• Mr. Hernan Cruz, M.A., MBA

A Brief Primer on Sustainable, Open and Disruptive Innovation Models

By Mr. Hernán Cruz, M.A., MBA, Professor Emeritus of Universidad Autónoma de Yucatán and Director of Operations at RGI


The historical experience of industrial growth and socio-economic development of different countries, particularly industrialized nations, shows that innovation is an essential driver of growth and that entrepreneurship vital for the economic health and growth of a country and the well being of its citizens. The literature on innovation in emerging market economies shows that well designed S&T policies which stimulate and support technological innovation (both ‘hard’ and ‘soft’) and properly implemented can result in:

  • Increased incomes for employees

  • Increased competitiveness and profitability in domestic and global markets

  • New markets and new value added products and services

  • Higher value addition in production, and per worker

  • Environmental benefits and improved productivity of natural resources, particularly those that are non-renewable or declining. i.e. The more efficient use of scarce resources

  • A healthy decentralization of the economy and reduced marginality

  • A better quality of a life for the population and improved health (hence productivity)

  • The emergence of new industrial and economic sectors

  • The betterment of the quality of life – better health, services, etc.,


By understanding the dynamics and determinants of successful innovation, those areas where policy can have the most tangible and realistic impact have been identified. It is our view that socio-cultural, demographic, political and behavioral factors, as well as gaps and weaknesses in the policy framework and policy instruments that focus on Innovation are the major determinants of slow progress in innovation and technology commercialization, more so than purely economic, structural or technical factors. A relative lack of understanding of the dynamics and processes of innovation and related processes is also an inhibiting force of some magnitude.


Sustainable Innovation


If there is any term that is heard in just about every forum of academic debate, policy discussions and business, it is “sustainability”. It is remarkable how widespread it has become as a concept, framework and guiding principle in almost every aspect of socio-economic activity At the risk of being repetitive, “sustainability” implies:

· A concern and focus on environmental impact of human activities and the preservation of the global environment

· The emphasis on social benefit and economic equity for the population at large and particularly the marginalized and poor segments

· A focus on undertaking activities that do not endanger the well being of future generations – a long term view

· And most of all, to achieve these in a manner that is sustainable : profitable for businesses, economically positive for governments, and independent of a continued dependence on external sources of support and financing, such as charities.


That being said, there have of course been extensive elaborations of these themes, and a great deal of research and policy analysis. Countless conferences, journals, associations, websites, government agencies and international organizations have been one major result. It is difficult to keep track of this.But underlying the concept is a fundamental implication necessary to achieve the goals of sustainability; that it requires the production and implementation of that knowledge is needed and which does not exist adequately at this time. Rhetoric is more abundant than knowledge. But without the necessary knowledge, there can be little progress – in other words, Innovation is essential in all dimensions of socio-economic and technological activity. It also highlights the need for new thinking in related fields such as governance, management, policy and education.It would appear that the need for such innovation is generally accepted broadly. What is lacking is the ‘fleshing out’ of this concept into specific emphases, activities, models and frameworks, models of implementation and strategy, methodologies for evaluation and metrics for measurement of sustainability.

Specifically, though not a complete list, some of the areas where focus is required include the identification of industrial, technological and economic sectors of importance – energy, water, materials, health, natural resources, medicine, construction, transportation, packaging, information technology and nutrition among others. These are where innovation is needed; the creation of new models for the selection, analysis, design and implementation of projects, policies and cooperative models to achieve the goals of sustainability; methodologies for developing suitable business strategies and national and international policies, the latter including regulations, incentives and support by governments, international agencies, foundations; the involvement of civil society and stakeholders in this process; building on the research and experiences to date; ensuring there are synergies among the different activities and institutions that are involved; and most importantly, an emphasis on risk mitigation in all related activities – since innovation involves risk, and can lead to serious unintended consequences if the full implications of these activities are not analyzed in a systematic manner.


Open Innovation

The central idea of ​​'Open Innovation' is to develop innovation as a process where internal and external stakeholders have a similar protagonism. This is a style of innovative capacity not restricted to the product, but also referred to the business model; it deals with innovations based on experimentation and collaboration between companies, universities, public sector and, of course, end users. The open innovation model makes use of internal and external knowledge as inputs to the innovation process and outputs the generated results, many in collaboration with other organizations, expanding existing markets and entering new markets. It is clear therefore that the barrier between the outside organizations is "porous".


In open innovation processes, innovation sources may be internal or external and can be incorporated into the innovation process in any stage, enriching at all times the idea or product. Innovations can reach the market through various channels, either through a spin-off, a license, a final sale, donation, etc., or they may contribute as input of other innovations from other organizations.The Open Innovation methodologies can be compared with open source software development, since both have the concept that the greater the number of external sources there will be a better creation of value. But open innovation methods explicitly incorporate the business model as a source of creating and capturing value.


Open innovation incorporates business models that complement internal innovation processes with external resources, focusing on value creation. It means moving from a closed network model to an open network model, where research and development that takes place within an organization, is supported and enriched greatly if opened to new ideas and new collaborations.


In companies, educational institutions, or other organizations, open innovation and technology transfer facilitate the process of transmission of scientific, technological and knowledge to third parties, either by developing a process, manufacturing a product or providing a service, helping to develop the capabilities of the users of the entity or entities involved in this process.


Disruptive Innovation


A concept developed by Clayton Christensen[1] at Harvard emphasizes the importance of simple, lower end and lower cost improvements which move up and eventually displace existing dominant organizations in that sector, i.e. "disruptive innovation"


By providing a simpler product or service at a lower price than the current products, it gives accessibility to consumers who had previously been unable to afford these products or services. In the initial stages, these innovations may be simpler, lower in quality, less attractive and are less profitable to the producers. Over time, however, with gradual improvements, these innovators overcome the dominant competitors.


To some extent this is because the dominant layers in a sector, in constant pursuit of higher gross margins, end up producing products or services that are too expensive, complex any perhaps too good, for many customers. Examples of “disruptive innovations” are mini-steel plants, cell phones and discount retailers.

 

About the Author

Mr. Hernán Cruz, M.A., MBA, is the Professor Emeritus of Universidad Autónoma de Yucatán, where he taught in the Chemical Engineering and Entreprenership Departments, publishing multiple papers on innovation. Cuurrenly, Mr. Cruz is the Director of Operations at RGI, where he directs development and integration of unmanned aired vehicle technology (i.e. drones), specifically in the sectors of agriculture, construction, and environmental conservancy. His other subject areas expertise include regional economic development, clusters and competitiveness.


 

References

[1] "Clayton Christensen's Disruptive Innovation", The New Yorker, May 2012

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