Un-leasing Innovation in Value Chain – A Driver for Growth

Posted in Operations & IT Articles, Total Reads: 1822 , Published on 27 July 2013
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"Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation."— Peter Drucker

In today's fiercely competitive global business environment, corporations are under compulsions to find new and unique ways to create and deliver value to customers through innovations and the demand to innovate and deliver better value addition is growing ever stronger and stronger.


Since value chain function has been identified as a key value lever linking demand to delivery, in order to capture this value, the focus has been on taking Value Chain to a central stage of business strategy. Unlocking its potential through innovation will create significant opportunities for corporate success, performance, and profit - it can become a key strategic differentiator and a corporate contributor. Un-leasing innovation in the value chain drives organizational growth.


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VALUE ADDED IN VALUE CHAIN :

In a value chain additional value is created at each stage. Value added refers to any additional value created (the difference between input cost and output value in financial terms and / or also perceived / intangible value enhancement in services) at a particular stage that include both tangible value added through raw material transformation, through various stages of production / processes by using man, machines and money and intangible value added through services, intellectual capital and capabilities of a firm and relational exchange like building of collaborative relationships to enhance efficiency and effectiveness. Value added (both tangible and intangible) at different stages making different levels of contribution towards value generation are being transferred along the supply chain from point of origin to point of consumption creating value chain.


INNOVATION - VISION TO ACTION :

Innovation is a process of identifying an opportunity or need and developing an idea, imagination, concept or creative thinking, coupled with use of knowledge, information, skill, ability and other resources (including financial resources) and taking risk to translate these into an outcome or change (Commercialization) that is substantially different, creative or new and the resultant product or service / process / method or way to do things is intended to create value by solving a problem, satisfy wants / needs and make some-thing or some-body better off strategically, technologically, economically, intellectually, socially and that is widely accessible and adoptable.


Change may be described as the adoption of an innovation, where the ultimate goal is to bring in new or improved outcomes through an alteration of practices or doing things altogether in a new way. However, the process of change may turn to be complex, with many different types of change possible. Further, there are a number of differing strategies for implementing these changes, with the success of implementation being highly variable.


Factors that drive change may be internal or external to the environment and innovations may be initiated at any level in the organizational structure and may bring in success.


NECESSITY IS MOTHER OF ALL INNOVATIONS :

Crisis opens up options. Options provide opportunity to trade off with resources and strategy. Crisis challenges precedence and existing practices drives mindset to new ideas to face the problem and a real test starts from there. Crisis, Chaos, disruption, confusion and even in frustration and dent when stared at with the right lens with strong desire to come out of the situation can lead to opportunity and re-energize thought process to generate ideas and put into action those ideas forms innovation.


Crisis driven innovation takes advantage of situation as an opportunity for change and improvement. There are many real life and historical facts of Innovation in times of crisis that lead to success.


INNOVATION DRIVERS :

Drivers for innovation are centered on to increasingly complex challenges with constrained resources. Since innovation is considered as a major driver of value, growth and change, the factors that lead to innovation are also considered to be critical to organizational growth and transformation. Although the factors that drive value creation differ by industry, some of the major areas of innovation include strategy, technology, alliances / collaborations, management capabilities, employee relations, customer relations, community relations, and brand value.


Innovation drivers may be broadly classified as :

Individual Drivers, Organizational Drivers, Customer Driven Drivers, Technology Driven Drivers, Socio-Economic-Political-Environmental Drivers, Regulatory Drivers


INNOVATION LEADS TO VALUE CREATION :


An essential element for innovation is its application in a commercially successful way. Innovation drives value creation that is transformation of ideas into vital products and processes into customer value into revenues in turn into increased stakeholder value. That is innovation in both products and processes contribute positively to company growth, prosperity and sustainability if it translates into business value through value added in the value chain.


INNOVATION – VALUE CHAIN :

This innovation translated into value in a chain of events, forms “Innovation – Value Chain”. Organizations are investing in the time, energy, creativity, research, planning, refining, modeling and retesting with the hope that innovation driven value chain will pay off in terms of improved product, process, better teamwork, a new business model, a refined brand – and value addition to customers in terms of improved product, price, distribution and service levels. These are assets that add value to the company, therefore innovation driven value addition in the value chain become absolute necessity for organizational growth, prosperity, enhance long-term competitiveness and sustainability.


INNOVATION - THE HEART OF THE KNOWLEDGE ECONOMY :

An economy that is driven by research, ideas, skills, knowledge and innovations can help promote greater economic growth, enhancing productivity and spur competitiveness and generate high-impact economic advantages for all out benefits that create wealth, prosperity and high-wage jobs. Managing knowledge driven innovation, is a critical driver for enhancing productivity that in turn offers higher and sustainable economic growth.


In the knowledge-economy model, a new kind of development strategy with a knowledge and innovation at its very heart is essential in organizing, creating, developing, disseminating and transferring knowledge in proper integration and positive contribution.


INNOVATION INNOVATES THROUGH COLLABORATION :

As innovation becomes more pivotal in business decisions, and innovation based strategies and actions become critical to the generation of business value. However innovation does not often happen with one person. Research shows that most innovation is the result of multiple people working together to generate ideas and identify new opportunities. It is well recognized that collaborative innovation is one of the most powerful means of creating new ideas that impact business success and also recognized that differentials in thinking are the primary source of innovation, and this can only come from having a broad series of alliances both internally and externally.


ORGANISATION WIDE FOCUS ON INNOVATION :

For achieving an organization-wide focus on Innovation - Value creation is to understand the sources and drivers of value creation within the industry, company, and marketplace. Understanding the customer / stakeholder or market need and identifying opportunities that what creates value will help focus on new ideas, creative thinking, brainstorming and mobilizing resources. That is un-leasing Innovation in Value Chain drives organizational growth


This article has been authored by S N Panigrahi from AGI Glaspac


References :

1. Innovation Drives Value Creation By Pete Harpum, Affliate Professor, University of Manchester

2. What Drives Innovation By Renee Hopkines Callahan & Gwen Smith Ishmael

3. Customer Driven Innovation By Kevin C Desouza, Yukika Awazu, Sanjeev Jha, Sridhar Papagari



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