Post on 20-Jan-2016
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SPECIAL TOPICS IN STRATEGIC MANAGEMENT OF CONSTRUCTION COMPANIES
Matineh EybpooshGülşah Fidan
OutlineWhat is/not Innovation?Advantages of InnovationTypes of InnovationModals of InnovationSuccess of Innovation ProcessComponents of Innovation ModelMeasuring Innovation
What is Innovation?The mostly emphasized aspects of innovation
within the literature are “new”, and “changes”, “opportunities”, “creative ideas”, “adoption of organization”, and “value creation”
A process of turning opportunities into new ideas (Drucker, 1993, Tidd et al., 1997), adoption of these ideas within the organizations ( Zeltman et
al. 1973, Damanpour, 19991) and successful applications of the resulting novelties (Pries and
Janzsen 1995) such that they provide value to the organization.
What is not Innovation? Innovation vs. Invention: Invention is a detailed design or model of a process or
product that can be distinguished as noval compared to existing ones. Innovation is the actual use of a nontrivial change and improvement in a process, product or system that is novel to the institution developing the change.
Invention is the conversion of cash into ideas. Innovation is the conversion of ideas into cash.
For invention to become an innovation, the organization needs to be introduced to the invention and invention should add value to the organization in some way.
Innovation(Commercializ
ed)
Invention(Not
commercialized)
What is not Innovation?Innovation(R&D&C) vs. R&D:
Innovation can be described as the result of some amount of time and effort into researching (R) an idea, plus some larger amount of time and effort into developing (D) this idea, plus some very large amount of time and effort into commercializing (C) this idea into a market place with customers .
Advantages of InnovationInnovation is closely linked with
competitivenessInnovation has deep impact on both
“Differentiation” or “Cost Leadership”The uniqueness of the products/services
increases the level of “satisfaction of the client”
Innovation in value chain may result in “time and cost savings”
Innovation Characteristics Strategic Advantages
Novelty Offering something no one has done before
Complexity Keeping entry barriers high
RobustnessImproving the basic model by extending its life and reducing overall cost
Radical Nature Carrying competitiveness into a new dimension
Continuous Incremental Innovation
Continuous improvement inperformance
Advantages of Innovation
However, the effect of innovation on competitiveness is dependent on the “nature of the market” and “client characteristics”
Tidd et al. (1997)
Reasons of Low Innovation in Construction Industry
CRC,Construction Innovation Survey Report,2005
Importance of Innovation in Construction Industry
Innovation should be better understood in construction industry because:
Construction plays an important role in the national economy
Due to the great size of workload, competition is high
Industry is directly related with human health and environmental safety
Types of Innovation according to Its Process - Extend of InnovationInnovation can take many forms regarding to its
process:
Evolutionary-Revolutionary
Incremental-Radical-Modular-Architectural
EvolutionaryIncremental
Modular
RevolutionaryRadical
Architectural
Extend of InnovationIncremental: Improve the existing functional
capabilities of a technology by means of a small scale improvements in the technology’s value adding attributes such as performance-safety- quality- cost
Radical: Introduce new concepts that depart significantly from past practices and help to create products or processes based on different sets of engineering or scientific principles, such as; opening to entirely new market
Modular: Incremental innovation that leads to creation of a new but not radically different system
Architectural: Introduce the notion of change in the way in which the components of a product or system are linked together
Extend of Innovation
Most commo
n
Least commo
n
Types of innovation according to its contentThere are different classification for types of innovation
within literature:
Technical-Non technical
Product- Process-Market- Organization-Resource
TechnicalProductProcess
Resource
Non Technical MarketOrganization
Types of InnovationProduct Innovation: Introduction of change in
end product/service or their quality
Process Innovation: Introduction of change in products/services delivery methods
Market Innovation: Opening of a new market
Resource Innovation: Change in sources of raw material supply
Organizational Innovation: Change in characteristics of organization structure
Type of Innovation
CRC,Construction Innovation Survey Report,2005
Panelized system usage (flat panels are manufactured in factory and erected on site)
Buildings erected by usage of panelized system will have better heat and voice isolation compared to ones constructed by traditional system
Types of Innovation in Turkish Construction IndustryMarket Innovation:
Most common type of innovation in Turkish construction industry
Creating new International Markets and most of the times being the first entrants (e.g. Libya, Russia, Turkmenistan, etc.)
Unrelated Diversification (e.g. Cleaning mine fields in Afghanistan)
Backward Integration (e.g. Creating sub-markets such as pre-fabrication and construction material products)
Process Innovation: Change in conventional methods due to problems faced at
site (e.g. New methods for road asphalting in high temperature difference between day and night)
Types of Innovation in Turkish Construction IndustryOrganizational Innovation:
Restructuring processes in the company organization as a requirement for ISO standards
Re-identification of company mission (e.g. Becoming administrative investor instead of being a general contractor)
Product Innovation:
Most rare in Turkish construction industry due to low R&D activities
Producing alternative products (e.g. New concrete type by using a special admixtures, or new formwork systems)
Models of InnovationFirst generation: “Black Box Model” The innovation itself is
not important and the only thing that count are input and output (e.g. Money invested in R&D and patents)
Second generation: “Technology Push and need pull” it is developed after the recognition of the importance of the market place and demands of potential consumers of technology.
Third generation: “Coupling and integrated models” innovation process as a complex net of communication paths linking the firm to the broader scientific and technological community and market .
Forth generation: “networking and national systems of innovation” firms that do not have large resources to develop innovation in house can benefit from establishing relationship with a network of other firms
Fifth generation: “evolutionary models” innovation are seen as equivalent to mutation by considering the Population Perspective, Interactions, and External Environment.
Sixth generation: “innovative milieux (environment)” states that innovation stems from a creative combination of generic know-how and specific competencies.
Milieux Innovation ModelMilieux innovation model’s components:
Innovative FirmsInter-firm and inter-organizational interactions
Private or public institutions support
Specific cultureDynamic collective learning process
Even if all these mentioned components exist in a productive system, there is no guarantee that each innovation attempt will be successfully commercialized.
Success of Innovation Proccess Fundemantal components of innovation success
Technical Resources
Organizational Capabilities
Good communication environment
Strong customer orientation
Good technical supportDynamic, open
minded, supportive management
Flexible structureRisk taking ability Strategic Integration
Modeling Innovation Management in Construction
Innovation in construction industry should not be studied like any other sector due to distinct characteristics:Project-Based NatureVariaty of ProductsSensitivity of Value Chain to Environmental ConditionsRelationships Among Project StakeholdersDifferent Organizational Context of Innovation
Tailor-made models are required for modeling Innovation Management Process in Construction Industry
Business Strategies
Human ResourcesTechnologyMarketingKnowledgeInnovation
Business Environment
Change DriversSources of Ideas
ObstaclesInternational Competition
CRC Construction Innovation
InnovationTechnologicalOrganizational
CRC,Construction Innovation Survey Report,2005
Dikmen et al. 2003
Innovation Strategy
The Organizatio
n
Drivers/Barriers
Company Target
1.Role of Drivers/BarriersDrivers/barriers affect the innovation process
The driver/barrier component is represented by a resistance in the model
When environmental factors acts as barrier the length of the resistance increases which makes innovation more difficult to be generated
The existence of a driver decreases the length of resistance or even diminishes it
Drivers/Barriers of Innovation in Construction Industry
Factors hinder-support innovation which are independent from other components
Country level Political, Economical, Social conditions
Industry level Uniquness of construction projects (there is no or very little need
and incentive for construction companies to innovate) Low profit margins, high fragmentation, low entry barriers,
intense rivalry (companies prefer low-risk survival strategies rather than high-risk innovative strategies)
Immobility, durability, high cost, complexity and great social responsibility of construction products and their deep impacts on quality of life (project parties hesitate to try new products/processes)
Weak patent possibilities and low profit margins which limits R&D activities
Uncertainty in market conditions
Drivers/Barriers of Innovation in Construction Industry
Bossink, 2004
Drivers/Barriers of Innovation in Turkish Construction Industry
Due to results of a survey related to Turkish construction industry, most important
barriers/drivers are as follow:Country based
Political Conditions
Economical Conditions
Legal Conditions
Cultural Conditions
Industry Based
Image of construction industry
Current rules and regulations
Price based competition
Variation in work load
Project based nature
Significance of consumer
Investment in R&D
2.Role of OrganizationInnovation capability of the company is determined by:StructureLeadershipCultureKey IndividualsTeamworkInformation & CommunicationEmpowermentOrganizational Learning Costumer Orientation
The strength and effectiveness of these components determine the weight of the circular in the model which determine the ease of dealing with barriers
and benefiting from drivers (Support/Hinder innovation)
Role of Organization in Turkish Construction Industry
Organizational Properties
Client Orientation
Company Culture
Teamwork
Organizational Learning
Key Individuals
Information and Communication
3.Role of Innovation StrategyStrategies are used to achieve objectives of the
company by increasing innovation capabilities
The Innovation strategy determines;
The reasons of innovation of the company (Why?)
Tactics and strategies used to innovate (How?)
Sources that the innovation is originated (From Where?)
Reasons of Innovation in Construction Companies
CIOB, Innovation in Construction: Ideas are the currency of the future Survey 2007
Strategies for InnovationStrategies used by companies are directly related to innovative capacity of organizations
Improving Human Resource ManagementImproving Knowledge ManagementMore Detailed Environmental ScanningMore Investment in R&DDevelop Stronger Relations with Customers and
SuppliersMore BrainstormingImprove BenchmarkingConsulting with Academicians or Research
Institutes
Origins of Innovation in Industry
CIOB, Innovation in Construction: Ideas are the currency of the future Survey 2007
Origins of Innovation in Company
Top Management
Construction Site
Technical Departments
R&D Departments
Project Team
4. Role of Company TargetCompany Target designates major reasons
that derive the organizations to innovate
Innovations provide competitive advantages only if they fit to the pre-set objectives
For Turkish construction industry’s most important targets are:
Improvement of product/service qualityEntrance/creation of new markets Maximization of customer satisfactionLong-term profitability maximization
Measuring InnovationInnovation is a complicated phenomena having
Inputs and Outputs as well as Impacts on several performance indicators at firm and national level
Innovation measurement focuses on Products and related Production Systems that is based on;
Measuring Inputs to innovationMeasuring intermediate Outputs Measuring Impacts on several aspects of performance
Inputs
No. of ideas or concepts No. of people activily devoted to innovationSources of informationCapitalNetworksR&D spendingNo. of R&D projects
Contextual (institutional parameters)
Organizational factorsCountry factorsIndustry factors
Implementation
Tools, techniques, strategies
Outputs
No. of new products introduced/commercialized/ exportedNo. of new processes/services introducedIntellectual property
Impacts
Revenue growth due to new products or servicesShort and long term profitabilityIncrease in organizational effectivenessIncrease in technical capabilityImprovement of service/ product quality/processImprovement of organizational structureImprovement of human resourcesMarket penetration and growthBetter company imageInnovation collaborationsImprovement of client satisfaction
Metrics for Measuremen
t of Innovation
at Firm Level
Ozorhan et al. (2009)
ConclusionConsidering the definition of Innovation, the main
components and outcomes of innovation are adding value to the organization and providing competitive advantage
Mentioned Innovation Management Model shows that innovation strategies are main triggering factors for an organization to reach its targets in the presence of environmental barriers/drivers through using its core organizational competencies
As environmental barriers are out of the control of the company, the company should improve its core capabilities for successful innovations
Some Related References for Innovation: Marasin, R., Dean, J. and Dawood, N. (2007) “APPLICATION OF VISUALISATION TOOLS INPROJECT MANAGEMENT IN CONSTRUCTION INDUSTRY: INNOVATION AND CHALLENGES” Computing in Civil Engineering, 12(261): 91-102. Bossink, B.A.G. (2004) “Managing Drivers of Innovation in Construction Networks” JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT, 130(3): 337–345. Manley, K., McFallan, S. and Kajewski, S. (2009) “Relationship between Construction Firm Strategies and Innovation Outcomes” JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT, 135(8): 764–771. Manley, K. (2005) “BRITE Innovation Survey” Icon.Net Pty Ltd. Dikmen, I., Birgonul, M.T. and Artuk, U. S., (2005), “Integrated framework to investigate value innovations”, ASCE Journal of Management in Engineering, 21(2005): 81-90. Dikmen, I., Birgonul M. T. and Artuk U. S., (2003), “Innovation in construction: Evidence from Turkey”, Proceedings of the Joint Int. Symposium of CIB Working Commissions W55,W65 and W107, 2(2003): 396-407.
Thank You