INNOVATION AND RISK MANAGEMENT
Executive Summary 3
Innovation and Risk Management: An Introduction 3
Invention and Innovation: The Concept 5
Innovation to Achieve Growth 5
Innovation and Risk Management 6
Recommendations 9
Conclusion 9
References 11
Executive Summary
Innovation is leading to newer products and technology advancements in today's business scenario. While it promotes growth and profitability, there lurch equally good chances of running into grave business risks. It is important to a business to avoid risks; risks cannot be avoided in totality. The key lies in taking calculative risks by which the organization can reduce the chances of losses and increase the chances to make business gains and advancements. This is done by understanding the true meaning of innovation, the role of managing risks for successful product innovation and new product development. The components of the new-product can be used effectively to mitigate and manage new-product development risks. This paper discusses how Apple Inc. can innovate on its iPhone by, conducting new-product development, and using solar technology in phones. It also throws lights on associated risks and how the company can follow recommended steps to minimize or reduce the risks in new-product development.
Innovation and Risk Management: An Introduction
The concept of innovation is gaining importance in today's globalized world. Rapid changes are taking place, in technology, at a rapid pace. The skills and awareness of individuals are impacting the competitiveness of countries as a whole. In some economies, innovation is the key driver of the economy. With an increase in competition and environmental issue innovation remains a challenge. Innovation is impacting developed economies. More due to the service sectors which are more predominant in such countries. A continuous innovation is demanded to keep up with the pace of competitors and sales. Often innovation is thought of as a process conducted in laboratory scenario. However, it is much more than that. Innovation is doing something differently, which no one has attempted so far. It can be both changes in either product or process. Doing things differently involves huge risk as the innovation can be either a failure or success. It involves uncertainty and risk . Risk can be of varying nature like technological, organizational, societal, market, financial and turbulence risks . Such risks and uncertainty limit many innovations, from reaching the customers, due to the fear of failure. While risk taking cannot be avoided for growth, it is advisable to embark into calculative risk with guidance. This can be done by learning through theory, critical analysis and finding guidance through examples, etc. Innovation can be successfully attempted by identifying and controlling the risks associated with it. The survival as a business will depend on upon how effectively it manages the risks associated with innovation .
Apple Inc. is renowned for its innovation in products. Apple product, including iOS, iPad, iPod and iPhone have revolutionized the world of technology. It is a classic example of being an innovative company in technology space. The company is renowned for its out of the box innovations and sets itself as an example to be followed by its competitors. Its impressive financial performance is a proof of the success of its innovation and business model for about past 4 decades . The vision, mission, and goals themselves emphasize the importance of creating innovative experiences for the users .
This study will discuss how Apple Inc. applied innovation, new-product development, and risk management practices to be incorporated for strategic growth. It will discuss the stages which transformed Apple Inc. from a brainchild to an innovative success.
Invention and Innovation: The Concept
The invention refers to the initial occurrence of an idea whereas innovation is the primary attempt made to carry out that idea into a process. Innovation is often used interchangeably with the invention. But both invention and innovation differ in totality. While the invention is the creation of something new, innovation is using that product in a manner which no one else has used before . Innovation happens when customers change their old habits to fresh habits for using things .
If the iPod (by Apple Inc.) was a standalone product, it would not have attracted so much attention from buyers as there were many MP3 players into the market. iPod was made innovative by setting it a way apart from the then-existing MP3 players. The innovation came as a result of aesthetic design, ease of use, ergonomics, iTunes software, a website that can download songs for iPod. A class combination of these elements together made the iPod differ from MP3s and attracted huge customers and sales . While there are many laptops in the market, the exceptional light weight feature and ergonomics of Apple Mac book Air and Mac book Pro made them an outstanding innovation. These laptops are easy to carry, sturdy build an exceptional ergonomics (like backlit keypads). Another such innovation is Mac Mini, which is just the size of a palm and is replacing heavy CPUs (Central Processing Units) across the globe. It is attracting customers due to innovative design, small size, processing speed and the ease of carrying the computer while traveling.
Innovation to Achieve Growth
Growth is strengthened by innovations, which lead to advancement in technology. The human race has witnessed a tremendous growth in standards of living due to evolution in technology led by innovation. Innovation is considered to be a major factor that determines industrial growth and progress for a nation. Innovation transforms itself into growth by economic activities like creation and distribution of goods and services. This leads to scientific and technological advancements which in turn creates growth for nations . Companies are using innovation for their growth as it contributes to increased profits and revenues. Innovation is turning out to be a competitive necessity for organizations .
Apple Inc. has supported the growth throughout the economy in Cupertino by providing full-time jobs, income to employees, supporting local businesses, fiscal impact on Cupertino, revenue generated by property tax, revenue generated by sales tax, construction, and investments. Its yearly sales have touched $156 billion; it employs about 16000 people; it spends about $4.6 billion in local businesses, Apple Inc. is a turning point for the economy of Cupertino .
Innovation and Risk Management
Innovation ignites the chances of risks due to its newness and uncertain nature. International businesses involve commercial risk. Whereas, the cross-cultural risk, country risk and currency risk. Commercial risk involves weak partners, operational problems, and timing of entry, competitive intensity and poor execution of strategy. Cross-cultural risks include cultural differences, negotiation patterns, styles of decision making, ethical practices. The country risk involves government intervention, red tapes, and unfavorable legislation, and mismanagement, social and political unrest. Currency risk involves currency exposure, asset valuation, foreign tax, inflationary and transfer pricing. While launching a new-product Apple Inc. should consider all these factors to ensure that risk is managed effectively. The company has decades of experience innovating and converting its innovative products to successful revenue, there are certain risks involved due to geopolitical tensions existing in some parts around the world. It can impact the sales of innovative Apple product in such areas. Also, the Britain exiting the European Union has caused concerns regarding the financial instability of the European Union and Euro (which is a commonly traded currency with foreign exchange). Apart from other managerial factors, Apple Inc. should consider these factors primarily to introduce the new product effectively in the market.
Risk management involves identifying, accessing and prioritizing risks,which are followed by actions to reduce any negative impact and increase the opportunities thereof . Risk should be managed in a calculative manner such that it reduces uncertainty to the maximum extent. Mitigating risk can be done by spreading awareness about development and assessment of ideas. The emerging risks should be mitigated such, that maximum benefit can be garnered by the organization .
New-Product Development (NPD) and Components
New-Product Development (NPD) is the introduction of a new product to market for organizational growth and success. It should have an impact on profitability and growth of a firm. It plays a crucial role in business planning as they are responsible for increased employment, the growth within an economy, technological changes and improved standard of living. Industries are growing increasingly aware about the importance of innovation and NPD. But NPD has challenges like financial risks, concerns facing human resources and sensitivity of a time factor .
The feedback and experiences of Apple iPhone users, posted across various shopping websites, have attracted the brightest minds of Apple Inc. to resolve their concerns. The major concerns revolve around battery life. It's low-power efficiency, consumption during standby mode, faster draining of power and non-removable features acts as a cause of concern to the users. As a solution, the company can improve the iPhone by using solar panel innovation in mobile technology, which will lead to much-required energy conservation. While green gadgets are the future of technology, it depends upon the risk-management skills of team Apple Inc. to launch the product successfully across its users.
The components of new-product development involve new-product strategy, which links the NPD to the objectives of the company. Apple has been instrumental in doing this by taking initiatives to conserve the environment and using solar power to generate power for its offices. This step is followed by idea generation where the organization searches for ideas to meet the objectives. The idea is to produce solar panel enables iPhones, which can keep charging on its own while not being used and while left unused. While this promotes the use of renewable energy, it also aims at conserving thermal energy. However, the idea should support business feasibility. Next is screening phase, which involves screening the idea and finding if it is pertinent and feasible. A technical feasibility and market feasibility study should be conducted in-depth as the idea should be feasible on technical grounds. If it is feasible, then the market study should be conducted to understand the response of customers. They should accept the idea, for it to be carried forward to execution. An in-depth study on usability and practical difficulties will provide a proof of the feasibility of an idea. Any chances for failure should be eliminated at this stage. This is followed by the business analysis involving profitability analysis, Return on Investment (ROI) and sales. Any sign of a pullback in profitability will roll off the idea of a new product. Upon successful justification of financials, the NPD should be followed by testing of the prototype of the product. Upon successful completion, the product should be launched for commercial success .
Recommendations
Green gadgets are the future of innovation. However, there are no ventures, which have launched green phones (solar charging phones). While this is an adventurous venture, it also evolves many risks. These risks can be mitigated by considering following recommendations: First, Apple Inc. should gather as many ideas and information from customers who are already using Apple phones. This is because the users are more appropriate people to pass a judgment and propose a solution of the product; Second, Apple Inc. should be able to design and develop such an idea in practicality. Mere creation of idea is not enough if it cannot be put to practice; Third, An in-depth analysis of product design and development should be conducted well in advance to mitigate any design flaws; Fourth, Apple Inc. should conduct financial impact analysis through initial screening, preliminary market analysis, technical analysis and business study. Fifth, The Company should reduce its development time so that the development is not impacted by the change in trends. Sixth, Product performance is a crucial factor in technology space. The firm should test its product thoroughly to eliminate any technology and performance-related flaws. This should be clubbed by user testing to ensure a smooth acceptance by customers.
Conclusion
Though the introduction of a new-product remains a challenge for any organization, the chances of risks can be mitigated by applying in-depth analysis during each stage of new-product development (NPD). Organizations are on a constant lookout for ways to improve its profitability by introducing new products or implementing effective practices. Innovation is encouraged at all stages by most of the organizations. While innovation can bring about a positive impact, there are equal chances of failure as the innovation brings along with it the path of uncharted territory, for an organization. In order to reduce the chances of risk, clear-cut strategies should be put in place by the management. The product should be well defined, create long-term trust and goals within the organization. It should also provide a solution to existing problems of customers, this way it will be easily acceptable to customers. The recommendations provided support the smooth execution of new-product development while considering the elimination of risk factors associated with the new-product development via innovation.
Apple has always been instrumental in patenting its innovations and features. The innovation of solar panel in iPhone can help the product go off its image of being a power-hungry device. This technology will not only help Apple gain an upper edge yet again, over its competitors but also help use of renewable energy in using an electronic device. It can prove to be a revolution in technology space, by Apple Inc., once again.
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