Richard Li-Hua on Innovation and Innovation Management

By: Richard Li-Hua

Innovation changes the world and is the key to tackling the slow recovery of the western economy, and to solving unemployment issues according to professor Richard Li-Hua, a world-leading expert on innovation. Innovation Management spoke to him about his thoughts on the need for, and the role of, innovation management.

What’s your take on innovation management as a discipline in its own right? And what kind of impact will innovation management have in the future?

One day in July, I was on the high-speed train from Beijing to Shanghai deep in thought. It took four hours and forty-five minutes. Normally I went to Shanghai from Beijing by air, which took two hours forty-five minutes. However you should allow half a day, as you need to add check-in time and the two taxies: one in Beijing and one in Shanghai. It occurred to me – a number of points that are all related to “innovation management”.

My view is clear that innovation management is vital for creating the knowledge of the economy in the 21st Century, and must be treated as a discipline in its own right in global higher education. It is pivotal in wealth creation and prosperity, but little understood. In addressing this question, I would like to highlight the following aspects:

• What is innovation?
• Innovation should be understood and addressed in a broader sense, and should not be limited to technological innovation only.
• It is important that innovation along with internationalization should be widely promoted in global higher education.
• Innovation management and its future.

“Innovation” is about change that outperforms the previous practice

The word comes from the Latin and means changing, making new. The term “innovation” hasn’t stopped shining since Joseph Schumpeter, an Austrian economist, coined the term in his book Economic Development Theory in 1912.  Innovation is central to the wellbeing of societies, as well as to the health and growth of commercial companies.  Innovativeness, including a propensity to engage in new idea-generation and experimentation, is associated with performance, as is pro-activeness. Innovation is found to be statistically three times more important to growth than other attributes or factors. Therefore, the penalty for people and firms not innovating is enormous.

Innovation management is vital for creating the knowledge economy in the 21st Century and must be treated as a discipline in its own right in global higher education.

Most of what we know about innovative and entrepreneurial new venture is based on the experience of start-up firms in the US. Many of them originated from a parent or incubators organization. Examples of university incubators include Stanford, which spawned much of Silicon Valley, the Massachusetts Institute of Technology (MIT), which spawned Route 128 in Boston, Cambridge and Imperial College as well. Technological innovation has to underpin ever higher value-adding products, services and processes. The innovation process depends on a strong foundation of basic science, which is then carried to the commercialization of new products and processes.

However, successful innovation requires an in-depth understanding of the dynamics of innovation, a well-crafted innovation strategy, and well-developed processes for the implementation of the innovation strategy. Innovation is the life-blood of competitiveness. From a technological point of view, innovation is seen as a process of one idea building upon another, resulting in a new novel product, process or service. In the era of globalization, technological innovation is now often the single most important competitive driver in many industries.

Innovation is not limited to technological innovation only, but is more diversified

There have been shining watchwords in the Chinese innovation vocabulary during its thirty years of economic reform. For example, concept innovations (“it would be a good cat as long as it catches mice no matter it is black or white”),and system innovation (“one country, two systems”) were invented by Deng Xiaoping, the former Chinese leader. The other example is management innovation, that is, “integration of western management with Chinese philosophy”.  ZHANG Ruimin, CEO of Haier, highlights the concepts of marketing innovationcultural innovationproject innovation, and management innovation, when he discussed how Haier has become a full-fledged global competitor in such a short period.

Global higher education has been challenged to be innovative

I would like to discuss this aspect of my experiences of PMI2 UK-China Connect, and UK-US Connect projects. I will discuss it more later on about PMI2.

There is consensus that global higher education is undergoing substantial change; this places a greater emphasis on market forces in the process of educational strategic decision-making. Universities have been challenged to become more innovative and entrepreneurial, to adapt to a changing and more diverse external environment. Globalization and internationalization are seen as different but related processes. Jane Knight argues that internationalization is changing the world of higher education while globalization is changing the world of internationalization.

In the era of globalization, as technological innovation relentlessly compresses the world in space and time, higher educational institutions are being challenged to follow suit. Many authors seem to suggest “internationalisation” as a “solution”. I argue that although internationalisation is essential, “innovation” through engagement with industry and enhancement of curriculum design and delivery will develop students’ learning experiences, entrepreneurship spirit, and employability. This needs to be highlighted in the process of internationalisation in global higher education.

Innovation management should also be regarded as processes of idea generation, creative thinking and innovative activities

In this respect, I’d like to highlight the importance of the process of  “innovative thinking”. It can be used to develop both product and organisational innovation. Without proper processes, it is not possible for R&D to be efficient. Innovation management includes a set of tools that allow managers and engineers to work together in a collaborative environment to achieve common goals.

Innovation changes the world

The curiosity of mankind started with an “apple”.  Mankind was tied to the apple when Eva picked the apple. Mankind was full of lust and a strong desire to open the door to the new world. Another apple hit the head of wise man, Newton, who was very keen to explore the unknown world. The apple led him a summary of the operational law of the world – people knew the what, but not the why of the nature. The third apple is now with Jobs, who has designed an entirely new world for people through his “apple”.

Clearly Steve Jobs has got the best understanding of the word of “innovation”. Because of innovation, Jobs has created thousands and thousands jobs. I have noticed with interest, some American complains about the current “occupation of Wall Street”. We did not get the word that we are in recession. Germany is going to eat our breakfast and China is going to eat our lunch. So they just go out and invent stuff, make stuff and export stuff. This is actually the essence of innovation.

We have noticed that China’s remarkable success among the BRICS countries. has made it become the driver of the world economy, while Germany with its well established applied sciences and technology leadership remains economically strong in the western power.

Innovation stimulates economic development

Technological innovation can lead to technological revolution, which accelerates the economy. A nation’s competitiveness is embedded in its innovativeness. China today even needs more innovation to upgrade its technology, to build its own brands and sustain its economy.

A nation’s competitiveness is embedded in its innovativeness.

In broader sense many innovations are  imitation, absorption, adaptation, improvement, reconfiguration, modification, or re-branding of existing technology, or successful transfer of technology. The power of the steady stream of innovative ideas and emerging technologies – international technology transfer, in particular – present considerable opportunities and challenges. China’s critics like to say that China has built its own high-speed train system by “stealing” the technology from Japan and Germany. China has made it clear that China’s innovation on the high-speed train was based upon international technology.

The high-speed train system is not only handy but also stimulates economic development. When I was on the train, I saw not only the high speed train running on the steel-fenced track, but also spacious and modernised railway station, better than airports, where thousands and thousands young man and women are working with smile.

In your opinion, how well prepared are business schools and universities today to teach innovation management?

Personally I worked in four business schools in the UK in the last 15 years, but travelled to many business schools and universities in China and the West to deliver seminars and workshops on strategic management of technology and innovation, and the appropriateness and effectiveness of international technology transfer.

I have noticed that within the traditional regime and hierarchy, the deans of the business school and programme directors have the absolute authority to design the curriculums around their own expertise, while students have little influence on the content and process of programme teaching and learning. For example, quite a number of business schools in the UK still focus on the traditional subjects. Some really important subjects, such as, innovation management, technology management, leadership and entrepreneurship, are given less attention.  The innovation management module in many business schools in the UK has not been mentioned at all because the schools have no expertise, or the schools have no interest at all in innovation management.

Some really important subjects, such as, innovation management, technology management, leadership and entrepreneurship, are paid less attention.

Some business schools have simply reallocated it to faculties that have knowledge on technology and innovation. My personal observation is that some other UK business schools have removed economics subjects simply because the dean has little interest in economics. In China, economics remains one of the strong subjects. The fact that many Chinese business schools are labelled as schools of economics and management, for example, the School of Economics and Management in Tsinghua University, Shanghai Jiao Tong University and Wuhan University, shows the key status of economics as a subject in China.

In the meantime, there is the under-representation of technology and innovation management. This is a very important discipline that should rank alongside other management sub-disciplines such as human resource management, financial management and marketing management. However, it is under-represented mainly because of lack of knowledge on the part of school leadership. This is also the case with business and management courses and MBA programmes. The significance of technology and innovation content has been neglected due to lack of knowledge in the leadership of business schools. This is very short-sighted, because future business managers need to understand every aspect of the workings of a business: technology, innovation, HR, operations, finance, and marketing.

In this regard, I am afraid that quite a large number of business schools are not in a good position to teach innovation and technology management.

However, I have recently undertaken two Prime Minister Initiative 2 Projects (PMI2) that aim to promote and re-conceptualise entrepreneurship, employability, innovation and internationalization in global higher education, particularly in the UK, US and Chinese context. The first PMI2 UK-China Connect enabled me to build a strong cross-culture and university research team for the consolidation and establishment of strategic partnerships with seven prestigious research-led Chinese universities, including Zhejiang University and Shanghai Jiao Tong University. The second PMI2 UK-US Connect enabled me to consolidate my research links with colleagues in MIT Sloan School of Management and Pennsylvania State University. I have had close interaction and in-depth discussion with colleagues there about innovation and internationalization. These experiences make me feel that these universities are well prepared for innovation management.

Also I have seen significant efforts that academics have made worldwide in designing MBA programmes, in which innovation management is a core module. I expect to see many new MBA programmes launched soon with a label of “innovation”, for example, MBA in Innovation Management, MBA in Technology Strategy, etc.

Considering the current economic situation in the world, what kind of possibilities does innovation management have compared to financial management, that is, measurements taken by banks and other financial bodies?

 

Some studies on the recession show that in the last 30 years, the political and economic consensus in the West has been promoting the New Right and economic liberalism. Privatisation, liberalization, and deregulation became watchwords.  The policy of “laissez faire” was widely adopted, and the slogan was essentially: “public bad and private good”.  The main principles of the New Right consensus were to minimize the state activities, maximize private sector activities, and deregulate the market at large. This led to the growth of “irrational” sphere. The “rational” sphere became weaker to some extent. Therefore, banking giants, such as Fannie and Freddy in Wall Street collapsed. The then US Treasury Secretary, Hank Paulson expressed that they were running a “flawed business model” that has no sustainability.

The debt crises threaten the very future of the Euro. The financial bubble bursting not only overshadows the depression of the US economy, but the downgrade of US credit rating has made its economy even worse. Why does this happen? What is the underlining reason? Where is the sustainability?

Therefore innovation management has never been as central as today since multi-national firms, government agencies, World Bank and IMF are seeking solutions in recession

However, the technology-focused companies currently in Silicon Valley remained strong and unwavering, while the banking giants in Wall Street collapsed one by one. Microsoft is a classic case of “technology strategy meeting generic business strategy”. In 1975, Bill Gates co-found Microsoft based on the belief that every desktop would one day have a PC; he wanted to see the Microsoft software run in these machines. He configured such a great idea and played a huge role in making this vision come true. The cases of Amazon, Yahoo and Google prove that sustainability in business is always with innovation led-companies. These founders are determined with business acumen and technological entrepreneurship. Most importantly they focus on technology driven innovation.

The idea of business sustainability seems attracting more attention. Therefore innovation management has never been as central as today since multi-national firms, government agencies, World Bank, and IMF are seeking solutions in recession. Innovation plays a more important role in the current economic climate. Innovation management and innovative approaches are the key to tackling the slow recovery of western economy, and to solving unemployment issues. In the meantime, innovation can help to upgrade the economy in emerging powers, such as BRICS, for the sustainability of their economy.

By Karin Wall, Chief Editor