Role of Innovation in the McLaren Group - Essay Example

Role of innovation in the Mercedes Benz Group Executive Summary Most companies lack a clear understanding of how to develop its innovation and technology strategy for effective market performance. Innovation is a vital aspect defining the firm’s ability to succeed in a highly competitive global market. It defines the firm’s strengths in leveraging its products and creating its brand positioning through distinctive product features that cannot be easily copied by others in the industry. Such strategic moves are strongly linked to the positive market performance of the firm and ensuring its leadership status in a competitive business environment. The Mercedes Benz Group has established itself over the past 125 years as a leader in promoting innovative trends in the automobile industry. Its strategic alliance with McLaren Group has added to the Mercedes Benz Group’s strengths as McLaren captures the market leadership position through its focus on innovation management. Rob Durrant, the Communications Executive at Mercedes Benz provides a deeper insight into the innovation policies of the company and the management practices that have helped in defining and supporting innovation goals and objectives. Introduction The global markets expose firms to wide complexities in terms of delivering unique products and services that help in distinguishing itself from similar goods available in the market. More and more firms today are developing their innovative capabilities to leverage their competitive advantage and expand their market shares. While this strategic capabilities have proved companies with extended capabilities to design and develop new products, there is limited understanding of what innovation is and how it can be managed effectively for desired results and outcomes. The McLaren Automotive Group represents one of the most innovative firms that have successfully launched premium cars in the luxury and sports segment. The Mercedes Benz SLR McLaren is the world’s highest volume high performing sports car. There are several milestones that this company has achieved over the years in terms of innovation in car design and launch of new models on the road (Mercedes-Benz, 2014). Technology plays an important role in defining the firm’s competitive advantage and its innovation strategy. Firms apply existing technology systems and tools to design new products, enhance product features and deliver creative solutions that cater to the rapidly evolving customer needs and expectations. The concept of innovation focuses on the effective use and deployment of its human resource skills and competencies to generate new ideas that is translated to develop new products. The report explores the management perspectives on innovation through an interview with Rob Durrant, the Communications Executive at Mercedes Benz. The report highlights the firm’s innovation policy, evaluates the type of innovation adopted, and the management processes that help in supporting the organization’s innovation strategy. Innovation – concepts and overview The term innovation has been defined as “the process of change that creates and grows more wealth” (More, 2011). More simply explained that innovation refers to the process of generating new ideas and applying these ideas to boost business goals and objectives. Innovation thus provides the entrepreneurs with the scope to exploit new business opportunities, create new and expanded avenues for growth and development of business strategies for commercial advantage (Tidd and Bessant, 2011). Durrant perceives innovation as the ability to build something new and push boundaries that help in establishing new trends in the market through improved product features and designs that appeal to practical settings. Mercedes Benz is a trendsetter in terms of launching new products with innovative features that define new boundaries in automobile performance. The company’s approach to innovation is remarkable considering its achievements so far. “With a rear mounted single-cylinder engine, the first automobile forever changes the way people move, and sparks a legacy of innovation that continues to this day” (Mercedes-Benz, 2014). The company was a pioneer in launching the honeycomb radiator, the electric powered car, safety features, and more recently an attention assist system that helps in detecting if the driver is drowsy. Other innovative features launched by the company include the anti-braking system and the virtual dashboard. The innovation culture at Benz has helped inculcate a sense of pride and ownership among its employees whose perception of the whole process has changed vastly owing to the management policies and practices. Innovation policies assume strategic significance within the organization as managers realize the vast potentials it offers through its ability to look beyond boundaries and explore new possibilities. This kind of innovation requires a collaborative approach and an enabling work environment where individual endeavours are encouraged for creative solutions (Palmer and Kaplan, 2010). Types of innovation The type of innovation applied within firms depends on its management perceptions and the decision making systems that influence workforce collaboration and participation in organizational work processes. Hence individual employees and the entire organizational structure or hierarchical patterns contribute to the type of innovation supported within the organization. While some organizations support disruptive or non-continuous innovation patterns, there are others that adopt a continuous and dedicated approach to cultivating an innovation culture within the organization (Shavinina, 2003). Broadly, innovation may be classified into product, process or incremental. Process innovation refers to the adoption of enabling work processes and approaches to assist in effective delivery of products or services. Product innovation relates to the focus on creating value added benefits or features that enhance existing product features. Incremental innovation results in the creation of new and different products that set the pace for new developments and fresh trends within the industry (Tidd and Bessant, 2011). Mercedes Benz adopts process innovation where greater emphasis is placed on adopting enabling work processes. This involves a focus on the manufacturing process and supporting automated operations. An example of this kind of innovation at Benz includes the use of robot technologies for automation in the production line. The innovation process in this firm takes into account each detail at the operational level right from the point of sourcing raw materials to assembly line production, testing and evaluation of products. The process of innovation is dynamic and requires constant efforts towards building key capabilities and competencies that inspire creative ideas at workplace. While innovation is regarded as the key to developing competitive advantage in the industry, it does not always guarantee success. Since the whole concept of innovation focuses on turning ideas into reality, the emphasis of innovation strategy is on managing and mobilizing resources that are critical to this whole process. These resources include time, money, energy and knowledge (Tidd and Bessant, 2011). Time and energy relate to the organizational culture that promotes creativity, motivates its employees to assume proactive roles and assume the responsibility of evaluating existing work processes to identify inherent loopholes. These loopholes can erode operational efficiency through redundant processes and escalated costs affecting the quality and overall financial outcomes. The significance of monetary resources cannot be ignored considering its role in mobilizing other operational resources (Shavinina, 2003). Innovation management Innovation is a complex process that requires a high level of understanding of the key aspects that influence its successful adoption within the firm. The key to successful innovation policies lies in effective management of various organizational activities. A number of studies and frameworks have been developed over the years to explain the concept of innovation, the various forces that boost the firm’s innovative capabilities and provide a clear understanding of how innovation can be successfully incorporated within the organization. A recent study by the Boston Consulting Group (2006) explored the key dimensions that make one firm more innovative than others. These dimensions were identified as innovative entrepreneurship, scientific freedom, product development capabilities, technical competencies, a deeper understanding of customer requirements, cultural forces that define customer behaviour, and collaborative efforts. Thus, innovation is essentially a management process that requires effective governance of the various forces that influence organizational capabilities (Trott, 2010). Mercedes Benz supports an innovative work culture where employees are exposed to a highly structured and motivating work environment. Innovative solutions and work processes are a part of the organizational culture that promotes a creative work environment. Creativity is driven by various factors that include the competitive environment, trends influencing changes in existing work patterns, external forces that drive management decisions, learning opportunities that support the development of desired skills and competencies, communication patterns, and hierarchical structures (Shavinina, 2003). The McLaren Group offers extensive training and development opportunities to its employees and the management emphasis is on developing technical expertise through the adoption of effective knowledge management systems (McLaren, 2011). This strategic measure has been widely appreciated and accepted by its various subsidiary companies that include Mercedes Benz. It is interesting to note that innovation at Benz is considered a vital and significant aspect controlling the firm’s strategic perspective and management practice for decades. This is primarily on account of the company’s heritage that has focused on delivering innovative solutions and pioneering trends within the automotive industry. Innovation is thus considered a vital part of the company’s legacy that is integral for the survival of the brand. The company has been successful in realizing the key product or process requirements that can help in delivering efficient vehicles to the customers. This is evident in the way the company has managed to achieve distinctive milestones in launching various trends in driving safety through the launch of anti-braking systems, airbags and virtual dashboards. The use of LED lights on its cars provided the vehicles with greater efficiency on roads. These and many other milestones have helped the company promote its innovative capabilities through the years. Innovation processes are strongly linked to the organizational research and development (R&D) activities. R&D provides the firms with the capability to analyze industry trends, seek new potentials, generate fresh ideas and work on these ideas to create commercially viable solutions for business growth and continuity. This is a time consuming process that requires intensive efforts and capital investment for successful outcomes (Cooper and Edgett, 2010). New product development and incremental product solutions are the key focus on R&D activities where management efforts is on achieving competitive advantage through innovative market solutions. However, this is not an easy process considering resource limitations, time factor, and process design aspects that pose great difficulties in ensuring the desired results. “Influential organizational design elements include formally planned stages, senior level involvement, business case preparation, customer input, and cross functional integration (Harmancioglu et al., 2007, p400). Thus, management involvement and collaborative efforts of all departments and concerned business units are vital parameters that drive the success of innovation processes. Kaplan and Palmer (2010) identified three dimensions that are essential for ensuring that the organization is ready to implement innovative ideas and strategies. These three dimensions are cultural readiness that enables individuals to think innovatively, process readiness that enable teams to function efficiently, and structural readiness that enables flexibility in terms of collaboration and flow of information across different departments, levels and business units. The success of any technology innovation is the “outcome of a wide range of firm and project related factors” (Panne et al., 2003, p311). According to Panne and his colleagues (2003) firm related factors influencing the success of innovation include the organization culture, the experience of the R&D team, innovation strategy, and focus on R&D. The project related factors involve management approach, managerial support and the link between technology viability and firm’s resource capabilities in terms of market research, development facilities and workforce skills. The success of technology innovations are deeply influenced by the organizational structures, dynamics of the project team, decision making, market trends, and technology forces driving the scope for further improvement and development. Often times innovative ideas from workforce do not substantiate on grounds of inability to transfer ideas to management, organizational control systems that does not allow employees to voice their ideas, and favouritism attitudes adopted by managers that supports only few employees who are favoured by their managers (Kaplan and Palmer, 2010). Hence organizational systems must support a free and democratic structure that facilitates extended collaboration, transparent communications and improved accessibility for the employees in terms of reaching out to top management. The whole focus of developing an innovative organization must be on increasing employee commitment, engagement and motivation levels through reduced hierarchical barriers and extended collaboration between employees. At Mercedes Benz innovation policy is given high priority and the management spends nearly 11 million pounds to R&D activities. This is a vital aspect that has driven the organization’s success and strong market presence through several decades of its operations. Innovative policies of the firm are supported by a strong sense of commitment to delivering high value products to its customers and a clear focus on developing its workforce capabilities to meet new challenges and market requirements. Technology is the key to success and firms have focused their energies on achieving new milestones through technology breakthroughs that provide them with a profitable enterprise. Technology entrepreneurship relies on changes emerging within the technical, political, social or demographical factors that create the opportunities for new products or processes to emerge (Shane, 2009). The strategic significance of the role of entrepreneurship is highlighted in its ability to identify or create such opportunities and adopt the necessary steps to take advantage of these opportunities. Innovation may be in the form of creating new products, defining new work processes, re-engineering business models, or discovering new markets (Shane, 2009). Problems in Innovation Innovation is a healthy aspect of any organization but care needs to be taken by the management that they are executed with a definite goal in mind. In an interview by Mercedes Benz employee, Rob Durrant stated that innovation should not be done for the sake of it. There needed to be a practical aspect to innovation without which it would be meaningless. There are many companies who state that they are innovative but those innovations are done without any specific goals and measures. Mercedes Benz has always been an innovative company and there are innovative policies which are drawn for the company. Drucker (2002) emphasized this fact by stating that the establishment of the right roles and processes, the setting of definite goals and relevant measures and reviewing the progress at every step where important to innovation policies. The other major issue of innovation stated by Mercedes Benz Group senior employee was that the company faced the problem of being innovative and productive at the same time. An example was drawn from one of the greatest innovation of Mercedes Benz in the 1969 when the company came up with the concept of the airbag and the deployment in production was made only until 1981. It still remains a big challenge for the company where innovation and production can go hand in hand. The company is constantly working to overcome these challenges where an innovation need to be nurtured, put into the production process, analyze the results of the process, and give feedback to the innovative team of the result of the process. The entire process management from innovation to deployment should be time monitored for the company to be able to launch it after testing in a smaller time frame rather than a decade. These issues need to be resolved by the company. It is true that regular innovative practices are required to compete with competitors. Glader (2006) was of the view that with the high pace of technological developments and the fact that current technologies many a times becomes obsolete, innovation leads to more opportunities for new competitors and products. Companies are constantly on the lookout of new innovative technologies where they can capture a greater share of the market. To counter the threats arising from competitor’s innovative practices, it is important to protect the knowhow of the company’s existing innovative techniques. For example, innovative technologies like the air fresheners in Mercedes cars where molecules in the freshener act as air purifiers and retain the fragrance in clothes. This information need to be protected between production and marketing. There are other factors which automatically protect competition rather than patenting products. These factors are higher cost of production of finished products which remains an entry barrier to competitors. These factors needs to be taken into account by Mercedes Benz Group where high end technology like the Laser light technology needs to be deployed by keeping the benefit of the users in mind as well as removing entry level external competition by maintaining high standards. Growth Due to Innovation Innovative practices have led to the technological growth of an organization and the global industry in a large scale. Companies have constantly being thriving to give itself an edge over and above their competitors. This has led to a lot of technological and innovative advancements. Grossman and Helpman (2001) have stated that technology in the form of knowledge has some unique properties as that of an economic commodity that has a role in the growth process. Mercedes Benz Group’s management have always highlighted the need for being an innovative company where they can change the way automobile industry used to work earlier. In the process they have made huge innovations by stressing on the primary need of safety of its consumers. This had led to their highly successful innovation of airbags which protected the passengers from car crashes which were life taking. This innovation led to a huge growth of the company where it has become the leaders of the automobile manufacturing industry. The management decision of not to compromise on passenger safety and the innovative ideas behind it made it a high growth company across the globe. The marketing discipline also goes along the idea that safety is the prerequisite of any potential car owner where they want to be protected against the likelihood of an accident. The innovative policies of the company for safety measurements have always been the top most priority. Since 1933, Mercedes Benz had introduced the wheel suspension technology still used today. (May, 2012) The company has always focused on the safety arena and won accolades across the globe. Mercedes Benz became the most popular luxury brand across the globe and still is the preferred choice of millions of customers. The growth rate of the company has been phenomenal with company selling 158523 vehicles to customers in March 2014 at a growth rate of 13.3%. (Automotive World, 2014). Mercedes Benz senior management also emphasized that innovations on safety were the unique selling point of the company more than anything else. Mercedes Benz Group had responded to the people’s plight for security measured since the 1950’s. The people did not want to get injured over car crashes and wanted safety measurements from car manufacturers. Mercedes Benz responded to this call and had taken a challenge for innovation where they could give people a car that had intelligent system, high standards of safety measures like the Airbags, Attention Assist Drowsiness Detection System, and Blind Spot Assist systems. It was only through these safety innovations that the company could attain such a high growth rate where it is still regarded as the most popular brand of the automobile industry. People have understood that the luxury and comfort are not being compromised with security which means the most to them. The company continues to sell a huge number of cars across the globe and have been able to record double digit rates every month since the beginning of the year 2014. Conclusion It can be concluded from this paper that innovations have played a huge role in the success of Mercedes Benz. The company had always been an innovative company and had understood the fact that people were concerned about their safety than anything else in the world. The company had an innovation management committee in the background who was overseeing innovative policies which had to be in line with the company policies. The success of the company can be attributed to their management for being innovative and to deliver high end security and comfort needs of their customers. In the process, the paper discussed the problems of innovation and the challenges faced by the company. Rob Durrant, a senior level management employee stated these challenges and how the company wants to overcome it. The fact that innovation can lead to growth was also discussed and how Mercedes Benz became the world leader in the automobile industry by focusing on innovation and nurturing it. References 1. Automotive World (2014), New Release, [online] available from http://www.automotiveworld.com/news-releases/mercedes-benz-posts-best-selling-month-ever/ 2. Boston Consulting Group (2006), Innovation 2006, Boston,MA:Boston Consulting Group. 3. Cooper, R.G. and Edgett, S.J. (2010), Developing a product innovation and technology strategy for your business, Industrial Research Institute Inc, May-June issue, pp 33-40. 4. Drucker,P.F. (2002), The Discipline of Innovation, Harvard Business Review, Reprint R0208F 5. Glader, M. (2006), Innovation Market and Competition Analysis – EU Competition Law and US Antitrust Law, Edward Elgar Publishing Limited, pp 5-6. 6. 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