Innovation & Innovation Management

Innovation & Innovation Management SPECIAL TOPICS IN STRATEGIC MANAGEMENT OF CONSTRUCTION COMPANIES Matineh Eybpoosh Gülşah Fidan

Outline What is/not Innovation? Advantages of Innovation Types of Innovation Modals of Innovation Success of Innovation Process Components of Innovation Model Measuring Innovation

What is Innovation? • The mostly emphasized aspects of innovation within the literature are “new”, and “changes”, “opportunities”, “creative ideas”, “adoption of organization”, and “value creation” • A process of turning opportunities into new ideas (Drucker, 1993, Tidd et al., 1997), adoption of these ideas within the organizations ( Zeltman et al. 1973, Damanpour, 19991) and successful applications of the resulting novelties (Pries and Janzsen 1995) such that they provide value to the organization.

Innovation (Commercialized) Invention (Not commercialized) What is not Innovation? • Innovation vs. Invention: • Invention is a detailed design or model of a process or product that can be distinguished as noval compared to existing ones. Innovation is the actual use of a nontrivial change and improvement in a process, product or system that is novel to the institution developing the change. • Invention is the conversion of cash into ideas. Innovation is the conversion of ideas into cash. • For invention to become an innovation, the organization needs to be introduced to the invention and invention should add value to the organization in some way.

What is not Innovation? • Innovation(R&D&C) vs. R&D: • Innovation can be described as the result of some amount of time and effort into researching (R) an idea, plus some larger amount of time and effort into developing (D) this idea, plus some very large amount of time and effort into commercializing (C) this idea into a market place with customers .

Advantages of Innovation • Innovation is closely linked with competitiveness • Innovation has deep impact on both “Differentiation” or “Cost Leadership” • The uniqueness of the products/services increases the level of “satisfaction of the client” • Innovation in value chain may result in “time and cost savings”

Advantages of Innovation Tidd et al. (1997) However, the effect of innovation on competitiveness is dependent on the “nature of the market” and “client characteristics”

Reasons of Low Innovation in Construction Industry CRC,Construction Innovation Survey Report,2005

Importance of Innovation in Construction Industry Innovation should be better understood in construction industry because: • Construction plays an important role in the national economy • Due to the great size of workload, competition is high • Industry is directly related with human health and environmental safety

Types of Innovation according to Its Process - Extend of Innovation Innovation can take many forms regarding to its process: • Evolutionary-Revolutionary • Incremental-Radical-Modular-Architectural

Extend of Innovation • Incremental: Improve the existing functional capabilities of a technology by means of a small scale improvements in the technology’s value adding attributes such as performance-safety- quality- cost • Radical: Introduce new concepts that depart significantly from past practices and help to create products or processes based on different sets of engineering or scientific principles, such as; opening to entirely new market • Modular: Incremental innovation that leads to creation of a new but not radically different system • Architectural: Introduce the notion of change in the way in which the components of a product or system are linked together

Extend of Innovation Most common Least common

Types of innovation according to its content There are different classification for types of innovation withinliterature: • Technical-Non technical • Product- Process-Market- Organization-Resource

Types of Innovation • Product Innovation: Introduction of change in end product/service or their quality • Process Innovation: Introduction of change in products/services delivery methods • Market Innovation: Opening of a new market • Resource Innovation: Change in sources of raw material supply • Organizational Innovation: Change in characteristics of organization structure

Type of Innovation CRC,Construction Innovation Survey Report,2005

Panelized system usage (flat panels are manufactured in factory and erected on site) • Buildings erected by usage of panelized system will have better heat and voice isolation compared to ones constructed by traditional system

Types of Innovation in Turkish Construction Industry • Market Innovation: Most common type of innovation in Turkish construction industry • Creating new International Markets and most of the times being the first entrants (e.g. Libya, Russia, Turkmenistan, etc.) • Unrelated Diversification (e.g. Cleaning mine fields in Afghanistan) • Backward Integration (e.g. Creating sub-markets such as pre-fabrication and construction material products) • Process Innovation: • Change in conventional methods due to problems faced at site (e.g. New methods for road asphalting in high temperature difference between day and night)

Types of Innovation in Turkish Construction Industry • Organizational Innovation: • Restructuring processes in the company organization as a requirement for ISO standards • Re-identification of company mission (e.g. Becoming administrative investor instead of being a general contractor) • Product Innovation: Most rare in Turkish construction industry due to low R&D activities • Producing alternative products (e.g. New concrete type by using a special admixtures, or new formwork systems)

Models of Innovation • First generation: “Black Box Model” The innovation itself is not important and the only thing that count are input and output (e.g. Money invested in R&Dand patents) • Second generation: “Technology Push and need pull” it is developed after the recognition of the importance of the market place and demands of potential consumers of technology. • Third generation: “Coupling and integrated models” innovation process as a complex net of communication paths linking the firm to the broader scientific and technological community and market . • Forth generation: “networking and national systems of innovation” firms that do not have large resources to develop innovation in house can benefit from establishing relationship with a network of other firms • Fifth generation: “evolutionary models” innovation are seen as equivalent to mutation by considering the Population Perspective, Interactions, and External Environment. • Sixth generation: “innovative milieux (environment)” states that innovation stems from a creative combination of generic know-how and specific competencies.

Milieux Innovation Model Milieux innovation model’s components: • Innovative Firms • Inter-firm and inter-organizational interactions • Private or public institutions support • Specific culture • Dynamic collective learning process

Even if all these mentioned components exist in a productive system, there is no guarantee that each innovation attempt will be successfully commercialized.

Success of Innovation Proccess • Good communication environment • Strong customer orientation • Good technical support • Dynamic, open minded, supportive management • Flexible structure • Risk taking ability • Strategic Integration • Technical Resources • Organizational Capabilities Fundemantal components of innovation success

Modeling Innovation Management in Construction • Innovation in construction industry should not be studied like any other sector due to distinct characteristics: • Project-Based Nature • Variaty of Products • Sensitivity of Value Chain to Environmental Conditions • Relationships Among Project Stakeholders • Different Organizational Context of Innovation Tailor-made models are required for modeling Innovation Management Process in Construction Industry

Innovation Technological Organizational Business Strategies Human Resources Technology Marketing Knowledge Innovation Business Environment Change Drivers Sources of Ideas Obstacles International Competition CRC Construction Innovation CRC,Construction Innovation Survey Report,2005

The Organization Innovation Strategy Company Target Drivers/Barriers Dikmen et al. 2003

1.Role of Drivers/Barriers Drivers/barriers affect the innovation process The driver/barrier component is represented by a resistance in the model When environmental factors acts as barrier the length of the resistance increases which makes innovation more difficult to be generated The existence of a driver decreases the length of resistance or even diminishes it

Drivers/Barriers of Innovation in Construction Industry Factors hinder-support innovation which are independent from other components • Country level • Political, Economical, Social conditions • Industry level • Uniquness of construction projects (there is no or very little need and incentive for construction companies to innovate) • Low profit margins, high fragmentation, low entry barriers, intense rivalry (companies prefer low-risk survival strategies rather than high-risk innovative strategies) • Immobility, durability, high cost, complexity and great social responsibility of construction products and their deep impacts on quality of life(project parties hesitate to try new products/processes) • Weak patent possibilities and low profit margins which limits R&D activities • Uncertainty in market conditions

Drivers/Barriers of Innovation in Construction Industry Bossink, 2004

Drivers/Barriers of Innovation in Turkish Construction Industry Due to results of a survey related to Turkish construction industry, most important barriers/drivers are as follow:

2.Role of Organization Innovation capability of the company is determined by: • Structure • Leadership • Culture • Key Individuals • Teamwork • Information & Communication • Empowerment • Organizational Learning • Costumer Orientation The strength and effectiveness of these components determine the weight of the circular in the model which determine the ease of dealing with barriers and benefiting from drivers(Support/Hinder innovation)

Role of Organization in Turkish Construction Industry

3.Role of Innovation Strategy Strategies are used to achieve objectives of the company by increasinginnovation capabilities The Innovation strategy determines; • The reasons of innovation of the company (Why?) • Tactics and strategies used to innovate (How?) • Sources that the innovation is originated (From Where?)

Reasons of Innovation in Construction Companies CIOB, Innovation inConstruction:Ideas are thecurrency ofthe futureSurvey 2007

Strategies for Innovation Strategies used by companies are directly related to innovative capacity of organizations Improving Human Resource Management Improving Knowledge Management More Detailed Environmental Scanning More Investment in R&D Develop Stronger Relations with Customers and Suppliers More Brainstorming Improve Benchmarking Consulting with Academicians or Research Institutes

Origins of Innovation in Industry CIOB, Innovation inConstruction:Ideas are thecurrency ofthe futureSurvey 2007

Origins of Innovation in Company Top Management Construction Site Technical Departments R&D Departments Project Team

4. Role of Company Target • Company Target designates major reasons that derive the organizations to innovate • Innovations provide competitive advantages only if they fit to the pre-set objectives • For Turkish construction industry’s most important targets are: • Improvement of product/service quality • Entrance/creation of new markets • Maximization of customer satisfaction • Long-term profitability maximization

Measuring Innovation Innovation is a complicated phenomena having Inputs and Outputs as well as Impacts on several performance indicators at firm and national level Innovation measurement focuses on Products and related Production Systems that is based on; Measuring Inputs to innovation Measuring intermediate Outputs Measuring Impacts on several aspects of performance

Metrics for Measurement of Innovation at Firm Level Ozorhan et al. (2009)

Conclusion Considering the definition of Innovation, the main components and outcomes of innovation are adding value to the organization and providing competitive advantage Mentioned Innovation Management Model shows that innovation strategies are main triggering factors for an organization to reach its targets in the presence of environmental barriers/drivers through using its core organizational competencies As environmental barriers are out of the control of the company, the company should improve its core capabilities for successful innovations

Some Related References for Innovation: Marasin, R., Dean, J. and Dawood, N. (2007) “APPLICATION OF VISUALISATION TOOLS IN PROJECT MANAGEMENT IN CONSTRUCTION INDUSTRY: INNOVATION AND CHALLENGES” Computing in Civil Engineering, 12(261): 91-102. Bossink, B.A.G. (2004) “Managing Drivers of Innovation in Construction Networks” JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT, 130(3): 337–345. Manley, K., McFallan, S. and Kajewski, S. (2009) “Relationship between Construction Firm Strategies and Innovation Outcomes” JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT, 135(8): 764–771. Manley, K. (2005) “BRITE Innovation Survey” Icon.Net Pty Ltd. Dikmen, I., Birgonul, M.T. and Artuk, U. S., (2005), “Integrated framework to investigate value innovations”, ASCE Journal of Management in Engineering, 21(2005): 81-90. Dikmen, I., Birgonul M. T. and Artuk U. S., (2003), “Innovation in construction: Evidence from Turkey”, Proceedings of the Joint Int. Symposium of CIB Working Commissions W55,W65 and W107, 2(2003): 396-407.

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Innovation & Innovation Management