What kind of companies contribute the most to innovations? Are they large and existing, or new and emerging?
In the current age and time, no business has a freedom to not be creative and innovative. Thus, to answer if a large and existing, or new and emerging business is more innovative is really difficult. Innovation is the multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace (Baregheh, Rowley & Sambrook, 2009).
Rather than creating a strict line to define a company for innovation, it’s more important to look into the positive impact to both producer and consumer with some tangible worth. Usually, if we’re to look at the large and existing companies, they tend to focus on incremental innovation. Companies like Apple, Samsung and other brand keep on releasing a new version of their products, be it a mobile phone, other hardware accessories or software. They also keep pushing out system updates for the system already out with improvements, innovations as they call it. Similarly, Alibaba, now an e-commerce giant came up with a new and innovative way to shop with the concept of new retail (Zhu, Goraya & Cai, 2018). This is something radical and one which holds the power to change the way we shop.
If we see a pattern, Apple acquired several new and emerging companies like Authentic to release touch id for themselves and Siri - the company they acquired became the voice for all their devices and their innovation to the outer world. Looking at the list of companies acquired, it looks like they’re working towards creating smart glass but in doing so have acquired companies like Luxvue, Sensomotoric, Vrvana, Flyby, and Metaio who manufacture different component which could all be used together to give shape to a smart AR glass. While looking at this trend, it could be observed that the smaller companies do come with a lot of innovative products and ideas but most often don’t get the spotlight. However, a big company doing the same gets a lot of coverage and a different type of attention. All this might have contributed to the way we think and compare these two different business segment in term of innovations they come out with.
When Amazon had just started, no one thought that they will be as big as they are today. From selling books to now almost everything, they did bring a new wave of innovation and transformation in the way people shop (Mellahi & Johnson, 2000). No one thought that shopping can be done by any other modes other than going to the store but they changed the entire belief system. Scrub Daddy is another example of a startup which came up with an innovative product and found the right connection to be an overnight success. They produced sponge but different from ones you find in the market, these would adjust as per the water temperature and clear any ridged incineration of wastes. Similar business model in Nepal, eSewa, and Khalti has changed the way we do a digital transaction. Tootle, a mobile application for providing and hiring bike ride possible is another example of the local context.
In either case, the focus is on added value to the existing belief and/or system. Knowingly or unknowing both large and existing or new and emerging businesses are in a unique position to innovate and contribute towards creating an ecosystem around it. However, nothing can be said in regard to which business model is more innovative, I would, however, say that new and emerging are the ones which are more innovative. This may be deceiving as well for the number of these businesses are huge and most of them fail as well. But innovation is there regardless of the scale. It is indisputable that innovation is crucial to modern companies and for me, I believe new and emerging companies contribute more towards.
Baregheh, A., Rowley, J., & Sambrook, S. (2009). Towards a multidisciplinary definition of innovation. Management Decision , 47 (8), 1334.
Mellahi, K., & Johnson, M. (2000). Does it pay to be a first mover in e.commerce? The case of Amazon.com. Management Decision , 38 (7), 445-452.
Zhu, J., Goraya, M., & Cai, Y. (2018). Retailer-Consumer Sustainable Business Environment: How Consumers’ Perceived Benefits Are Translated by the Addition of New Retail Channels. Sustainability , 10 (9), 2.
Innovation is really about how we can continue to remain relevant and competitive in the marketplace so that we can do whatever it is that our organizations trying to do. The creative process is what generates the new ideas but it’s innovation that takes those new ideas into practice and adds value to the organization (Keeley, 2002). It is how you stay currently as a company. It is how you continuously improve as a company and if you are interested in staying current and continuing to improve you have to innovate. In here I discussed two different company innovation model Amazon and Apple. Amazon based whole innovation strategy on constantly disrupting the sales and deliver channel. Which are just a one part of business model of a company. They started by disrupting channel for the book market. Instead of going library to buy and pick up your physical books, you would order them online get them delivered by post directly to your home. That was channel innovation. Amazon kept doing this ever since by selling more and more product through online. As we see above Amazon is mainly innovating one single area sales and deliver channel. Similarly, Apple doing the same another area of business model which is the revenue model, If we go back to CDs era we need to pay big amount of money for whole Album if we like few songs only on it then some time later Apple came to with iTunes and disruptive this market by along people to pay each song individually that was first massive revenue model for the music industry. Similarly, Apple is mainly innovating another area of the business model is revenue model. The business innovation and revolution are starts from mid of 17th century. In 1784 there was a first industrial revolution and many mechanical instrument and manufacturing business process was innovated. Similarly, in 1870 the division of Human resource, power or electricity and mass production of product was innovated. Similarly, in 1969 there was a big revolution in electronic system and computer and Internet. In current situation every human capital is replaced by Robot and AI system (Ndesaulwa, 2016). So that digital business, advancing technology, transporting and telecommunication main production would be cheaper, better and faster so when we develop any product in a cheaper, better and faster way then we call it as innovation in business process.
Customer has a problem, if we address those problem as a faster, better and cheaper ways then we called it is innovation in business process. Basically the technology based company are more innovative than others. Like Google, Facebook, Microsoft, UBER are more innovative product or service. Similarly, Coca-Cola is also an innovative product, the automatic vending machine is unique innovation for Coca-Cola but manufacturing process of Coca Cola is not innovative. So I can say that innovation is defined as the progression of captivating new ideas to a position of investing something new or an innovative model of doing things (Teece, 2010).
Keeley, L. (2002). Inspiring Innovation : Abandon the Crowd . Harverd Business Review .
Ndesaulwa, A. (2016). The Impact of Technology and Innovation (Technovation). Journal of Business and Management Sciences, Vol. 4, No. 1 , 7 - 11.
Teece, D. (2010). Business Models, Business Strategy and Innovation. International Journal of Strategic Management, ELSEVIER , 4-7.
After World War II, at the dawn of space exploration, the public as well as the government perceived innovation was limited to big companies who had capital to invest in research and development. Research done by National Science Foundation, U.S Department of commerce and others found that half of all and 95% of essential innovation were born in small entrepreneur firms. (Spinelli, Jr. & Adams)
It was also observed that small firms return on investment in research and development were almost two times as compared to big companies. Steve Jobs once said ""Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”
Thus innovation and research and development is no more limited to owning large capital, assets or having a heredity of business people in the family. With the infusion of internet into the society some 20 years back, people can acquire research materials and data as never before. New venture and innovation are not bound to old thought and ways anymore. People can start and pursue their dreams with capital from banks or alternative financing. Selling equity from your business generates capital for you to invest in your dreams. Facebook, Google are some good examples of business that started without large assets and capital or having rich business heritage.
People are more aware of the market products and their purchasing habit are not always limited to the old brand. Customers keep an eye out on the new and happening a part of it coming from marketing principle of consensus. These have driven the need for innovation now more than ever.
"Another interesting finding was that small firms indicated that they had a larger percentage of their sales affected by new products developed in the last five years. Evidently, smaller firms rely more on recent developments for product sales versus large firms. As a result, it becomes increasingly important for small firms to provide innovations at a more frequent interval for firm continuance. (SHAW, 1961)”
This reasons show that innovation is not limited to large firms but rather small firms seem to thrive on innovation and data shown that they have contributed more to innovation and radical changes in new innovation as compared to larger firms.
SHAW, R. (1961). A COMPARISON OF FACTORS AFFECTING INNOVATION IN SMALL AND LARGE FIRMS. Ann Arbor, United States of America: UMI Company.
Spinelli, Jr., S., & Adams, R. (n.d.). New Venture Creation . New York City: McGraw-Hill Irwin.
Innovation refers to idea, practice or object that is perceived new by people. It can be used as a tool to exploit change for a diverse business or service. Innovation is relevant concept for companies as they can use it as a source of generating additional revenues, saving costs and improving the existing business practices (Zawawi, et al., 2016). Innovation refers to anything helps in value addition by making the products/services faster, cheaper and better. So, whether the companies are large and existing, or new and emerging, they can contribute to innovation in their own way.
The new and emerging companies focus more on radical innovation that includes creation of new services or products involving new ideas and incorporating the changing needs and preferences of the customers. This type of innovation can result in creation new market (Zapfl, 2018). For example: Emergence of Amazon was a radical innovation. It changed the way people used to shop and provide them the comfort to get the things they want delivered at their place. In case of Nepal, F1Soft can be taken as an example of radical innovation as it created a market that does not exist before through its innovation. The mobile and internet banking system along with online payment gateway was new product offered by F1Soft was a new company.
In case of large and existing companies, the focus is on incremental innovation. Instead of developing a totally new product, they look for ways to make the existing product better and user-friendly. The automobiles or smartphone companies that launch new edition or version of the product by incorporating some additional features can be taken as an example of incremental innovation.
Most of the business experts these days believe that innovation ignites more in starts-ups than the large existing companies as they are too invested in past to create and new ideas. But in my opinion, the resources available with the large and existing companies can be used to fuel innovation. That is why if we look at the list of most innovative companies of the world, the large and existing companies like Google, Facebook, Amazon, GE etc. are on the top of the list (Govindarajan, 2016).
The large companies have enough resources to invest in research and development for innovation while the small companies cannot innovate in large scale due to financial constraints. Having said that, small companies and start-ups are more receptive to new ideas and processes. Thus, the companies irrespective of their size and history contribute in innovation in their own way for value addition.
Govindarajan, V. (2016). Stop Saying Big Companies Can’t Innovate. Harvard Business Review . doi:https://hbr.org/2016/06/stop-saying-big-companies-cant-innovate
Zapfl, D. (2018, March 26). What types of innovation are there? Retrieved from Lead: http://www.lead-innovation.com/english-blog/types-of-innovation
Zawawi, N. F., Wahab, S., Mamum, M., Yaacob, A. S., Samy, N. K., & Fazal, S. A. (2016). Defining the Concept of Innovation and Firm Innovativeness: A Critical Analysis from Resorce-Based View Perspective. International Journal of Business and Management, 11 (6). doi:10.5539/ijbm.v11n6p87