let's have a session on innovation so the types of innovation there's two types there's product innovation and process innovation product innovation is when you find new or better products to ideally increase revenue whilst process innovation is that you find new or better methods of production with the hope that you would reduce unit costs essentially become more efficient why innovate well ideally you're going to look to increase revenues or reduce unit costs and you might do it because you have increasing competition changing consumer tastes changing technology maybe it's a rapid change in that technology perhaps there's increasing ethical standards that you need to meet or increasing ethical or environmental concerns that you need to therefore innovate to improve your products or processes also it could be that shareholders are demanding higher the dividends so you therefore need to become more efficient or have greater revenues to enable you to finance those higher dividend requests from your shareholders the advantages of innovation so to improve product quality and if you improve product quality it may lead to increased sales increased growth and hopefully higher turnover also you might want to innovate because it will improve your brand image and therefore give you as a business a competitive advantage and that will allow you to charge premium prices probably because you have a brand image and your price elasticity of demand has become lower or another way of putting that it's become more inelastic price inelastic and therefore that may allow you to initially use price skimming with your new releases disadvantages of innovation well you're going to have initial costs because of research and development because of market research you're going to have to do and innovation takes time to come into fruition the benefits may not be realized in the short term and in the later term you're going to have other costs because you may need to protect intellectual property perhaps through patents or copyrights innovation considerations or you could think of it as a valuation are your rivals innovative how much innovation do you need to do do your consumers demand more innovative products is there finance available for you to be able to innovate are your staff skillful enough are management prepared to take risks to innovate in order to become a more innovative organization you need to be thinking about these four methods bird k is the way i think about it or k bird benchmarking entrepreneurship research development and kaizen they're ways that you could become more innovative let's look at each of these so we'll start with benchmarking benchmarking is essentially the process of identifying high level performance and then you use that as a comparison when actual results are available and if the business fails to meet the benchmark management can then create new strategies to enable the business to meet the benchmark the pros of this encourages analysis into results if you've done your benchmarking you know what top dollar performance is then if you don't meet that you can analyze your results to see how you can meet that and also by having top elite standards that you're aiming for it may lead to higher aspirations for the business and the employees of the business problems things to consider is the benchmark realistic have you compared it to businesses within your industry or to just industry to other businesses generally because that could make a difference you want to do it to your nearest rivals and also with benchmarking it might encourage you to actually be less innovative because you just look at what other competitors are doing and you just simply copy them the next method to becoming more innovative is intrapreneurship and entrepreneurship is when employees apply entrepreneurial skills and attributes into their job roles such as creative thinking risk taking and problem solving and it's more likely that that will occur within a flat structure with lots of delegation and it may be facilitated through the use of kaizen quality circles so there's frequent meetings to try and get small and continuous improvement within the business now advantages of entrepreneurship it could be motivating if they feel entrepreneurial within their roles and it may lead to increased staff retention and foster a creative culture problems though of entrepreneurship the loss of management control if employees are becoming too intrapreneurial it might slow down decision making and it risks inconsistency in the output and the processes of the business if each employee is applying intrapreneurial ship within the business the next method to becoming more innovative is b i r d bird research and development and research development is the work directed towards the introduction innovation and improvement of products or processes and we can see here from a previous video that research and development may be used to foster product innovation to find new or better products and that may lead to better met customer needs and that means that you may be able to increase your prices improve reputation and increases the perceived added value of the business leading to higher turnover and that might lead to profit margins increasing or research and development can be used to foster process innovation process innovation to reduce unit costs and that may reduce the waste in terms of raw materials components labor or even time and that will allow you to reduce costs and increase the efficiency in the manufacturing of the product and that could lead to higher profit margins now research and development general pros new products create a competitive advantage for the business it might create a brand image for the business and higher prices as a result could be charged but there's always a risk of failure and research development is very time consuming and is certainly very expensive the final way to become more innovative is kaizen and kaizen is the management philosophy to encourage small and consistent changes as opposed to infrequent large changes the general idea is that you have the empowerment of workers throughout the business there's a culture of making and listening to their suggestions and it's facilitated through regular staff meetings sometimes referred to as quality circles pros it's motivating if you operate within a kaizen environment less waste smaller changes are easier to implement as opposed to larger changes and therefore there's a smaller capex meaning there's a smaller capital expenditure if you're only making small changes your general expenditure on machinery for example will be smaller quality circles take a lot of time in the terms of the fact that you may have to do quality circles each day as opposed to a weekly meeting so that's taking up more time and may lead to you being slightly less productive and also there may be a resistance to working in this kaizen manner now that you've got your product or process innovation that is your intellectual property your ip so how could you protect that well you want to protect that because you want to keep your competitive advantage and you'll do that through patents or copyrights now these essentially are the right to exclude others from copying your product or process innovation for a set period of time and it tends to be that inventions will use patents and music books literacy artistic work will use copyrights and the general advantages are that successful patents will grow market share which means your rivals are unable to copy it which means you can charge higher prices wider your profit margins and it might be that you put these profits that you've made back into the business in terms of reinvestment however intellectual properties were they're complex to achieve also they're complex to prove to get them and you need to maintain them when we're thinking about innovation in the functional areas some small points we might want to consider so within marketing innovation requires market research within marketing also if you are doing lots of innovation it may lead to you having overweight amount of stars or question marks within the boston matrix in terms of human resources it's more likely that you can be innovative with delegation in place with soft hrm with flatter structures and with a culture that's more willing to take on risks in terms of finance the cost of research and development is likely to be expensive budgeting for benchmarking you might want to consider that and if you're going to encourage entrepreneurship you need to accept there's going to be some failure within that so you might want to have a cash buffer and with operations it may be that operations will likely in terms of innovation move you away from a labor intensive business towards a capital intensive business additionally you might want to consider your supply chain within that if you are being more innovative so i hope that helps and i'll see you at the next session