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Part I: Essay
Innovation is proving to be crucial to firms in keeping up with the markets and building up its
competitive advantage. Innovation may be in the form of product, process, methods, business
practices, which can have a wide range of implications in the way business can be conducted.
Innovations generally require big investments, both in the form of cash, and even non-cash
items, such as time, effort, etc. With these considerations in innovation management, it is
important to measure how well the innovation process is being implemented and how effective
the results are.
There is a vast array of academic literature that aims to provide structure and frameworks on
how to measure innovation. Research shows firms that use predefined innovation metrics to
assess their innovation programs do better than ones who do not. The most commonly used
metrics are levels of profit from new products or percentage sales of new products. Many have
come up with their own indexes of best practices and comprehensive lists on the different
dimensions of innovation as well.
However, most of these metrics measure innovation in a way that is quite systematic, losing
sight of the fact that innovation is largely dependent on novelty. Thus, innovation entails leaps
and risks that may not be quantifiable at all times. Not to disregard these metrics entirely,
because these are valid measurements of innovation. Moreover, using these metrics measures
innovation in an almost fixed and automated way. But this must not be at the ignorance of the
fact that at large, innovation cannot entirely be calculable.
At this point, proponents of contingent measurements of innovation come into the discourse,
introducing metrics that adjust according to the nature of the innovation. Some frameworks view
innovation as a process and that metrics must be adaptive and constantly reevaluated,
depending on the project timeframe and the scale of innovation. Other proponents view
innovation as a relationship between inputs and outputs and that metrics on these must be paid
great attention to, while others focus on the research and development aspect of innovation.
Some argue that the essence of innovation is novelty and that a predetermined measure would
derail and limit its perceived effectiveness.
A metric that further moves the discussion forward is Shapiro’s (2006) proposed way of
measuring innovation beyond profit from an accounting perspective, integrating both a fixed and
a variable aspect in measuring innovation. Shapiro contests the idea of measuring innovation
solely as a percent revenue from new products, because it does not wholly represent
innovation. This metric merely shows the change in monetary value, or in financial terms
additional cash flow, but does not clearly reflect what “new” means, what scale or the quality of
“new”-ness, what the time frame is in which the “new”-ness can still be called so, and what kind
of innovation is actually being measured. Shapiro discourages relying too much on this metric
and suggests to simply think of it as just another metric.
With this, Shapiro proposed a new metric in supplementary of percent revenue from new
products, which introduces a variable and contingent aspect to measuring innovation. This new
metric is the percent revenue from new platforms. Although still a measurement in terms of
monetary value (i.e. revenues), it focuses less on the currency but more on the quality of
newness or innovation. In other words, it measures how much of the new revenues come from
platform innovation. This metric relies on the presence of new platforms that can dramatically
change and improve a business process is conducted. Platforms are powerful a way that it can
produce not just incremental improvements for the firm, but create a long-term source of
competitive advantage when executed and implemented well. Platforms can be in the form of
technologies, marketing strategies, operational processes, or even a business model. It is
contingent and up to the firm to fully define what platform innovation they are measuring. It
represents a new way of doing things at a groundbreaking level or a higher level. The extent of
its effects are wide and it produces growth and leverage for the firm.
Shapiro proposes to combine the two measures together, which provides deep and insightful
results. For instance, if a firm rates high in percent revenue from new products but low in
percent revenue from new platforms, it could mean that the firm may be responding well to
innovation from competition by introducing incremental improvements to products, however,
from a broader perspective, there is nothing radically innovative about the new product which
would have been brought about by a new platform. Another example is if a firm rates low in
percent revenue from new product, but rates high in percent revenue from new platforms, this
could be an alarming signal that the firm is not able to take full advantage of new platforms that
it has invested on. If a firm rates low on both metrics, then it is likely that the firm is not
innovating and might not be in a good long-term strategic position. Lastly, if both metrics are
high, it is also possible that new products are cannibalizing old products. Although this might not
necessarily be a bad thing, since at one point obsolescence is a possibility anyway, it is
important to identify how big of a concern this is for the firm. These are just examples of
possible interpretations of the result of combining both metrics. In actual business situations,
interpretations vary from firm-to-firm and depend on numerous factors, both internal and
external.
This is a more effective indicator because the variable aspect of this metric takes into account
management of innovation considerations, strategic innovation planning contexts, and the
quality of the innovation’s impact to the firm. It includes external-related factors and considers
innovation from a broader perspective and thus, can provide deeper insight into the
measurement of innovation beyond the internal limitations of a firm. The impact of the
innovation may be attributed and traced back to its real source, providing valuable information
that firm will benefit from.
This is reflected in the fact that it is not a simple feat for a firm to define what a new platform is
and to measure revenues from new platforms. There is no strict definition of what a platform is,
therefore the firm has to decide for itself what can be considered as a new platform and what
that means for their firm. In short, measuring this requires deep knowledge and insight on the
firm and the industry it is working in. It also requires someone with a high level of analytical and
managerial skill to make the correct assessments and strategic decisions.
Furthermore, the metric also provides insights on the company’s implementation of its strategies
and other operational concerns. When a company creates and implements a strategy, it is
essential that all of its different units are working together towards a singular goal and
undertaking a single strategic position. It cannot be taken away then that the actions of one are
highly likely to affect other units. Thus, lower than expected results may be due to an
inefficiency stemming from another internal unit, or externally from market conditions and
technological progression. With this, Shapiro’s metric could be a very useful tool to evaluate
how well the firm as a whole is executing and implementing its innovation efforts. This
strengthens the idea that innovation cannot be done just for the sake of innovating, but because
it is in line with a firm’s corporate strategic thrusts.
Lastly, Shapiro’s metric may help firms easily identify if the innovation is incremental or radical.
The metric provides insight on the scale of the effect that the innovation has brought to the firm
and how the that is translated to the product and the costumers. For example, if a firm rates
high in percent revenue from new products but low in percent revenue from new platform, the
increase in revenues may be attributed to new products. However, there is no platform
innovation behind it that may evidence an innovation substantial enough to signify radicalness.
The market may simply be responding well to the new product improvements, or perhaps the
market pull is strong enough to have that significant positive effect on revenues. However, there
is no evidence that just because a lot of consumers are buying the new or improved product, it
can immediately be considered a radical innovation.
At the end of the day, there is not one all-encompassing metric for assessing innovation.
However, a lot would agree that it can be looked upon in a contingent and systematic way,
wherein metrics must be aligned with internal and external conditions of the firm and must be
banded together with the firm’s top corporate objectives. This provides a more holistic and
effective approach in measuring innovation, which has become essential in sustaining long term
competitive advantages for firms.
References:
Shapiro, Amram R. “Measuring Innovation: Beyond Revenue From New Products.” Research-
Technology Management, vol. 49, no. 6, 2006, pp. 42–51.,
doi:10.1080/08956308.2006.11657407.
Tohidi, Hamid, and Mohammad Mehdi Jabbari. “Providing a Framework for Measuring Innovation
within Companies.” Procedia Technology, vol. 1, 2012, pp. 583–585.,
doi:10.1016/j.protcy.2012.02.127.
Part II: Movie
The Imitation Game was a stirring historical drama film about mathematician and cryptanalyst,
Alan Turing, and his work for the British government of decrypting German intelligence codes
during World War II. The Enigma was the machine used by Nazis in communicating to their
various units everything from weather reports to military intelligence, such as the location of
their next attack. Given Turing’s obsession with analyzing extremely difficult puzzles, he sought
to take a crack at solving the most difficult puzzle at the time, the Enigma. What was especially
difficult with the Enigma is that it is reprogrammed every 24 hours, thus any progress at
cracking the code today is no longer applicable tomorrow. Despite this challenge, Turing was
able to think of and to create a machine called Christopher that would would decrypt all coded
messages received from the Enigma, helping Britain win the war against Germany. A machine
with such computing capabilities and sociopolitical impact did not come often, especially during
the 1950s, and the invention was considered to have helped pave the way to what we know
now as the computer. Thus, in retrospect, the machine played a pertinent role in the progression
of human creativity and computing technology to where we currently are. This, then, demands
that we explore its innovational properties.
Without a doubt, Christopher was an innovation that radically changed the odds of Britain
winning the fight against the Germans, through both its intended and unintended consequences.
When viewed from wider lenses, the product impacted not just the course of the war, but
technological progress as a whole. Turing’s innovation was one of the earliest forms of
reprogrammable computing devices and fast forward to now, what we know as our the gadgets
we use daily. Indeed, albeit a long and difficult process, innovation needed to happen as there
was nowhere else to go but to explore and to maximize growth opportunities for a greater future
impact on the human race.
Bonus:
Based on your collaboration experience with your startup partner team, what are your insights
and realizations on technopreneurship? What does it take to be a successful Filipino
technopreneur?
The concept of a startup company is not new and has been quite a buzzword in the recent
years. Upon working with Doc KM and the rest of the Veris team, some of my realizations on
technopreneurship in the Philippines are as follows.
There is no lack of highly skilled individuals who have good ideas and possess the capabilities
to implement new technologies, especially from the context of a third-world country like the
Philippines. However, it is also because of the state of our economy that there exists numerous
hurdles that hinder startups from fully realizing their products’ commercial potential. This is not
to say that startups abroad do not experience hurdles, but startups here experience a unique
set specific to the Philippines economy. With these, the main hurdles stem from weak
government systems, poor infrastructure, and slow adaptiveness of consumers.
It is also true when they say that the Philippines has low ratings in ease of doing business due
to factors that hinder foreign investors from doing business here. The innovation ecosystem
exists, but lack sufficient support from private and public sectors. Limitations and inefficiencies
are further presented by the government and other institutions on issues such as licensing
rights, regulatory concerns, and other systematic inefficiencies.
While the mentioned concerns are beyond the control of startups, another crucial element in
surviving the first few years of operations that is also partly within their control is fundraising.
There are institutions that provide support to tech startups, but there is a general perception that
it is not enough in proportion to the demand. Although this may not be unique to the Philippines,
it is indeed a challenge to look for equity investors who will believe in your business idea.
Although money is not the one determining factor that creates a successful tech startup, it is
quite an important element, as these funds fuel initial operations and move startups forward.
On the flipside, conducting technopreneurship in a third-world country also has good points.
One of these is that there are more opportunities to use technology to provide solutions to
actual problems, precisely because the country is falling behind its more progressive peers like
Singapore or Taiwan. Thus, there is a wealth of pressing problems that can be provided tech
solutions to, addressing long-standing concerns such as garbage, pollution, poverty, and so
much more.
Creating one or working for startups is not an easy feat. There are numerous risks involved and
returns may not always be in the form of money. However, being exposed to such a community
is only telling that there is big potential for these startups and that there are people who are
working very hard to realize this potential. But more importantly, a central theme that integrates
all of these, is the role that technology and innovation plays in creating solutions to problems,
which will push the country and its citizens forward to a more progressive future.
Final Exam additional bonus #1
This Hollywood Golden Age actress produced several inventions, and has worked on research
that would later help in the development of Wi-Fi, CDMA and Bluetooth technologies. Name this
actress (stage name only).
- Hedy Lamarr