Convenience

technical
innovations
A change in the
appearance or
performance of a
product or service or
of the physical
processes through
which a product or
service is
manufactured
managerial
innovations
A change in the
management
process in an
organization
product innovations
A change in the
physical
characteristics or
performance of an
existing product or
service or the
creation of a new one
process innovations
A change in the way
a product or service
is manufactured,
created, or
distributed
212
Part 3:
Organizing
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difficult for managers and other members of an organization. Thus, resistance to change
can slow the innovation process.
Promoting Innovation in Organizations
A wide variety of ideas for promoting
innovation in organizations has been developed over the years. Three specific ways for
promoting innovation are through the reward system, through the organizational
culture, and through a process called
intrapreneurship
.
31
The Reward System
A firm’s reward system is the means by which it encourages
and discourages certain behaviors by employees. Major components of the reward
system include salaries, bonuses, and perquisites. Using the reward system to promote
innovation is a fairly mechanical but nevertheless effective management technique. The
idea is to provide financial and nonfinancial rewards to people and groups who develop
innovative ideas. Once the members of an organization understand that they will be
rewarded for such activities, they are more likely to work creatively. With this end in
mind, Monsanto gives a $50,000 award each year to the scientist or group of scientists
who develop the biggest commercial breakthrough.
It is important for organizations to reward creative behavior, but it is vital to avoid
punishing creativity when it does not result in highly successful innovations. It is the
nature of the creative and innovative processes that many new-product ideas will simply
not work out in the marketplace. Each process is fraught with too many uncertainties to
generate positive results every time. An individual may have prepared herself to be
creative, but an insight may not be forthcoming. Or managers may attempt to apply a
developed innovation, only to recognize that it does not work. Indeed, some organiza-
tions operate according to the assumption that, if all their innovative efforts succeed,
then they are probably not taking enough risks in research and development. At 3M,
nearly 60 percent of the creative ideas suggested each year do not succeed in the
marketplace.
Managers need to be very careful in responding to innovative failure. If innovative
failure is due to incompetence, systematic errors, or managerial sloppiness, then a
firm should respond appropriately, for example, by withholding raises or reducing
promotion opportunities. People who act in good faith to develop an innovation that
simply does not work out, however, should not be punished for failure. If they are,
they probably will not be creative in the future. A punitive reward system will discour-
age people from taking risks and therefore reduce the organization’s ability to obtain
competitive advantages.