ISSN: 0976-2876 (Print) ISSN: 2250-0138(Online) MEASUREMENT AND ANALYSIS OF INNOVATION CAPABILITIES IN IRANIAN ENGINEERING SERVICES INDUSTRYAND SOLUTION FOR EXISTING SITUATION IMPORVEMENT (CASE STUDY: HAMPA ENERGY ENGINEERING AND DESIGN CO.) ABBAS KHAMSEH a1, KAMRAN AREZOO b AND POOYAN SADEGHI c a Department of Industrial Management, College of Management and Accounting, Karaj Branch, Islamic Azad University, Alborz, Iran b Doctor of Business Administration, Alborz Branch, Industries and Mines University, Alborz, Iran c BS in industrial engineering, management consulting in Hampa Energy Engineering and Design Co. ABSTRACT Survival and stability in a competitive environment is not possible without innovation and it should be toward the increasing competition ability. Otherwise, there is no way other than destruction and elimination. Innovation and technology management will result in a current competitive market to remain stable. In this regards, the innovation capability assessment may help managers in their investments and resource allocations. Assessment of innovation capabilities provides the analysis of conditions, potentials of the institutions and its comparison with status of the competitors before taking strategic decisions. In other words, without enjoying a level of innovation capability, innovation implementation would not be possible (including innovation in product/service or innovation in process). In the present work, a detailed assessment for the innovation capability of Hampa Energy Co. and in parallel the status of various aspects of innovation will be discussed. The gap in the aspects is determined and the suggested solutions will be proposed for the improvement of current status. KEYWORDS: Technology, Innovation, innovation capability, Innovation system When in the twentieth century Schumpeter's theory of creative destruction dominated in West's industrial economics (and thus in the world), what happened practically was the removal and destruction of static olds versus dynamic and innovative newcomers. Everybody sought for seizing more market share and driving out competitors from the market, the result of which was the elimination of competitors from the market. Thus, a concept known as competitiveness was developed. Innovation plays a basic role in competitiveness. Competitiveness is discussed at two levels: at national level and firm level. Innovation is as old as human life in terms of practice. However, in terms of theory, innovation theory emerged in the industrial era with emergence of economic schools. Two main issues are discussed in economic theories: 1- How the wealth is created in the community? 2- How the wealth should be distributed in the community? Economic schools seek for answering two questions. The appropriate answer to these two questions guarantees social development. Success of organization mostly originates from innovation. Competitive advantage may result from the size and ownership of the assets. But it changed mostly in favor of organizations which can use technological knowledge and experience for innovation in products or services and their development methods (Tidd and Bessant, 2009). Assessment of innovation capabilities provides possibility for analyzing conditions and potentials of the institutions and its comparison with the competitors in adopting strategic decisions. Also, innovation capabilities are prerequisite for the realization of innovation in the economic institution. In other words, without enjoying a level of innovation capabilities, innovation (including innovation in product/ service or innovation in process) would not be possible. In addition, assessment of innovation capabilities is very useful in defining future strategies. REVIEW OF LITERATURE According to Khalil, innovation means delivering new product, services or process to market through developing new applications of the existing technologies or creation and commercialization of new technologies. According to Schumpeter, innovation is not confined even to technical aspects and includes also organizational aspects (Khalil, 2000). On the other hand, innovation is known as transforming knowledge and ideas to the new or improved products, services or for obtaining competitive advantage (Microsoft Corporation, 2007). 1 Corresponding author
Literally the word "innovation" is rooted in the Latin word "novus" meaning "new" which is taken from the verb "in + novare" meaning "to create something new". Hence, to "innovate" means being the first or introducing (something new) for the first time and "innovation" means "the act of introducing something new" (The American Heritage Dictionary, 2000) (Mutlu and Er, 2003). Innovation is a repetitive process which initiates with perceiving a new market or opportunity for a new service for an invention based on the technology and leads to development, production and marketing efforts for invention s business success (Kumar and Phrommathed, 2005). A more perfect definition was provided in 2012 in which innovation capabilities refer to a collection of related capabilities which product and allocate value in the company. It can include the introduction of new products, services, or ways for organizing a company s processes (Borjesson & Elmquist, 2012). Some approaches to innovation assessment are as follows: Approach 1: Tidd et al. approach: Tidd et al. showed at innovation with a strategic view and assess innovation at organizational level based on this view. They consider that concepts of the organization's success in innovation and organizational capacity for innovation are complementary, though they look at the organization in two different aspects. The concept of organization's success assessment is an investigation of the past status of the organization in terms of innovation and it is merely assessment of results and outcomes of the organization. In other words, it shows the organization success and health in comparison with the optimal status of the industry, while innovation assessment represents weakness and strengths of the organization in basic parameters of innovation and it is a guide for improvement of the organization status or progress of relative advantages to transform them to strategic advantage (Tidd, Bessant; Pavitt, 1998) Approach 2: Cebon et al. approach: Cebon et al. (1999) attempted to propose a theoretical framework for developing indexes for innovation assessment. They refer to some basic differences between innovation concepts which show why developing simple indexes is difficult for innovation assessment (Cebon, 1999). Approach 3: Niwasan and Narayana's approach: They are two Indian authors. Their definition for innovation is somehow different from others' definition, since they consider R & D stage separate from innovation. They were too accurate in developing innovation criteria and indexes. Their approach can help in identifying weaknesses and strengths to the institutions. In addition, these authors provided useful material on pathology and promotion of innovation (Bushehri et al., 2002). Approach 4: Arasti et al. approach: This approach is extended model proposed by Morrell and Boolean. This model provides a primary classification of the factors shaping innovation capacity (Arasti et al., 2008): - Creating suitable workspace through leadership, of innovation activities - Procedure of processes and communication within and outside the organization - Strategic Knowledge Management - Collecting and generating new ideas - Human Resource Management based on innovation. Approach 5: Bushehri et al. approach: This model consists of two areas within the organization and outside the organization. In the external environment, industrial relations with customers, suppliers, competitors, markets, and scientific communities are evaluated. Internal space consists of three main balancing systems, including idea generation system, resource supply system and product development system. These three categories constitute the organization's system of innovation (Bushehri et al., 2002). Place of innovation in the new is shown below in Table 1.
Table 1: Place of innovation in the new world Comparison case Old world New world Training Techniques vocational training through apprenticeship in the production stage Vocational training in technical and vocational schools based on the knowledge gained from the innovation Creating technical knowledge Production Creating technical knowledge in the production and storage stage in mind Craftsmanship production resulting from difficult human labor and subject to natural coercive forces Establishment of technical knowledge in R & D institutions and recording in patented innovations and embodied in machinery and production lines (resulting technical innovations)che miko production resulting from human creativity, machinery working free from coercive forces of nature (technology-driven and requiring constant innovation to improve the level of technology) Market Shifted production to local markets and consumer production based on relative and competitive advantages focused on global and regional markets (innovation is the main factor of competition) Innovation levels form the Schumpeter can be concluded as follows: 1. Innovation in product / service Introduction of a new Product/Service or dramatic development in the existing product quality 2. Innovation in the process METHODOLOGY AND RESEARCH METHOD Research conceptual model that was used to design questionnaire and indexes is shown in Fig 1. Introduction of new methods of production 3. Innovation in resources (raw materials) Mastering a new source of supply of raw materials or semi-manufactured goods 4. Innovation in Market (opening new markets) Opening different new markets, particularly export market in a new area 5. Innovation in organization (new ways to organize business) Creating a new type of industrial organizations, that is, administrative innovation (managerial) Figure 1: Conceptual research model (Khamseh et al., 2013) The results of this research can be used in Hampa Energy Co., and other petrochemical industrial companies. It is an applied research study with a logical purpose. Given presence in the company and gaining
information from inside the company using questionnaire for collecting expert ideas, it is a survey of field type. RESEARCH OBJECTIVES AND QUESTIONS The current research aim is determining the innovation capability of the Hampa energy Co., and specifying the innovation gap in its levels and providing the practical solutions for compensating this gap. Considering research objectives, research questions include: 1. What are the innovation capability indices in the Hampa energy Co.? 2. What are the innovation capabilities in the Hampa energy Co., based on the innovation capabilities versus the optimal level? 3. What can provide to compensate the gap and to improve the innovation capabilities in the Hampa energy Co.? STATISTICAL POPULATION Hampa Energy design and engineering company (HEDCO) was established in winter 2007 in the fields of Table 2: Statistical population characteristics systematic engineering, detailed engineering and procurement services for Oil, Gas and Petrochemical projects. It includes all engineering sectors such as process, piping, structures, tanks, machinery and equipment, electrical and instrumentation and has already about 300 employee who are working in engineering and project sectors of the company. Hampa Energy Co., has a unique software system known as Hedco Total Management System (HTMS) for the management of its projects in engineering, procurement, implementation, monitoring and control areas. HEDCO license for AMMONIA unit, design catalytic reformer and cold, consortium of Tadbir Energy Eram, new hardware platform for AVEVA Engineering activities are salient activities of the company. Considering limited number of experts, the research was conducted by counting the total number of middle and top class managers as well as the expert staffs of the Hampa energy Co., who are holding a BA or MA degree and having at least one year of experience in the research statistical population field (Table 2). Education No. Percent Average Working Experience (year) BA 18 51.43 13.6 MA 15 42.86 8.5 PhD 2 5.71 8 TOTAL 35 100 11 Diagram 1: Statistical population frequency in terms of education
FINDINGS Q1. What is level of innovation capabilities indexes in Hampa energy Co.? Considering the data collected from the questionnaire, innovation capability level in Hampa in each index is specified in Table 3. Table 3: Innovation capability level in Hampa energy Co. in each index Aspect Index Mean (%) Gap (%) What is the innovation level in your organization s strategy? 78.00 22.00 Strategy Structure Culture What is the awareness level in the organization management about the innovation strategy? 83.14 16.86 What is the awareness level in the staffs about the innovation strategy? 66.00 34.00 Does the existing organizational structure help to promote innovation and development? 71.43 28.57 Does the existing organizational structure facilitate the teamwork and problem solving of the groups? 68.29 31.71 In which level the failures and errors of staffs in the innovation area tolerated by the organization? 70.86 29.14 What is the encouragement level of the organization for the innovation? 80.57 19.43 In which level the management of the organization supports for the innovators and their activities? 82.57 17.43 Management In which level the organization managers are positive toward risk-taking and supporting the innovative staff? In which level the managers attempt to generate more innovative ideas in relation with current and future customer need? In which level the managers try to facilitate the replacement of new ideas and make them functional (operational)? 77.14 22.86 79.71 20.29 73.14 26.86 In which level the managers attempt for funding new ideas? 68.86 31.14 Training In which level the innovation related topics such as technology and innovation management, entrepreneurship, marketing, customer relationship techniques, etc. are considered in educational programs of the organization? 64.14 35.86 In which level training have the positive impacts on innovation? 61.71 38.29 In which level the educational facilities such as library, internet, participating in seminars and specialized training for reading, learning and research are provided for the organization s staffs? 84.00 16.00 Teamwork How common is the teamwork and formation of inter-sectorial teams for innovation in the organization? In which level the problem solving mechanisms and teams on innovation issues are used in the organization? 66.29 33.71 63.71 36.29 In which level the organization has success to hire (absorb is even true) the innovative staffs in its needed areas? 66.86 33.14 Staffs In which level the policy of supporting innovative t (bonus, incentive vacation, etc.) are used? 66.29 33.71 What is the innovation result of the staff???? To what extent innovations result from the staffs inside the organization? 68.00 32.00
In which level new ideas of the staffs are used in the organization? 68.57 31.43 Regulations Innovation System In which level the organization regulations could facilitate the innovation? 42.57 57.43 In which level the governmental regulations encourage innovation in the organization? 56.29 43.71 In which level the specific mechanisms (participation system, project definition and approval mechanism, etc.) are used for absorbing innovative ideas of staffs? In which level different techniques (Problem solving methods, concurrent engineering, cross-functional teams, and QFD, etc.) are used for generating new ideas? 52.29 47.71 63.43 36.57 In which level the R&D unit of the organization (if any) is effective in the innovations? 59.71 40.29 In which level different organizational units have relationship and interaction with each other in order to have more innovation, development and implementation 63.14 36.86 How much time has been spent on funding of the innovative projects? 63.14 36.86 What is the speed of innovative projects in terms of outcome? 77.14 22.86 Market and External Stakeholders In which level the decisions about the innovative projects are made based on the market research and with the awareness about the competitors? 76.86 23.14 In which level the innovation is based on the customer feedback 58.00 42.00 In which level the marketing and sales unit is involved in the organization s innovations? 61.14 38.86 In which level the innovations is based on the awareness of competitors products and their processes? 74.00 26.00 In which level the innovations is based on the relationship with suppliers? 76.00 24.00 How do you evaluate your organization in technology development or basic improvement for the existing technology? 75.14 24.86 Organizational Capabilities In which level you considered the quality and the standard roles to have success in the market for any new (innovative) products provided by the organization? In which level the previous innovative experiences are used in the current and future innovations of the organization? 74.57 25.43 73.43 26.57 In which level the given ideas were practical and suitable for have innovation? 73.71 26.29 In which level the innovative projects are completed and offered to the market in due time? 67.43 32.57 In your opinion, how strong is the organization for implementing the innovative ideas and reducing the organizational costs and increasing productivity? 71.43 28.57 Q2. What are the innovation capabilities of the Hampa energy Co., by comparing the in aspects of innovation capabilities with the optimal level? Comparison of the existing innovation capability and the aspects of innovation capability as well as total innovation capabilities are given in Table 4.
Table 4: Comparison of existing innovation capability level with optimal level in its aspects Aspects Existing average innovation capability (%) Gap to optimal level (%) Strategy 75.71 24.29 Structure 69.86 30.14 Culture 75.71 24.29 Management 76.29 23.71 Education 69.95 30.05 Teamwork 65.00 35.00 Staff 67.43 32.57 Terms and Conditions 49.43 50.57 Innovation System 63.14 36.86 Market and external stakeholders 69.20 30.80 Organizational Capabilities 72.62 27.38 Total average innovation capabilities 69.22 30.78 Q3. What are solutions for compensating gap and improvement in aspects of innovation capabilities in Hampa energy Co.? Table 5: Solutions for compensating gap and improvement in innovation capability aspects Aspects Index Gap (%) Compensation Solution Pay special attention of the organization to the innovation strategy 22.00 During the review of the organization's strategy, creativity and innovation and its effective s parameters should be more emphasized. strategy management should be aware of the innovation status for their strategy staff should be aware of innovation status in the organization's strategy 16.86 In order to fill this gap, the innovation strategies and the procedure should be clarified for the managers by explanatory meetings. 34.00 Training seminars and workshops in different levels should be held at organization. Structure To help promoting innovation 28.57 Necessary training seminars and classes should be held for staffs. Facilitating the problem solving by having teamwork in different teams? 31.71 Necessary incentive levers and workshops should be considered and applied. Culture Bearing failures and mistakes in innovative areas from the staffs Innovation in encouraging the environment of the organization 29.14 Strategies should be considered for reducing different types of errors in order to have more safety with the help of staff. 19.43 Financial and nonfinancial incentives should be increased. Manage ment Support the risky and creative staffs. 17.43 In addition to financial and nonfinancial incentives, sense of security and support in expressing new ideas should be created in the staff.
Management efforts to generate ideas that are more in line with the current and future needs of the client. Management attempts to facilitate the implementation process od the innovative ides Supplying financial resources for the new ideas pay attention for innovation-related topics in the teaching programs of the organization 20.29 A group of experts familiar with the market should be used to understand customer trends. 26.86 New ideas and their collection process should be facilitated and the financial bonus have be considered. 31.14 Managers should pay attention to suggestions of the staffs. 35.86 It should be attempted to offer novel topics in training courses. Education positive impact of trainings on innovation 38.29 Process of selection and holding courses should be more practical and purposeful. providing educational facilities for study, research and learning toward the organizational goals 16.00 Staffs should be ranked based on the capabilities. The facilities and training courses should have the exception for the talented individuals. Teamwork teamwork bonus and formation of intersector teams for innovation in organization Using problem solving mechanisms among different team members for any innovation issues 33.71 In the organization activities such as sport tournament, different groups of staff should be formed considering vertical and horizontal structure of the organization and the teamwork culture should be common in different aspects of the organization. 36.29 More coherent process to investigate the problem solving ideas and encouraging the teams for their new ideas success of the organization in absorption and maintenance of the innovative staffs 33.14 Financial incentive should be increased. Staff Having practical policies for supporting innovative staffs Innovation classification based on the importance, efficiency and performance 33.71 Clear and more effective mechanisms should be used to encourage the staff. 32.00 More effective process should be considered for collecting and using the staff s ideas. size of organization use from new ideas of staff Facilitating the procedure of the implementation the new ideas from the organizational regulation motivation of the organization by governmental regulations for innovation 31.43 In idea collection process, more attention should be paid to implementing ideas. 57.43 Experts in the organization should act for necessary changes with holding systematic meetings. 43.71 More emphasis should be put on facilitating internal bylaws. Terms using different techniques for generating new ideas effectiveness of R&D department of the organization in proposed innovations 36.57 Developing different groups for correcting the current mechanisms or designing more effective ones 40.29 Employees should be informed about the R&D policies. In this regard, necessary training courses should be held for them. communication and interaction of different departments for innovations appropriate and adequate time spent on funding innovation projects 36.86 Periodic coordination meetings should be held between sectors. 36.86 Precious experiences should be used as much as possible.
appropriate and adequate time spent on funding innovation projects 22.86 More accurate training is needed and motivation of staffs should be increased. Market and external stakeholders Getting right decisions about the innovation process based on the information of the market and the competitors innovations that achieved by the communication with the customers involvement of marketing and sale department in organization's innovations innovations resulting from the awareness of competitors' products and processes innovations resulting from communication with suppliers 23.14 Speed and accuracy of information should be increased using novel technologies and decision making is modified. 42.00 --- 38.86 More interested and active people should be used in this unit. 26.00 Information taking mechanisms should be updated and more accurate information should be taken from the market. 24.00 More accurate and purposeful mechanisms should be developed for communicating suppliers. organization's ability in developing technology or improving the current technology 24.86 Expert individuals in this unit should be increased so that more force is focused on this issue. Organizational Capabilities Having a good quality along the high standard can provide success of new (innovative) products using previous innovation experiences in current and future innovations in organization suitability and practicality of ideas developed in innovation creation timely completion of innovation projects to the market 25.43 More accurate control should be done in all stages of designing and production of new products. 26.57 A specific process should be developed for recording and extending learning. 26.29 Necessary training courses should be held for related individuals. 32.57 Information taking mechanisms should be updated and more accurate information should be taken from the market. organization's strength in implementing process innovations for reducing organizational costs and increasing productivity 28.57 Organization processes should be reviewed. RESULTS According to Table 3: From the strategy aspect, the highest score is for the management awareness about the innovation procedure in the organization strategy and the lowest score is for the awareness of the organization's staff about the innovation place in the organizational strategy. From the structure aspect, the highest score is for the innovation development and promotion and lowest score is for facilitating teamwork and problem solving. From the culture aspect, the highest score is for the encouraging individuals in the organization to do more innovation and lowest score is for the staff's innovation failure and the error tolerance by the organization. From the management aspect, highest score is for attempting to raise more funding for the new ideas and lowest score is for the management support of the innovators and their activities. From the education aspect, the highest score is for providing the educational facilities to study and
research that is line with the organizational goals and the lowest score is for the positive impact of trainings on innovation. From the teamwork aspect, having different groups to promote new ideas that has a good impact on the organization goal is the highest and using problem solving mechanisms has the lowest scores. From the staff aspect, the highest score belongs to the use of new ideas by the organization and the lowest score is for the index of having supportive policies for the innovative staffs. For the aspect of terms and conditions, highest score belongs to the motivation of the organization by the governmental regulations and lowest the score is for facilitating the organizational regulation for innovation. From the aspect of innovation in the system, the best one is the high speed data collection for the innovative projects and the lowest score is belongs to the effectiveness of the R & D department of the organization. For the market and external stakeholders, the highest score is for making decisions related to the innovation based on the market research and awareness about different competitors and the lowest score is for the customer feedbacks and their need. Industry, European Online Journal of Natural and Social Sciences, vol.2, No. 3(s), pp. 1763-1768 Borjesson, S., Elmquist, M., 2012. Innovation capabilities: what are they? Towards a systems view of the prerequisites for innovation in large firms, Gothenburg: chalmers university of technology. Cebon, Peter; Peter Newton; Philip Noble; Innovation In Frims Towards a Model for indicator development; Melborn Business School Working Paper 99-9, 1999. Khalil, T. (2000). Management of Technology: The Key to Competitiveness and Wealth Creation. McGraw-Hill Microsoft Corporation, 2007, White Paper Innovation Process Management, 2007, download.microsoft.com Tidd,J. Bessant,T.2009, Managing Innovation: Integrating Technological, Market and Organizational Change, Tidd, Joe; John Bessant; Keith Pavitt;1998, Managing Innovation Integrating Technological Market, and Organizational Change; John Wiley & Sons, 1998. In the organizational capabilities, the highest score is for the ability of the organization to develop or improve the technology and the lowest score is for the completion of the innovative projects and releasing the final products to the market. According to Table 4, among different aspects for the innovation, culture and strategy with 75.71 scores are the highest and the terms and conditions with 49.43 scores is the weakest ones. REFERENCES Arasti, M.R. et al., (2008). Identifying factors affecting innovation capacity of enterprises: A Case Study of Industrial Automation Companies in Iran. Bushehri, A.R. et al., (2002). Assessment of innovation. Defense Research Institute Publications. Khamseh, A. et al., (2013). Developing a Model for Innovation Assessment in Iranian Steel