use to produce or deliver technologically new or improved products, which cannot be produced or delivered using conventional methods of production, also it could increase primarily the efficiency of production.

Organizational Innovation

It is the introduction of changes in the forms of management of the establishment. There are new changes in the organization and management process, incorporating new organizational structures

2.1 INNOVATION MODELS

There are several innovation models, which 4 of them are common and relevant

Linear model

The linear model of innovation is an interpretation of the act of innovation, outdated but is still applied in many cases. This model is a way of theorizing the logical sequence of the process that results in innovation. Sequence is too rigid to describe a process that depends not only on science / technology or market to initialize the generation of innovations. The strict separation between invention, innovation and marketing does not accurately represent the dynamics of innovation today. The linear model is a first generation model, and only takes into account the thrust of science / technology or market pull (concepts 50-60-70 years) as a means to begin the process of innovation

Open model

Open model Innovation is a new innovation strategy in which companies get innovation that comes from outside the company’s internal boundaries. This term was coined by Henry Chesbrough, who in his book “Open Innovation”, proposes to open the creative processes of innovation, in order to get innovative ideas from any source, whether internal or external to the company, and not only from the areas dedicated to the business activity

Open Innovation means combining internal knowledge with external professional cooperation. Thus, research centers as well as universities, experts and other companies offer solutions to companies of what is known as collective intelligence. This will break new ground, contacts, opportunities, where innovative ideas flow freely from any source

Teece model

Teece proposes a model that takes into account two factors that are important to profit from innovation: ease of imitation (imitability) and complementary assets. The imitability can come of intellectual property, protection of technology or the fact that imitators have no powers to mimic the technology. Complementary assets are beyond the capabilities-technology that the firm needs to exploit (manufacturing, marketing, redistribution channels, service, reputation, brand and complementary technologies)

Blue ocean-

The author focuses on the need to put aside destructive competition between companies if you want to be a winner in the future, expanding the horizons of the market and create value through innovation. the author differentiates two most common competitive situations in any industry: blue oceans and red oceans. Red oceans represent all the industries that exist today, while blues symbolize business ideas currently unknown. In red oceans industries limits are well defined and are accepted as they are. The more competitors there are, the benefits and growth opportunities diminish, products are standardized to the maximum and competition becomes bloody. By contrast blue oceans are characterized by the creation of markets in areas that are not currently exploited, and that create opportunities for sustained profitable growth and long-term

3. INNOVATIVE COMPANIES

This are some examples of successful companies

Huawei

The Chinese company based in Shenzhen has reached the second position as a provider of telecommunications equipment, ahead of Alcatel Lucent and Nokia. He recently defeated by Nokia Siemens and Ericsson 4G system contract in Norway. This year has reached its global market share to 20%.

Apple

Apple company has won the award in the categories of gadgets and music. In less than two years, their App Store and sells more than 140,000 applications, and users have downloaded 3 billion to them. He has also continued to develop its iTunes music unit with organic growth and acquisitions as Lala. He has also been able to control an increasingly fiercer distribution channels

Google

Google has come out victorious in the mobile category (with a 86% share of searches) and video (where YouTube is the top server). Google has been a exelent company to launch new products, as Smartphone Nexus One, Android, operates the largest digital library market .

First Solar

For years, the race of the global photovoltaic industry has been to minimize the cost of energy production in order to compete with other energy sources. First Solar was the first company to lower the barrier to a dollar per watt, and by the end of 2009 was $ 0.85

Novartis

The Swiss drug maker is a constant generator of ideas, after focusing its R & D in rare diseases and vaccine development. The Food and Drug Administration has approved no less than nine new drugs last year.

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environmental effect

it can be define the organizational environment as all the elements that significantly influence the daily operations of the company, dividing them into two: micro environment and macro environment.

Microenvironment

This consists in real people and organizations with whom they interact with the company. Among the main ones include:

• Customers: constituted by groups of persons or institutions who buy the goods and use the services of the organization.

• Providers: Providers are company specific, both information and funding, as the raw material that the company needs to operate.

• Competition: specific companies that offer goods and services identical or similar to the same groups of customers or clients.

• regulators: who are the agencies and government representatives at the local, state and national laws that punish and regulations affecting business operations within a given country.

macroenvironment: understand the social forces that affect the whole microenvironment and includes demographic forces, economic, natural, technological, political, cultural and competitive.

Competitive environment, every company must take into account its size and position in the industry with respect to its competitors. To survive, a company must meet the needs and desires of consumers better than does the competition.

Economic environment: involves factors affecting purchasing power and spending patterns of consumers. Purchasing power depends on income, prices, savings and credit of the moment

Technological environment: the most dramatic force that shapes our destiny is technology.

Political environment: consists of laws, government agencies and pressure groups that influence and limit the activities of various organizations and individuals in society.

Cultural Environment: includes institutions and other forces affecting the values​​, perceptions, preferences and behaviors of society

LIDERSHIP

Leadership has been defined as “the activity of influencing people to strive willingly for the achievement of the objectives of the group.” By group we mean a small group, a sector of the organization, an organization. What matters is the organizational leadership in the field. From this definition arise two key areas of leadership:

1) The intellectual process of thinking about the objectives of the organization.

2) The human factor, that is, influence people to voluntarily strive to achieve the objectives.

John P. Kotter, in his book “The Leadership Factor” (1988), says that leadership is characterized by the following:

1) Develop a vision of what should be the organization and generate the necessary strategies to implement the vision.

2) Achieve a “network” cooperative human resources, which involves a group of highly motivated and committed to make the vision a reality.

The definition of leadership cited at the beginning contains a key word “voluntarily”, which could also be translated as “willingly”. Not just about influencing people to do but to voluntarily strive to corresponding targets.

Approaches

These approaches are based on the study of behavior rather than on the depth of personality traits of substantival theories.

The most important contributions in this regard have been those of:

Theory X and Y Mc Gregor

Theory X leads to an autocratic leader performance, and the Y theorie leads to a participatory performance. But being a one-dimensional approach that works with a single variable, the use of authority by the person who leads, is not accourate enough to explain its complexity as is leadership

Likert management systems

Formulated a model with intermediate degrees between X and Y. To Likert best to lead a team corresponds to a participatory behaviour Likert found that management under the participatory system were most effective and in which showed the best motivation.

He built a very comprehensive questionnaire on organizational characteristics, that tests 18 variables classified in the categories Leadership, Motivation, Communication, and others. Its main limitation is that it is only useful in cases where it is intended to improve the lead making it more participatory. In this sense it is more applicable to small groups and instructed personnel.

The Managerial Grid of Blake and Mouton

This marriage of researchers was able to define a model based on the intersection of two variables: the concern for people and concern for production.

While five main positions are standardized, the grid gives possibilities to eighty-one intersection between the two variables.

The main contribution is to show that both variables are called mutually. It would be hard to imagine good long-term gains without a committed and motivated personnel.

Without doubt, the greatest value of this approach is that it breaks the paradigm dimensional. However, the main criticism he has received is that indicate a unique driving style as best for all circumstances.

CHANGE MANAGEMENT

It is a process by which organizations move from the present state to a future state,changing in order to increase their effectiveness. A Process to achieve better efficiency, in which an organization achieves its objectives. organizational efficiency is amount of resources the organization has ,to be used to produce a number of products.

Levels change

When focused on the organization as a whole, we see that this can be divided into four levels at the time of analyzing the changes:

Strategic level: proposing a change in the overall objectives of the organization, both in terms of its essential orientation of vision and their reason for their mission.

Structural level: proposes a change in the organizational structures, it involves changing authority relations, the coordination mechanisms, redesigning jobs, or similar structural variables

Technical level: technology change encompasses changes in how work is processed and the methods and equipment used.

Human level: people change refers to changes in attitudes, skills, expectations, perceptions and behavior of employees, including, in turn, according to Daft and Steers (1992) four types of changes: patterns of interaction, skills in human relations and in the basic attitudes, values ​​and motivations of individuals. Thereby changing the behavior of individuals and groups requires the transformation of one or more of the aforementioned levels (Quoted in Romeo, 1999).

Models of organizational change

Many models are used to carry out or try to explain, in an effective way, the process of change, example is the model of Lewin.

Lewin (1951) develops a dynamic theory, which explains that the the behavior is a function of the individual’s interaction with his social environment, essentially based on the different groups to which the person belongs. it should focus not only on the individual in isolation, but in this within their social environment, taking as unit change the social group to which the individual belongs.

The “status quo” of the organization, to Lewin (1951) is a state of dynamic equilibrium between forces that tend to help the organization and forces that tend to counteract or prevent wrong decitions, and to effect a change is necessary to break that dynamic balance between these forces. unfreezing is the name given to this initial process where old ideas or practices are suppressed by new ones and can be induced by increasing the driving forces of change growing perception of benefits associated with this, by reducing the resistance or obstacles to change, or combination of both. Following the “Change” in which new ideas practices. then comes refreezing ,requiring the integration of new insights into the structure of the organizational system . The refreezing state marks the return of the organization to a dynamic balance of forces that support or restrict any intervention.

Critical analysis

4. INTRO

Few companies can be described as revolutionary and successful, changing markets and consumer behaviours, apple is one of them, a remarkable company that over time has created an identity and an image that impacted in their followers.

The technological direction of the company began to build in 1971 when they met Steve Wozniak and Steve Jobs. The former is responsible for creating the first Apple computer, while the latter promoted among the major supporters of computing and digital electronics shops.

Apple has begun a career that has had its ups and downs due to different administration, Steve Jobs being the most successful, turning the company into one of the largest in history

But what does make it a success?

Innovation, the key of success, which leads to a competitive advantage.

From the beginning of Apple’s history in 1976, Steve Jobs, the soul of the company, had a different view of its competitors, looking distinguished among its rivals, seeking exclusivity and novelty, as jobs mention, I want to bring an easy to use computer to the market.

From here we can analyze that jobs from the start thinking like a consumer, which would win the loyalty of its customers.

With the launch of Apple II the computer revolution began, having as the main rival IBM.

But what type of innovation strategy do they have at that time?

Clearly the development of their products were made by them within their company, all the ideas were in apple, As mentioned in the textbook Apple “practised to horizontal and vertical integration relied on its own property design”

A classic type of linear model innovation, as mentioned in the literature review.

Basic research

Applied research

Development

Commercialization

The challenges started when IBM developed a faster processor and the use of an open operative system(ms dos) Limitating the sofwares that apple had developed,as well as the slow processor speed, and falling 62% of apple net income between 1982 and 1983 leading to a crisis in the company and the dismissal of Steve Jobs.

With the entry of Sculley as CEO, apple tried to gain space in a new market, education, which were driven by its high technology softwares, they recover their market share and stabilized at 8% as (referred in the case study)

As the philosophy of Jobs to make things simple, Sculley introduce “plug and play peripherals” which allow overpricing their products.

4.1 THE STRATEGY

At this stage the revenues came from “exclusivity” rather than cheap products and apple still producing their own monitors, chips and disk drivers, keeping the classic innovation model.

But now apple forge and alliance with their main rival, IBM ,creating 2 joint ventures in order to produce new operating systems and multimedia applications,

Sculley was replaced in June 1993 by Michael splinder.

It was a good decision to change the management?

With the new management, changes were inevitable, apple started licence many companies to make Mac clones, trying to reduce costs, which was a poor decision made by splinder, apple lost 69 billion dollars in 1996

After 12 years Steve Jobs returned and became the interim CEO of apple

4.2 NEW BEGINING, NEW IDEAS, INNOVATION

With the return of Steve Jobs, Apple returned to the path of innovation. Not only in technology but also in the strategy and business model.

For example:

Opening its own stores to broaden the scope of the external distribution channel.

For the first time apple open and online store to set up direct sales

They invest more money on Research and Development

Decrease its inventory

In 1998 apple gained real profit from their all in one computer, iMac, that could support Microsoft’s peripherals for the first time.

With jobs in command, the company started to reshape quickly. Those were signs that the course was on track, Apple posted a profit of 309 million Dollars

4.3 NEW STRATEGY-BLUE OCEAN

The real revolution of apple came with uncontested line of products, the reinvention of portable music devices, the telephone and the tablet.

Apple had an outstanding strategy, the digital hub strategy, Mac became the preferred hub to control, integrate and add value to these devices.

All started with the iPod

As the theory of Blue Ocean, in order to create a new market and escape from the battling Red Ocean a company have to be innovative, different.

Apple launched a new concept of music device, the iPod

Blue ocean strategy – quick analysis (BASED ON IPOD DEVICE)

1. Increase: the music storage can store up to 1000 songs

2. Reduce: energy consumption, up to 10 hours battery

3. Create: ultra portable high performance device, iTunes

4. Eliminate: old concept of music device.

Through this commitment to innovation on all fronts in which focused,

Apple managed to gain success as 60% of the digital music market.

With the iPod, Apple has done what he does best: offer a product

Innovative, bringing together high technology, attractive design and a simple interface

use. And with its iTunes online store, Jobs offered an innovative business model.

iPhone

A new revolution of the company would begin with the launch of the iPhone in 2007, a multimedia smart phone with Internet access, touch screen and a minimal hardware interface. His success was such that it would be awarded the “Invention of the Year” by Time magazine in 2009, Apogee has maintained that through the sale of new issues as the iPhone 3G, iPhone 3GS and iPhone 4

iPad

With a revolutionary concept between smartphone and a laptop (which would later be called tablet), the company lashes out in early 2010 to introduce its new device called iPad. Its multitouch capabilities, wide screen, its innovative design and powerful hardware allowed him to position itself as the most popular product of the year.

However not all inventions made ​​by apple where sucesful, not always an Innovative product will be succesful, for instance the Mac Mini and the Apple TV were a failure,

But why?

“Because they haven’t figured out the right way to create a compelling TV product”

Most of their best selling products are based on an apple operative system, and a TV box does not need that.

Microenvironment FACTORS-SWOT ANALYSIS

Strengths: Apple is one of the marks of technological innovation in the world’s largest entertainment. It has a large number of fans who admire the quality of their products. Such loyalty guarantees the permanence of its customers and generates the attraction of new consumers. In turn, Apple products are easy to handle and excellent quality.

Weaknesses: Apple has been criticized for antenna problems on its latest iPhone. Moreover, its admission policies iTunes Store applications and user freedom are very restrictive. The costs of their products are usually a little higher.

Opportunities: The mobile market is expanding and Apple can leverage its established position in digital distribution. In the course of time, Apple has made a huge acepatación the AppStore (billion download until this year) developed by various groups of programmers in the world. Furthermore, due to its success, Apple is an interesting market for investment, which has benefited the company in times of crisis.

Threats: There is increasing competition in the technology market. Market companies are quick to market with products like the iPhone or iPad. To remain in place, Apple should invest more in research and technological development. Economic crisis.

ChNGE

Recall that after having problems with the top management of the company he founded, Jobs was fired from Apple Computer in 1985, later founding the company NeXT, which was reabsorbed by the very Apple Computer in 1997, where Jobs is president ( CEO) since.

1. Changes in the board of the company that meant a renewed confidence in the company and markedly increased the stock price of the company.

2. The re-purchase of the licenses the use of PowerPC 750 (G3) of all companies that could make Mac clones (yes, there was a time that I had), so the company re-take control of the hardware in running your operating system.

– Start of organizational change

– Create a culture

– Reduce by 50% to 10% Research & Development, and removed the unnecessary worker

– Launches first product of the new era Jobs. The IMAC computer without a tower, and of different colors, with cd, and no floppy.

– Jobs realizes the market opportunity that I had in music. After the success of Napster.

– AND ITUNES product launches, to the IMAC.

– And you create a culture, a style … the best philosophy that a company can have. The music.

– Sony created the personal music player but did not use the MP3 market

3. The announcement of the Power Mac G3 in November 1997 (new flag)

These changes Apple made were to have a profitable quarter ($ 47 million). But after more decisions were taken that catapulted the company to a winning streak that continues to this day:

1. Drastically reduced hardware production line of the company.

2. Because of this reduction is greatly simplified product offering Apple aside rare model names (most identified by numbers) and variations that just confused the current and future customers.

3. The announcement of the iMac and PowerBook G3 in May 1998. Thus Apple’s offer was reduced to three elements:

* Advanced Desktops: PowerMac G3.

* Equipment for home desktop: iMac.

* Portable: PowerBook G3.

4. Completing hardware divisions that reported earnings as Newton, production printers and accessories. Significantly simplifying the internal structure of Apple.

5. It starts selling the iMac on August 15, 1998 and became the fastest computer sold in history.

Apple went from a quarterly loss of $ 740 million in June 1997 to gains above the $ 100 million per quarter in July 1998.

In 2009, Apple reported profits over 8 billion dollars per quarter

Leadership

When analyzing the personality of Steve Jobs, co-founder of Apple, there are many features that spring to mind to describe this technological genius who profoundly influenced a new generation with products like the iPod, iPad and iTunes.

Some, stand for the rest of the business in its category. For example, a person was extremely perfectionist with each of the products created, intuitive to realize that products would have positive results and which are not, studious because researching every detail of your market and competition, and charismatic, because enthused employees to perform their work in a better way.

While these qualities we find in some other successful entrepreneurs in their areas, the fact is that there is one that is shared by all innovative leaders: curiosity.

That’s because the primary secret of success of Steve Jobs lay in his curiosity, according to Forbes, for example, curiosity led him to study calligraphy, which could create fonts that Apple made known to its original design.

Even the same curiosity led him to travel to India to study Eastern mysticism and Zen Buddhism, to seek simplicity of design. And it was precisely this feature which became known as Apple technology company worldwide.

This shows that the top executives are not always the most skilled, but are those who exploit the curiosity the most, as their ideas generate creative and successful business.

In fact, one of the most famous phrases of Steve Jobs is “when you innovate, you run the risk of wrong. Admit and innovates again. ” This reflects the spirit of entrepreneurship and creativity. Jobs was ahead of his time and embodied everything we thought it would be impossible to do.

So do not doubt your ideas or your impulses. If your curiosity leads to new business plan, try. Maybe you can turn those ideas into big business to take you to achieve success in your caption and recognition among your competitors

6. CONCLUSION

With the case study over, it has been learned the importance of innovation and the impact that it has in companies around the world, such is apple and its successful history. Also it is important to point out the influence of the strategic planning in order to gain competitive advantage among competitors

it has been shown the importance of good management in critical situation and how it can affect the overall direction of a company.

the blue ocean strategy has provided relevant information for the understanding of creating opportunities in new markets, for instance in the case of apple, the innovative idea of Steve jobs in the creation of the iPod, iPhone and iPad in the technological market made apple an outstanding successful company in the 21st century despite the fact of the global recession

For the purposes of further research this assignment is for free use

DANIEL LIZARRAGA

References

Medina Salgado Espindola and Espinosa 1994

Freeman, C., 1982 the economics of industrial innovation pg 56

Peter Drucker 1985 Innovation and Entrepreneurship pg 28-pg29

Steve Jobs 2005 Stanford university speech

Henry Chesbrough Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era pg 66

Telegraph 2011