MUHAMMAD ANAS MS MANAGEMENT 1ST SEMESTER.
CONTEMPORARY ISSUES IN MANAGEMENT
INNOVATION VS INVENTION
INNOVATION
 A 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.
 Innovation is the successful commercialization of invention be it a product or a
process.
 Innovation is also associated to a problem solving, it is either a solution to a new
problem or a novel solution to an old problem.
 Innovation is characterized by a (preceded) systematic process of innovation with
a certain objective at the beginning (Betz).
INVENTION
 Invention is the creation or discovery of a new product or a process based on
research and development efforts, undertaken internally or contracted externally.
INNOVATIVENESS
 Innovativeness represents a basic willingness to depart from existing
technologies or practices and venture beyond the current state of the art
(Lumpkin and Dess, 1996).
REASONS FOR INNOVATION (WHY INNOVATION)
 Change is inevitable (customer tastes, preferences, culture values), therefore
innovate or die.
 Innovation is a key driver of sustainable growth and development.
 Innovation is the lifeblood of organizations because it affects their longevity.
 Corporation depend on products developed only some years ago for a significant
proportion of their current revenue.
 Innovation helps in getting market leadership and thus raise the bar for
competitors.
 Ultimately shareholders’ wealth increases.
IMPORTANT GOALS OF INNOVATION






Improving quality of product.
Raise customer satisfaction.
Reducing energy consumption
Reducing labor cost.
Reducing environmental damage.
Extension of product range.
TYPES OF INNOVATION Schumpeter (1934) referred to entrepreneurship as the
process of creative destruction. He identified five types of innovation.
1. PRODUCT VS PROCESS INNOVATION
 Product innovation represent the outputs of an organization, which are apparent
to general public.
 It is also called outcome innovation.
 Product innovation helps an organization in penetrating existing markets or
creating new ones.
Example: Atlas Honda ltd; the company was established by Mr. Yusuf Shirazi in 1962
with an initial capital of Rs. 5lac.
In 1963 it signed agreement with Honda motor company for the production of Honda
motorcycles in Pakistan.
Net sales for the year were recorded at Rs. 131.9 billion as compared to Rs. 93.2 billion
of last year, up by 42%.
At 1.35 million annual sales, Atlas Honda now ranks as the fourth highest contributor to
global Honda motorcycle volumes.
 2017 The Company launches CB150F, a 5-gear self-start motorcycle with
latest features.
 2018 The Company launches CB250F, a 6 gear self-start motorcycle with
latest features.
 2019 Company launches two new models CB125F and CG125 Self.
2. PROCESS INNOVATION
 Process innovations are oriented towards improving the effectiveness and
efficiencies of production.
 It makes process of producing something simpler, faster, more accurate,
more reliable and less expensive.
 Most often such innovations are not apparent to general public.
Example: Atlas Honda Ltd; in 2022 the company;
 1978 Company sends its engineers and dealers to Japan for attending training
courses for the first time.
 1979 Company incurs cost of Rs. 10 million for modernizing its manufacturing
environment in order to bring it in line with international standards.
 1987 Engine parts manufacturing plant is installed with an investment of Rs. 73
million.
 2007 The Company introduces SSP (Smart Sales Points) in its distribution
network for remote areas of Pakistan.
3. RADICAL INNOVATION
 Radical innovations are exceptionally different from existing products.
 Represent new to the world (not existed earlier) new to the market or new to the
firm innovations.
 It is followed by a series of incremental innovations.
 It creates major disruptive changes.
Example:
Canon inc. a Japanese company founded in August, 1937 produces cameras,
photocopiers, printers, scanners etc. As per 2022, the company;
Revenue $30.31 Billion
Net Income
$2.65 Billion
Total Assets
$38.31 Billion
Employees
184,034
Early in 1961, the company introduced the Canon pelix, a sngle lens reflex camera.
In 1971 it introduced Canon AE-1, the world’s first ever camera with an embedded
micro-computer.
4. INCREMENTAL INNOVATION
 Incremental innovations involve adaptations and refinements to existing
products.
 It is not particularly new but just improvement or a little incremental in previous
ones.
Example: Gillette
Founded in 1901. An American brand company products include; shaving razor,
shaving supplies and personal care products.
2022; Revenue $10.3 billion Sales growth 13.44%
The company constantly upgrades its razors, adding new features i.e extra blades,
heated razors and a pivoting head.
5. COMPETENCE ENHANCING INNOVATION
 If an innovation builds on the firm’s existing knowledge base, it is competence
enhancing innovation.
 It does not make the firm’s existing products obsolete.
 Example: Intel, founded in 1962 produces CPUs, microprocessors, WiFi
and Bluetooth chipsets etc.







204-2007- intel inside
2007-2010 Intel corei2
2010-2012 Intel Corei5
2022-Revenue $63.05Billion
N.income $8.02 Billion
Assets $182.1 billion
Area served
worldwide.

6. COMPETENCE DESTROYING INNOVATION
 If an innovation does not build on the firm’s existing competencies and
instead demands new competencies, it is called a competence destroying
innovation.
 It will make the firm’s existing products obsolete.
Example: Honda fuel cell technology will be competence destroying
innovation in the future as it would make Honda’s 1st generation obsolete.
In 1976, when canon launched the canon AE-1, the world’s first ever camera
with an embedded micro computer. It is competence destroying innovation
because it made the company’s earlier products obsolete.
7. OPEN INNOVATION
 Open innovation is the use of purposive inflows and outflows of knowledge to
accelerate internal innovation and expand the markets for external use of
innovation, respectively (Chesbrough, 2003).
 It is often linked with co-creation.
 It is a situation where an organization does not rely just on their own internal
knowledge, sources and resources (their own staff and R&D) for innovation of
product and services, business models and processes.
 In this type of innovation, organizations use multiple external sources such as
customers’ feedback, competitors, external agencies and general public.
Example: Local motors; an American motor manufacturing company founded in
2007.
2022;
Revenue-$1371million with a gross margin and operating margin of 29.9%
and 7.6% of sale respectively.
Its open innovation strategy include;
 It contracted with partner organizations i.e Airbus and Domino’s to facilitate
production.
 It also used a co-designing type of customer co-creation in which the
selective process is made by its community and some features such as frame
and structure are scoped by the company. Through this the company made
1st world’s open source car.

8. CLOSED INNOVATION
 Closed innovation means that the design, control, management and
ownership of the innovation is with a single enterprise.
 No external source is used in such type of innovation.
 In such innovation an organization creates, incubates and develops the
needed technologies in lieu of external support and through in-house R&D.
 Third party i.e customers’ idea is not included here.
Example: Microsoft that has historically been known for its closed innovation
approach, where the company develops its software and hardware products
internally without external collaboration.
Another example is Proctor and Gamble which generated most of its phenomena
growth by innovating from within.
SOURCES OF INNOVATION/INVENTION






Organizational creativity.
Research and development intensity.
Alliances and collaborations.
Innovation engines: Universities and Governments
Technology clusters.
Technology spillovers.
PROCESS OF DEVELOPING NEW PRODUCT
Successful product development requires the achievements of three objectives:



Maximize fit with customer requirements.
Minimize time to entry
Control development costs.
The attainment of these objectives requires co-ordination among various functions of
the firm.
Collaboration with customers and suppliers is also required in order to ensure fit with
customer requirements and ensure appropriate quality raw materials at minimum costs.
The organization, seeks to develop a new product needs to be structured in a way so as
to enable new product development rather than hinder it.
The following stepwise process is followed for developing of new product;
1
I.
II.
Concept Generation:
Market Pull:
 A scenario in which the market demands a product or service and the
producer responds by developing and making available that product/service.
 Market desire is well calculated and the producer intends to full the marketniche.
 The customer defines the solution and educates the producer.
 It touches customer side.
 Adopted for incremental innovation.
Technology Push:
 A scenario in which the producer creates a product type and also creates
demand for that product.
 In this the producer sees advantage to customer that the customer does not
see.
 It studies producer side.
 Adopted for radical innovation.
2.
Project Selection:
Includes the screening and selection of product concepts based on the
organizational criteria decided earlier.
Typically, cost-benefit analysis, contribution to corporate image, market
positioning, market potential and competitive advantage are the organizational
criteria for project selection.
3.
Product Development:
The product actually developed and produced-the action phase.
Gap between current design and user requirements needs to be closed in
speedy fashion.
Therefore, it involves iterative design-test-build cycles.
4.
Product Commercialization:
Often product development and product commercialization get blurred due to
their iterative nature.
In practice commercialization involves test marketing, formal launching and
marketing the new product.
Afterwards, the newly rolled out product is assessed for its relative failure or
success.
FACTORS INFLUENCING NEW PRODUCT SUCCESS OR FAILURE








Customer perception.
Market Knowledge
Clear product definition
Risk assessment
Project organization
Project resources
Proficiency of execution
Top management support
INNOVATION IN DEVELOPING COUNTRIES
 Developing countries are characterized by the presence of large numbers of
individuals have low disposable income (Prahalad and Hart, 2002).
 Because of low disposable income, they cannot afford expensive products
marketed by large MNCs (Webb et al., 2010)
 Therefore in developing countries, the major issue is not the identification of new
customers, but the affordability of products that companies produce and market
there (Anderson and Markides, 2007).
 Thus, companies operating in developing countries need to use ‘bottom of
pyramid’ (people surviving on less than $2 income per day) approach in
innovating their products.
 BOP markets consist of the nearly 4 billion people, or 70% of the world’s
population, that live on less than two dollars a day, (Webb et al.,)
 They have special requirements which need localized solutions.
 The basic premise is that the company adopting BOP approach will earn on
volume.
CORPORATE SOCIAL RESPONSIBILITY
EVOLUTION AND DEFINITION:
 In the words of Bowen; 1953; “It refers to the obligation of businessmen to
pursue those policies, to make those decisions or to follow those lines of
actions which are desirable in terms of the objectives and values of our
society”.
 Atiq, 2014; defined CSR in the context of Pakistan as; “Such corporate
initiatives that educate stakeholders on important aspects of personal and
business well-being, focus on the quality of products, provide relief and
assistance to employees in times of needs and contribute towards the
development and uplift of society in general can be termed as CSR”.
 The most widely adopted and debated definition of CSR is given by Archie
B.Carrols; “The social responsibility of business encompasses the
economic, legal, ethical and discretionary expectations that society has of
organizations at a given point in time”.
 CSR just focuses on social value.
EXAMPLE OF CSR:Unilever Pakistan; founded ni 1946.
Product; Lipton tea, pearl dust (tea), sunsilk (shampoo), lifebuouy (soap) and Dove
soap etc.
2022; Revenue-$98 million, N. Income- $27 million
The company ensures CSR by;
 Accidents in the workplace were cut by two thirds.
 The company opposes child labor, encourages and funding children education
(discretionary)
 It complies with international labor organization convention on minimum working
age (legal).
 The company is committed to SDG’s. it funds researches in agricultural, water,
renewable marine stocks etc and has been cited by the Dow Jone’s sustainability
group as an “Industry of group leader”.
STRATEGIC CSR:
 Originally developed by Burke and Logsdon (1996).
 CSR (Policy, programs or process) is strategic when it yields
substantial business-related benefits to the firm, in particular by
supporting core business activities and thus contributing to the firm’s
effectiveness in accomplishing its mission.
 SCSR focuses on shared value. Social value + Business value= SCSR
 SCSR can have benefits for the corporation in terms of good
reputation, cost reduction, increased sales, product differentiation and
attracting highly qualified employees (Husted and Salazar, 2006.
 Atiq, 2014 reports education of stakeholders, providing right quality of
product and concern for employees as SCSR initiatives.
EXAMPLE OF SCSR:Nestle Pakistan is operating in Pakistan since 1988. It is the leading Food & Beverages
Company in Pakistan with key focus on Nutrition, Health and Wellness and reaching the
remotest of locations throughout Pakistan to serve the consumers. The company in its
third quarterly report of 2023 witnessed the following financial figures;
Sales Rs.151,153 million
Net profit Rs. 15791 million
EPS Rs. 348.21
 The company’s director said; “We not only follow CSR but we believe
on SCSR to create shared value”.
 During 2021-2022, Nestlé contributed to installation of solar systems at
selected dairy farms to introduce renewable energy to reduce
Greenhouse Gas (GHG) emissions and energy costs.
 Cow dung can increase GHG emissions. For the proper treatment of
cow dung—to produce alternate energy which is a good source of
organic matter for the agricultural land—in 2021-2022 Nestle Pakistan
installed multiple biogas digester at various suppliers’ farms.
 Due to adversaries of climate change, which the country is facing,
Nestle Pakistan in 2021-2022 together with its partners developed a
low-cost moisture sensor that helps farmers decide when to irrigate
crops.
“The above initiative can be considered as SCSR strategies for the company because
despite societal values, these can create business value for the company because
quality dairy leads to quality product (nestle juice, beverages and nestle cream) of the
company”.