Innovation Importance to International Business

Introduction

The concept of innovation covers a wide range of creative changes that are introduced into business practice to boost organizational performance and foster creativity. Thus, innovation is a part of a creative process as it allows finding the most effective and, in many cases, an unprecedented solution to the existing problems by changing the ways of doing business. There are a lot of different definitions of innovation that can be summed up in the following way:

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  1. Innovation is always a change of the current state of things;
  2. It arises from the necessity to solve organizational problems using technical solutions;
  3. Innovation is both a process and its result.

Innovation management, in its turn, is the process of distributing human and technical resources to achieve improvement of production and marketing by implementing changes.

In the context of globalization and expansion of businesses, the importance of innovation is hard to overestimate. While only less than several decades ago, economic theories stressed a finance-based approach based on capital accumulation, current theories have shifted the focus of attention to technological advancement and building of international networks. As a result, the processes of innovation and globalization have intertwined to become the driving force of business development in the age of information.

Belloc (2012) states that the ongoing process of knowledge seeking and acquisition has brought innovation systems to the international level to enable knowledge exchange between various countries. Modern companies are forced to participate in the process if they want to stay afloat in a highly competitive environment. Innovation at the global level creates new standards of quality of goods and services as well as new models of employment, manufacturing, management, etc. Innovation allows companies to increase their market presence, enter new markets, replace outdated technologies, and switch to a more environmentally-friendly policy.

Innovation Rules

To identify what aspect requires innovation, it is necessary to perform a regular assessment of all organizational processes. At this point, companies need to follow innovation rules that can be summed up as:

Exert Strong Leadership on Innovation Direction and Decisions

Strong leadership is crucial if the company wants to be successful in innovation. Some vivid examples are proving the importance of the leader’s role: Steve Jobs and Bill Gates are those CEOs, whose presence in their companies has brought them to the peak of performance. It has been proven that the strength of the leader is a key factor for business success, closely followed by the strength of the project team and the selected strategy. Technology occupies only third place. According to a survey, 95 percent of respondents can invest in the company only under the condition that it has a prominent CEO whereas 72 percent indicated that this organization should also have market dominance (Chen, Tang, Jin, Xie, & Li, 2014).

Only 64 percent said that technology leadership prevails over the abovementioned factors. The point is that it is the CEO and the top management who are responsible for all decisions in the company including technological ones. They are to communicate them to other employees and ensure their execution. That is why it is not by chance that leadership is the key factor predetermining the outcome of any innovation as it is supposed to set innovation direction and pace. Innovation is not abstract. On the contrary, it has to be a theory in action, which means that it relies on people who make it happen.

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Integrate Innovation into the Business Mentality

Innovation can be introduced by a leader, but it cannot thrive if it does not become a part of a business mentality. It cannot be an optional element in the organization. According to Markides (2013), only if innovation equals existence and survival, it has a chance to become effective. Innovation is based on two major activities: the first one is technological improvement whereas the second one is related to business model transformation. If the company focuses only on one of them, it is likely to fail. This is the mistake made by a lot of organizations: They believe that it is enough to introduce technological innovations to modify the process of manufacturing while their major strategy and business model remain unchanged. As a result, a collapse of the old and the new occurs, bringing success to naught.

Match Innovation to Company Strategy

The key goal of any business strategy is winning profit regardless of its methods and techniques. That is why innovation can be viewed as a way to achieve long-term success and win a competitive advantage. It is important to understand that innovation cannot be an uninterrupted process as it requires a lot of effort and resources as well as considerable changes that face a lot of problems including the lack of finance, change resistance, misunderstanding, etc. That is why, when the company decides to innovate, it should ensure that innovation is aligned with its key business strategy. The major mistake committed by CEOs is choosing innovation based on the external market situation and the customer’s demand. Though these factors are highly important, relying only on them while ignoring the inner situation in the company leads to failure.

Manage the Natural Tension between Creativity and Value Capture

As has already been indicated, innovation always involves creativity. Introducing an innovative technology means managing a large number of creative processes, structures, and resources (Johnston & Bate, 2013). A company should be able to select those elements that would attract the attention of potential customers and bring profit and customer loyalty (Davila, Epstein, & Shelton, 2012). A good example of successful creativity management is Apple that, despite its high prices and upper-class orientation, attracts plenty of people by its creativity. Nevertheless, a company should not forget that its values are to remain unchanged regardless of what innovations it introduces.

Neutralize Organizational Antibodies

One of the key problems with innovation is that it rarely comes smoothly. In the majority of cases, the organization has to face several obstacles, the so-called antibodies, that can defeat the success. According to the general rules, the more radical innovation is, the more antibodies it has to encounter. Moreover, if the organization is successful and its performance indicators are impressive, it is likely to deal with stronger antibodies. To innovate, the company should create a culture that would have the courage to change. Many successful companies believe that those factors that led to profit in the past will continue doing so in the future, which is typically wrong.

Cultivate an Innovation Network Beyond the Organization

The creation of a network between organizations should be considered as a top priority instead of focusing on a person and his or her peculiarities, Both inside and outside issues can be extended with the help of such networks. For example, marketing and manufacturing as well as suppliers and partners will benefit from the cooperation between various organizations (Lai, Lin, & Wang, 2015). A competency of innovation can be clearly defined in the example of, for example, a 3M company that made significant contacts in the technological sphere. At this point, the concept of innovation platforms can be used as a framework to integrate all the processes that require innovation. In particular, partners, customers, supply chain knowledge, etc. are to be taken into account while planning and implementing innovations in terms of network creation.

Create the Right Metrics and Rewards for Innovation

To encourage innovation, companies establish adequate rewards and create proper metrics. However, managers prefer to avoid risks and invest only in safe projects, thus impeding the development of innovative strategies and techniques. Anderson, Potočnik, and Zhou (2014) claim that the mentioned reward system cannot promote motivation in employees. The question of assessment also remains difficult for many companies. There is a need to provide appropriate reward and measurement systems to breakthrough innovations, creating a more balanced view of the potential risks, thus achieving better results in the long-term perspective.

Innovation Importance for International Business

The increased role of scientific and technological potential in modern production has led to the fact that the international business increasingly moves to the area of ​​novelty and improvement of products, services, and technologies in its performance. The release of new products or upgraded ones serves the main goal of distinguishing and differentiating a company’s products in the market and obtaining at this expense the enhanced effectiveness along with customer preferences. The same situation is observed in the market of services: the supply of new services based on the use of new equipment and new materials allows stimulating demand, create new markets, increase sales of new products and services, and create a basis for the formation and rapid development of new companies.

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Sometimes corporations may be in such a situation, where the results are much poorer than expected since their efforts were placed in the wrong areas, which makes them unable to receive an adequate return on investment. Another mistake to follow the rule “the more innovation–the better”. It is wrong to be carried away by innovation effort as every organization needs stability to survive between technological breakthrough changes. Since time and resources are always limited, a CEO should be able to focus on one field at a time.

The problem is that very few companies have effective diagnostic tools that would allow them to select activities that require innovation, which prevents them from knowing where they should start. Innovation faces several problems, the major of which are coordination and organizational obstacles (Moreira, Silva, Simões, & Sousa, 2012). The situation, in which managers try to impose changes based on beliefs and values that they do not share is quite impossible. Thus, a good leader is a change agent, who fosters innovation by the power of his/her commitment.

To succeed, a company should address the so-called organizational “antibodies” that may impede innovations. As a rule, “the more radical the innovation and the more it challenges the status quo, the more and stronger are the antibodies” (Davila et al., 2012, p. 123). Also, the greater the past successes of a company, the greater are the organizational antibodies. With the aim of innovation, management should create a culture that will encourage employees to change, investigate, and innovate while at the same time remaining consistent to implement innovations (Dunning, 2012).

The creation of an innovation-friendly culture helps to address customers’ resistance to change and succeed in offering innovations. The point is that innovation is not a unidirectional process that resides in only one part of the organization (Unger, Rank, & Gemünden, 2014). On the contrary, it requires coordination of all departments that would allow transferring an abstraction into reality. Collaboration is now an integral part of any innovation, which accounts for the fact that many organizations merge and resort to outsourcing. Thus, innovation is a highly complex process, the success of which is determined by a wide range of various factors. Therefore, the paper at hand is going to investigate the rules of innovation and account for its role in international business.

Conclusion

To conclude, it is necessary to emphasize that innovation is a rather important issue that needs to be considered by every company, especially by those that operate in the international area. Taking into account that customers’ expectations change and grow with the development of technology, innovations provide the required extent of change. In particular, innovation aspects that were identified in this paper clearly show how innovations may affect a company’s success.

References

Anderson, N., Potočnik, K., & Zhou, J. (2014). Innovation and creativity in organizations: A state-of-the-science review, prospective commentary, and guiding framework. Journal of Management, 40(5), 1297-1333.

Belloc, F. (2012). Corporate governance and innovation: A survey. Journal of Economic Surveys, 26(5), 835-864.

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Chen, Y., Tang, G., Jin, J., Xie, Q., & Li, J. (2014). CEOs’ transformational leadership and product innovation performance: The roles of corporate entrepreneurship and technology orientation. Journal of Product Innovation Management, 31(1), 2-17.

Davila, T., Epstein, M., & Shelton, R. (2012). Making innovation work: How to manage it, measure it, and profit from it. New York, NY: FT press.

Dunning, J. H. (2012). International production and the multinational enterprise (RLE international business). New York, NY: Routledge.

Johnston, R. E., & Bate, J. D. (2013). The power of strategy innovation: A new way of linking creativity and strategic planning to discover great business opportunities. New York, NY: AMACOM.

Lai, W. H., Lin, C. C., & Wang, T. C. (2015). Exploring the interoperability of innovation capability and corporate sustainability. Journal of Business Research, 68(4), 867-871.

Markides, C. C. (2013). Business model innovation: What can the ambidexterity literature teach us? The Academy of Management Perspectives, 27(4), 313-323.

Moreira, J., Silva, M. J., Simões, J., & Sousa, G. (2012). Drivers of marketing innovation in Portuguese firms. Amfiteatru Economic, 14(31), 195-206.

Unger, B. N., Rank, J., & Gemünden, H. G. (2014). Corporate innovation culture and dimensions of project portfolio success: The moderating role of national culture. Project Management Journal, 45(6), 38-57.

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