1. Innovation & Innovation Management
SPECIAL TOPICS IN STRATEGIC MANAGEMENT OF CONSTRUCTION COMPANIES
Matineh Eybpoosh
Gülşah Fidan

2. Outline What is/not Innovation? Advantages of Innovation
Types of Innovation
Modals of Innovation
Success of Innovation Process
Components of Innovation Model
Measuring Innovation

3. What is Innovation?
The mostly emphasized aspects of innovation within the literature are “new”, and “changes”, “opportunities”, “creative ideas”, “adoption of organization”, and “value creation”
A process of turning opportunities into new ideas (Drucker, 1993, Tidd et al., 1997), adoption of these ideas within the organizations ( Zeltman et al. 1973, Damanpour, 19991) and successful applications of the resulting novelties (Pries and Janzsen 1995) such that they provide value to the organization.

4. What is not Innovation? Innovation vs. Invention:
Invention is a detailed design or model of a process or product that can be distinguished as noval compared to existing ones. Innovation is the actual use of a nontrivial change and improvement in a process, product or system that is novel to the institution developing the change.
Invention is the conversion of cash into ideas. Innovation is the conversion of ideas into cash.
For invention to become an innovation, the organization needs to be introduced to the invention and invention should add value to the organization in some way.
Innovation
(Commercialized)
Invention
(Not commercialized)

5. What is not Innovation? Innovation(R&D&C) vs. R&D:
Innovation can be described as the result of some amount of time and effort into researching (R) an idea, plus some larger amount of time and effort into developing (D) this idea, plus some very large amount of time and effort into commercializing (C) this idea into a market place with customers .

6. Advantages of Innovation
Innovation is closely linked with competitiveness
Innovation has deep impact on both “Differentiation” or “Cost Leadership”
The uniqueness of the products/services increases the level of “satisfaction of the client”
Innovation in value chain may result in “time and cost savings”

7. Advantages of Innovation
Innovation Characteristics
Strategic Advantages
Novelty
Offering something no one has done before
Complexity
Keeping entry barriers high
Robustness
Improving the basic model by extending its life and reducing overall cost
Radical Nature
Carrying competitiveness into a new dimension
Continuous Incremental Innovation
Continuous improvement in
performance
Tidd et al. (1997)
However, the effect of innovation on competitiveness is dependent on the “nature of the market” and “client characteristics”

8. Reasons of Low Innovation in Construction Industry
CRC,Construction Innovation Survey Report,2005

9. Importance of Innovation in Construction Industry
Innovation should be better understood in construction industry because:
Construction plays an important role in the national economy
Due to the great size of workload, competition is high
Industry is directly related with human health and environmental safety

10. Types of Innovation according to Its Process - Extend of Innovation
Innovation can take many forms regarding to its process:
Evolutionary-Revolutionary
Incremental-Radical-Modular-Architectural
Evolutionary
Incremental
Modular
Revolutionary
Radical
Architectural

11. Extend of Innovation
Incremental: Improve the existing functional capabilities of a technology by means of a small scale improvements in the technology’s value adding attributes such as performance-safety- quality- cost
Radical: Introduce new concepts that depart significantly from past practices and help to create products or processes based on different sets of engineering or scientific principles, such as; opening to entirely new market
Modular: Incremental innovation that leads to creation of a new but not radically different system
Architectural: Introduce the notion of change in the way in which the components of a product or system are linked together

12. Extend of Innovation
Most common
Least common

13. Types of innovation according to its content
There are different classification for types of innovation within literature:
Technical-Non technical
Product- Process-Market- Organization-Resource
Technical
Product
Process
Resource
Non Technical
Market
Organization

14. Types of Innovation
Product Innovation: Introduction of change in end product/service or their quality
Process Innovation: Introduction of change in products/services delivery methods
Market Innovation: Opening of a new market
Resource Innovation: Change in sources of raw material supply
Organizational Innovation: Change in characteristics of organization structure

15. Type of Innovation
CRC,Construction Innovation Survey Report,2005

16. Panelized system usage (flat panels are manufactured in factory and erected on site)
Buildings erected by usage of panelized system will have better heat and voice isolation compared to ones constructed by traditional system

17. Types of Innovation in Turkish Construction Industry
Market Innovation:
Most common type of innovation in Turkish construction industry
Creating new International Markets and most of the times being the first entrants (e.g. Libya, Russia, Turkmenistan, etc.)
Unrelated Diversification (e.g. Cleaning mine fields in Afghanistan)
Backward Integration (e.g. Creating sub-markets such as pre- fabrication and construction material products)
Process Innovation:
Change in conventional methods due to problems faced at site (e.g. New methods for road asphalting in high temperature difference between day and night)

18. Types of Innovation in Turkish Construction Industry
Organizational Innovation:
Restructuring processes in the company organization as a requirement for ISO standards
Re-identification of company mission (e.g. Becoming administrative investor instead of being a general contractor)
Product Innovation:
Most rare in Turkish construction industry due to low R&D activities
Producing alternative products (e.g. New concrete type by using a special admixtures, or new formwork systems)

19. Models of Innovation
First generation: “Black Box Model” The innovation itself is not important and the only thing that count are input and output (e.g. Money invested in R&D and patents)
Second generation: “Technology Push and need pull” it is developed after the recognition of the importance of the market place and demands of potential consumers of technology.
Third generation: “Coupling and integrated models” innovation process as a complex net of communication paths linking the firm to the broader scientific and technological community and market .
Forth generation: “networking and national systems of innovation” firms that do not have large resources to develop innovation in house can benefit from establishing relationship with a network of other firms
Fifth generation: “evolutionary models” innovation are seen as equivalent to mutation by considering the Population Perspective, Interactions, and External Environment.
Sixth generation: “innovative milieux (environment)” states that innovation stems from a creative combination of generic know-how and specific competencies.

20. Milieux Innovation Model
Milieux innovation model’s components:
Innovative Firms
Inter-firm and inter-organizational interactions
Private or public institutions support
Specific culture
Dynamic collective learning process

21. Even if all these mentioned components exist in a productive system, there is no guarantee that each innovation attempt will be successfully commercialized.

22. Success of Innovation Proccess
Fundemantal components of innovation success
Good communication environment
Strong customer orientation
Good technical support
Dynamic, open minded, supportive management
Flexible structure
Risk taking ability
Strategic Integration
Technical Resources
Organizational Capabilities

23. Modeling Innovation Management in Construction
Innovation in construction industry should not be studied like any other sector due to distinct characteristics:
Project-Based Nature
Variaty of Products
Sensitivity of Value Chain to Environmental Conditions
Relationships Among Project Stakeholders
Different Organizational Context of Innovation
Tailor-made models are required for modeling Innovation Management Process in Construction Industry

24. Innovation Business Strategies Business Environment
Technological
Organizational
Business Strategies
Human Resources
Technology
Marketing
Knowledge
Innovation
Business Environment
Change Drivers
Sources of Ideas
Obstacles
International Competition
CRC Construction Innovation
CRC,Construction Innovation Survey Report,2005

25. Dikmen et al. 2003 The Organization Innovation Strategy Company Target
Drivers/Barriers

26. 1.Role of Drivers/Barriers
Drivers/barriers affect the innovation process
The driver/barrier component is represented by a resistance in the model
When environmental factors acts as barrier the length of the resistance increases which makes innovation more difficult to be generated
The existence of a driver decreases the length of resistance or even diminishes it

27. Drivers/Barriers of Innovation in Construction Industry
Factors hinder-support innovation which are
independent from other components
Country level
Political, Economical, Social conditions
Industry level
Uniquness of construction projects (there is no or very little need and incentive for construction companies to innovate)
Low profit margins, high fragmentation, low entry barriers, intense rivalry (companies prefer low-risk survival strategies rather than high-risk innovative strategies)
Immobility, durability, high cost, complexity and great social responsibility of construction products and their deep impacts on quality of life (project parties hesitate to try new products/processes)
Weak patent possibilities and low profit margins which limits R&D activities
Uncertainty in market conditions

28. Drivers/Barriers of Innovation in Construction Industry
Bossink, 2004

29. Drivers/Barriers of Innovation in Turkish Construction Industry
Due to results of a survey related to Turkish construction industry, most important barriers/drivers are as follow:
Industry Based
Image of construction industry
Current rules and regulations
Price based competition
Variation in work load
Project based nature
Significance of consumer
Investment in R&D
Country based
Political Conditions
Economical Conditions
Legal Conditions
Cultural Conditions

30. Innovation capability of the company is determined by:
2.Role of Organization
Innovation capability of the company is determined by:
Structure
Leadership
Culture
Key Individuals
Teamwork
Information & Communication
Empowerment
Organizational Learning
Costumer Orientation
The strength and effectiveness of these components determine the weight of the circular in the model which determine the ease of dealing with barriers and benefiting from drivers (Support/Hinder innovation)

31. Role of Organization in Turkish Construction Industry
Organizational Properties
Client Orientation
Company Culture
Teamwork
Organizational Learning
Key Individuals
Information and Communication

32. 3.Role of Innovation Strategy
Strategies are used to achieve objectives of the company
by increasing innovation capabilities
The Innovation strategy determines;
The reasons of innovation of the company (Why?)
Tactics and strategies used to innovate (How?)
Sources that the innovation is originated (From Where?)

33. Reasons of Innovation in Construction Companies
CIOB, Innovation in Construction: Ideas are the currency of the future Survey 2007

34. Strategies for Innovation
Strategies used by companies are directly related
to innovative capacity of organizations
Improving Human Resource Management
Improving Knowledge Management
More Detailed Environmental Scanning
More Investment in R&D
Develop Stronger Relations with Customers and Suppliers
More Brainstorming
Improve Benchmarking
Consulting with Academicians or Research Institutes

35. Origins of Innovation in Industry
CIOB, Innovation in Construction: Ideas are the currency of the future Survey 2007

36. Origins of Innovation in Company
Top Management
Construction Site
Technical Departments
R&D Departments
Project Team

37. 4. Role of Company Target
Company Target designates major reasons that derive the organizations to innovate
Innovations provide competitive advantages only if they fit to the pre-set objectives
For Turkish construction industry’s most important targets are:
Improvement of product/service quality
Entrance/creation of new markets
Maximization of customer satisfaction
Long-term profitability maximization

38. Measuring Innovation
Innovation is a complicated phenomena having Inputs and Outputs as well as Impacts on several performance indicators at firm and national level
Innovation measurement focuses on Products and related Production Systems that is based on;
Measuring Inputs to innovation
Measuring intermediate Outputs
Measuring Impacts on several
aspects of performance

39. Metrics for Measurement of Innovation at Firm Level
Inputs
No. of ideas or concepts
No. of people activily devoted to innovation
Sources of information
Capital
Networks
R&D spending
No. of R&D projects
Contextual (institutional parameters)
Organizational factors
Country factors
Industry factors
Implementation
Tools, techniques, strategies
Outputs
No. of new products introduced/commercialized/ exported
No. of new processes/services introduced
Intellectual property
Impacts
Revenue growth due to new products or services
Short and long term profitability
Increase in organizational effectiveness
Increase in technical capability
Improvement of service/ product quality/process
Improvement of organizational structure
Improvement of human resources
Market penetration and growth
Better company image
Innovation collaborations
Improvement of client satisfaction
Metrics for Measurement of Innovation at Firm Level
Ozorhan et al. (2009)

40. Conclusion
Considering the definition of Innovation, the main components and outcomes of innovation are adding value to the organization and providing competitive advantage
Mentioned Innovation Management Model shows that innovation strategies are main triggering factors for an organization to reach its targets in the presence of environmental barriers/drivers through using its core organizational competencies
As environmental barriers are out of the control of the company, the company should improve its core capabilities for successful innovations

41. Some Related References for Innovation:
Marasin, R., Dean, J. and Dawood, N. (2007) “APPLICATION OF VISUALISATION TOOLS IN
PROJECT MANAGEMENT IN CONSTRUCTION INDUSTRY: INNOVATION AND CHALLENGES” Computing in Civil Engineering, 12(261):
Bossink, B.A.G. (2004) “Managing Drivers of Innovation in Construction Networks” JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT, 130(3): 337–345.
Manley, K., McFallan, S. and Kajewski, S. (2009) “Relationship between Construction Firm Strategies and Innovation Outcomes” JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT, 135(8): 764–771.
Manley, K. (2005) “BRITE Innovation Survey” Icon.Net Pty Ltd.
Dikmen, I., Birgonul, M.T. and Artuk, U. S., (2005), “Integrated framework to investigate value innovations”, ASCE Journal of Management in Engineering, 21(2005):
Dikmen, I., Birgonul M. T. and Artuk U. S., (2003), “Innovation in construction: Evidence from Turkey”, Proceedings of the Joint Int. Symposium of CIB Working Commissions W55,W65 and W107, 2(2003):

42. Thank You