Free The Role of Innovation in Achieving Competitive Advantage Essay Sample
Knowledge Management and innovation form a vital part in any given organization. They are incredibly necessary for the success of an organization through creation of a competitive advantage over and above the competitors.
Knowledge Management can be defined as the process of gathering, disseminating and using knowledge within an organization. It deals with the entire process of discovering, creating, disseminating and utilizing knowledge.
Rollett defines Knowledge Management as a systematic organization, coordination, planning, monitoring, controlling and deployment of workforce, capital, resources and equipment in an appropriate manner that targets overcoming various organizational constraints such as finances, technical drawbacks, social constrains, scarcity of economic resources among others as an organization struggles to achieve its objectives (Rollett, 2010). Knowledge Management targets continuous renewal of an organization’s knowledge and information base. It oversees smooth transformation of an organization’s intellectual assets into value business ventures. Nonaka describes Knowledge Management as the most fundamental intangible asset of any organization. He further asserts that knowledge management is the only sustainable competitive advantage that a company can easily acquire and possess (Nonaka, 2005).
Knowledge Management ensures that there is a proper interconnection and befitting unity between all employees within the organization as well as with other stakeholders. It is the effective use of information in conjunction with skills of people, their competence, technical know-how, moxie and motivations. Through legitimate and apt knowledge management, an organization should dedicate and assign adequate resources that are needed for innovation. Such allocation of resources should be determined by the objectives, goals and strategies of the organization.
Relationship between Knowledge Management and Innovation
Knowledge Management and Innovation are used by organizations to attain competitive advantage over their competitors through improved and better serving of customers. In addition, other organizational objectives, such as total quality management and business process re-engineering heavily depends on Knowledge Management in attaining sustainable competitive position. Though innovation is one of the independent aspects of Knowledge Management, it is evident that a combination of the two results into greater competitive advantage. Knowledge Management enhances learning at both individual level and organizational level, though continuous learning, innovation is improved.
Knowledge Management provides the organization with ways of retaining and exploiting knowledge within the organization. The knowledge is captured, made accessible and finally distributed to add value to the operations and product outputs of the organization.
Through Knowledge Management, it is possible for the organization to draw information and skills from a wide range of disciples and other dimensions. This enhances innovation. Various dimensions of information are taken into account, for instance, social, cultural and technical dimensions.
Equivalently, Knowledge Management also enables organizations to free drift expertise within the company. This further enhances attainment of competitive advantage goals. As O’Dell, Elliott and Hubert bring it out, Knowledge Management is endeavored to speed up the creation and generation of new ideas, sharing, retention, acquisition and usage of information within an organization. In my view, further facilitates the achievement of organizational goals and objectives, and consequently results into improved competitive advantage (O’Dell, Elliott & Hubert, 2008).
Barriers to Knowledge Management Success
Awad and Hassan outlined various barriers to successful Knowledge Management as follows:
- Poor and rigid organizational culture.
- Inability to adapt to the fast changing information and communications technology (ICT).
- Organizational processes and operations that do not have well laid-down standards and guidelines.
- Bureaucratic organizational structure.
- Lack of adequate commitment and support from the top-level management in proper knowledge management.
- Employees with individualized mentality, which discourages team work at corporate level due to conflicts of interest between personal and organizational goals.
- High rate of staff turnover and poor staff retention strategies- employees who leave the organization exist with some vital information necessary for future innovations (Awad & Hassan, 2007).
Innovation may be defined as the process of generating new ideas or interventions and consequent conversions or translations into viable business opportunity that produces goods and services, which are capable of satisfying consumer wants and needs. Bessant and Tidd set forth two specific elements of innovation, that is, ability to be reproduced with less economic costs incurred and ability to satisfy a given specific need or goal (Bessant & Tidd, 2007). The American Heritage Dictionary simply puts it as the act of coming up with something new.According to Stamm, innovations is a change that brings into existences a new scope, magnitude or extent of performance. She suggests that innovation involves transforming an imagination through application of information to derive economic value from resources and covers all processes and idea undergoes during its conversion into useful products or service (Stamm, 2010).
Furthermore, Jolly and the Design Council tried to draw a distinct line between creativity and innovation by saying that creativity is the development and expression of useful ideas whereas innovation is the end product of a creative process that represents, coalesce and blends knowledge by bringing together all relevant ideas, processes and resources into new products and services (Jolly & Design Council, 2009).
Innovation has been driven by various factors, such as increased levels of competition, reduced cost of information access due to quick access to the internet, increased and diverse demands made by consumers, increased differentiation of businesses, environmental or climatic changes, such as global warming, economical recession.
Sarka classifies innovation into two groups, namely, evolutionary innovations and revolutionary innovations. Evolutionary innovation is continuous in nature and entails incremental advances in technology, whereas revolutionary innovation is discontinuous and involves adoption of new behavioral patterns (Sarka, 2009).
It is worth noting, that innovation is not strictly pegged and attached to profit organizations only, but is practiced by non-profit organizations as well as governments too. It occurs locally and internationally.
Role of Innovation
In a business organization, innovation usually assists in reducing the gap between the expectations of the consumers and the eventual performance of the organization’s end products. As simply put forward by marketing guru Narayanan, innovation does not only relate to production of new products, but also concerns the various processes and approaches used in exploring the marketplace. He argues, that innovation must not necessarily result into a physical product, but would rather entails diversification of production techniques, operations methods, flexibility in provision of goods and services, and reliability in products’ utility (Narayanan, 2011).
Afuah similarly agrees, that innovation is usually new in nature and aspires to change the way an organization or a group of people within the organization operates and delivers its services to the customers (Afuah, 2009).
According to Tidd, Bessant and Pavitt, innovation purposely serves three major functions, namely, inspiration, creation and connection. Innovation involves seeking answers to the questions on ethics in business, sustainability, impact of business on the environment as well as consumer protection (Tidd, Bessant & Pavitt, 2010). In the real sense, these question will lead to coming up with special ideas and finally new products and services.
How Innovation Helps Improve Competitive Advantage
Innovation offers great success to businesses that embrace it by allowing for effective and efficient provision of highly quality goods and services. Nicholas describes this as the value adding aspect of innovation (Nicholas, 2010).
Innovation allows for redesigning of the business in a manner that differentiates it and its products from competitors, both locally and internationally. A good design enhances business performance. According to Nicholas, a well designed business often performs better and thus grows rapidly in comparison to other poorly designed ones (Nicholas, 2010).
In addition to business redesigning, innovation makes possible introduction of new products, which is a crucial aspect of growth in business. According to a research study carried out by Betz, it was revealed that more that 85 percent of most profitable organizations in the UK grew rapidly within a time span of only 3 years due to their rapid adaptation of ever changing customers’ needs (Betz, 2011). They steadily increased in size due to the flexibility and ability to quick improve existing products and/or introduce new ones.
Moreover, innovation enables a business to connect bright ideas with the customers’ needs, thus producing high quality and valuable products and services that satisfy customers beyond their expectations.
Need for Innovation
Today organizations are operating in an expanding environment and thus should focus at doing new things that will help them grow at the same pace as the dynamic business environment. The business environment is highly volatile and go-ahead. This poses numerous challenges and difficulties that need to be faced and tackled with high professionalism. In order to maintain and increase their market shares, businesses thus has to find new ideas, ways and techniques of doing things. Every organization, therefore, strives to deliver creativity or provide magical solutions to their day to day challenges.
Loss of Innovational Knowledge
Most innovational knowledge is lost due to constraints of product development lifecycle. It is quite a long process that takes a lot of time, thus unable to harness the rapidly evolving innovation ideas.
Various techniques can be used to prevent loss of knowledge. Examples include use of decision support systems, data mining and data warehousing methods, systems engineering as well as data communications and networks. Proper modeling and simulation can also be used to come up with ways of doing things, thereby enhancing innovation.
Ways of Capturing Knowledge for Future Innovative Capacity
In order to tap adequate knowledge and expertise for future growth and development, organizations should create conducive environments that encourage its employees and other stakeholders to continuously seek new ideas and ways of doing things. They should create an organizational culture that encourages innovative ways of operations, delivery and provision of goods and services. Betz pinpoints that most aspects, if not all, of an organizations’ culture must energize and bolster employees’ drives to innovate. It is evident, that a culture underpins the way in which organizations behave, operate and work in everyday life (Betz, 2011). Changes must, therefore, be initiated right from the traditionally underlying culture.
Every employee should be trusted, respected and empowered by the organization. Trust facilitates willingness to change. Employees thus views change as non-threatening course of action. Loh advices that an organization should not only collect information relating to its internal and external environments, but rather aim at turning this vital information into useful knowledge, especially for purposes of policy or strategic formulation and implementation (Loh, 2007).
Innovation can also be enhanced through thorough research and development. An organization should allocate adequate resources that will effectively facilitate its research and development programs. Furthermore, businesspersons should continuously seek better ways of meeting their customers’ expectations by making available high quality goods and services at reasonable prices. Kressel and Lento link organizational innovation with increased efficiency in operations, high levels of production, high quality goods and services, above the edge competitiveness, wider market share and overall effective organizational management (Kressel & Lento, 2007).
Likewise, an organization can capture lost knowledge for future use through transformational leadership. This is a leadership style that is supportive, encourages collaborative interaction and continuous participation of employees in organization’s affairs. It also promotes mutual trust between the organization, its employees and other stakeholders through open communication systems. Transformational leadership is learning centered and change catalyst. Leaders should be innovation champions.
Accompanying transformational leadership is the challenging and encouragement of employees to think on their own, come up with new ideas and query any predetermined rules and processes. This offers employees with ability to be creative and innovative. An organization, employees and its stakeholders should constantly seek unforeseen opportunities and device unconventional strategies for improved competitive advantage. Likewise, employees should be given freedom to experiment, test and evaluate new innovations. Such employee autonomy has proved rewarding in strive for competitive advantage through innovations.
According to Mitchel and Coles, good leadership in Knowledge Management encompasses seven vital elements, which they collectively refer to as the “7C’s of Knowledge Management Leadership”. These elements include context, competence, culture, communities, conversation, communication and coaching (Mitchell & Coles, 2010). They further argue that good leadership in Knowledge Management should aim at strengthening customers and employee orientation, thereby consequently facilitating innovation within the organization. They also enunciate that strategic commitment is the foundation stone for organizational innovation and Knowledge Management.
Loh asserts that all organizational leaders should give their juniors the relevant strategic focus and direction that is desirable for attainment of creativity and innovation objectives. They should constantly seek answers to various questions, such as innovation is required to create a new product or enlarge the existing market (Loh 2007). At what point is the innovation acceptable for redesigning the business or to what extend is the innovation required and what are the related risks that the organization faces, if it undertakes the new ideas or development? Leaders need to commit themselves to supporting individuals who contribute to the creative processes.
Management support is another vital tool used in harnessing knowledge that may be required for future innovative capacities. It can be noted that there should be an apparent and active support from the top-level management. Another important aspect of fostering innovation is through the use of reward and recognition schemes. Organizations should align their rewards and recognition schemes with its innovation goals. As Bessant and Tidd stipulate, when these two schemes are properly used,, they catalyze employees’ quests for new innovations. For instance, at Phoenix, the management worked hard to recognize and reward employees with most outstanding performances. A research study carried out by Scott Tarry in various public airports revealed that the effect of inadequate rewarding and recognition programs is diploid. First, employees will lack the motive to innovate. They thus do not struggle to develop new skills or ways of doing things. Secondly, employees who are successful innovators may remain frustrated by the systems due lack of recognitions and rewards, such as salary increases and job promotions (Bessant & Tidd, 2007). However, it is important to note, that even though poor reward and recognition systems may not totally inhibit innovation, it often reduces its possibilities of occurrence.
In addition, organizations should readily provide the necessary resources that may be required for innovation. During innovation, certain costs must be incurred due to intensive researches. The organization must increase its capacity by building a culture that allows easy absorption of changes, for instance, technical and technological advancements.
Knowledge Management and innovation similar requires adequate and proper planning. All resources within the organization’s reach and its workforce must be properly sourced, coordinated and well managed for better results. To ease future developments in innovative capacity, innovation and inventions that have proved successful in area or department of the organization can then be replicated in other departments.
Various obstacles that might possibly hinder an organization’s efforts towards attaining its goals through effective Knowledge Management and innovation should be totally prevented and kept at bay. For examples, business activities should be in line with industry laws to avoid regulatory constraints. The stakeholders should not be hesitant towards changes and new developments.
Last but not least, the organization can captured innovative knowledge for future capacity developments by changing or overhauling the whole systems, deploying appropriate technologies as well as exercising employee empowerment. It should also continuously pursue change management within its operations and processes and uninterrupted product improvement.
How to Support Innovation within an Organization
Various research studies have been conducted to unveil the best possible ways of promoting innovation within an organization. It is, however, globally agreed that there are certain courses of action that every organization must initiate in order to successfully achieve this goal. First, an organization must make readily available all economic resources that are needed to aid innovation. Examples are financial resources, technical trainings and employee development, machinery and equipment. Secondly, the organization should be able to recognize and embrace the importance of diversified thinking. Thirdly, it should be able to learn from the outside environment with less effort. This will enhances quick and smooth transplanting of ideas from external sources (Narayanan, 2011). Likewise, it must have high adaptive capability. Fourthly, an organization should make innovation a responsibility for every employee. This will pose them a challenge and hence increased critical thinkers that come up with innovations frequently. Fifthly, the organization should recruit and deploy a large pool of diversified workforce. When people from various backgrounds are pooled together, there is rapid exchange of ideas, skills and information. This forms a good basis for innovations.
Furthermore, the organization should be generally curious about new developments within the industry. There should also be close interconnections between the various management levels and others departments. Unnecessary organizational bureaucracy should be minimized as far as possible.
Future Challenges in Knowledge Management, Innovation and Competitive Advantage
The business arena has recently observed varied changes. There has been increased geographical dispersion in the work environment. Technology has enables people to work from various places, such as from their homes. It expected, therefore, that organizations acquire relevant technologically advanced equipment and infrastructure that incorporates such developments.
The business environment has also become more complex. Organizations thus have to diverse their operations, grow and develop at a similar pace as environmental advancements. There has been increasing call for quick and efficient decision making to curb the dynamic challenges pose by the environment (Stamm & Trifilova, 2009).
Similarly, organization should accurately filter and utilize only relevant information. This is because large volumes of information are currently available to organizations as a result of increased advancements in telecommunications and internet technology. The continuous development of communication channels, such as social networks, new operations techniques and readily available information may unnecessary expose an organization’s internal structure and objectives to its competitors. Great caution should be taken. Ethical and social responsibility with respect to knowledge assets, economic resources, environment and their use should be strictly observed as well.
It is important for each and every business to encourage, nurture, implement and foment innovation. Top managers should encourage creativity among frontline employees through signing of challenging tasks and responsibilities. Creating the right environment is thus crucial in successful promotion of innovation. This may entail incentives, rewards and increased availability of resources.
To better understand innovation, it is important that we first of all understand the people who initiate innovations and their jobs or duties in the organization. Most innovative people like taking risks in their jobs, a condition that should be highly encouraged. Organizations should thus encourage more risk taking and leadership roles.
Just as Loh asserts, the future of a company is determined by its ability to utilize its most valuable resource, that is, business knowledge. Another important factor that would enhance use of innovation for achieving competitive advantage is free interaction and good communication within the organization.
Good business leaders should often question the economic, social, financial, and political impacts of their business strategies. In addition, they only pursue those strategies that would add value to their business through creation of better products and greater competitive advantage. This can be achieved only through well established Knowledge Management systems that enhance innovation.
Businesses should have the expertise to focus on the unique needs of the organization as well as those of the customers. It must possess in-depth knowledge of the market. This includes understanding the current trends in business competitive environment, the challenges it faces, opportunities available to it and other related issues. The organization should also create an environment, where individual employee’s confidence and organization’s confidence are increased by participating in the innovative and creative processes. There must be a well established knowledge management system that supports creativity.
Last but not least, every organization should make innovation and Knowledge Management its fundamental goals. This is because it is only through innovation and effective knowledge management that a trading enterprise can improve its efficiency in provision of goods and services, overall performance and attain high competitive advantage. It helps in transforming imaginative ideas into a viable and profitable business.