Organizational Innovation

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University of Nairobi *

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DMA 302

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Management

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Nov 24, 2024

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Uploaded by DeanFlamingo2695

1 Organizational Innovation Name Institution Course Code Instructor’s Name Due Date

2 Organizational Innovation Metrics are important in measuring the level of success of innovation initiatives. Before an organization can begin to measure its innovation level, it needs to set innovation initiatives that align with overall business goals. A measure of the impact of a company’s innovation process sums up its level of innovation on its leadership, capacity, structure, and culture (Savkin, 2017) with metrics such as the number of new products launched, the revenue generated from these new products, the company’s Reserch and Development (R&D) budget, total R&D headcount, The number of active projects, and the number of ideas submitted by employees. Using metrics to assess organizational growth is a tool for innovation management that identifies organizational processes for incremental or disruptive innovation. For instance, metrics such as a large number of active products show an incremental innovation since there have been new products already in circulation. This metric is a good measure of innovation since a small number of active products shows decremental innovation. Additionally, R&D is a measure of innovation. R&D headcount evaluates the input in a particular project (Kaplan, 2021). However, R&D headcount alone cannot be used to measure labor efficiency since it also needs output levels. A high R&D headcount levels indicate a high level of innovation, while a low headcount shows little or no innovation. An increase in each of these metrics over time is an indicator of increased innovation. R&D creates new products meaning that there will be an increase in the number of active products. An increased level of R&D headcount signifies a high probability of new products. It is important to note that a large R&D team has a large pool of creative ideas compared to a

3 small R&D team. From the data provided, AMBB Inc. is more likely to have an organizational culture that supports innovation. This conclusion is arrived at, following factors such as tracking the time employees spent in experimenting with new products. A company cannot use all of its employees’ time testing new products when other productive activities to be undertaken. However, keeping track of time used to experiment with new products shows that a company values and appreciates innovation. A high amount of non-R&D staff time spent experimenting with new products shows that an organization values innovation. Unless innovation is part of an organization’s culture, it will feel that involving non-R&D staff is a waste of its resources, which can be redirected elsewhere. There are scenarios when an organization having more patents would not be a good indicator of an innovation culture. Patents are exclusive rights granted following an invention. Having a large number of them doesn’t mean that a company will create products out of it. A faulty R&D system will create many inventions which cannot be replicated for business purposes. Additionally, innovations around technology could become outdated very fast. This is because technology is a dynamic field, and each day brings new changes in the sector. Stockpiling patents in a dynamic field will render them useless due to market shifts. From the table provided, the number of active projects is a metric that is a good measure of innovation. However, a huge limitation to this metric is having a high number of projects that generate products that are not differentiated. This may lead to deal stock, making the company incur additional storage costs. Besides, these projects could not have resulted from innovation and could have been carried from a previous period. Also, the

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4 percentage of sales from new products will show the revenue generated from innovation. However, if a company is not careful, it may have a misconception that a certain new product is in demand, and they choose to focus on it while ignoring other products with a good market share. The metric on the number of patents in the last four years is a good metric but is limited by the fact that some of these patients could be useless. Through combining several metrics, some of these limitations could be avoided. For example, the number of products launched in the past four years and the percentage of sales from the products introduced in the last four years could be used jointly to evaluate the level of innovation. Besides, business intelligence can be used for data collection and analysis for decision-making. It can also be used to visualize the innovation metrics for easy tracking and evaluation. Reference

5 Kaplan, S. (2021). The complete guide to innovation metrics – how to measure innovation for business growth. InnovationPoint. Retrieved from http://www.innovation-point.com/innovationmetrics.htm (Accessed on 30 November 2021) Savkin, A. (2017). How to measure and manage innovations with KPIs. BSC Designer. Retrieved from https://bscdesigner.com/innovation-kpis.htm (Accessed on 30 November 2021)

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