Introduction

INTRODUCTION Innovation management is probably the most searchable and discussable term over the last decades. Everybody talking about innovative approach almost in every sphere of our life. As innovation was first introduced in beginning of 20th century, nowadays exist hundred and thousands definition of it, sometimes close to each other, sometimes diametric opposite. Main purpose of this work is to study the most common approach of innovation management and apply it in order to management of small business enterprise unit. The main aim of this work is to use tools and instruments of innovation management in order to solve existent problems Vorontcov company. The main aim of this diploma theses will be studying and research innovation management in the way to solve existent problems in small business unit Vorontcov. To certain extend, this work is attempt to show that innovation is not only for huge overseas companies and global corporation, but innovative approach may be implemented to small business working in quite ordinary and traditional industry as wood working. Usually, when we mention innovation in our usually life we imagine hi-tech laboratories working on the most secret topics all over the world. At the time, innovation management is not only the way how it is described above. This work is divided to 3 main chapters. First chapter presents theoretical research of innovation management basis, what helps to see the evolution of innovation thoughts and understand how to implement and to use it for exact company. Also will be analyzed certain practical instruments and tools to manage innovation in order to use them further to company analyze. Chapter 2 first of all aimed to study macro and micro company environment in order to understand its potential, existent problems and threats, as well as to look for possible solutions and development ways. At the end of this Chapter the most relevant solution is chosen. Third chapter logically follows implementing the most appropriate and suitable solution to company and evaluation of its effect. Thus, this work is an example of uniting theoretical knowledge of certain subject with is practical usage and implementation to company of small business unit. 9 1 THEORETICAL FOUNDATIONS OF INNOVATION MANAGEMENT 1.1 THE BASIC THEORETICAL CONCEPTS OF INNOVATION MANAGEMENT. 1.1.1 The basic definition of innovation Innovation distinguish leader from running after. Steave Jobs Innovations are almost concurred our life in last years. Innovation is discussed by everybody from any kind of tribune. William Poundstone in his book “How would you move Mount Fuji”1 quote Jeff Raikes “If we stop offering new solutions to satisfy customer demand and technological progress, we will be forced out of the business anytime”. Innovation plays very important role in company prosperity. In order to understand, how innovation can help company not only survive in constantly changing environment, but to be successful, it is necessary to analyse what is actually innovation, which kind of innovation exist and the main functions and role in company. For the aim of this work I would like to analyse the most common definition of innovation which are available in Russian and English. It is important to understand to process behind it evolution and modern approach to innovation in order to make it possible to use for further development of investigated company. It is really necessary to mention that there are hundreds of definition but all of them combine certain features and words. That’s why, after mentioning the most common of them, the summary will be done to define the most appropriate from my point of view. First of all, as this diploma thesis is dedicated Russian enterprise, I would like to cite a definition from Russian law about innovation and science “About science and governmental science and technology policy” Federal law from 23.08.1996 No. 127-FZ2 Here in Chapter 1, clause 2 it says: “Innovation is implemented to the use new or significantly improved product (goods, services) or process, a new sales method or a new organizational method in business practices, workplace or external relations organization.” First definition, which might be named as underlying innovation French economist, J.B. Say already 2 centuries ago had said, the “entrepreneur moves economics resources from sphere with less possible to sphere with more possible productivity and effectiveness” But the most significant role in introduction and determining innovation, understanding innovation role in business and production was done by Austrian scientist Josepf Alois Schumpeter (1883-1950), who in 1911 determined entrepreneur as “By enterprise we understand the implementation of new combinations, as well as embodied of this combination. 1 Poundstone, W. 2004, p.32 2 Federal law from 23.08.1996 No. 127-FZ Chapter 1, clause 2. 10 Entrepreneurs we call business entities whose function is precisely the implementation of new combinations and which act as an active element"3 Significant role in determining and explaining appearing of innovation played famous Russian economist N.D. Kondratyev. He analysed macroeconomics data of 4 developed countries (England, France, Germany, USA) from 1780 till 1920 and made a conclusion about 3 main cycles (waves) with approximately similar periodic. Influence of innovations according to changing of dynamic in macroeconomics date, analysed by Kondratyev. He explained the reason for appearing this buoyant waves as 1 wave: innovation in textile and iron (cast iron) production 2 wave: innovation in railway and sea transportation 3 wave inventions in sphere of electricity, radio and electronics. 4 Term innovation itself was introduced later by Schumpeter, in 30th years of 20th century and he interpreted innovation as “changings with goal of implementation and usage new types of goods, new production and transport facilities, markets and organisation forms in industry.” 5 Schumpeter determined the content of innovation as realization of new combinations, influencing to dynamic of economic growth. He distinguish 5 common situations: 1. Product production, which is not known for consumers yet or adding a new quality (property) of the product 2. New production method, which means new technological processes, not known yet in industry. It doesn’t need to be based on new invention or discovery, but could be determined as improvement or commercial usage (technology of executing buying-selling process) 3. Usage of new source of raw materials, sub products regardless, was it invented before and were not used due to some reasons, or it need to be introduced. 4. Systematic changings and optimization of production structure and rearrangement of managing body, for example foundation of holding to provide a monopoly position on the market 5. Promotion products to different sales markets, where this products has not been yet introduced.6 Schumpeter’s ideas get huge dissemination between scientists of this time. For example famous economist and management specialist P. Drucker in his definition of entrepreneurship specified “Innovation is a special tool of entrepreneurs, the means by which they use the change as opportunity for a different kind of business or services”7 Brian C. Twiss in his book “Managing technological innovation” (1986)8 determines that innovation is a process, during which invention obtaining economic value. 3 Schumpeter J. 1982, p. 89 4Korotaev, A. V., Cirel' S. V. 2010, p.191 5Vertakova, JU. v 2008 p.7 6 Tidd J. 2009, p. 13 7 Drucker, P. p.31 8 Twiss, B 1989, p.17 11 According to Fathudinov (Fathudinov, 2005) Innovation is the end result of the introduction of innovations in order to change the control object and obtain economic, social, environmental, scientific, technical or other type of effect.9 Zavlin determines Innovation as a result of a creative process as established (or implemented ) new user values, the application of which requires the persons or organizations change usual patterns of activities and skills. The concept of innovation extends to a new product or service, their method of production, innovation in organizational, financial, research and other areas, any improvement, providing cost savings and creating the conditions for such savings.10 Another step for developing innovation sphere and attempt to introduce regulation in innovation field collecting and analysing data about science and innovation took place in Frascatti, Italy in 1963. Here OECD introduced a new document “The Proposed Standard Practice for Surveys of Research and Experimental Development”, which is valued till today and last edition was published in 200311. Next regulation in sphere of innovation was introduced in 1992 in Oslo together by OECD and EuroStat Quidelines for collecting and interpreting innovation data According to Oslo Manual innovation is the introduction of the use of any new or significantly improved product (good or service) or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations All above authors mentioned determine innovation either as process, or product, what shows different approach. Nevertheless I would try to combine the most important points of all definitions and provide the one, which in my point of you, more suitable for the aim of this work. 1.1.2 Classification of innovation Classification of object or process helps to determine special features of studying product and to develop ways of influence. There are a lot of different classification of innovation are introduced in modern science. Classification might be done according to big variety of factors. For company it is always important to understand, which type of innovation they would like to implement or develop, because innovation strategy therefor further development of company is usually based on it. Different authors implement different approaches to classification features and factors. To understand, which type of innovation might be implemented to improve company performance in long term period, I’ll make a digest of most common classification in Russian and world literature and researches.

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