INNOVATION AND

STRATEGY FORMULATION
Lesson 2: Sources of Innovation

Irish Kate A. Tanallon

Instructor
What is Innovation?
■The practical implementation of an idea into a
new device or process
■It can originate with individuals, as in the
familiar image of the lone inventor or users
who design solutions for their own needs.
■ Innovation can also come from the research
efforts of universi ties, government
laboratories and incubators, or private
nonprofit organizations. One primary engine
of innovation is firms.
■ Innovation begins with the generation of new ideas. The
ability to generate new and useful ideas is termed creativity.
Creativity is defined as the ability to produce work that is
useful and novel. Novel work must be different from work that
has been previously produced and surprising in that it is not
simply the next logical step in a series of known solutions.
■ Individual Creativity
An individual’s creative ability is a function of his or her
intellectual abilities, knowledge, personality, motivation, and
environment.
The most important intellectual abilities for creative thinking
include intelligence, memory, the ability to look at problems in
unconventional ways, the ability to analyze which ideas are
worth pursuing and which are not, and the ability to articulate
those ideas to others and convince others that the ideas are
worthwhile.
■ One important intellectual ability for creativity is a person’s
ability to let their mind engage in a visual mental activity
termed primary process thinking, in which primary process
thinking can result in combining ideas that are not typically
related, leading to what has been termed remote
associations or divergent thinking.
■ The personality trait most often associated with creativity is
“openness to experience.” Openness to experience reflects
an individual’s use of active imagination, aesthetic sensitivity
(e.g., the appreciation for art and literature), attentiveness to
emotion, a preference for variety, and intellectual curiosity.
■ Intrinsic motivation has also been shown to be very
important for creativity. That is, individuals are more likely to
be creative if they work on things they are genuinely
interested in and enjoy.
TRANSLATING CREATIVITY INTO INNOVATION
The Inventor
The familiar image of the inventor as an eccentric and doggedly
persistent scientist may have some basis in cognitive psychology.
Analysis of personality traits of inventors suggests these
individuals are likely to be interested in theoretical and abstract
thinking, and have an unusual enthusiasm for problem solving. One
10-year study of inventors concludes that the most successful
inventors possess the following characteristics:
1. They have mastered the basic tools and operations of the field in
which they invent, but they have not specialized solely in that field;
instead they have pursued two or three fields simultaneously,
permitting them to bring different perspectives to each.
2. They are curious and more interested in problems than
solutions.
3. They question the assumptions made in previous
work in the field.
4. They often have the sense that all knowledge is
unified. They seek global solutions rather than local
solutions, and are generalists by nature.
These traits are demonstrated by Dean Kamen,
inventor of the Segway Human Transporter and the
IBOT Mobility System (a technologically advanced
wheelchair), profiled in the Theory in Action section
on Dean Kamen.
Innovation by Users
■ Innovation often originates with those who create
solutions for their own needs. Users often have both a
deep understanding of their unmet needs and the
incentive to find ways to fulfill them. While
manufacturers typically create new product innovations
in order to profit from the sale of the innovation to
customers, user innovators often have no initial
intention to profit from the sale of their innovation––
they create the innovation for their own use.
■ Users may alter the features of existing products,
approach existing manufacturers with product design
suggestions, or develop new products themselves.
■ For example, the extremely popular small sailboat, the
Laser, was designed without any formal market
research or concept testing. Instead it was the creative
inspiration of three former Olympic sailors, Ian Bruce,
Bruce Kirby, and Hans Vogt. They based the boat design
on their own preferences: simplicity, maximum
performance, transportability, durability, and low cost.
The resulting sailboat became hugely successful; during
the 1970s and ’80s, 24 Laser sailboats were produced
daily.
Research and Development by
Firms
■ Though the terms research and development are often
lumped together, they actually represent different kinds
of investment in innovation-related activities. Research
can refer to both basic research and applied research.
■ Basic research is effort directed at increasing
understanding of a topic or field without a specific
immediate commercial application in mind. This research
advances scientific knowledge, which may (or may not)
turn out to have long-run commercial implications.
■ Applied research is directed at increasing
understanding of a topic to meet a specific need. In
industry, this research typically has specific commercial
objectives.
■ Development refers to activities that apply knowledge to
produce useful devices, materials, or processes. Thus, the
term research and development refers to a range of
activities that extend from early exploration of a domain
to specific commercial implementations.
Firm Linkages with Customers, Suppliers,
Competitors, and Complementors
Firms often form alliances with customers, suppliers,
complementors, and even competitors to jointly work on an
innovation project or to exchange information and other
resources in pursuit of innovation. Collaboration might
occur in the form of alliances, participation in research
consortia, licensing arrangements, contract research and
development, joint ventures, and other arrangements.
■ Firms may also collaborate with competitors and
complementors. Complementors are organizations
(or individuals) that produce complementary goods,
such as light bulbs for lamps, chargers for electric
vehicles, or applications for smartphones. In some
industries, firms produce a range of goods and the
line between competitor and complementor can blur.
INNOVATION IN COLLABORATIVE
NETWORKS
■ is about people coming together, sharing their
diverse wisdom, skills, experience, and resources,
to innovate and to solve a common problem, or
pursue a shared opportunity.
Technology Clusters
■ Regional clusters of firms that have a connection to
a common technology, and may engage in buyer,
supplier, and complementor relationships, as well as
research collaboration.