Module: Innovation
Lecturer:
Table of Content:
1. Introduction p.3
2. How to manage innovation in organizations p.4
2.1 – 6 general categories of
managerial practice p.6
3. Creativity and innovative at Hang Seng p.7
3.1 Hang Seng – Background p.8
3.2 Training p.8
3.3 Motivation p.8
3.4 Freedom p.9
3.5 Work Group Features p.9
3.6 Organizational Support p.9
4. Develop creative and innovative activity at
Hang Seng p.10
4.1 The Changing Market p.11
4.2 Communication p.12
Conclusion p.12
References p.13
1. Introduction
In the past decades, companies were able to get rich by making average products for average people, but those markets have long since been sewn up; mass is no longer achievable or desirable. It is today an accepted fact that innovation is essential in all organizations. Innovation can increase synergy from information sharing, joint initiatives, integrated policy, investment in R&D and benchmarking.
Innovation involves the introduction of something new within an organization, which may relate to a product, a process or a service. Innovation may be radical or incremental.
While innovation typically adds value, innovation may also have negative or destructive effect as new developments clear away or change old organizational forms and practices. A key challenge in innovation is maintaining a balance between process and product innovations where process innovations tend to involve a business model which may develop shareholder satisfaction through improved efficiencies while product innovations develop customer support however at the risk of costly R&D that can erode shareholder return.
There are several types of innovation, which include production innovation, management innovation, process innovation, service innovation and marketing innovation.
2. How to manage innovation in organizations
In general innovative organizations, they devote specific resources to research and development, spent money on training, communication, knowledge transfer, and ideas generation, rewards and pipeline administration. These methods could maximize employees’ creativity.
(1998) carries out a research on how to manage creativity within the organization. She suggests that individual creativity is a function of three components.
1. Expertise (technical, procedural and intellectual knowledge)
Creative thinking skills (flexibility, imagination, perseverance)
Motivation
When give talks to managers, she often start by asking where in your organization do you most want creativity? Typically, they’ll say R&D, marketing, and advertising. When she asks, where do you not want creativity? Someone will inevitably answer, “Accounting.” That always gets a laugh because of the negative connotations of creative accounting. But there’s this common perception among managers that some people are creative, and most aren’t. However she suggested that’s not true. As a leader, you want everyone in your organization producing novel and useful ideas, including financial people.
The greater the expertise, the broader of knowledge, which the employee can work in exploring and solve problems. Expertise and creative thinking skills in an organization will be a function of recruitment and selection, training and development. Motivation is arguably the component over which a manager can exercise the most immediate control. In experimental research that has been done on creativity suggests that money isn’t everything but money can be a creativity motivator. In the diary study, she asked people, “To what extent were you motivated by rewards today?” Quite often they’d say that the question isn’t relevant — that they don’t think about pay on a day-to-day basis. And the handful of people who were spending a lot of time wondering about their bonuses was doing very little creative thinking.
Bonuses and pay-for-performance plans can even be problematic when people believe that every move they make is going to affect their compensation. In those situations, people tend to get risk averse. Of course, people need to feel that they’re being compensated fairly. But in her research shows that people put far more value on a work environment where creativity is supported, valued, and recognized. People want the opportunity to deeply engage in their work and make real progress. So it’s critical for leaders to match people to projects not only on the basis of their experience but also in terms of where their interests lie. People are most creative when they care about their work and they’re stretching their skills. If the challenge is far beyond their skill level, they tend to get frustrated; if it’s far below their skill level, they tend to get bored. Leaders need to strike the right balance.
In order to motivate the staff, reward system need to set up systematically, otherwise it will influence the effectiveness of innovative activity. The reward systems cannot be only emphasized on extrinsic reward such as individual performance. Although it is necessary to provide sufficient extrinsic reward to maintain employee’s motivation, the effectiveness of a reward system with only extrinsic reward is neither high enough nor sustainable if intrinsic reward is not properly included
(1997) describes that direct remuneration aim to strengthen and expand the linkages between performances, individual and work group contribution to that performance and the distribution of rewards. But the indirect rewards are also important to promote job satisfaction and work motivation.
2.1 – 6 general categories of managerial practice
In research, there are six categories that managers can do to enhance creativity.
1. Challenge
Of all the things managers can do to stimulate creativity, perhaps the most efficacious is the deceptively simple task of matching people with the right assignments. Making a good match requires that managers possess rich and detailed information about their employees and the available assignments.
2. Freedom
When it comes to granting freedom, the key to creativity is giving people autonomy concerning the means that is concerning process but not necessarily the ends. Give employees the freedom to find new paths to new solutions, unleashing their creativity.
3. Resource
The two main resources that effect creativity are time and money. Time pressure can heighten creativity; organizations routinely kill creativity with fake deadlines or impossibly tight ones. When it comes to project resources, managers must determine the funding, people and other resources that a team legitimately needs to complete an assignment and they must know how much the organization can legitimately afford to allocate to the assignment.
4. Work Group Features
If you want to build teams that come up with creative ideas, you must pay careful attention to the design of such teams. The group must have diversity of perspectives and background so that teams comprise people with various intellectual foundations and approaches to work.
5. Supervisory Encouragement
Managers in successful, creative organizations rarely offer specific extrinsic rewards for particular outcomes. However, they freely and generously recognize creative work by individuals and teams often before the ultimate commercial impact of those efforts is known. By contrast, managers who kill creativity do so either by failing to acknowledge innovative efforts or by greeting them with skepticism.
6. Organizational Support
Organizational systems and culture need to support collaboration and the free exchange of idea. Take expertise. The more often people exchange ideas and data by working together, the more knowledge they will have. The same can be said for creative thinking.
3. Creativity and innovative at Hang Seng
3.1 Hang Seng – Background
Hang Seng Bank is a world-class financial institution and one of Hong Kong’s largest listed companies in terms of market capitalization. The company was founded in 1933. Hang Seng Bank is a principal member of the HSBC Group, which is among the world’s largest financial services organizations and holds a 62.14% equity interest in the Bank. Hang Seng bank is the largest local bank in Hong Kong, its vast network of about 150 branches and automated banking centers means a Hang Seng outlet can be found around most corners. Hang Seng is currently expanding in China. It has 18 outlets in Beijing, Shanghai, Guangzhou, Dongguan, Shenzhen, Fuzhou and Nanjing. Hang Seng is strengthening their position as a leading financial institution in Greater China.
3.2 Training
As concept, Hang Seng understand that employees are its most valuable asset, Hang Seng Bank allocates ample resources to staff training and development with the aim of sustaining a competent and professional staff force that will contribute to the success of the Bank.
Newcomers would be assigned to an experienced manager to providing you with on the job coaching and guidance, so that by the end you will know your division inside out. All new staff joining the bank will attend in induction programmed which enables them to better understand the history, culture and values of the bank, making it easier for them to integrate with other staff members and adapt to the new environment.
3.3 Motivation
When you need guidance or inspiration, business head will be there to be personal mentors. They will guide you in your personal and professional development, using their expensive experience and expertise to make sure you stay on the right path.
3.4 Freedom
Within Hang Seng bank, there are many different business departments, which include personal banking, business banking, investment banking, private banking etc. Each department provides different kinds of products and services. Each department has its kind of freedom but also comes with responsibilities. Business units can set their own targets but once they set them, they have to achieve them.
3.5 Work Group Features
Providing quality service and building a trustworthy relationship with client is one of Hang Seng’s strength. In order to achieve that, every staff would need to pay extra attention on the clients. For example, in commercial banking, there are different teams to handle different industry, so each team is more focus on their clients. Each team normally have 20 people, lead by a team who have expensive experience in the specific sector.
3.6 Organizational Support
Hang Seng launched a series of reforms to promote a greater balance between the work and home life of each employee. These included an employee assistance programmed to deal with personal and career issues, medical service, stress programmers leave of absence for childcare and many others employee benefits.
4. Develop creative and innovative activity at Hang Seng
Hang Seng Bank is strengthening its brand experience for customers.
Is brand is all-important in appeal to customers in this age of “instant access” and is Hang Seng’s primary source of competitive advantage. But in the new marketing era we are in today, Hang Seng’s brand has to keep evolving. Above all, it has to convey to customers that: Hang Seng embrace innovation and continue to deliver memorable and rewarding experiences to them.
Hang Seng’s brand represents a culture of everyday innovation that permeates through all levels of the organization and inspires staff. Innovation is not just about product R&D, it is also about continuous improvement in all Hang Seng’ business processes, including delivery, cost-efficiency and corporate effectiveness.
In Hang Seng Bank, they have a well-established system to encourage staff to achieve this target. They reward staff that makes proposals for cost reduction and revenue generation. Each year, they give special awards to staff and departments that are able to change and innovate. The level of award depends on the amount of saving or revenue generated. Indeed, this is one of the reasons why Hang Seng’s cost-to-income ratio is well below the industry average. Their ratio of 25.3% last year was most attractive against the local banking average of 37.8%, and one of the lowest in the banking world.
(1998) suggests that after determining the need for change, the next step is to find the proper individuals to champion the change management effort. A change management champion must be a leader in the organization and should be recognized for the continuing contributions to the company’s mission.
4.1 The Changing Market
I am sure there is no need for me to tell that today, the world and the market are changing with unprecedented speed due to technology. Technology is entering our lives in more and more ways and there is growing acceptance of all things “e”. People can read Sun Tzu’s The Art of War on Palm Pilots, use mobile phones as alarm clocks and apply for IPO shares on the internet.
Competition is becoming hyper as new competitors from around the world target the same pool of customers. Customers are now better informed and are taking good products, personal service and low prices for granted. Market competition is continually raising their expectations and unhappy customers are only a mouse click away from a competitor’s website.
The internet is becoming a major channel for two-way dialogue with customers. The website not only gives customers information about the organization.
Hang Seng’s business models have had to change accordingly, to meet new customer demands in the rapidly developing market. Most importantly, instead of finding customers for our products, we now have to find products for our customers.
As (2001) states it involves developing both the ability to scan for signals about change and a readiness to move into new areas and let go of old ones. It suggests that the primary task is one of managing knowledge, developing and building distinctive competence in particular fields, adapting and absorbing new and different knowledge sets when it becomes necessary and moving out of particular knowledge areas when they become redundant.
4.2 Communication
An effective system of communication, both lateral and vertical is essential. Effective communication in an organization is a manifestation of a cooperative and purposeful group of people at work. Creativity and innovation can flourish in organizations with effective communication.
To strengthen Hang Seng’s innovation culture, they have appointed head of retail banking as Innovation Champion, set up a task force, and launched a Bank-wide Innovation Quest. This includes a staff e-education plan, articles in the in-house magazine and morning broadcasts of interviews with well-known businessmen.
Traditional management by objective just directly advocates specific goals and feedback. However, the major benefit of using participation is that it appears to induce individuals to establish more difficult goals. ( 1997)
Conclusion
In today’s dynamic world, markets will continue to change whether we like it or not. We have to innovate with the best use of technology to bring positive brand experiences to customers. Knowing our customers individually through tools such as data mining, personalization and 1-to-1 marketing is the key to the future.
Hang’s Brand is clearly differentiated promise to customers. It has to be an ongoing demonstration of customer care and value. Creating a positive brand experience enhances our ability to compete. It is also a very important tool for building and retaining customer loyalty.
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