Innovations as company development tool
Introduction: Concept of innovations
The concept of innovation can be understood with varying degrees depending on the way it will be interpreted. Innovation is a series of activities leading towards creation of new or improved products, technological processes or organizational systems1. Generally speaking, this is a novelty that is introduced in order to improve the initial state. Most often, this term means technical and IT solutions.
If we look at press reports in recent years, the word “innovation” appears so often, that we can make the statement that “the 21st century is the age of innovation”. Progress that has taken place over the last dozen or several dozen decades is enormous, computerization has flooded the world and there are practically fewer and fewer industries that have not been affected by it, and there are more and more ones that have been significantly changed or even got fully conquered by new IT solutions.
Enterprises in the market want to be described as innovative. This increases the company’s prestige, the way it is perceived on the market, and most importantly – a well thought-out implemented innovation gives an impetus to the company’s development and increases its value.
Openness to innovations
When it comes to the innovations, the first element is how to approach them. The market is divided into those who create innovative things, products or services and use them for their purposes, and those who create innovation primarily for others. In the second case, not everything depends on the creators. At this point, the potential client must be opend to the new ones, sometimes take a risk, leave the “comfort zone” and show willingness to use them. Sometimes enterprises see nothing desirable in innovations because they generate costs, veryfied solutions seem much better and there are no threats that the methods which are effective today will be outdated soon and the costs of their improvement or adjustment to the requirements will be greater.
Areas of innovations
Considering different types of enterprises, you can find a lot of areas in which innovations will find use. It is worth to remember that innovation is a very broad concept, so the multitude of areas should not be surprising.
To begin with communication between employees – in many companies there are problems in this area because communication is for example ineffective or in some ways difficult. Another area is the data management system. Each company creates a huge amount of data which must be stored, and what is more important – well protected. Going further, companies can optimize and modernize the way of orders, storage, waste management, production method, etc. Practically in every area there will be something unnecessary, something that works inefficiently or something that can be organized in a completely different way.
In the literature, innovations are not clearly divided. Due to the wide range of this concept, there are many classifications which divide them – depending on the different points of view. The easiest division of innovations divides them into products and services2. Another example may be company’s inner division into innovations, which improve its actions and external, which are prepared for distribution on the market and aim to get the customer’s attention.
Innovations are capital-intensive. Often, what stands in the way of innovations is the cost of introducing them. At a given moment they are too expensive to be profitable and they have to wait for some time “in a drawer” until more favorable conditions for their use are found. To create a service, product or unconventional solution, in many cases it requires not only weeks but months or years before the problem is resolved. For this purpose, during this time, funds must be spent so that its implementation in the future can be completed. However, money is not always available for such purposes.
As presented in the chart above3, the outlays in 2016 increased by over 80% in relation to the expenditure from 2010. The increase in research and development expenditures will translate into a growing number of useful solutions, innovative products and will allow our economy to develop.
In the next chart4, expenditures on innovative activity in enterprises in PLN million are presented. What is included in such expenditures? In expenditures on innovative activity, there are expenditures on research and development […] and everything related to their production; purchase of software; purchase and assembly of machinery and equipment for construction; staff training in connection with innovative activities; marketing […]5. Moreover, we can see an upward trend in expenditures up to a slight drop in 2016. The increase in outlays is always a positive information, because it is a signal that in Poland the need to search for innovation is noticed.
Increased invensment in innovations can be seen both in cash and in relation to GDP. Polish enterprises are increasingly willing to invest in innovations and cooperate with other entities in the field of innovative activity. In 2010-2016, the expenditures of this sector on R & D in relation to GDP increased more than threefold – from 0.19% in 2010 to 0.63% in 2016, and in absolute terms – by PLN 9 billion6. It can be clearly seen that 2016 was not good for all types of investments, however it was a forecast that the next years will be better in this field. An important information included in the report is that expenditures on R & D are still primarily borne by large and medium-sized enterprises7. This is related to capital intensity of investments in innovations and the fact that small and medium enterprises can not afford such an activity.
Influence on innovations
Stakeholders who are assosiated with the enterprise got an impact on its innovative activities. We can distinguish three groups that can effectively “force” the introduction of information in a specific company:
Clients – this market always verifies each idea. If a specific innovation seems to be a great idea but on the other hand it generates costs for an enterprise, the customer may come to conclusion that by increasing the final price of the service or product it will no longer be attractive to him despite presented innovation. I have no doubt, that innovations always translate into customers. It is important to meet their expectations and to guarantee that the final price of the product will not be excessively high8. Therefore, it is necessary to take into account the impact on whether the product will still be attractive to the customer after refining the product or service.
Competitors – enterprises which are introducing innovations on the market are giving themselves an advantage in some aspect of the activity – it can not remain unanswered. Competitor’s behavior does not happen in vacuum and can have a big impact both in the short and long term.
Political / legal environment – legal issues created by the political environment, which often forces some changes or modernization of the company’s operation. Trends in politics or the current country or region situation may also have an impact on the way the company operates.
Considering all the environments that affect an enterprise, sometimes it happens that it may be “forced” to be innovate, although it does not aim for it. This is because enterprises do not work in vacuum, but in a market that is like a system of connected vessels. If the market is maintained by new solutions, someone can gain a larger share of the market or change the situation prevailing on it.
How to behave?
Monitoring activities undertaken in the company’s environment is the basic activity of market analysis. Situations and conclusions can be interpreted in a variety of ways. Market stagnation or prevailing calm may not be encouraging to take action that would lead to a complete change in the situation. On the other hand, it is also a great opportunity to take action and achieve benefits before someone else chooses to take it. A good example is the signal coming from the Polish power industry, which is in a worse position than similar industries in other European countries. How to find lost profits? The industry suggests that modern technologies are the solution. Three years ago at PGNiG, we came to the conclusion that the supply chain, the entire business, will not function properly in the future without focusing on innovations. […] Without innovations, there will not be a cheaper and better offer for the customer9. The energy industry has noticed its problems and started to take action to make up for the lost distance.
Research and development are areas that should be closely watched and properly developed by enterprises. Developing and adapting own solutions or technological know-how is a good way to build solid foundations of the company and give it more value.
Observing competitors is always less effective, often a non-surprising element, however it allows you not to be left behind. Of course, we are not talking about copying everything that our competitors introduce or offers in a 1: 1 ratio, but when it comes to proven solutions that have been accepted with positive recognition and verification of the environment, it is worth considering adaptation or even improvement.
In a study ran by the Central Statistical Office for 2012-2016, it was specified that over three-quarters of industrial and service enterprises did not implement innovations due to the lack of arguments standing for them. Other entities were considering introducing, but the barriers proved to be too high. Two factors causing non-implementation of innovations were the lack of good ideas for them and the lack of the need to introduce them due to low competition on the market.
The process of introducing innovations may have several types of goals, depending on people introducing them and thier personal motivations. Another issue is the type of industry and also the area that needs to be improved.You can specify several goals that guide innovations: – increasing market shares, – improving the production process or the service offered, – improving the company’s operation from the inside, – company’s opinion, the way it is perceived from the outside, – cost reduction, – maximization of income, – opening up to new markets, – environmental aspect.
Thesedays, innovations are one of the most important tools that can be used to develop a company. Very often, significant financial resources and possession of technological know-how are needed to introduce innovations. It is worth to observe market trends and the company’s environment to make the best use of solutions offered by the market. Do not be afraid or closed to the new solutions. A trait of our time is the “new” displacing “old” practically in every field. Appropriate selection, observation and drawing conclusions allows us to control the situation by not missing any changes – unless they are adapted in a timely manner, in the future those changes may turn out to be unreachable.
1Management Encyclopedia https://mfiles.pl/pl/index.php/Innowacja
3Chart based on data from z http://strateg.stat.gov.pl
4Chart based on data from z http://strateg.stat.gov.pl
5Chart based on data from http://strateg.stat.gov.pl
8Rafał Milanda’s quote, Vice President of PERN w artukule www.money.pl/sekcja/forum-ekonomiczne-w-krynicy-2018/innowacje-branza-energetyczna,10,0,2415370.html