WHAT YOU NEED TO KNOW ABOUT INNOVATION

TYPES OF INNOVATION

1.      Breakthrough innovation – basis for further innovation e.g. penicillin, computer, internet innovations. Great protection needed. 

2.      Technological innovation – innovation in products, markets e.g. personal computers voice and text messaging, jet airplane .These also need protection. 

3.      Ordinary innovation – bring market appeals, come from market analysis. Most common innovation.  

IMPORTANCE OF INNOVATION

1.      Reduced costs of product and distribution. – cost effective methods and processes, improving a firm’s profits. 

2.      Improvement in quality and quantity.

3.      Customer satisfaction – lower price. 

4.      Corporate image. – Good name of a firm, many customers  want to associate with firm.

5.      Customer loyalty – repeat sales and favorable recommendations by customers

6.      Competitive advantage-a firm stands out among others. 

7.      Motivation to employees.

8.      Expansion of business.

9.      Solving emergencies problems. 

10.  Profit improvement- new technology in management and production.

11.  To counter competition.

12.  To facilitate opening of new markets. 

13.  To facilitate diversification of products, minimize  risks and losses.  

 REQUIREMENTS OF INNOVATION

i)       Economic demand-the economic returns should be greater than its costs.

ii)          Surplus capital-startup costs for implementing a new idea.

iii)        Ability to assemble and invest capital—managerial and technical skills.

iv)        Mobile capital which is stable.

·         Capital cannot serve unless it can move to potential innovator unless it can move to allow the various types of wealth to be created e.g title deeds -stability is provided by a rule of law.

v)          Availability of growth- fostering social institutions which facilitate the speed of

          technological advancement.

vi)        Ability and willingness to think and act creatively (Entrepreneurs) i.e the philosophical and

          psychological requirements.

vii)     Geographical and other circumstantial causes such as ethical issues.

·         Societies in which innovation is seen as a sinful or people are punished or are shunned for thinking differently from others are unlikely to experience innovation. 

viii)    The size of the firm.

·         Large firms have the advantage of introducing innovation since they can afford it.

·         They tend to attract more talents employees to advice on new ideas.

REASONS FOR OPPOSING INNOVATION 
i)                   The entrepreneurs tend to have a practical concern that unforeseen innovation may cause a disaster e.g side effects e.g of a drug.

ii)                 Fear of losing profits in the event innovation does not translate to the expectations.

iii)              Where the entrepreneur held a monopoly position in the market, there is fear of losing authority and control.

iv)               Fear of upsetting the moral and social value of demand for the product.

v)                 Desire to preserve the existing market confidence.

vi)               Fear of upsetting tradition in production management and market scope.

vii)            Fear of opening a loophole to competition hence lose of business grip.