Innovation Management - Principles of Management - ثالث ثانوي

4 Challenges of Contemporary Management وزارة التعليم 2022-1644

اعرارت التعليم 2022-1644 CHAPTER LESSONS 4) Innovation Management 4.2 Logistics and Supply Chain Management 4.3 Crisis Management T here are many challenges faced to- day in contemporary management. Managers must be willing and prepared to react to changes in the environment, taking proactive steps to remain ahead of competitors or avert disasters. Evi- dence has shown that the most suc- cessful companies and business people innovate This chapter discusses three contemporary topics in management; innovation, supply chain management. and crisis management New innova- tions are particularly important in times of change in order for companies to both survive and thrive. The chapter then turns to the importance of effective sup- ply chain management in the success of a business. Finally, the chapter addresses the matter of crisis management and strategies that can be put in place by managers to minimize the impact. Why is managing innovation a critical challenge in today's business world?

Lothair 4.1 Innovation Management KLEY TERMS Organizational Innovation Product Innovation Process limovation Paradigm Innovation Position Innovation Creative Work Environment LEARNING OBJECTIVES Once you have completed this lesson, you should be able to 4.1.1 Describe the innovation process and different forms that innovation can take in an organization. 4.1.2 Explain the methods and processes managers can adopt to encourage and manage Innovation in an organization. REALITY CHECK A Great Ideal Maha has just started a new job on the management team at a company in Riyadh. She is very excited because the company is known for encouraging new ideas from its employees. "We have a creative work environment." Maha's new boss ex- plains on her first day, while showing her around the office: "If any employee has a great idea about a new product, or a better way to do things, then we want to know about it!" "That sounds great! Maya replies. "I can't wait to get started." This is a notably different environment compared to Maha's previous job. While Maha found it to be a friendly place to work, the company she used to work for had established processes for product development and was less receptive to new innovations from within the team. She had witnessed several employees grow frustrated after their ideas for innovations went unnoticed. When Maha suggested that the company needed an outlet for creativity within the team, the response was that the company's strategy was already successful and didn't need new ideas. What's Your Reaction? Do you think a company that's already successful needs to generate new ideas from the team? التعليم 174 Chapter 4 Challenges of Contemporary Management

حرارت التعليم " LO 4.1.1 Innovation in Organizations The extent of innovation in today's business world can be highlighted by the following scenario involving a businessman named Faisal. As Faisal approaches his office parking garage, the LED lights inside brighten. Prompted by an app on Faisal's smartphone, the garage camera match- es his license plate to his personnel record, raises the gate, and locates a parking space. Inside the office, the same app finds a desk based on Faisal's schedule and preferences (standing desk, sitting desk, work booth, concentration room, or meeting room). Before setting off to his desk, Faisal drops his personal belongings in an empty locker (indicated by a green light), using his ID badge to unlock it. As he arrives at his desk, the temperature and lighting automatically adjust to his personal preferences. A central dashboard collects data on everything from ener- gy usage to when the espresso machines-which, naturally, remember how Faisal likes his coffee-need to be refilled. One exterior wall is glass, while another is composed of an alternating pattern of windows and solar panels that generate more electricity than the building uses. When everyone leaves for the day, small security robots begin their patrol while other robots clean the rooms that were most heavily used that day. While this may sound like something out of the future, this unbelievable account is an example of a smart or intelligent building, with its services, technological systems, and occupants all connected seamlessly via a smartphone app. Intelligent technology is being incor- porated into many new buildings like this across Saudi Arabia. Neom, the large-scale, cutting-edge development project in Tabuk, takes this idea one step further, envisioning an entire 'smart city' incorporating customizable state-of-the-art technology.. What is Organizational Innovation? Organizational innovation is the successful implementation of creative ideas in organizations, like the construction of state-of-the-art intelligent buildings. Analysts can only guess what changes technolog- ical innovations will bring in the next 20 years. People already carry Lesson 41 innovation Management 175

10 Smart office bundlings with persamtlized Envirorune controlled via a smartphone app ure examples of organizational Innovator! Can you think of any other examples? sophisticated handheld computers in their pockets - today's smart- phones are more advanced than the computing technology behind early space exploration. Will solar power and wind power get cheap and efficient enough so that homes across Saudi Arabia will have a stain- dalone power source off the main electrical grid? Will fully automated, self-driving cars transport business people to work? What is dear about the next 20 years is that innovation will continue to change everyone's lives, Saudi Arabia is at the center of this innovation revolution, with a range of initiatives instigated as a result of Saudi Vision 2030 designed to encourage new ways of thinking that lead to economic prosperity and sustainability. The Innovation Process It is important to recognize that innovation is not a single event, but rather a continuous process, which can be broken down into several stages. The four key steps of the innovation process are outlined in Figure 4-1. التعليم 176 Chapter 4 Challenges of Contemporary Management

عبارت التعليم 2 Identify the PROBLEM Find the SOLUTION Test the PROTOTYPE Implement the RESULT Figure 4-1 The Innovation Process There are four key steps in the innovation process, as an idea is developed from concept to reality. ■ Step 1: The initial stage is to observe the situation, whether it is a product or service or business scenario, and identify the problem that could be fixed or improved upon. ■ Step 2: This stage involves the key aspect of innovation, and one of the trickiest to master - finding the solution. However, note that a solution can only be devised and successfully im plemented if there is a genuine problem that needs fixing ⚫ Step 3: Before rolling out the solution, it needs to be tested in a controlled environment by creating a prototype. Many innovators might be tempted to skip this step, however it is an essential one and avoiding it could prove to be a costly mistake at a later stage. Step 4: Finally, only once the prototype has been refined, and proven to work, should the innovation be implemented on an operational level. It should be noted that this process can often be cyclical, meaning that it will rarely progress in straightforward sequence from step 1 through to step 4. If a solution cannot be found to a problem, the innovator may need to consider returning back to step 1 to identify another problem to solve. Equally, if the prototype faces continued challenges, the inno- vator may question whether the solution is adequate. A fifth step could be added into the process to review and repeat, analyzing the success of the innovation so that it can be assessed, improved and replicated. Lesson 41 mnovation Management 177

Why is important make prototypes before manufacturing the real product tglided f customers?

وبارد التعليم Key Innovation Types Innovation can take a wide range of interconnected forms, which have been grouped into broad categones known as the '4 Ps of innovation', as illustrated in Figure 4-2: 1. Product innovation 2. Process innovation 3. Position innovation 4. Paradigm innovation PRODUCT What it is A New Approach POSITION Who it's for The 4Ps of Innovation Value added PROCESS How it's done PARADIGM How we think Figure 4-2 The 4 Ps of Innovation The four Ps of innovation were devised by Joe Tidd and John R. Bessant, high- lighting the ways in which a new approach leads to added value Each of these types of innovation is characterized as follows: 1. Product Innovation When asked to provide an example of innovation, many people are likely to suggest a new product or physical invention Product innova- tion is a new iteration of a product or service, that creates a clear and Lesson 4.1 invation Management 179

ليم A hybrid car is an example of product Innovation What aug examples cin intünk tangible improvement on the existing offering, Many new products and services are introduced to consumers every day. However, this does not mean that every new example is genuinely innovative. In order to be considered an innovation, it must possess distinct characteristics that offer some clear form of advantage or benefit that was not present before its introduction. A notable example of product innovation over the last 20 years is the development of hybrid cars, which have made a significant com. mercial impact in the car industry. However, product innovation is not limited exclusively to physical commodities; it also relates to services. For example, the financial services provided by banks and money lenders are often packaged as 'products that offer innovative solutions for customers who wish to access loans or protect their savings. Several innovative developments have been established in the financial sector In Saudi Arabia over the last decade. While product innovation may be the most obvious type of innovation, in reality it's not necessarily the most frequently occurring type of innovation.

ودارت التعليم 2. Process Innovation A common form of innovation is process inno- vation. Process innovation occurs when a new way of handling a task is developed that creates some form of advantage or benefits. Process innovation is largely centred upon the operational aspects of a business and the form or nature of delivery of services or products As a result, it often has a cus- tomer-centric focus, centered on improving the lives of the consumer. One example is the introduction of an electronic customer relationship management (CRM) system that builds a profile of each customer's preferences in order to target mar keting and promotions directly at them. Alternatively, it might be a new online payment system or sell-check-out tills that reduce queuing and hence offer a more positive customer experience In Saudi Arabia, many government services, such as Absher and Najiz, can now be accessed immediately, 24-hours-a-day, from the comfort of people's homes, via online portals. A recent example of process inno- vation that has revolutionized everyday lives include ordering food or other services via an app from a smartphone Another success story is the rise of digital streaming services for delivering audio-visual content rather than physical formats. Many customers are also drawn to the environmental benefits of digital services that cut down on physical packaging and delivery. 3. Paradigm Innovation Paradigm innovation is concerned with perception, creating an entirely new model that challenges the accepted norms of how people view something. In other words, it presents a new possibility, providing consumers with a new product, service or benefit that they didn't real- ize that they needed While it may not be the easiest form of innovation to conceptualize, it is one of the most significant and successful. The classic example Sell-check out Lills and online government portals are example of process innovation What other examples can you dink of Lesson 4.1 innovation Management 181

The prevalence of Jauheld smart devices is an example of paradigm innovation What other examples ca you think of? Low cost airlines ore an example of position innovatio What other examples can you think of? 4. Position Innovation of paradigm innovation is the early develop- ment of the affordable family motorcar. Its introduction fundamentally revolutionized the way people live their lives, and led to many innovations in other areas. A more recent example is the development of hand- held smart devices. Although each individual new device is a product innovation, the wider shift can be regarded as a paradigm innova tion in the way that these handheld devices have altered every aspect of daily life and business. Another significant yet often over-looked innovation type is position innovation. Position innovation is an important component of marketing management that considers the specific customer base or segment that a product or service is targeting. One way to envisage position innovation is the process of finding a new or profitable 'space' or 'niche' for a product or service to thrive. It often involves an existing technology, product or service that has its focus reframed to enter a new market or to attract a different customer segment For example, a growing trend in position innovation worldwide can be seen in the private healthcare sector, in which providers are posi tioning the experience of hospitals more closely to hotels. This is in rec- ognition of the fact that discerning patients are putting greater emphasis on the level of comfort, in addition to the medical treatment they are receiving A classic example of position innovation is the introduction of low-cost airlines. Another is the differentiation between premium.exec- utive cars and economy cars, each aimed at a specific market segment. Today, a growing market segment is attracted to electric cars with minimal environmental impact. ان التعليم 182 Chapter 4 Challenges of Contemporary Management

عبارت التعليم The Relationship Between Types of Innovation It's important to note that these innovation categories are closely linked. A new innovation may well fit into several categories, incorporating ele- ments of several of the Ps Smartphones for instance, could be said to encompass all four Ps: A smartphone is a product, yet it has helped to facilitate process innovation in how people access data and content; it is a key example of paradigm innovation in the lifestyle shift it has created. It has also experienced position innovation: the first smartphones were high-cost luxury products, targeted at executives and business people. Today, as costs of production have come down, they are positioned as affordable products for everyday users. Net Knowledge Open Innovation A growing phenomenon in business is the concept of 'open innova- tion', in which members of the public or a business community are invited or encouraged to submit and pool ideas, work together and build on the work of others to develop new products or services. Similarly, wikis' are designed to encourage collaboration in online content creation and knowledge dissemination so that it is available for everyone. The Saudi government encourages open innovation through inviting ideas from citizens and the business community. Go online, visit https://www.my.gov.sal and research examples of open innovation In Saudi Arabia. ? CHECKPOINT What are the '4 Ps' of innovation? Lesson 4.1 mnovation Management 183

ارد التعليم 184 LO 4.1.2 Managing Innovation Evidence has shown that the most successful companies and business people innovate. What is more, as has been illustrated in Figures 4-1 and 4-2, innovation is not an entirely random phenomenon that relies solely upon a 'spark of inspiration. Rather it is a methodical process that can be encouraged and embedded into an organization's daily practic es. In today's competitive environment, managers must learn how to manage innovation. Why Innovation Matters to Organizations Innovation is not simply preferential, it is a necessity for a business to thrive and remain profitable over time. There are wide range of reasons why all companies should innovate in some form. The benefits it can bring to an organization can be grouped into four broad areas, as illus- trated in Figure 4-3: 1. It solves business problems 2. It increases productivity 3. It creates a competitive advantage 4. It reduces cost and increases revenue These benefits can be illustrated by considering an example from the business world. The Reality Check example at the beginning of this lesson introduced Maha, who had just joined a company in Riyadh that encourages innovation. Suppose that the business has now acted upon an innovative suggestion from Maha. It has innovated by introducing a new high-tech, automated system for fulfilling customer orders. Pre- viously, the company had to guess how many raw materials it would need, and sometimes overstocked or understocked as a result. This new system automatically sends each new order to the manufactur- ing department and works out exactly how many raw materials are required from suppliers. Maha believes this new system will be much more efficient Chapter 4 Challenges of Contemporary Management

وارد التعليم Solves business problems Increases Productivity Benefits of Innovation Creates Competitive Advantages Figure 4-3 The Benefits of Innovation Reduces Costs and Increases Revenue There are four key benefits for an organization that innovates in its approach to operations. Solving Business Problems In the previous example, Maha's suggested innovation has solved a business problem: the understocking and overstocking raw materials. which is costly for the business. Previously, the company was spending more on stocking and warehousing than necessary. It was also losing revenue when not able to fulfil orders as a result of understacking. Increasing Productivity The automated system ensures that the factory always has enough ma- terials to produce the required amount of orders. The production line does not need to stop due to lack of supplies. The system can also pre- empt busier penods and adjust production schedules accordingly. Creating Competitive Advantage Competitors that do not have a similar automated system are likely to be experiencing the same challenges that Maha's company was previously. By introducing this system, Maha's company is creating a Lesson 4.1 innovation Management 185

الصليم 186 competitive advantage over these rivals Conversely, if competitors had already adopted an automated system, Maha's company would have a competitive disadvantage. Innovation is not only essential to get ahead. of competitors, it's essential simply to keep up with them. Reducing Cost and Increasing Revenue The new system is intended to improve efficiency, by reducing waste and unnecessary expenditure, which should lead to increased profits. Equally, increased productivity may lead to additional revenue through being able to fulfill a greater number of orders. Innovation Management Principles Managers can introduce a formal policy of innovation by adopting sev- eral management principles, as illustrated in Figure 4-4: Strategic direction ■ Culture The realization of value Cullere Strategie umovation management principles W Figura 4-4 Innovation Management Principles There are several Innovation management principles, including culture, strategic direction and realization of value. Chapter 4 Challenges of Contemporary Management

The extent that an organization takes an innovative stance is informed by the strategic direction set out by the senior leadership team. Looking at an organization's mission statement or objectives, typically found on its website, will give a good indication of whether it is committed to innovation However, while some companies may outwardly profess their innovative nature, the reality can be judged by their actions: the products and services offered and the processes they follow. An innovative culture can be achieved by encouraging a creative work environment Innovation comes from great ideas. So a starting point for managing innovation is to manage the sources of innovation, that is, where new ideas come from. One place where new ideas orig- inate is with brilliant inventors. But only a few companies employ such innovators. However, there are actions that managers of companies can take to ensure a steady flow of good ideas. Innovation begins with creativity. Creativity is the production of innovative and useful ideas. Although companies can't command employees to be creative, they can jump-start innovation by building creative work environments in which workers perceive that creative thoughts and ideas are welcomed and valued. This in turn leads to the realization of value. In what ways do you think a company can facilitates creative work environment?

التعليم 188 As Figure 4-5 shows, creative work environments have six compo- nents that promote creativity: challenging work, organizational encour- agement, supervisory encouragement, work group encouragement, freedom, and a lack of organizational impediments. Challenging Work Organizational Encouragment Lack of Organizational Impediments Creative Work Environments Freedom Supervisory Encouragement Work Group Encouragement Figure 4-5 Components of Creative Work Environments There are six components that encourage a creative work environment. ? CHECKPOINT What are the key benefits of innovation and the key innovation management principles? Chapter 4 Challenges of Contemporary Management

عبارت التعليم 41 Assessment UNDERSTAND MANAGEMENT CONCEPTS Determine the best answer for each of the following questions. 1. Which of the following is not one of the 4Ps of innovation? Perry Cobability d. 2. The successful implementation of creative ideas in organizations is known as 4. Тватимарк Is monesmonal inovation Coup decivan d. Collatiorative processo Think Critically Answer the following questions as completely as possible. 3. Suggest several ways in which a manager can encourage a creative work environment, citing examples. Do you think that innovation is possible in every business. environment? Give reasons for your answer Lesson 4.1 innovation Management 189