'Innovation is the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth. Innovation, indeed, creates a resource. There is no such thing as a 'resource' until man finds a use for something in nature and then endows it with economic value. Until then, every plant is a weed and every mineral just another rock.' (Peter F. Drucker, 1985) The subject of innovation is receiving increased interest both from companies because of their increased awareness of the impact of innovation in determining market success and also from the research community. Academics are increasingly beginning to place innovation as a priority area in their research agenda. This impetus has been partly fuelled by the Economic & Social Research Council (ESRC) who have designated innovation as one of nine research areas in their research initiative schemes. Importance of Innovation has been discussed for decades and continues to be the most talked about management issue these days. Today, knowledge in all its forms plays a crucial role in economic processes. Organizations with more knowledge systematically outperform those with less. Within the knowledge-based economy, innovation is seen to play a central role. But why we have to innovate? What are the reasons? First of all we have to innovate because of the advancing technology, changing environment, changing industrial structures and strategies, evolving society, evolving customer desires, competitors improve their products, processes and services, customers stop buying your old products and services so you need to replace them and add new products and services. Then we have to respond to customers, increase the market share, be at the forefront of industry, establish a new market, improve the quality and speed of service, expand the product range, meet Government standards/regulations, reduce costs and increase revenues. Innovation happens in every industry. From new industries such as genetic engineering, electronics and telecommunications through automotive and aerospace to old industries such as shipbuilding and mining, they all use innovation. Management innovation essentially means implementation of new management, practices, innovative ways of doing things and dramatically transforming and improving the effectiveness of management functions and significant departure from the current norms. Management innovation also includes 'collaborative Innovation and strategic innovation'. Collaborative innovation requires finding new synergies for harnessing the creativity and capabilities of other organizations. Strategic Innovation initiative generates a portfolio of breakthrough business growth opportunities using a disciplined yet creative process. Successful innovation in an organization occurs when technological, product, or process innovations in the value chain are implemented through effective management innovation. Innovation as a driver for growth, profitability and success of an organization will include people, leadership, creativity, process and organizational culture. Innovation in an organization should not be approached in a piecemeal manner but in a systematic enterprise wide capability and should be initiated even at the lowest levels. Day by day, innovation is becoming more important because : - Technology is changing fast, new products come from new competitors - Fast changing environment, product lifetimes shorter, need to replace products sooner - Products are increasingly difficult to differentiate - Customers are more sophisticated, segmented and demanding, and expect more in terms of customization, newness, quality and price - Customers have more choice - New technologies no-one understands - Apparently separate technologies come together - Markets forming and changing fast
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