Organizational innovation is the implementation of a new organizational method in the principles of operation adopted by the company (including knowledge management), organization of the workplace or relations with the environment, which has not been used in a given enterprise so far. These innovations must be the result of strategic decisions made by management. They do not include mergers and acquisitions, even if they were made for the first time. Organizational innovations are not only a factor supporting innovation in products and processes, but they can also have a significant impact on the efficiency of enterprises. They can contribute to improving the quality and productivity of work, intensify the exchange of information or increase the company's ability to learn and use new knowledge and new technologies.
Innovation is usually associated with something that is new, or with a change of something so that it would be better, newer. Innovations may concern various types of processes, phenomena of organizational, technical as well as social or psychological nature.
Innovation can also be understood as:
- introduction of a new product, which customers do not know yet, or some new brand of it
- introduction of a new production method - which wasn't applied yet
- opening a new market
- finding a new source for raw materials
- being a new organization
The concept of innovation if understood differently, is the exploitation of new ideas. These ideas are to bring economic benefits, various technological improvements, or better methods of doing something.
Because this concept can be interpreted in different ways, innovations should be divided into two categories. The first one distinguishes technological innovations, i.e. those that relate to the product or concern the production process. The second one is non-technological innovations, i.e. those that concern organizational and marketing innovations.
Product innovations are to improve the existing product, or introduce a new product or service to the market. This improvement is to concern the technical side, materials used for production, product functionality and ease of use. Process innovations rely on a change in the method of producing a product. This innovation may concern the improvement of the existing method or the use of a completely new production method. Companies choose this type of innovation for several reasons to reduce unit production costs, increase product and service quality or to introduce new production or improved products. Marketing innovations concern changes in, among others, product packaging, its appearance, various sales methods, product or service promotion, its prices.
The last type of innovation is organizational, these innovations introduce changes in the internal structure of the enterprise as well as in its connections with the environment. They are intended to improve the company's operation, for example in terms of reducing costs and improving work efficiency. These innovations lead to improvement of both strengthening the position of the company communication with the external environment of the enterprise.
Innovation may be caused by demand or supply. Innovation can be applied within an enterprise or it may refer to the market environment in which an enterprise operates. These applications may refer to either the regional, enterprise, national or international market, or even to the global market. In the process of creating innovations, an enterprise may introduce its own pioneering solution or choose an easier route and apply a solution already tested by another company. Innovation can laugh different roots, it can come from a given enterprise, from outside or it can be the result of cooperation of various enterprises in the process of creating innovations. The process of creating innovation is as follows, at the beginning of course there must be an idea for a new solution. The next stage is to create the concept of an innovative solution. Later, one person or a designated team develops a given innovation. The innovation developed and used in the company is put on the market and sold as a product. It is important to remember that all innovations that relate to the company should above all meet new expectations.
Factors and sub-factors influencing an organizations ability to manage innovation
- Technology (utilization of technology, technical skills and education, technology strategy)- output of innovation
- Innovation process (idea generation ,selection and evaluation, techniques, implementation mechanism)- means the implementation of a new or significantly improved production or delivery method
- Corporate strategy (organizational strategy, innovation strategy, vision and goals of the organization, strategic decision making)- defines organization goals and how they impact the innovation process
- Organizational structure (organizational differentiation, centralization, formality)- how structure of the organization affects the ability to manage innovations
- Organizational culture (communication, collaboration, attitude to risk, attitude to innovation)- business personality, beliefs, assumptions, values and how these impact the ability to manage innovation within the organization
- Employees motivation to innovate (employee skills and education, employee personalities, training)- refers to personal characteristic, motivation, how they are affecting innovation management
- Resources (utilization of slack resources, planning and management of resources, knowledge resources, technology resources, financial resources)- all the resources that the organization has and how they are managed
- Knowledge management (organizational learning, knowledge of external environment, utilization of knowledge repositories)- the process of innovation depends heavily on knowledge
- Management style and leadership (management personalities, management style, motivation of employee)- refers to employees who are responsible for the management of the organization, good leadership is significant during innovative processes.
Barriers of organizational innovation:
- Lack of organizational slack- in order to generate new ideas people need space, time and permission. A barrier to the successful implementation of a strategy involving creativity and innovation can be the absence of slack.
- Bureaucracy- it is not conductive to flourish creativity and innovation. However, it is often introduced in organizations.
- Structure- it is not easy to identify the ideal organizational structure enable the development of creativity and innovation within the organization
- Lack of communication- effective communication in an organization is essential because thanks to that creativity and innovation can flourish. Without effective communication the chances for that are very slim
- Risk aversion- creativity and innovation requires taking risks.
These barriers can be overcome by:
- Removing fear and increasing trust
- Incorporate innovation into the performance assessment system
- Building looseness for staff to discover new opportunities and collaborate with others both inside and outside the system
- Staff training to scan the environment in search of new trends, technologies and changes both within and outside the organization
- Encouraging employees and raising awareness about the key importance of diversity styles of thinking, experience, perspective and experience.
- Developing an idea management system
- Damanpour, F. (1991). Organizational innovation: A meta-analysis of effects of determinants and moderators. Academy of management journal, 34(3), 555-590.
- Damanpour, F., & Evan, W. M. (1984). Organizational innovation and performance: the problem of" organizational lag". Administrative science quarterly, 392-409.
- Daft, R. L. (1978). A dual-core model of organizational innovation. Academy of management journal, 21(2), 193-210.
- Dingli S. M. (2006). How innovative is your company?
- Marisa Smith M., Busi M., Ball P., Robert van der Meer (2008). Factors Influencing an Organisations ability to Manage Innovation: a Structured Literature Review and Conceptual Model