**2. The constructs of Innovation and Agility**

In this section we provide an overview of how the constructs of Innovation and Agility have been developed since they became topics for academic study.

#### **2.1 Innovation**

We define Innovation as 'a deliverable from specialised work undertaken to transform opportunities, ideas, resources or needs into something of value that is new to the unit of adoption and strengthens either Dynamic or Ordinary Capabilities and/ or contributes to achievement of competitive or comparative advantage'.

By defining Innovation as 'a deliverable from specialised work' we make an unusual distinction. An example helps to clarifies this point. For us, a pharmaceutical company that undertakes the research and development work needed to develop a new drug is undertaking an Innovation initiative. A different pharmaceutical company that buys a start-up company that has developed an identical new drug is being Agile as it is using its existing (financial and executive) resources to acquire the right to register the new compound but it has not done the specialised work required to transform an opportunity into something of value.

It is impossible to understate the importance of Innovation as it has transformed human experience in almost every conceivable dimension including in social structures, health, life chances, economic labour and warfare. The distinguished economist William Baumol [11] concluded that "virtually all of the economic growth that has occurred since the 18th century is ultimately attributable to innovation". Many countries promote Innovation as a political and economic imperative. For example, in China, "Invention and innovation are (recognised as) the sources of technological change" [12] and South Korea sees "Research and Innovation as the driver of national economic and social advance" [13]. From an academic perspective, Innovation has received much greater attention than Agility. In 2022 there were approximately 58,000 hits in Google Scholar for articles with titles that included variants of the search-term 'Innovation' and an identical search procedure, using variants of the search-term 'Agility', yielded just 4480 hits (of which a significant proportion related to medical conditions or the training of dogs).

The work of manging and delivering innovative initiatives is demanding. Not all innovation initiatives can be successful, and some may be dysfunctional as a search to find, develop and exploit something new can be costly, unpredictable, distracting, resource-intensive, unproductive and sometimes exploitative, socially damaging or environmentally harmful.

Often, but not always, Innovation includes an element of risk. More ideas will be generated than can be implemented so many must be killed-off, sometimes without a full understanding of their potential. There may be a need for many aligned initiatives to be undertaken at the same time, most of which will be narrow in scope and improvement orientated but some may be transformational and require the destruction of existing assets, routines or mind-sets. In addition, Innovation requires that organisations possess a superior capability to execute by getting new things done effectively and efficiently.

For these reasons, it is wrong to assert that 'Innovation is always needed and more Innovation is better'. Rather, *Requisite* Innovation is needed 'not too much, not too little, of the right type and delivering wanted deliverables'.

#### *2.1.1 Innovation as a (Untidy) process*

Although the work of innovating may appear to be a systematic process there have been numerous case examples that demonstrate that it is rarely neatly structured and there will be twists and turns, set-backs, dead ends and, hopefully, lucky breaks along the way: more like the process of a jazz band than a string quartet [14]. For this reason, we describe the work of innovating as a journey with phases rather than a set of rigid steps. Capable managers know what skills are needed in each phase of an Innovation journey, how to deploy them and they will coach others in their use. As an Innovation initiative passes from one phase to another then those involved must change the mindsets, skills, structures and processes that they use to make progress.

There are five phases of any Innovation journey that, in practice, may not be sequential. *Searching* requires scanning the environment to detect existing or potential needs, ideas or possible improvement pathways that could possibly be captured and exploited by the unit of adoption. *Exploring* is when ideas or opportunities are carefully analysed to assess issues related to their possible development such as costs, risk factors, potential benefits, relationship with corporate strategy, rivals' offers, difficulties in adopting and whether a proposed innovation is wanted by internal or external customers. *Committing* is when decisions are taken as to 'what we will and

### *Untangling the Relationship between Innovation and Agility DOI: http://dx.doi.org/10.5772/intechopen.112557*

won't do' and the resources that will be needed to move forward quickly, efficiently and effectively are defined and allocated. In *Realising* required development work is undertaken, often as a project, to transform a commitment into a deliverable. The ethic for this phase is 'we get this done on-time and on-budget'. *Optimising* finds ways to maximise possible benefits from an Innovation journey. Here the ethic is 'Let's squeeze every last drop of advantage from what we have achieved'.

### *2.1.2 Targeting Innovation Capability*

Once possessed Innovation Capability is ineffectual unless it is used. It can be targeted directed towards one or more of six potential target areas (we refer to these as the 6Ps). In brief, the targets are: (i) outputs (Product), (ii) how things are done (Process), (iii) interactions outside the enterprise (Position), (iv) business models (Paradigm), (v) acquisition of resources (Provisioning) and/or (vii) means of simplifying value chains (Platform) [15, 16]. The 6P target areas are explained in greater detail below.

#### *2.1.2.1 Product Innovation (P1)*

Product Innovation (P1) targets what is produced. Specifically, the outputs of an organisation or a sub-unit that are, or could be, provided for external and/or internal customers and/or other stakeholders. Products are tangible or intangible goods or services. Targeting innovation capability on developing new and/or improved products can involve multiple actors engaged in complex and inter-linked processes with a single end in view, which is creating superior value at an acceptable cost for users, distributors or customers. Many products targeted for external customers are inherently complex, so decisions need to be made about issues such as branding policies, market development trajectories, industry logics, resource availability, technological developments and other factors.

Modern methods for managing Product Innovation emerged in the late nineteenth century. Early movers found that units specifically dedicated to delivering successful innovative journeys (that became known as Research and Development or R&D Centres) strengthened Dynamic Capabilities, especially for science or technology intensive operations. For example, in Germany the Carl Zeiss company opened its first R&D laboratory in 1889 thereby creating an internal capability, and a facultative ecosystem, to enable multiple innovative journeys to deliver waves of superior science-based products until today.

Although R&D centres proved to be an effective wellspring of some forms of Product Innovation numerous other methods have been subsequently developed including skunkworks (for radical innovation), lean-start-up (for iterative innovation), open innovation (to reduce costs and gain access to a wider pool of capability) and, increasingly, Artificial Intelligence (using machine intelligence to draw from big data repositories to create novel solutions).

### *2.1.2.2 Process Innovation (P2)*

Process Innovation (P2) targets how work is done. Processes are sequences of activities that enable tasks to be accomplished. This target for Innovation has many potential benefits including making processes faster, more responsive, cheaper, more reliable, technologically enabled, accurately measurable and/or better integrated.

Processes can be extensive, interdependent, adaptive, socio-technical and integrated. Process Innovation is facilitated by systematic analysis, comparative benchmarking, consultancy and offers from specialist providers. Technological developments are extremely influential. For example, intelligent automation is widely adopted, the Internet of Things has changed processes for the maintenance of equipment fundamentally and intelligent digital systems are transforming processes for organisations to relate to their customers.

Modern methods for managing Process Innovation emerged in the early years of the twentieth century. The research, writings and lectures of Frederick Winslow Taylor [17] were a pivotal turning-point as they demonstrated that Process Innovation could be rigorously structured. Taylor's methodology was developed by efficiency engineers who spent months in the Bethlehem Steel Company in Pennsylvania observing the micro-dimensions of inefficiency using laboratory-style techniques of scientific enquiry. Taylor concluded that: "It is no single element, but rather this whole combination, that constitutes scientific management, which may be summarised as: Science, not rule of thumb; harmony, not discord; cooperation, not individualism; maximum output, in place of restricted output; the development of each man to his greatest efficiency and prosperity" [18]. Taylor's work demonstrated that organisational culture was critically important, as were human-centric values, a team-ethos, stretching goals, personal development and a reward system that recognised endeavour and output. Some of these principles were challenged in later research studies, especially in the Hawthorn Plant in the USA in the 1930s that found that non-rational factors profoundly influenced performance by the kind of intellectual rigour demonstrated by Taylor continues to drive Process Innovation.

#### *2.1.2.3 Positional Innovation (P3)*

Positional Innovation (P3) targets how meanings and interfaces between an organisation and external entities are managed. It has wide relevance as Positional Innovation includes all aspects of an organisation's interplay with its environment, including, suppliers, customers, potential customers, influencing agencies, regulators and with the wider world.

Reactive Positional Innovation focuses on improving how an enterprise senses political and social changes, industry dynamics, technological developments, rival's activities, needs of customers (internal and external), potential customers, entities in its ecosystems and other stakeholders or influential bodies.

Proactive Positional Innovation focuses on image, reputation, influence, differentiation and communicating the merits of products or services offered. In larger organisations marketing functions play a key role in determining positional strategies and tactics. Successful Positional Innovation improves the management of identities by reshaping advertising, marketing, media, packaging and the management of meanings. The use of digital technologies, including artificial intelligence powered analytics, is transforming the role of Positional Innovation in many enterprises. Now, facilitated by the internet and other forms of digital communication, information flows easily and enables organisations to be proactively outward looking and globally focused. Positional Innovation can: (i) provide higher quality and almost real-time macro- and micro-levels of customer intimacy; (ii) exploit collective task-specific collective knowledge easily and cheaply; (iii) increase the probability of beneficial partnering.

It was in the late 1980s that a method for structuring Positional Innovation known as Absorptive Capacity was developed [19]. This aims to: (i) strengthen the capability of people in an organisation to look outside of their own organisation and find ideas, opportunities, connections and other possible useful or advantageous inputs; (ii) consider (absorb) each new input so that they understand its strengths and weaknesses and possible relevance to their own organisation; (iii) select inputs that are most likely to be beneficial to their own organisation and (iv) effectively implement the selected inputs.

#### *2.1.2.4 Paradigm Innovation (P4)*

Paradigm Innovation (P4) targets what has been called 'the Brain and the Heart of the Firm' [20]. Thomas Kuhn [21] used the term paradigm to mean a coherent, shared body of knowledge, that becomes a largely unquestioned collective perceptual lens through which the world was interpreted.

All organisations are shaped by a de facto paradigm that may be implicit or explicit, weak or strong. Sometimes a paradigm is codified by a written creed or a statement of vision, mission and values. Paradigm Innovation is usually focused on an enterprise as a whole but its principles can also apply to sub-units. Not all paradigms are optimal as some will become obsolete. It is a key leadership task to review the efficacy of the current paradigm and redefine it if necessary.

Paradigm Innovation is helped when senior leaders examine questions like: 'What Business Models are viable in the industries in which we choose to compete?' 'Are Change Drivers reframing what is viable?' 'What Vision, Mission and Values do we chose to adopt?' 'What organising principles are best for us?' 'What deliverables do we need from our Dynamic Capabilities?' 'What must we be excellent at doing?' and 'How do we gain the greatest value from technological change?' 'What would 'success' mean for us?'

An example from the financial services industry clarifies the importance of Paradigm Innovation. For more than a century retail banking in the UK was largely predictable. The market for financial services was dominated by a small number of national banks with branches in almost every city and town in the country. This enabled customers to have direct access to a broad portfolio of personal and business services. It was not to last. In the twenty first century this paradigm of retail banking almost collapsed as the extensive use of mobile digital devices enabled different concepts of service to revolutionise the banking experience with 'Platform as a Service' and 'Software as a Service' becoming widely accepted. In addition, Artificial Intelligence (AI) and Machine Learning techniques automated risk calculations and blockchain technology is being used to improve customer authentication. Traditional banks found that they had to practice radical Paradigm Innovation if they were to compete successfully in the digital era.

Modern approaches to paradigm innovation owe much to the recognition that organisations need a coherent driving force. Work by Tregeo and Zimmerman [8] in the 1970s provide useful typologies that have been subsequently extended.

#### *2.1.2.5 Provisioning Innovation (P5)*

Provisioning Innovation (P5) targets where and how resources are obtained and is relevant for enterprises and sub-units. The resources sought include financial, knowledge, technological, locational, contractual, reputational or legal inputs or assets. Successful Provisioning Innovation develops a facilitating ecosystem that includes users, supporters, actual and potential customers, service providers, kindred organisations, funding sources, special interest groups, networking sites, advisors

and resource providers. This form of innovation is complex as the value that can be gained from external resources differs greatly. Nine categories of provisions provide a useful overview of the scope of opportunities for this target of Innovation. These are: (i) recognition (gaining prestige and stature); (ii) development of managerial capabilities; (iii) sector-specific requirements and opportunities; (iv) finance and investment; (v) human resource management; (vi) access to suppliers; (vii) insight into customers and potential customers; (viii) developments in science and technology and (ix) procurement policies and practises.

Although Provisioning Innovation is broader than supply chain strategy some of the policies and practises developed for this specialisation are relevant to the development of external ecosystems. These include legal and informal contracting; sustaining mutual trust; ease of maintaining relationships; risk resilience; transparency; sustainability; procurement strategy; real-time management; systems integration; supplier evaluation; negotiation and contract management; supply chain operations; inventory and operations; transport and project management.

The identification of provisioning as a target for innovation is relatively new although there are long-established processes in accounting to value assets and the significance of resources was clarified in the academic perspective known as the Resource-Based View of the Firm [22].

#### *2.1.2.6 Platform Innovation (P6)*

Platform Innovation (P6) targets how customers or users access products or services. There are two major types of platforms. One provides do-better and do-different concepts, tools and facilities for improving or redesigning conventional marketing and sales activities. The other is digital platforms: (i) that provide hitherto unavailable opportunities to contact previously unreachable market segments; (ii) proactively shape attitudes and behaviour in customers and others; (iii) greatly enhance opportunities to interact with users or customers; (iv) accelerate learning and (v) facilitate collaboration between individuals and groups that previously could not interact easily, if at all.

Currently, the most dynamic area is Digital Platforms as their presence has been transformational. Entire industries have been reshaped, often fundamentally, as opportunities for global enterprises have proliferated, often at the expense of local providers. Wealthy corporations invest millions to provide Platforms that can gain global competitive advantage. These are frequently enhanced and enriched by streams of new or improved products or services with Big Data and Artificial Intelligence acting as engines for further waves of innovation. Previously unformed or unreachable market segments may be reached and influenced. Marketing can be targeted at individuals in ways that were previously impossible. Interaction between buyers and sellers is enhanced as information is exchanged seamlessly and real-time data tracks trends. It becomes possible to grasp opportunities to gain advantage by connecting groups that previously could not interact easily, if at all, as Airbnb has so brilliantly demonstrated.

Platforms have a history buried deep in time. A simple marketplace in a town square is a form of Platform. The development of the Internet in the 1980s reconfigured the functions of Platforms in ways that continue to be developed.

#### *2.1.3 An innovation Litmus Test*

As a quick Litmus Test, we can describe Requisite Innovation as having seven characteristics.

