Video: Thursday 10 December 2015
We often associate innovation with technological innovation. Kevin Heij of Rotterdam School of Management, Erasmus University (RSM) offers a number of new insights into the rewards to be gained by looking beyond technological innovation alone. His study shows that non-technological innovations such as management innovation, co-creation and business model innovation can bring about valuable competitive advantages.
For his thesis, Heij investigated the extent to which the return on R&D investments depends on innovative methods of management and organisation, or management innovation. His results show that companies with high levels of R&D investment create more radically new product and service innovations when they also apply a large degree of management innovation.
In his thesis, which was supervised by Professor Henk Volberda and Professor Frans van den Bosch, Heij describes how organisations, in addition to radical product and service innovations, can innovate their output more incrementally. Implementing management innovations is also valuable for this type of so-called exploitative innovation. However, the size of the company is important, says Heij, with larger organisations needing to make sure they don’t introduce half measures.
Co-creation with customers has been growing in popularity recently as a source of competitive advantage. Heij maintains that co-creation with customers leads to more radical product and service innovations, but that there is an upper limit to how much it can contribute to exploitative product and service innovations. At a given moment, the relevant knowledge has been exchanged and the innovation slows down. The radical product innovations, which require more ‘out of the box’ thinking, benefit from more intense knowledge sharing.
In his thesis, Heij also describes the conditions under which business model innovation can be successful and distinguishes two basic types: replication and renewal. Replication of the existing business model involves enhancing and scaling up an existing model, for example by entering similar but geographically different markets. Business model renewal is the introduction of a new model outside the parameters of the old model. Heij considers the environmental dynamic to be an important contextual variable: a more dynamic environment dampens the positive effect of business model replication on company performance but strengthens the performance of organisations that operate in average and highly dynamic environments.
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