Efficiency in business and industry
Technological advancement in business is a key factor to its efficient and effective expansion. Increasingly, progress in technology is offering new ways of doing business and also permitting businesses to expand their horizons both nationally and internationally. Reduction in costs of communication, elimination of geographical barriers, effective innovative approaches and newer technologies all facilitate business.
As a result, commitment to developing technology and innovation capabilities is crucial for achieving and maintaining a competitive edge in business. Some firms derive their competitive advantage directly through technological innovation. For others technology plays a supporting role, where the issue is more about understanding how technology can support key operational activities. A failure to match the technological advances of competitors limits opportunities for growth by inhibiting effectiveness and efficiency of inherent systems.
Innovation and Technology Practices
Innovation and technology practices fall into four main categories:
- Product innovation: which brings together technology and market needs to develop new products. Each business passes through a life cycle. The new product, spurred by a new idea, captures a market share that grows quickly. After a while the growth stabilizes and then it starts falling. This is the business cycle that is seen in most cases through the world. To reinvent and rebuild the business cycle, the firm must innovate. It is only a new idea and a new product that again starts with fast growth on the business cycle.
- Product development: which brings a new product concept through development and manufacturing to the market. As product life cycle fade, it is important to give the product new qualities and develop them further to stay ahead. Constant innovation enables a firm to develop various forms of one product that can then be differentiated by price and quality. This enables the firm to occupy new segments in the same market.
- Process innovation: which improves and develops practices and new production processes. New products build new markets. As the new market captures a market share, competitors come in, offering sometimes better substitutes at lower costs. The novelty fades off and competitive forces occupy space in the market thus driving down demand for the original firm. This again can only be solved through innovation and the development of new products that would again build a new market for the firm
- Technology acquisition: which acquires the technology necessary for product and process innovation through internal or external research and development (R&D).
Innovation is often regarded as the development and use of new and better products. But being innovative also involves thinking creatively about improved processes and ways of doing things. Hence innovation is not driven only from the breadth and depth of skills in R&D, engineering and market research, but also an atmosphere in which people can be creative and have this recognized (Czinkota et al, 1999). Innovation requires a high degree of employee involvement, openness to ideas, team-based improvement initiatives, an understanding that innovation requires risk taking, and a tolerance for failure.
Innovation brings together the two ideas of novelty and utility. It is a concept which is inherently societal and utilitarian. Where inventors are often thought of as solitary geniuses working away in a garret or lab, innovators, in contrast, start with an idea of what the marketplace needs. They create, but they also apply their creations.
And those applications, in turn, generate further innovations, giving rise to new industries and national and global markets; spurring productivity and economic growth; fueling wealth creation and profits; generating high-value, higher-paying jobs; and raising the standard of living, not just for direct beneficiaries of those new jobs, but also for other people touched by the innovation.
Currently, the cycle of innovation begins not with the producer, but with the customer. In an era when manufacturing and distribution are becoming increasingly componentized, fluid and responsive, consumer demand is in the driver’s seat. Businesses and organizations such as Linuz, eBay, Home Depot show how innovation’s increasingly collaborative nature is such that the the whole notion of a passive consumer seems unreliable. The user is now an innovation co-creator in a service-based partnership transforming core processes.
Further, thanks to the Internet, both the speed and the nature of innovation have changed, and both have become critical competitive success factors for a company or a nation. Innovation today is happening at a different pace, in a different place and with a different face.
Technology investment needs to be undertaken as part of an overall strategic approach by business geared to promoting innovation and adding value. There are two key processes fundamental for this approach. The first is a technology strategy or policy which includes the decisions that a firm makes about acquiring and developing technology and the organizational and managerial processes for technology deployment. It may include decisions on types of technology, make versus buy, R&D investment, and timing of technology introductions.
The second strategy is technological capability development and diffusion. This is about the transfer of technical know-how between functional areas such as R&D and engineering, and marketing and management. This entails ensuring that employees are equipped with the appropriate skills and training to develop and use technology effectively. It also involves effective communication and consultation with the hands-on users of technology about acquisition and deployment, recognizing that they are best placed to provide advice.
We see therefore that the inherent role of businesses is to translate ideas into products and services and deliver them in the most efficient and effective ways possible to the marketplace. The market ultimately determines the value of a product or service and also the efficiency of the business in delivering it.
Impact of Technology and Innovation on Efficiency
Science, technology and innovation have seldom been as crucial to development as they are today. Technological advances are at the core of many contemporary phenomena, including knowledge based societies and the network age. Modern technology and innovation offer opportunities for both economic and social gains. The impact of technology and innovation is, in many cases, contingent.
It is not the amount of money a firm spends on R&D and new equipment that determines the level of innovation, but the systems they have in place to convert the expenditure into products and processes that meet market demands. Some of the businesses and industries where the impact of technology and innovation can be seen include (TechNet, 2005):
- The Food and Drug Industry: Science and technology can be powerful tools in combating poverty through their contribution to sustained economic growth, enhanced market efficiency, and creation of employment opportunities. The application of innovation and technology in agriculture has the potential to increase food production through better soil management, efficient irrigation and high-yield crops with enhanced food value. Innovations and technology also play a pivotal role in developing newer, more effective and efficient drugs, vaccines, and diagnostic systems. They also facilitate improved access to medical information, and monitoring systems for drug quality, and are indispensable in the fight against infant and maternal mortality, malaria, HIV/AIDS and other diseases.
- The Health Care Industry: Technology and innovation are transforming healthcare with telemedicine applications that that allow doctors to diagnose, monitor and treat patients in remote locations to sophisticated video-conferencing and streaming video that allows patients or doctors to consult with specialists around the world to combined robotics and telecommunications links that enable interaction between doctors over large distances for education or surgical care. This has resulted not only in greatly improving the efficiency of existing systems but also increased productivity and economic growth in this industry.
- The Biotechnology Industry: Biomedical, molecular and genomic innovations have combined to create breakthrough therapies, drug delivery methods and health care strategies. The mapping of the human genome, the potential of stem cell research, nanotechnology and new Internet applications are weaving together with advances in biotechnology. These combined forces have and will redefine and redirect the development of the industry.
- Biotechnology innovations are enabling truly personalized medicine by patient-specific diagnoses, prognoses and therapy choices that are tailored to the specific genomic profile of an individual patient. Innovation is also enhancing collaboration, enabling information sharing and accelerating research and the pace of discovery. This creates efficiencies and ultimately reduces health care costs significantly. Biotechnology has spread from mere healthcare to further become the major driver of innovation in agriculture, environmental management and industrial production.
- The Internet Industry: With the advent of wireless broadband Internet access, legal music downloading services, live Internet broadcasts of sporting events, blogs with the power to influence a presidential campaign and the availability of Web content on mobile phones, the face of the internet has evolved and changed, all for the better. Technology is creating an Internet that is infinitely more personal, searchable and usable not to mention far more efficient and effective.
- Energy, Water and Transportation Industries: New innovations and technology are transforming industries across the globe, creating prospects for the efficient distribution of energy, clean water and transportation. Energy is being generated by clean, quiet, emissions-free fuel cells. Fuel-cell, hybrid or electric-power techniques are also enabling the mass production of environmentally improved, high-performing automobiles. The material science underlying nanotechnology will form the basis for many of these new technologies including nano-based systems that enable more efficient and reliable methods of distributing water and energy.
The Role of Intellectual Property Rights in Technology and Innovation
Patents play an increasingly important role in innovation, technology diffusion and economic performance. They help encourage innovation by allowing inventors to profit from their inventions. In a series of surveys conducted in the United States, Europe and Japan in the mid-1980s and 1990s, respondent companies reported patents as being extremely important in protecting their competitive advantage in a few industries, notably biotechnology, drugs, chemicals and, to a certain extent, machinery and computers (Cohen, Nelson and Walsh, 2000).
Moreover, patents might actually enhance technology transfer and diffusion. Patenting means disclosing inventions which might otherwise be kept secret. Industrial surveys show that the reluctance of firms to patent their inventions is primarily due to the fear of providing information to competitors (Shapiro, 2002). Patents thus facilitate transactions in technology markets as they can be bought or sold and more importantly be covered by licensing agreements which allows the licensee to use the patented invention in return for a fee or royalty.
Sherwood (1990) analyzes the concept of infrastructure and argues that an intellectual property system protects innovation and creative expression, and therefore is a helpful precondition for creation and use of new technology. Hence, the largely invisible intellectual property protection mechanism can be considered a valuable part of a country’s infrastructure. It is further argued that robust intellectual property protection fosters the transfer of technology by facilitating licensing, disclosing innovations and creating incentives to publish results.
As the world become a global market place and competition itself gets global, ideas and information flow faster than ever before. A new product manufactured anywhere is quickly transported to distant markets. The better the product, the more intense the efforts of a global competitive market to invent alternate products and substitutes. Hence, it is imperative that the modern firm innovate continuously to be able to survive. The role of technology and innovation in scaling up production, providing the goods to larger markets, reaching distant locations, efficient distribution networks and supply chains cannot be underestimated.
- Cohen, W.M., R.R. Nelson and J.P. Walsh (2000), “Protecting Their Intellectual Assets: Appropriability Conditions and Why US Manufacturing Firms Patent or Not”, NBER Working Paper 7552
- Czinkota, M, Ronkaien, I, and Mofett, M. (1999). International Business. Fifth Ed. The Dryden Press. Florida.
- Shapiro, C. (2002), “Competition Policy and Innovation”, OECD STI Working Papers 2002/11.
- Sherwood, R.M. (1990), Intellectual Property and Economic Development, Westview Press, Boulder.
- The Technology Network (2005). The TechNet Innovation Initiative and 2005 Innovation Policy Agenda.
Need essay sample on "Efficiency in business and industry"? We will write a custom essay sample specifically for you for only $ 13.90/page