How are new approaches to innovation management improving traditional industries?

Introduction

In today’s competitive business world, innovation has become a critical factor for success and sustainability. Traditional industries, often characterized by standardized processes and rigid structures, are increasingly recognizing the need to adopt new approaches to innovation management in order to stay relevant and competitive.

Innovation management involves not only the generation of new ideas, but also the effective implementation of these ideas to improve products, services and processes. This approach has proven essential in sectors such as oil, gas, mining, manufacturing, agriculture, construction, among others, where modernization and adaptation to new market demands can be decisive for survival and growth.

This article discusses new approaches to innovation management in traditional industries. We will initially analyze the theoretical bases of innovation and innovation management, and then study different approaches currently used to manage innovation in different industrial sectors and what advantages these approaches generate when applied to traditional industries.

Innovation management

It is convenient to start by defining innovation, which refers to the process of introducing something new or significantly improving something existing, whether it is a product, a service, a process or a practice. According to the Organization for Economic Cooperation and Development (OECD), innovation implies the implementation of a new or significantly improved product (good or service), a new process, a new marketing method or a new organizational method in business practices, workplace organization or external relations.

As for the types of innovation we have:

• Product innovation: Involves the creation of new products or the significant improvement of existing ones. Examples include new models of automobiles, electronic devices with advanced functionalities or innovative drugs.
• Process innovation: Refers to the implementation of new or significantly improved production or distribution methods. This may include new manufacturing techniques, supply chain improvements or new customer service methodologies.
• Marketing innovation: Consists of the implementation of new marketing methods that involve significant changes in product design, packaging, promotion, pricing or distribution. Examples may be innovative advertising campaigns or unique selling strategies.
• Organizational innovation: Involves the implementation of new organizational methods in business practices, workplace organization or external relations. This may include new management strategies, organizational structures or decision-making processes.

In terms of innovation management, we need to be a systematic approach to foster and manage the innovation process within an organization. It involves planning, organizing, directing and controlling resources and processes to achieve innovative objectives.

Innovation management includes the generation of ideas, the selection of the most viable ones, the development of these ideas into concrete products, services, practices or methods, and their successful implementation.

Innovation management is key to the survival and growth of organizations in an increasingly competitive and changing business environment. By adopting a structured and systematic approach, companies can not only stay ahead of the curve, but also seize new opportunities and respond effectively to market demands.

Approaches to innovation management

Innovation management can be approached in a variety of ways, using different frameworks and tools that have been developed to guide organizations in their innovation efforts. Below are some of the most recognized and widely used approaches to innovation management.

UNE 166000 family of standards

The UNE 166000 family of standards provides a framework for the management of Research, Development and Innovation (R+D+i) in organizations. These standards help to establish a management system that ensures the systematization, measurement and continuous improvement of innovation activities. Key aspects include:

• UNE 166001: Requirements of an R+D+i project. This standard can be used to obtain a certificate for an R+D+i project. Its purpose is twofold, first, to facilitate the systematization of research, development and innovation activities in the form of R+D+i projects; and on the other hand, to help define, document and elaborate R+D+i projects, improve their management, as well as communication to interested parties.
• UNE 166002: This standard specifies the requirements for an R+D+i management system, including the planning, control and improvement of innovation activities. It promotes the creation of an innovative culture and the integration of innovation in the business strategy.
• UNE 166006: This standard focuses on the technology watch and competitive intelligence system.

The OECD Oslo Manual

The Oslo Manual is a guide developed by the Organization for Economic Co-operation and Development (OECD) that provides a conceptual and methodological basis for the measurement and analysis of innovation. It is widely used by governments and companies to assess and promote innovation. The main aspects of the Oslo Manual include:

• Innovation definition and classification: The manual classifies innovation into four types: product, process, marketing and organizational. This classification helps organizations to identify and categorize their innovative activities.
• Innovation indicators: Provides a set of indicators to measure the innovative performance of organizations. These indicators include investments in R+D, number of patents, and the economic impact of innovations.
• Influencing factors: Identifies factors that influence the ability of organizations to innovate, such as industry structure, the regulatory environment, and the availability of financial and human resources.

The Oslo Manual is an essential tool for benchmarking innovation and for the design of public policies that foster a favorable environment for innovation.

Hamel Solution Model

The solution model of Gary Hamel, a leading management theorist, focuses on innovation as a core competency for competitive advantage. Hamel proposes that organizations must innovate in three key areas: products, processes and business models. His main proposals include:

• Product innovation: Develop products that offer added value and are significantly differentiated from existing products on the market. This requires a deep understanding of customer needs and desires.
• Process innovation: Implement significant improvements in business processes to increase efficiency and reduce costs. This may include the adoption of new technologies and work methodologies.
• Business model innovation: Redefining the way the organization creates, delivers and captures value. This involves exploring new markets, developing new revenue streams and changing the cost structure.

Hamel also emphasizes the importance of an organizational culture that fosters creativity and disruptive thinking. According to his model, organizations must be willing to challenge the status quo and experiment with new ideas to remain competitive.

Application of innovation management in traditional industries

Innovation management is not limited to cutting-edge technology industries. Even more traditional industries can benefit greatly from the implementation of innovation strategies and frameworks. The following discusses how the UNE 166000 family of standards, the OECD Oslo Manual and the Hamel solution model can be applied in these industries.

UNE 166000 family of standards in traditional industries

The UNE 166000 family of standards provides a structured framework that can be especially useful for traditional industries seeking to systematize and formalize their innovation processes, highlighting the following applications:

• Establishment of an R+D+i management system: Industries such as manufacturing, agriculture and construction can use the UNE 166002 standard to establish R+D+i management systems that promote innovation in a consistent manner. This system can include processes for idea generation, prototype development, and testing and validation.
• Innovation project management: Using UNE 166001, companies in traditional sectors can manage innovation projects more effectively. This includes the planning, execution and follow-up of projects that seek to improve existing products or develop new products adapted to market needs.
• Technological and competitive surveillance: Through UNE 166006, traditional industries can establish technological and competitive surveillance mechanisms that allow them to keep abreast of advances in their field and market trends. This is essential to identify innovation opportunities and react in time to changes in the environment.

Application of the OECD Oslo Manual in traditional industries

The Oslo Manual provides a conceptual and methodological framework for measuring and analyzing innovation, which can be adapted to the needs of traditional industries, among some of the most important applications:

• Innovation identification and classification: Companies can use the Oslo Manual classification to identify product, process, marketing and organizational innovations. For example, an agricultural company can innovate by introducing new cultivation techniques (process innovation) or by developing value-added organic products (product innovation).
• Innovation measurement: Implement innovation indicators, such as investment in R&D, the number of patents registered or the economic impact of innovations. This allows traditional industries to evaluate their innovative performance and compare themselves with other players in the sector.
• Influencing factor analysis: Industries can use the Oslo Manual to analyze the factors that affect their ability to innovate, such as the regulatory environment, availability of financial resources and industry structure. This helps them identify barriers and opportunities for innovation.

Application of Hamel’s solution model in traditional industries

Gary Hamel’s solution model offers a practical and adaptable approach to foster innovation in any sector, including traditional industries.

• Product innovation: Traditional industries may pursue significant product innovations. For example, a textile company may develop smart fabrics that regulate body temperature or repel stains.
• Process innovation: Adopting modern technologies and methodologies to optimize production processes. An example would be the implementation of advanced manufacturing techniques such as 3D printing in the traditional automotive industry.
• Business model innovation: Exploring new ways to create, deliver and capture value. A company in the construction sector could adopt a business model based on the circular economy, reusing materials and reducing waste.

Competitive advantages of traditional industries based on innovation management

Innovation management is not only a necessity for high-tech industries, but also offers a significant competitive advantage for traditional industries. The ability to innovate can transform entire industries, allowing traditional companies to stay afloat, and to thrive in competitive markets. Below are some of the key competitive advantages and benefits that traditional industries can gain through innovation management:

Adaptation to new market demands

Innovation management enables traditional industries to adapt quickly to changing market demands. For example:

• Product customization: Innovation in manufacturing processes can enable the production of customized goods on a large scale. A furniture company can use advanced technology to offer custom-designed products to customer specifications, thus differentiating itself from competitors that offer standardized products.
• Sustainability and social responsibility: Integrating sustainable and responsible practices into production processes can appeal to a growing segment of conscious consumers. Companies in the food industry, for example, can adopt sustainable farming techniques and reduce the use of chemicals, standing out in a market that values sustainability.

Increased operating efficiency

Implementing innovation management strategies can lead to greater efficiency in day-to-day operations:

• Process optimization: Companies can identify and eliminate inefficiencies in their production and operational processes. For example, a textile mill can adopt automation and in-line quality control technologies to reduce waste and improve productivity.
• Reducción de costos: Innovar en los procesos puede ayudar a reducir costos operativos. Un ejemplo es el uso de tecnologías de energía renovable en la manufactura, lo cual puede disminuir los costos de energía a largo plazo y mejorar la rentabilidad.

Product and service diversification

Innovation management opens the door to diversification, allowing traditional companies to expand into new markets and customer segments:

New product development: Companies can introduce innovative products that address unmet needs. A company in the building materials industry can develop environmentally friendly and durable materials, such as bricks made from recycled waste.

Extending product lines: Innovating can also mean improving existing products or adding new features. An appliance company can incorporate Internet of Things technology to make its products smarter and more connected.

Improved customer relations

Innovation in customer relationship management can significantly improve customer loyalty and satisfaction:

• Customer experience: Implementing new technologies to improve the customer experience, such as mobile apps for order tracking or automated customer service via chatbots, can differentiate a company from its competitors.
• Rapid feedback and adaptation: Using innovation management tools to collect and analyze customer feedback enables companies to quickly adapt their products and services to market preferences.

Brand strengthening and market positioning

Companies that stand out for their capacity for innovation can strengthen their brand and improve their market positioning:

• Reputation for innovation: Being recognized as an innovative company can attract customers, partners and talent. A traditional company that constantly innovates can position itself as a leader in its industry.
• Sustainable competitive advantage: The ability to innovate continuously and systematically creates a sustainable competitive advantage over the long term. Companies that can anticipate and respond quickly to market changes are better positioned to remain relevant and competitive.

Conclusions

The integration of innovation management in traditional industries is a powerful strategy that can transform these organizations, enabling them not only to adapt to market changes, but also to lead in their respective sectors. Throughout this article, we have explored how new approaches to innovation management are improving traditional industries and providing significant competitive advantages.

It is essential to emphasize that integrating innovation management into traditional industries requires adapting these approaches to specific contexts, leveraging their principles to overcome challenges and maximize benefits, which can range from improved operational efficiency to product diversification and enhanced customer relationships. These advantages strengthen companies’ market position and enhance their ability to compete in the long term.

References

1. UNE 166000:2014 Standards. “R+D+i Management: Terminology and definitions of R+D+i activities”. Spanish Association for Standardization and Certification (AENOR).
2. OECD Oslo Manual (2018). “Oslo Manual 2018: guidelines for collecting, reporting and using innovation data”. OECD Editions.
3. Hamel, G. (2000). “Leading the Revolution”. Harvard Business School Press
4. Porter, M. E. (1985). “Competitive Advantage: Creating and Sustaining Superior Performance”. Free Press.
5. Christensen, C. M. (1997). “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail”. Harvard Business Review Press
6. Schumpeter, J. A. (1934).”The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle”. Harvard University Press
7. Tidd, J., Bessant, J., & Pavitt, K. (2005). “Managing Innovation: Integrating Technological, Market and Organizational Change”. Editorial: John Wiley & Sons