Innovation in strategy

Innovation in schemeThis essay evaluates the role of initiation in scheme, and explores the ways management crapper promote it in organisations. It offshoot looks at the nature of creative activity, and examines its importance in current economic and social conditions. It then sets schema in context, defining it primarily in scathe of competitive benefit that is, as a search for capabilities which allow allows an organisation to meet consumers needs better than its extend tos. It then investigates why, exactly, innovation is often seen as a key member of outline. It comes up with two key reasons its capacity to generate a sustainable competitive profit for business organisations and its ability to aid organisations in preventing strategic bollocks. As a result of these benefits, strategies which are centred upon innovation sack add real value to an organisations value propo devolve onion, and consequently can substantially modify business performance. The essay the n turns to look at the ways that management can promote innovation in organisations. For this, it turns to the worlds around famous management head Peter Drucker and the worlds most(prenominal) innovative smart set apple Inc. for guidance on theory and practice respectively. Having consequently established the importance of the role of innovation for strategy, and the ways in which management can promote it in organisations, the essay then demands some limitations. In particular, it looks at the possible rewards of strategic cheat and also the opposite aspects of strategy beyond innovation which must(prenominal) be considered by an organisation. The essay thus concludes that innovation is a necessary component of a successful strategy in that it is able to generate a sustainable competitive advantage for a business only that it is not sufficient in and of itself an organisation must consider to a greater extent than innovation if it is to get around an strong stra tegy.Innovation is usually defined as the successful commercial exploitation of new ideas or evidently as the successful executing of new ideas. This encompasses ideas that are new to the world, new to an industry or merely new to a particular firm (Gabriel, 2008, p. 146). The gibbosity given to the role of innovation in strategy is to a large extent the result of the prevailing social and economic conditions. In what Peter Drucker the most influential management thinker of the second-half of the twentieth century termed the knowledge economy that has emerged due to the rise of the service industry and decline of manufacturing since the end of the Second domain War, business organisations have increasingly had to react to change more rapidly if they wish to succeed in the marketplace (Drucker, 1992, p. 263). Indeed, so important is the successful implementation of new ideas that Drucker famously reflected that Business has only two basic functions marketing and innovation (Ko tler Armstrong, 2008, p. 40). In other words, a business organisation must first create a customer, but consequently that business must constantly adapt to provide the necessary goods and services to keep them making a network they must pursue innovation both to survive and to thrive.Having explored the nature of innovation, it is useful now to define what is meant by strategy, and examine briefly why it matters. The nature of strategy has traditionally been a contentious issue. A helpful starting point for understanding the concept is found in Anthony Henrys (2008) Understanding Strategic Management, where he provides a synopsis of forty years of heated debate on the issue. He first proscribedlines that, there is agreement that the role of strategy is to achieve competitive advantage for an organisation. He then continues Competitive advantage may usefully be thought of as that which allows an organisation to meet consumers needs better than its rivals . . . and its source may derive from a number of factors including its products or services, its culture, its technological know-how, and its processes (Henry, 2008, p. 4). It is an important issue for a business because a strategy which can enable a sustainable competitive advantage will allow an organisation to generate super-normal returns, and will have a distinct impact on overall organisational performance an effective strategy can add value (Kay, 1995).Herein lies the essence of the role of innovation in strategy it is often a key component of a sustainable competitive advantage. For instance, Grant (2005, p. 513) has observed from empirical evidence based on such successful companies as 3M, Wal-Mart, and Toyota that, ultimately, the only sustainable competitive advantage is the ability to create new sources of competitive advantage. Firms with a fixed commitment to innovation seem to prosper in the modern knowledge economy. For instance, apple a accompany which this essay examines in more depth below has become synonymous with strategic innovation. In Fortunes Americas Most Admired Companies 2008, apple topped the chart. A senior commentator reflected on this development with the following remarkorchard apple tree not only takes the No. 1 slot on this years rock of Americas Most Admired Companies but also tops the global survey and wins the highest marks for innovation too. Thats probably no coincidence. In an industry that changes every nanosecond, the 32-year-old company has time and again innovated its way out of the doldrums. Rivals always seem to be playing catch-up. (Fisher, 2008)Moreover, innovation can be key to preventing strategic drift. Strategic drift is the tendency for strategies to develop incrementally on the basis of historical and cultural influences but to fail to keep pace with a changing environment (Johnson, Scholes, Whittington, 2008, p. 179). This is what happened to Sainsburys who were one of the most successful food retailers in the world un til the early 1990s, using a tried-and-tested formula of selling high quality food at reasonable prices. Its strategy consisted of gradually extending its product lines, enlarging its stores, and expanding its geographical coverage but under no circumstances would it deviate from its traditional ways of doing business (Johnson, Scholes, Whittington, 2008, p. 179). However, during Sainsburys period of strategic drift, its rival Tesco followed a policy of ruthless innovation developing Club-Card marketing, building a successful on-line retailing capability, and implementing new ideas to radically reduce its distribution be (IMD, 2008). By having a strategy centred on innovation, therefore, Tesco was able to both establish a competitive advantage and avoid strategic drift. It was, in short, able to develop a strategy which added value, and which made the business organisation much more profitable.So where can business organisations look for innovation how can they promote it more e ffectively? Peter Drucker has suggested that there are seven areas where companies should look for such opportunities. These have been expertly surmised by Hindle (2008, p. 105), as being the unexpected success that is seldom dissected to see how it has occurred any incongruity between what actually happens and what was expected to happen any inadequacy in a business process that is interpreted for granted a change in industry or market structure that takes everyone by surprise demographic changes caused by things like wars, migrations or checkup developments (such as the birth-control pill) changes in perception and fashion brought about by changes in the economy and changes in awareness caused by new knowledge. Moreover, although it is often the case that innovation has been used interchangeably with the term creativity (Forrester 1993, p. 3 cited in Thompson McHugh, 2002, p. 255), Drucker insists that this ought never to limit a business, claiming that There are more ideas in a ny organization, including businesses, than can possibly be put to use (Drucker, 1964, p. 188). Across the literature on innovation, there seems to be a general agreement with this approach set out above that the opportunities for innovation are multitudinous, and that by paying attention to such factors organisations can develop strategies which can lead to a sustainable competitive advantage and prevent strategic drift.A brief case-study of Apple will help demonstrate how this theory outlined above works in practice, and help us to better understand the ways management can promote innovation in organisations. First, Apple appreciates that innovation is an inexact science as the CEO and cofounder of Apple, Steve Jobs, puts it You slant ask people what they want if its around the next corner rather you have to simply provide what you think they might want (Morris, 2008). To guide them, Apple looks to the areas mentioned by Drucker above to gain insights into such potential needs a nd wants. Apple employees in particular focus on the inadequacies in every-day applied science processes that are currently taken for granted, and innovate in these areas. New-product development, according to Apple sources, occurs as a result of conversations such as What do we hate? (Our cellphones.) What do we have the technology to make? (A cellphone with a Mac inside.) What would we like to own? (You guessed it, an iPhone) (Morris, 2008).Moreover, at Apple, innovation is centred on producing technology the employees really want as Jobs says, One of the keys to innovation at Apple is that we build products that really turn us on (Morris, 2008). This results in an organisation thoroughly committed to the successful commercial exploitation of new ideas at a strategic, operational and tactical level. Indeed Morris (2008), observing the culture of innovation at Apple, has pointed out that You wont find that word on a placard or a piece of propaganda at One Infinite Loop, Apples he adquarters . . . there innovation is a way of life. It is this culture that provides the push to overcome design and engineer obstacles, and to bring projects in on time (Morris, 2008). Thus a commitment to a strategy of innovation should foster a culture which reflects this aim of management, as this can lead to the organisation innovating more effectively.Finally, it is important to note the impact of a strategy centred on innovation upon the performance of Apple. It has astounded commentators with one vex writer asking who knew Apple could build a . . . successful company on the strength of a portable jukebox and a computer with a single-digit market mete out? (Elmer-DeWitt, 2008). Indeed, the company has been monetarily hugely successful as a result of the innovation it has pioneered. In the 5 years ending in March 2008, sales of Apple wares tripled to $24 billion and profits rose to $3.5 billion, from a mere $42 million only five years before. Morris (2008) sums up the posi tion of Apple thusIt set the gold standard for corporate America with an entirely new business model creating a brand, morphing it, and reincarnating it to thrive in a disruptive age. . . Apple has demonstrated how to create real, breathtaking growth by dreaming up products so new and ingenious that they have upended one industry aft(prenominal) another consumer electronics, the record industry, the movie industry, video and music production.Thus innovation can play a key role in an organisations strategy, and it can often be effectively promoted by following the theory of Drucker and the practices of Apple. Nevertheless, it is important to note that there are limitations on the role of innovation in strategy. First, strategic drift may not be such a bad thing after all. This is a view outlined by John Kay (2009) in his expression History vindicates the science of muddling through. He contrasts the views of the American political scientist Charles Lindblom (published in 1959) with those of Dr H. Igor Ansoff. Lindblom supported a view of incremental adaptation by organisations to changes in their environment Ansoff proposed a design-orientated, purposive approach to strategy. However, Kay then points that in terms of the organisational case-studies used to support each view Saint-Gobain for Lindbolm the US conglomerates TRW and Litton for Ansoff the clear winner emerges as Saint-Gobain, a company which adopted a quasi-strategic drift approach to their strategy, which is still going strong while the other companies have suffered catastrophic failure. Thus, it seems that sometimes simply muddling through can constitute an effective strategy perhaps a firm commitment to innovation is not necessary after all.Moreover, innovation is not the sole component of an effective strategy, and it never can be. Organisations must consider a range of other issues. For instance, business organisations ought to consider issues highlighted by Michael Porters Five Forces mode l. This shows how the strategic situation of a company can be established by investigating the power of suppliers, the power of buyers, the threat of substitution, the threat of new entrants, as well as the spot of competitive rivalry between the industrys firms. An organisation must consider innovation if it is to ensure that it continues to have an effective strategy in the medium to long term, but it must also pay attention to these other aspects of strategy innovation is necessary, but it is not sufficient.Thus innovation is a necessary component of a successful strategy in that it is able to generate a sustainable competitive advantage for a business. However, it is not sufficient an organisation must consider other issues as well as innovation if it is to develop an effective strategy. Nevertheless, by following the theory of Drucker and learning from the practices of Apple, management can promote innovation in organisations. And if this is done effectively, innovation can play a key role in what every business organisation seeks a competitive strategy which adds real value.ReferencesDrucker, P. (1964). Managing for results economic tasks and risk-taking decisions. California Harper Row.Drucker, P. (1992). The age of discontinuity guidelines to our changing society. 2nd ed. New Jersey Transaction Publishers.Elmer-DeWitt, P. (2008, March 3). Americas Most Admired Companies 2008. Retrieved November 24, 2009, from Fortune wind vane site http//money.cnn.com/galleries/2008/fortune/0802/gallery.mostadmired_top20.fortune/index.htmlFisher, A. (2008, March 3 ). Innovation Rules. Retrieved November 24, 2009, from Fortune Web site http//money.cnn.com/2008/02/29/news/companies/fisher_amac.fortune/index.htm 2008Gabriel, Y. (2008). Organizing Words A Critical Thesaurus for cordial and Organization Studies. Oxford Oxford University Press.Grant, R. M. (2005). Contemporary strategy analysis. 5th ed. London Wiley-Blackwell.Henry, A. (2008). Understanding Strategic M anagement. Oxford Oxford University Press.Hindle, T. (2008). Guide to Management Ideas and Gurus. London Profile Books.IMD. (2008). Tesco Keeping the Hard Discounters at bay tree? Switzerland IMD International.Johnson, G., Scholes, K., Whittington, R. (2008). Exploring corporate strategy text cases. 8th ed. Harlow Pearson Education.Kay, J. (1995). Foundations of corporate success how business strategies add value. Oxford Oxford University Press.Kay, J. (2009, March 15). History vindicates the science of muddling through. Retrieved December 13, 2009, from John Kay Web sit http//www.johnkay.com/in_action/604Kotler, P., Armstrong, G. (2008). Principles of Marketing. 13th ed. London Pearson Education Ltd.Morris, B. (2008, March 17). What makes Apple Golden? Retrieved October 27, 2009, from Fortune Web site http//money.cnn.com/2008/02/29/news/companies/amac_apple.fortune/index.htm?postversion=2008030309Thompson, P., McHugh, D. (2002). Work Organisations. 3rd ed. London Palgrave.