30 innovation management techniques

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Innovation management techniquesand tools: a review from theoryand practiceAntonio Hidalgo and Jose AlborsDepar tment of Bus iness Adminis t ra t ion . Univers idad Pol i tecnica de Madr id , c /Jose Gut ier rezDe par tm ent of Business Adm inis t ra t ion . U nivers idad Pol i tecnica de Valencia , c /Cam ino de

Knowledge is considered to be an economic driver in today s econom y. It has become acommodity, a resource that can be packed and transferred. The objective of this paper is toprovide a comprehensive review of the scope, trends and major actors (firms, organizations,government, consultants, academia, etc.) in the development and use of methods to manageinnovation in a knowledge-driven economy. The paper identifies the main innovation management techniques (IMTs) aiming at the improvement of firm competitiveness by meansof knowledge management. It will specifically focus on those IMTs for which knowledgeis a relevant part of the innovation process. The research study, based on a survey at theEuropean level, concludes that a knowledge-driven econom y affects the innovation process andapproach. The traditional idea that innovation is based on research (technology-push theory)and interaction between firms and other actors has been replaced by the current socialnetwork theory of innovation, where knowledge plays a crucial role in fostering innovation.Simultaneously, organizations in both public and private sectors have launched initiativesto develop methodologies and tools to support business innovation management. Highereducation establishments, business sch ools and consulting companies are developing innovativeand adequate methodologies and tools, while public authorities are designing and settingup education and training schemes aimed at disseminating best practices among all kindsof businesses.

1. Introduction: paper objectivesI nnovation is something of a buzzword. Asit is now perceived as central to achievementin the business climate of the 21st century,organizations, large and small, have begun tore-evaluate their products, their services andtheir operations in an attempt to develop a cultureof innovation. This re-examination of organizational purpose is due to the recognitionthat developing a culture of innovation withinthe organization is the best insurance an organi

zation can have of (relative) longevity in anenvironment of fast-moving markets. It isalso the best guarantor, even though nothing isguaranteed, of long-term survival in today'sknowledge-driven economy.Various scholars from social and economyfields were pioneers in advancing the concept ofa knowledge-based economy and predicting thedecline of a manufacturing industrial culture

(Clark, 1940; You ng, 1961;Bell, 1974). New trend sand types of data in the economy supported theidea of knowledge as a resource (Machlup, 1962).


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Subsequently, Drucker (1969) identified the concept of 'knowledge workers.'Furthe rmo re, the knowledge-driven economy isa recent idea based on the long evolution ofprevious concepts such as knowledge, the knowledge economy, etc. In the mid-1990s, the conceptevolved to refer to, at least, two supposed characteristics of the new economy. Firstly, knowledge is mo re quan titatively an d qualitativelyimportant than ever before. Secondly, applications of information and communication technologies are the drivers of the new economy (Godin,2003). The knowledge economy can be said to bebased on an efficient system of distribution andaccess to knowledge as a sine qua non conditionfor increasing the amount of innovative opportunities (David and Foray, 1995). The OECD (1996)defines knowledge-based economies as 'economieswhich are directly based on the production, distribution and use of knowledge and information.'It is not simply abo ut pushing b ack th e frontiers ofknowledge; it is also about the more effective useand exploitation of all types of knowledge withinall manners of economic activity.

In this direction, two schools of thought havedeveloped (Dankbaar, 2003) linking knowledgeand innovation management: that of Drucker,already mentioned, which, following Taylor, suggests that innovation management involves theapplication of knowledge to the work of knowledge workers within a clear and denned context,and, alternatively, that of Burns and Stalker(1961), which outlines a context of more blurredorganic and flexible structures that foster creativity by limiting bureaucracy.

The increasing importance of knowledge ischanging the way firms compete and the sourcesof comparative advantage between countries . Forcountries in the forefront of the world econom y, itis a reality that the balance between knowledgeand tangible resources has shifted so far towardthe former and that knowledge has become perhaps the most important factor determining thestandard of living (World Bank, 1998). Today'smost technologically advanced economies aretruly knowledge-based. The main changes associated with the importance of knowledge as aneconomic driver in today's economies are: Know ledge is increasingly considered to be acommodity. It is packaged, bought and sold inways and to levels never seen before. Advances in Information and Comm unicationTechnologies (ICTs) have reduced the cost ofmany aspects of knowledge activity, for exam

ple, knowledge gathering and knowledgetransfer. The degree of connectivity between knowledgeagents has increased dramatically.This paper has three major objectives:

1. To p rovide a com prehensive review of thescope, characteristics, trends and business relevance of the main innovation managementmethodologies developed by relevant actors inthis field (those that seek to provide advice tofirms, and that focus on knowledge as the mostimportant benefit to a firm) across the European Union, the United States and Japan.2. To clarify and facilitate b oth a con ceptual

framework in this area and a consensus amongthe relevant actors developing and using thesemethodologies.3. To ana lyze the perceptions of various keyplayers - the promoters and users of suchmethodologies.

The paper is organized as follows: First, innovation management has been reviewed from a conceptual knowledge framework, paying specialattention to the challenges of the know ledge-driveneconomy context. Second, innovation management techniques and tools are introduced and ataxonomy is proposed. Third, the results of thesurvey are discussed. Finally, the last section concludes by outlining the conclusions of the research.

2. Knowledge and innovationmanagement: innovation techniques2.1. Wh at is innovation?The first and seminal definition of innovation wasproposed by Schumpeter (1934). He associated itto economic development and denned it as a newcombination of productive resources. His workdenned five specific cases: introduction of newproducts , new production methods, explorationof new markets, conquering of new sources ofsupply and new ways of organizing business.

Since then, the conception of innovation hasevolved significantly over the last 40 years. During the 1950s, innovation was considered to be adiscrete development resulting from studies carried out by isolated researchers. Nowadays, innovation is no longer conceived as a specific resultof individual actions, but more as the following: A process, mo re specifically, a problem-solvingprocess (Dosi, 1982).


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many of them outside the formal research process(Liyanage and Poon, 2002). Knowledge is thusgenerated not just in universities and researchcenters but also in a very wide variety of loca tionswithin the economy, and notably as a product(learning-by-doing) or of consumption (learning-by-using). In the current economic context,growth must mainly originate from increasingthe productivity of knowledge work, and increasing this productivity is the most important contribution management can make. The mostvaluable assets of a 21st-century firm are itsknowledge workers and their productivity.KIOs, ranging from knowledge-intensive service-providers to high-tech manufacturers, need tomanage innovation processes so as to increaseknowledge productivity (Drucker et al., 1997).

Innovation and knowledge generation havebeen analyzed by Popadiuk and Choo (2006)from a specific systemic approach consideringthe market role, the knowledge architecture,etc. and the innovation alternatives (process, product, radical, incremental) outlining a parallelcomparison between both processes (knowledgeand innovation).In comparison with traditional mechanisticcommand and control management, innovation

management entails a fundamental change in thestrategic perception of the organization, whichaccordingly has to consider the following management challenges: Man age human capabilit ies in a s trategic man ner. Modern management has to face theperpetual challenge to place the human beingat the forefront of operations, and understandthat an organization is a collection of differenthuman beings (James, 2002). Netwo rk with internal and external partners .People have different attitudes, different

custom s, different professional back grou nds -management should focus on integratingthe web of formal and informal relationships inside and outside the company (Ahuja,2000). Create adaptive and interactive organizationalstructures. If the organization is to remainresponsive to external change, a flexible andadaptable organizational structure is a necessity (Schlegelmilch et al., 2003). Balan ce orde r an d cha os - process efficiencyversus destructive innovation - and individual

and corporate motivation by developing aninnovation strategic vision (Martensen andDahlgaard, 1999).

The challenges of the new knowledge-driveneconomy can be classified into the followinggroups: New characteristics of the market. The marketis constantly changing, it is becoming moreglobal and new competitors are emerging. Inaddition, technology complexity is increasing,product life-cycles are shortening and knowledge is consolidating as a crucial input. All ofthese new characteristics of the market requirethe development of additional competitivenessfrom firms. New types of innovation. Innovation takesmany forms. There is technological innova

tion, but also innovation through new businessmodels and new ways of organizing work,innovation in design and in marketing. Innovation can also consist of finding new uses andnew markets for existing products and services.It emerges where the market offers incentivesto introduce new products and productionmethods, and where people are willing totake risks and experiment with new ideas(Bullinger et al., 2004). New needs of stakeholders. Customers, ownersand stock markets increasingly equate an orga

nization's worth with its ability to get winningproducts to market on time, every time. This isespecially true in the case of SMEs (Libutti,2000; Scozzi and Garavelli, 2005). New approach to innovation managem ent. In novation m anagem ent encom passes all the keyareas that need to be mastered to developsuccessful products and services, efficientlyand continuously. The capacity of a firm toimplement innovation management revolvesaround its success in dealing with these twomain challenges: top-line growth and bottom-line efficiency (Liyanage and Poon, 2002). New technology innovation assessment skills.The rapid development of new technologiesprompts firms to assess and implement themost appropriate technology according totheir need to retain their competitiveness(Ram, 1996). Need for new innovation managem ent tools. Thedevelopment of knowledge-based innovation management requires the capacity toimplement technical and relational tools.Technical tools refer to the acquisition andutilization of new information and commu

nication technologies - they do not createa competitive advantage because they arereadily available to others. The creation of


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competitive advantage rests in relational tools- the way of doing business, both in theinternal and the external environments of firms(Lengrand and Chartrie, 1999). Moreover,technology and innovation require a holisticapproa ch toda y (Butler, 1999; Martensen andDahlgaard, 1999).

2.3. IMTsTaking into account the previous considerations,innovation management has been associated withknowledge management (Coombs and Hull,1998). Coombs et al. (1998) define KnowledgeManage ment Practices for Innovation as those'. . . observable routines involved directly in thedevelopment and application of knowledge Theprevious authors have identified these tools byobserving the practices of numerous R&D firmdepartments. It is from this basis that innovationmanagement has been approached in a holis ticway. Freeman and Soete (1997) include in theinnovation process all those activities encouraging the commercialization of new technologies.Moreover, Dogson (2000) proposes a holisticmodel that includes six specific areas in themanagement of technology innovation: R&D,new product development, commercialization ofinnovation, operations and production, technological collaboration and technology strategy. Hepoints out that the context of Management ofTechnology Innovation is complex (of systemicnature) and risky. There are problems associatedwith uncertainty, knowledge appropiability andcosts unpredictability. As a consequence, firmstrying to develop organizational competitivenessin innovation will require knowledge management and organizational skills in order to learnfast (see enclosed Figure 1).

Innovation does not always mean using thevery latest cutting-edge technology. On the contrary, it is less a question of technology and morea way of thinking and finding creative solutionswithin the company. In this context, IMTs can beseen as a range of tools, techniques and methodologies that help companies to adapt to circumstances and meet market challenges in asystematic way (Phaal et al., 2006). The growthof IMTs results from a new way of thinking. It isnot necessarily due to technology, but more to thecapacity of firms to apply their knowledge toimprove their businesses internally and their relationships with external actors. This is true forboth large and small firms, as innovation is vital

^ Complexity Risk ^ .y ^ N e w Pr o d u c t ^ ^ \ K n o w l e d g >x R&D development X

Operations/ \Technology Production jstrategy /v Technological /^^Commercialisation collaboration ^ /C r e a t i v i t y^ ^ ^ O r g . L e a r n i n g / ^

Figure 1. Management of technological innovation: a holisticapproach (Dogson, 2000) .

to the survival of both in a competitive, changingmarketplace.In innovation management, there is a widerange of IMTs available on the market. Thisstudy focused on IMTs that complied with thefollowing parameters:

1. IM Ts th at w ere sufficiently developed andstandardized, and had fairly systematic methods of application. In other words, the implementation procedures and the benefits for theIMT were generally known and recognized inthe market.2. IMTs that aimed to improve the competitiveness of firms by focusing on knowledge as themost important benefit . Companies make useof a variety of tools and techniques to performtheir daily management. This study consideredonly IMTs that include knowledge as part ofthe innovation process.3. IMTs that werefreely accessibleon the m arketand not subject to any copyright or licensingagreement.

The application of a group of selection criteriaresulted in 10 groups of IMTs called TMT typologies.' Table 1 summ arizes the 10 IM T typologiesand their associated methodologies/tools.

There is no one-to-one correlation betweenone firm's specific business problem and themethodology that solves it. As a result, it cannot be claimed that there is a closed set ofdeveloped and proven IMTs for solving, one byone, the challenges faced by business as a whole.Furthermore, IMTs do not usually act in adeterministic, unique manner and the diversityof firms and business circumstances means thatthere is not a single ideal model for innovationmanagement, although there are some principlesof good practice.


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Table 1. IMT typologies and associated methodologies1IMT typologies Methodologies and toolsKnowledgemanagement toolsMarket intelligencetechniques

Cooperative andnetworking toolsHuman resourcesmanagementtechniquesInterfacemanagementapproachesCreativitydevelopmenttechniques

Process improvementtechniques

Innovation projectmanagementtechniquesDesign and productdevelopmentmanagement tools

Business creationtools

Knowledge auditsKnowledge mappingDocument ManagementIPR ManagementTechnology Watch/Technology SearchPatents AnalysisBusiness IntelligenceCRM: Customer relationshipmanagementGeo-marketingGroupwareTeam-buildingSupply Chain ManagementIndustrial ClusteringTeleworkingCorporate intranetsOn-line recruitmente-LearningCompetence ManagementR&D - Marketing InterfaceManagementConcurrent EngineeringBrainstormingLateral ThinkingTRIZScamper MethodMind MappingBenchmarkingWorkflowBusiness process re-engineeringJust in TimeProject managementProject appraisalProject portfolio managementCAD systemsRapid PrototypingUsability approachesQuality Function DeploymentValue analysisBusiness SimulationBusiness PlanSpin-off from research tomarket

Developedbyauthors basedon v rioussources (Thorn, 1990;Cordero, 1991; European Commission, 1996; Ram, 1996;Libutti, 2000; European Commission, 2005; Scozzi and Gar-avelli2005;Phaal etal., 2006).

For these reasons, an innovation managementtechnique cannot be considered in isolation. Theusefulness of one IMT for a particular businesschallenge is normally measured in combinationwith other IMTs, this combination being adaptedto varying degrees for each specific case. Thebenefit gained by the company depends on acombination of IMTs and the firm itself, andthe mix of these two elements is what determines

an effective outcome. To achieve the best fitbetween an IMT and the company, an understanding is needed of the firm and its business.This understanding is necessary to support thedefinition of clear objectives, and the criteria forknowing when those objectives have beenachieved. The criteria can be framed in terms ofsurvival, growth, new product introduction, competitiveness, etc.

3. Methodology: field workThe methodology followed in this research isbased both on an exhaustive literature researchand a survey carried out of a balanced sample(geographically and activity wise) of firms, academic centers, business schools, consulting firms,business support organizations (BSOs) and government agencies.

The research was financed by the EuropeanCommission and was carried out among respondents from the 15 Me mbe r States of the E urop eanUnion. In total, 4,000 questionnaires were distributed. The target audience was defined asfollows: 50 from industry and 50 distributedacross four categories: consultancies, businessschools, academic centers and BSOs. Questionnaires were available in four languages: English,French, Spanish and German. To facilitate boththe collation and analysis of questionnaire responses, survey participants were mostly requested to select their answers from a closed list.Some questions, however, were open-ended sothat participants were able to describe some oftheir suggestions and experiences on the implementation of IMTs. The questionnaire was testedbefore launch of the questionnaire to the targetaudience with a pilot audience sample.

The choice of the number of organizationsfrom each country to send the questionnaire wasdetermined according to the following factors:population of each EU Member State and economic weight, measured by the GDP. However,there was a bias to these conditions, simplybecause the degree of innovation culture anddevelopment of IMTs within a country has nodirect relationship with its size. This unavoidablebias was carefully reviewed to take into consideration the qualitative aspects related to theobject of the study. Additional factors were thenintroduced, such as policies recently developed,priority given to IMTs by universities and business schools, etc. The resulting selection of targetsample represented in the opinion of the study


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30 innovation management techniques

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