Difference between Invention and Innovation
The given assignment discusses about the differences between invention and innovation. The assignment provides a brief introduction of oil and natural gas Company which is emerald energy. There are different models of applying innovation strategy according to Roothwell such as first generation model, second generation model, third generation model, fourth generation model, and fifth generation model. It has also been described that how the application of this model can be done in case of oil and Natural Gas Company. Furthermore the assignment describes about the systematic risk management by applying innovation strategy. At last, Pinwheel risk management has been described, and a conclusion is provided providing a brief summary of the assignment (Benoit, 2014).
Difference between invention and innovation
Invention is defined as the introduction of a product or technology or creation of a product or technology for the first time. While in case of innovation; is when someone makes some improvement in the existing technology or product or service (Waples, 2012). This can also be understood by quoting a an example of oil and gas industry like Emerald energy, if it introduce a new product or technology in the market it would be termed as invention, while when it makes any changes in the technology or product which is either introduced earlier by the same company or another company, it would be termed as innovation (Welfens, 2009). Innovation can lead to growth in the industry by: combining various skills and resources which are already developed by some other company or the same company, hence it is easier for the management to gauge the expected results and revenue that can be earned due to such innovation (Bryce, 2014).
It is considered that by innovation growth can be ensured in economic growth and economic development as it is the only effective way to achieve long term growth in organization by reducing the cost. Innovation can lead to reduction in cost as it reduces the diminishing rate of capital invested in the organization. In case of oil and natural gas, it is linked with environmental aspect, hence by innovation in such industry effects to climate and greenhouse emissions can be maintained. Innovation in case of environmental aspect can be ensured by applying some innovative techniques and non-innovative techniques. This will lead to increase the employees concern toward sustainable manufacturing, and would prevent environment from further pollution. This would also reduce the negative impact of the organization in society (Tidd, 2006).
In case of oil and natural gas industry, the companies are very much dependent over the natural resources, organic resources. Innovation in this industry can be in the form of refinery operations, upstream to midstream infrastructure, and petrochemical operations (Chursin, Vlasov and Makarov, 2016). Innovation strategy would lead to faster production, and cheaper cost of production. This would result into sustainable resource management. The benefits which employees would get from innovation are environmental benefits such as benefits to air quality, benefits to forestry, benefits to water quality. The socio economic benefits can also be achieved by bringing innovation in the organization such as benefits in gross domestic product if the nation, and ease in getting subsidy from government (NCUB).
Successful Implementation of Innovation to Achieve Growth in Case of an Oil and Natural Gas Industry
In an organization, innovation model is needed in big companies to create a reasonable return for shareholder. In case of smaller companies it is needed to increase the demand. Innovation model provides a framework in which the ideas are identified and implemented which have a potential to generate more values in the organization.
According to Rothwell there are five generations of innovation model which are as follows:
- First generation model: is the linear model which needs pull and push technology. The features of this model are that it lays simple linear sequence, it emphasizes on research and development and science in the organization. The strength of this model is that it is simple to understand and it lays radical innovation. While the criticism of this model is that it lack of feedback from the user, no attention from the market is given to this model, it does not give any importance to network interactions. Besides this no technological instruments are used in this model (Brant and Lohse, 2014).
- Second generation model: it comprises of providing sequential linear process. In this model the major source of innovative ideas and creativity is market. The key advantages of this model are that: it is simple to understand, it leads to incremental innovation. Besides positive aspects, market pull also lays some negative aspects which are as: it contains lack of feedback from the user; there is no research to technology done. Furthermore, there is no networked interactions are promoted; no technical instruments are used here.
- Third generation model: it interacts between different elements and identifies loop between them. It is also called as coupling model. The advantage to this model is that it is simple to understand and implement, it considers incremental innovation in the organizational management. Besides this it also emphasis on interactions between different elements in the organization and creates a connection or loop by considering research and development and marketing aspects. But it has some critics also which are as: it lack of feedback, it do not consider any technological research, and it does not give emphasis on building network with inbound and outbound logistics. It also not considers any technological instruments (Chesbrough, 2011).
- Fourth generation model: it is called as parallel line model or interactive model. It integrates between the firm, its valuable customers, and key customers. The main objective of this model is to create a link between the inbound and outbound logistics of the organization. The main characteristics of this model are that it combines both push and pull technology, it also give emphasis on creating linkages with external departments. This also lays the advantage to the organization. The critics to this model are that it has a complexity in reliability, and it does not use technological instruments.
- Fifth generational model: it integrates and provides extensive networking to the organization. It also provides flexibility and customized response to the organization. The key characteristics of this model are that it gives considerable emphasis on accumulating knowledge, establishing networking, creating external links, integrating systems. The key advantages to this model are as: it involves universal innovation by using advanced level of technologies, and networking. The critic to this model is that use of accumulated innovation and link create complexity in the organizational structure which reduces the reliability of external people in the organization.
- Rothwell has also developed a sixth model; which considers combination of internal and external path so to make the technology advance in the organization. The critic of this model is that it assumes that the members of the organization have that level of capacity and willingness to make link between networks (IPACSO).
In case of oil and gas industry like in the given case study of emerald energy, the company must consider sixth model of Rothwell. It is because of increase in expert in the organization as well as outside the organization. Besides this, the main thing which makes a link between open innovation model and oil and gas industry is the use of technology and this model gives emphasis on creating network. Furthermore it is said that open innovation model gives the organization to follow decentralized and participatory approach. This creates a better working environment in the organization (Godin, 2005).
Innovation in the organization leads to increase in the quality of products and services in oil and natural gas industry at reduced cost. It also helps the management in providing increase in the variety of goods and services as provided by the industry. By adding value in the organization it also increases the retention of staff in the organization. Besides these advantages in the organization due to implementation of suitable innovation model, it also levies some risk in the organization. These risks can be classified as:
- Competition: though innovation gives competitive advantage to the company, but it is only up to the time when its competitors are not able to copy same competitive advantage. It has been observed that in United Kingdom there are a lot of oil and natural gas companies, which increases the competition between industries; hence it creates risk to the company in its competitive advantages.
- Uncertain commercial returns: the research of innovative ideas in the organization is speculative in nature; it does not ensure the organization that implemented model would be effective. This creates a risk for the organization in relation to getting return.
- Availability of finances: research and development lays high cost to the organization, hence the company might come in liquidity crash if it has not planned effectively for the investment to be made in the innovation plan.
- Productivity: during the planning of innovation strategy, the productivity from the employees reduces as they will not be capable to work on both at the same time. Hence if they are working on planning the strategy for the organization they will not be able to concentrate on the work as before (Friedman, 2008).
Pinwheel framework is adopted by the organizations to make the organization align with the strategy adopted, risk processes and planning for improving the performances and governance issues and to establish a better allocation of business and capital resources. To implement Pinwheel risk management in an organization, it takes approximately 24 months. To adopt Pinwheel framework in the organization, it has to ensure the compliances of following steps which are as follows:
- Understanding to the governance strategy for finding out the relationship between risk and reward.
- Designing the formal process to incorporate management structure based on the organization culture and applying the same culture in subsidiaries of the organization.
- Creation of incentives for leaders in the organization, this is to make the leader support and make some required changes in the framework. It is the leader duty to make a match between the performances and enterprise risk management.
- Ensuring the collaboration between the chief executive officer of the company and its subsidiary.
- Clearing the role of accountant at each and every step.
Pinwheel framework involves following steps:
- Step1: evaluation of business intelligence: At this step, in depth analysis of the oil and natural gas industry has to be made with all the trends and business conditions globally. Here an analysis of external environment has to be done by applying PESTLE method.
- Step 2: refine strategic purpose and vision: After analyzing the external environment by PESTLE analysis, a match has to be made between the risk management and its vision. In the given case, the company faces risk like political risk, geological risk, price risk, supply and demand risk and many more risk.
- Step3: define goals and aspirations: emerald energy has goals to provide energy efficient electric vehicles.
- Step 4: determine strategic priorities: the CEO of the company must ask the question from its management about the risk and reward relationship, sustainability issues, short term and long term liquidity by implementing the innovational plan(Emerald, 2008).
- Step 5: identification of critical initiatives: from the strategic priorities, critical initiatives has to be find out such as which initiative would lead to best result to the organization. Besides this it also to be known in case of emerald energy that what would be the compliance risk in relation to implementing those initiatives.
- Step 6: integration of plans, project and budgets: after identification of critical initiatives, emerald energy must plan about the financial as well as non-financial measures, key performances indicators, and risk management practices.
- Step 7: monitoring of critical initiatives: it has to be identified by the management of emerald energy that all set targets are complying with the governance and whether the organization is achieving cost benefit analysis or not(European commission, 2010).
- Step 8: assessing strategic performances: in this, management of emerald energy has to make separation between management actions and external factors. By this, it is meant that though the organization is achieving its required results but may be not doing well in stock market(Pisano, 2015).
Conclusion
By analyzing the given assignment it can be said that if there is totally new product or services launched in the market it is called as invention, while to make some changes in the existing product and services it would be called as innovation. Innovation causes some systematic risk factors such as: competition, risk factors, uncertainty, and competition. While in case of applying the Pinwheel risk management strategy, the organization must ensure the compliance to the required steps.
References
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