Consequences of Innovation

What are the consequences of innovation? Consequences are defined as the changes that
occur to an individual, organization or social system as a result of the adoption or rejection
of an innovation. Consequences can be:

i) desirable or undesirable,

Whether a consequence is desirable or undesirable depends on whether the effects of an

innovation are functional or dysfunctional from the point of reference of the organization. In
making this distinction, the assumption is that usually, the desirable and undesirable effects
of an innovation cannot be managed separately.

ii) direct or indirect,

Whether a consequence is direct or indirect depends on whether the changes in response to

the innovation are first-order or second order. Direct consequences are changes to an
organization that occur in immediate response to an innovation. Indirect consequences may
take years to develop.

iii) anticipated or unanticipated.

Whether a consequence is anticipated or unanticipated depends on whether the changes

are recognized by members of an organization as the intended consequences of the
innovation. Unanticipated consequences are by definition unknown to the innovator until
after the innovation is widespread.

Effects of an innovation are functional or dysfunctional from the point of reference of the
organization. In making this distinction, the assumption is that usually, the desirable and
undesirable effects of an innovation cannot be managed separately.

POSITIVE CONSEQUENCES OF INNOVATION

1. Increased production, efficiency and effectiveness. A good example of this is how

mechanization has affected most industries. It has increased production by greatly
increasing the speed of production. It has also increased efficiency in some areas e.g. use of
conveyor belts in factories to reduce the amount of time spent transporting materials and
finished goods.

2. Most studies found a positive relationship between product innovations and

employment. This is because new products tend to occupy a niche in the market that was
previously unoccupied and lead to a need for more people to handle the supply of the new
product: production, storage, distribution, sales, marketing and customer service.

2. Higher income

This effect is usually seen in the early adopters of innovations. This is because in an effort for
new products/processes to penetrate the market they tend to be well priced, especially in
those industries that do not have a very capital intensive innovations process. Also, those
that adopt the innovations early have a ‘virgin’ market and are able to skim the market
before it becomes flooded with the product.

3. Impetus for more innovation

Successful innovation often tends to encourage companies to allocate more finances

towards innovation, and also motivates employees to look for both radical and incremental
innovations.

4. Increasing customer value and satisfaction

When corporate executives accept that experimentation and a fair amount of failure are an
important part of innovation, they begin to understand that it delivers best when different
business functions—and external partners—come together. Then they can develop
products, services, solutions, and processes that meet the needs of users and customers.

6. Increased consumption of other services

A good example of this is how M-Pesa has led to an increased consumption of banking
services due to linkage between the two.

NEGATIVE CONSEQUENCES OF INNOVATION

1. Changing the status quo

While some executives are open to change, most seem to prefer to keep things just as
they are. A risk of disturbing the status quo is inherent in the open innovation process—
and should be recast as opportunity. The winners will be the companies and executives
that are best at handling this.

2. Greater Expense

Innovation is a resource demanding activity, and may not always produce immediate
results. Also, the success of innovations is not guaranteed and this is a challenge for
most firms.
 3. Innovation is a source of increasing productivity, but it is also a source of stress.
Psychological research shows that moderate stress increases the productivity of an
actor, but above a certain level, additional stress decreases productivity. Stress is
reduced by coping behaviour of the individual, and in addition it is buffered by social
relations. However, high levels of stress negatively affect social relations, causing
social erosion in the end, affecting productivity.
4. Less equitable distribution of income, land, or other resources.
This is usually an unintended consequence of innovations with the wealth being with
those who are able to constantly innovate.
5. While innovation may increase technical efficiency (“doing things right”), it is
possible that they reduce allocative efficiency (“doing the right things”). This
situation arises because

i) early adopters of an innovation tend to be those already well placed to exploit and pay
for the higher-cost innovation while the late adopters tend not to be;

ii) innovators tend to concentrate on persuading early adopters in the hopes that they will
be opinion leaders and diffuse the innovation further;

iii)early adopters of an innovation earn windfall or supernormal profits

6. innovations which have gone on to be used for purposes other than those
envisioned by the creators e.g. the airplane being used as a tool for war, atomic
theory being used to create bombs
7. some innovations which have rendered people unemployed e.g. mechanization of
the assembly line
8. creation of waste by products that have been obsolesced by innovations. Obsolence
can be of three types:
i) Obsolescence of quality: a product breaks down in a pre-determined time frame. An
alternate description is a weakness designed into the product so as to compel a
purchaser to buy a new unit sooner than they otherwise might have had to.
ii) Obsolescence of desirability: a product becomes worn out in the mind of the
consumer, encouraging them to buy a new one. This form of obsolescence is
created by introducing new styles of the product and has been linked to the
traditional role of the industrial designer.
iii) Obsolescence of function: the consumer wishes to replace their version of a product
with a product which is able to perform the function better. This is usually due to
technological advancement.

The rate of technological change is bringing new products to market at a faster and faster
rate, leading to a constant stream of new, and improved products (listed as innovations in
most cases). The problem becomes the back end of this situation – the older products left
behind.
 9. The effect of process innovations leads to different results, with an overwhelming
majority of process innovations having a negative effect on employment.

References

1. Rothaermel, Frank T., Hess Andrew M., “Innovation Strategies Combined,” Spring
2010, Volume 51, Number 3, pages 13-15
2. Burgelman, R.A., Christensen, M.C., Wheelwright, S.C., Strategic Management of
Technology and Innovation, 4th Edition. McGraw Hill-Irwin, New York.

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