Innovation as Organ of Economic Growth

While talking about a Business, it can be said that the marketing alone does not make a business enterprise. In a static economy there are no “business enterprises”. There are not even “businessmen”. For the “middleman” of a static society is simply a “broker” who receives his compensation in the form of a fee.

A business enterprise can exist only in an expanding economy, or at least in one which considers change both natural and desirable. Thus, business is the specific organ of growth, expansion and change.

The second function of a business is therefore innovation, that is, the provision of better and more economic goods and services. It is not enough for the business to provide just any economic good and services; it must provide better and more economic ones. It is not necessary for a business to grow bigger; but it is necessary that it constantly grow better.

Innovation may take the form of lower price – the form with which the economist has been most concerned, for the simple reason that it is the only one that can be handled by his quantitative tools. But it may also be a new and better product (even at a higher price), a new convenience or the creation of a new want. It may be finding new uses for old products. A salesman who succeeded in selling refrigerators to the Eskimos to prevent food from freezing would be an “innovator “ quite as much as if he had developed brand-new processes or invented a new product. To sell the Eskimos a refrigerator to keep food cool, is finding a new market; to sell a refrigerator to keep food from getting too cold is actually creating a new product. Technologically there is, of course, only the same old product; but economically there is innovation.

Innovation goes right through all the phases of business. It may be innovation in design, in product, in marketing techniques. It may be innovation in price or services to the customer. It may be innovation in management organization or management methods. Or it may be a new insurance policy that makes it possible for a businessman to assume new risks.

Innovation extends through all forms of business. It is as important as a Bank, an Insurance company or a retail shop as it is to a manufacturing or engineering firm.

In the organization of business enterprise innovation can therefore no more be considered a separate function than marketing. It is not confined to engineering or research but extends across all parts of the business, all functions, all activities. It is not, to repeat, confine to manufacturing business alone. Innovation in distribution has been as important as innovation in manufacturing; and so has been innovation in an insurance company or bank.

The leadership in innovation with respect to product and service can normally be focused in one functional activity, which is responsible for nothing else. This is always true in a business with a strong engineering or chemical flavour. In an insurance company too, a special department charged with leadership responsibility for the development of new kinds of coverage is in order; and there might be another such department charged with innovation in the organization of sales, the administration of policies and setting of claims. For both together is the insurance company’s business.

It is not that only the top chairs of the company must be responsible for all the managerial and innovational activities of a business, rather every other managerial unit of the business should also have clear responsibility and definite goals for innovation. It should be responsible for its contribution to innovation in the company’s product or service; and it should, in addition, strive consciously and with a direction toward advancement of the art in the particular area in which it is engaged: selling of accounting, quality control or personnel management.

The growth of economy of an organization is but a gross effect of these all concerns of innovation.

Press Esc to close