Page 4 - tr1-64

REVIEW of FINANCE - Issue 4, 2021
market or society, and not all innovations require a only the relationships between them.
new invention. - Modular Innovation: "innovation that changes only
The Oslo Manual - an international reference the core design concepts of a technology".
guide from the OECD for collecting and using data on 2.3. The role of innovation in business
innovation, defined the concept of innovation as a new or
improved product or process (or a combination thereof) Apple is a great example of an organization that
that differs significantly from the unit’s previous products effectively embraced innovation at multiple key points
or processes and that has been made available to potential in its lifetime. In the 1990s, for example, the company
users (product) or brought into use by the unit (process).” was on the verge of bankruptcy, but managed to stave
Cirera and Maloney (2017), innovation is defined it off by partnering with Microsoft—a company long
as the introduction and adoption of new products, seen as the enemy. This move effectively shaped Apple’s
technologies, business processes, business models and entire corporate philosophy and led to the introduction
ideas in the market, as well as invention of new ideas. of the iMac, which was an overall turning point for the
Traditionally, innovation has been viewed through the company. However this was only the beginning for
narrow lens of science, formal research and development Apple, the partnership with Microsoft kick-started an
(R&D) and inventions. era of innovative risk-taking, which led to the invention
2.2. Different types of innovation of tech products many consider staples of their lives
today—including iPods, iPhones, Macbooks, Apple
According to the 4th and most recent edition (2018) of Watches, iPads, and more—alongside the invention of
the Oslo Manual, there are four main types of innovation: iTunes, which effectively reshaped the music industry as
- Organizational Innovation: It refers to the development a whole (Will Purcell, 2019).
of a new organizational strategy that will somehow According to Will Purcell (2019), innovation is very
change a company’s business practices, as well as the important for business success for reasons as follows:
way its workplace is organized and its relationship with Firstly, innovation helps companies grow.
external stakeholders. In a recent survey conducted by The Boston
- Process Innovation: It is about implementing a new Consulting Group, 79% of surveyed executives claimed
or improved production or delivery approach, including innovation ranked among their top three business
changes in operational methods, the techniques used and initiatives—the highest percentage since the survey
the equipment or software. began almost a decade ago. Furthermore, the BCG notes
- Product Innovation: It is the introduction of a new or that organizations consistently earning high rankings in
improved good or service. These inventions or changes the annual “top 50 most innovative companies” all have a
may have to do with improving technical specifications, common focus on science, technology, and development.
the materials or the software used or even advancing These companies continue to grow while staying one step
on user experience. However, product innovations ahead of the competition because they value the positive
don’t need to improve all functions or performance impact of innovation.
specifications. An improvement to or addition of a new Secondly, innovation keeps organizations relevant.
function can also be merged with a loss of other functions Changes of technology have led to a new age of
or the downgrade of some other specifications. Moreover, innovation across business models and industries,
a product innovation must add available to potential allowing new businesses to enter the market and disrupt
users but doesn’t necessarily need to generate sales. incumbents in serious ways. In fact, executives today
- Marketing Innovation: It means developing a new believe 40% of Fortune 500 companies will be wiped out in
marketing strategy that produces changes in, for instance, the coming decade due to this level of digital disruption.
the way a product is designed or packed, or even other Just as a start-up often innovates in order to break into an
decisions regarding price or promotion. industry, established organizations need to innovate in
Meanwhile, another framework was suggested by order to fend off competition and remain relevant in this
Henderson and Clark. They divide innovation into changing environment.
four types: Thirdly, innovation helps organizations differentiate
- Radical innovation: "establishes a new dominant themselves.
design and, hence, a new set of core design concepts At the core, innovation is about doing something
embodied in components that are linked together in a differently from everyone else operating in your space.
new architecture." If an organization is using innovation on its products,
- Incremental innovation: "refines and extends an for example, then the goal is to develop or update the
established design. Improvement occurs in individual products until there is nothing else on the market like it.
components, but the underlying core design concepts, If an organization is using innovation on its processes,
and the links between them, remain the same." it will save time, money, or other resources, and give a
- Architectural innovation: "innovation that changes competitive advantage over other companies stuck in

3