William Pollard was quoted saying in a nutshell that change is a prerequisite for innovation, creativity or incentive for improvement. He further went on to say that change is inevitable and that those who initiate this change will have a way better chance of managing the change (Think and exist, 1999-2010). For change to occur anywhere there has to be a need and a will to initiate it. Most important of all there has to be someone brave enough to initiate change. This person has to be well equipped to handle the challenges of propagating the change, they have to have the potential or capabilities required to spearhead an innovation that will lead a company to greater heights. This paper is concerned with outlining how the capabilities of an organization coupled with innovation can affect the existence of the same.
Impact of Capabilities and innovation on the sustainability of a firm
Capabilities for the purpose of definition in a firm include financial resources that a firm possesses including their debts and credits. The physical resources are the assets of the company like the buildings and the operational facilities. The human resources of the organization, workforce, skills and experiences. It also includes the attributes associated with the organization because of its history and relationships with clients in the delivery of goods or services. This definition is according to Barney (n.d., pp. 4).
The capabilities of any organization should possess certain attributes: they should add value to the organization in the first place. This means that at any point they should be able to allow a firm to explore new opportunities, find greener pastures, and help eliminate risks to the organization. They should also give room for utilization of traditional ideas that the company might be operating on in the modern world.
Secondly, they should be rare. If any other organization possesses the same capabilities shortly, the firm might be pushed out of business no questions asked. The resources should also not be too rare to the point they are irrelevant. Simply stated, a firm should acquire resources that are essential for being in the business, which might be common and others that are not common as an added advantage to give them a competitive edge against the competitors. This could last for a while, at least until the competitors imitate (Barney, n.d.).
The third quality resource and capability a firm should have is that they should be difficult to reproduce in any way either by duplication or substitution. This is made possible because of the fact that every organization has its own story that contributes to its structure and maintenance. The values and relationships that it builds through the years make it difficult to imitate. Another factor has to do with the decisions made by the management many small decisions made by the management make it hard for outsiders to copy than few big decisions which are more visible and easier to emulate. The culture attributed to an organization is hard to imitate because it is developed over a period for example trust or flexibility in service (Best, 2005).
The final attribute for competitive advantage is organization. A firm should have a structure that makes use of its potential to give it a cut above the rest of the business. It should come up with strategies and policies that are attractive to the target market.
Innovation and sustainability
Innovation is the ability to come up with creative inventions. For the purpose of this context, innovation refers to the ideas that a firm generates that increase profits and gives them a competitive edge over the other companies in the business.
The ability to innovate in any company depends on some factors. Size of the firm, the internal structures and systems that run the firm, the magnitude of innovation to be undertaken whether radical or gradual/incremental and the life cycle of the industry. It is not definite whether a small firm or a large firm is better when coming up with innovative ideas, both have their advantages. For small firms, it is easier to get funding if needed from scientists and research bodies. The amount of flexibility in decision-making in the management makes it easy to accomplish projects faster due to quick decision-making processes. They also have the potential to see the importance in technology and modernization since they are still growing; they are more motivated per se (Best, 2005).
Bigger companies on the other hand have a higher amount of funding at their disposal. This is due to the size of the company and the income it generates therefore they are at liberty to choose the magnitude of innovation to embark on. They also have a greater capacity to incur large costs and business risks, which will be conveniently cushioned by the returns that they enjoy from investments made.
Innovation in an organization is the driving force for competitiveness and should be given utter importance. In achieving this there should be a culture of recombination and connection of ideas that have been used independently before with new ideas that are coming up every day. A good example is the use of technology in machinery like the automated sawing machine and the use of paperless documentation in companies and banks.
Organizations should seek to innovate by affecting internal procedures like marketing operations or even the design of the various products they sell. After they reorganize their marketing strategies and their values, they should seek to incorporate external input. This could mean having new ways of delivery or even more efficient means in terms of mobility. There should be fluid interaction between the internal sources of innovation and those that are foreign to the firm. This causes a concoction of ideas that are original and most likely feasible due to the magnitude of the scope of information. Sharing of material is primary in accomplishing this (Clark & Guy, 1998).
Openness is essential since it makes the organization be open to ideas and suggestions by other organizations in the business or even by critics. The feedback they get could be useful in forming strategies that not only deal with the weaknesses pointed out but will help prevent or avoid potentially bigger problems in the future (Innovation in business, n.d., p. 5).
Innovative ideas come from people and for more and fresh ideas a firm should have a considerable number of participants involved in the creative phase of generating viable ideas. The management should be ready to spend on getting this amount of players on board even if it means promoting from within if it gets too costly.
In this time and age, organizations should be user-centered in their innovations they should seek to design or come up with products that put into consideration their demand in the market. They should change their perspectives from making what they think people want to actually sell what people need and will be willing to pay for (Freeman, 1991). In the production of goods, a company should be careful to engage careful research in coming up with a new product. The management can make use of questionnaires to find out whether the intended product that they are to launch is actually needed in the market. This could help in saving on the much-needed resources.
When launching a new product, one has to also consider its lifespan. If the product’s life cycle is too short it means it will not last long enough to recover the capital invested and therefore might end up costing the company in terms of losses incurred. When doing this there are two types of innovation involved: the horizontal and the vertical. Horizontal changes are also known as the architectural innovations that affect the components of the product and the vertical changes are those that affect the way in which the different components are joined together (Henderson & Clark, n.d).
For the firms dealing in the service industry more than before they need to seek to solve the problems of the customer rather than just servicing them. The client should not need to solicit more services from other service providers after they visit the particular organization. They should invest in building lasting relationships by providing better services, which culminate in developing a bond of trust between the organization and the client.
Service-providing companies are also to ensure they foster teamwork for effective service. They need to outsource and co-operate with other service providers to map out a way forward. They should make sure they communicate warmth and assurance to their customers so they leave a lasting impression long enough for the customers to tell it to the next potential target. They should form close relationships that would shield them from new market penetrators (Innovation in business, n.d.,p.6).
Generally, both product and service providers should strive to assimilate information that is gathered by researchers concerning their various fields to avoid falling behind in delivery in their respective areas of specialization. They should also ensure they stay competent by encouraging learning more strategies on the same to continue building on their knowledge. On the question of acquiring information Freeman (1991, p. 506) said that there is a difference between knowledge and information and that the idea is not to amass vast amounts of information but to turn this information into useful knowledge that will lead to the production of innovative products and processes. He also talked about codified and ‘uncodified’ information, ‘uncodified’ information being that which anyone can access. Lastly, he shed some light on information being tacit. This mainly is in skill and experience that two people may have in common. They are insights and knowledge not documented.
More emphasis is to be laid on “doing the existing things better than doing altogether different things” (Wayne & Abernathy, n.d). This entails the use of the learning curve strategy. The strategy explains that the organization after a period of time gets really good at doing what they do in terms of the processes involved in making the products. They learn more by doing it.
They should also not dwell so much on gaining new knowledge and neglect what they know. This could be a danger, management should make sure they emphasize proficiency in all tasks that the employees in the organization tackle.
It should be noted that innovation stems from two drives that influence it. According to the two versions of the linear model, the ‘technology push’ model explains innovation as an outcome of new ideas in research and science or even technology considered to be viable commercially. The ‘demand pull’ is a result of demand for a certain good or product in the market (Clark & Guy, 1998).
In conclusion, this paper has looked at the capabilities that are at the disposal of a firm: human resources, assets and value of a company, attributes, skills and experience over time. Further on it is stated that the capabilities of an organization should be rare, bring value to the company even during stiff economic situations, should be hard to imitate by the competitors to give them a temporary competitive advantage. The fourth property is that they should be able to be organized in a number of ways to achieve the organizational goals more efficiently and effectively.
On the subject of innovation and how it can be able to sustain the firm’s strategy, certain factors have to be put into consideration. The size of the firm, whether big or small, determines how well it will handle the risks that come with innovation. A big firm will recover quickly and will be at liberty to explore more due to available funds. A small firm will be able to get funding easily since they are considered to be more open to modern technology and experimentation. The magnitude of innovation is also a major factor, whether they are major changes or minor changes should be determined. Then lastly the lifecycle of the industry in which the firm operates helps in determining the perfect timing to launch a new product or give out vouchers or to cut down on minor expenses and so on (Think exist, 2010). Minor changes in a product or service are known as incremental changes. These are the changes that do not affect the basic knowledge in the concept of the commodity for example a change from fluorescent tube lights to bulbs of the same is a change in appearance more than introducing incandescent light bulbs altogether. The changes that affect the sets of principles used in the engineering and the science of the product are known as radical changes (Henderson & Clark, n.d).
Some of the ideas that have been put forward include creative recombination of new and existing ideas to come up with better ones. Introducing technology to the whole process and the readiness to experiment. Firms should also look within the organization and deal with the internal processes like marketing and efficient ways of production, building communication skills among workers and so forth. They should, however, also be open to external influences and new ways of improving transactions Firms are also advised to be open in their businesses and to invite ideas that will make their businesses thrive. They should provide an atmosphere that is permeable so they could share information and knowledge with other business people. Another important point is the production of user-centered ideas and innovations. They are to have a perspective that sees the needs of the market. Service-oriented firms are urged to focus on solving customer problems more imaginatively. They should seek to view the needs of customers as they see them so they can satisfy them and soothe customers will not have a problem paying for their services.
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Henderson R.M,& Clark K.B., (n.d) “Architectural Innovation: the Reconfiguration of Existing Product Technologies & the Failure of Established Firms” Chapter 11.
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