Innovation Theories and Their Application in Business

This report explores different innovation theories and their application in business. It discusses the benefits and limitations of innovation theories such as open innovation and design thinking. It also examines how Funding Circle used innovative theories in their business model.

Report Managing
Innovation

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
Describe one or two innovation theories along with their benefits and limitations..................................3
Application of innovative theory in the historical development..............................................................7
Innovation theory in future development context....................................................................................9
CONCLUSION.........................................................................................................................................11
REFERENCES..........................................................................................................................................12

INTRODUCTION
Innovation simple refers to the generation of new idea, thoughts, imagination as well as
concept which is apply buy the business entity throughout their business in order to derive out
better solution. It basically generates the awareness and address unarticulated needs or
requirements of potential candidate (Biemans, 2018). Most of the successful organization adopts
different innovation theory in order to remain competitive and constantly outperform in rapid
changing environment. Crowdsourcing and idea management is one of the innovation theories
where company offers the opportunity to both internal and external stakeholder to post their
innovative idea thoroughly emails. This helps in better understanding and application of
challenging innovation for the scope of improvement. Along with that design thinking is most of
the most common and crucial form of innovative theories that leads to prudential thinking and
discussion until the unique solution is derived of the critical problem. Thus, these innovation
theories help in the continuous development of an organization and effective shape its internal
operation. This report cover topics like deep evaluation of different innovation theory.
Furthermore, application of theories to gain historical as well as future development for the well
being of whole organization.
MAIN BODY
Describe one or two innovation theories along with their benefits and limitations
Innovation plays an essential role in each and every organization irrespective of their
working culture as well as size. The main reason behind this is that it helps business entity to
remain competitive and gain core competencies over other rivalries. Creative is considered as a
core skill that can assist an organization to gain historical as well as future development. As the
trends keeps on changing so it makes it necessary for the firm to resolve the problem by explore
opportunities which further helps in matching up the changing requirements of customer.
Interaction and managing long term relationship with external customer helps in the generation
of feedback and review based on which their always exists the scope of further improvements
(Seebode, Jeanrenaud and Bessant, 2012). There are different innovation theories that are
immensely useful for the firm to evaluate and launch innovative offerings in the prevailing

market and successfully enhance the market share of company. Explanation of the main
innovation theories are discussed down below:
Open innovation, Crowding and idea management: This innovation theory has
different names but its purpose is to derive out most feasible idea in order to effectively
participate in the challenging environment. Here only the internal stakeholders that include staff,
employer and manager are not only responsible to come up innovative idea but if also offers
opportunity to hundreds and thousands of the people who operate external and can be customer,
investor and so on (Important Innovation Theories, 2020). This concept has been derived from
the historic companies that had a system called suggestion box where the visitor or internal
employer on the basis of their experience and put viable suggestion, recommendation or
complaints. Although it was desirable practice but reach and response was limited also the
manager used to hardly take out time and notice ideas. In modern era with the help of
digitalization, respected innovation theory have successfully overcome gap or limitations. Open
innovation involves various processes that are listed down below:
 Globalization and dependency on internet has given the platform to the diverse
companies like multinational organizations and startup to come forwards and carry out
their operations in dynamic environment (Tidd and Bessant, 2014). The primary
objective of the business entity is to serve their audience in more structure manner due to
which focus is given to maintain the transparency.
 Moreover, to attain the objective common digital platform is establish where both
internal and external stakeholders that mainly include customer and employees can post
innovative idea that helps to overcome existing issue and accommodate future growth
and development.
 Companies facing stubborn challenges can be posted for which outsider can share their
perspective by offering key solution to the problem. Obviously the representative of
company needs to entertain diverse idea to better resolve the issue.
 Further, company will use structured system to funnel of idea generated from various
potential ideas which need to be evaluated and desirably assigned. Basically suggestions
are derive either to modify the existing product or entirely launch new offerings in the
market.

 After the final process the company actively responds towards productive idea and
incorporate out the actions successfully leads the adoption of innovation.
Principle of Open innovation
Optimize the growth of an organization: With the help of Open innovation company gets
the opportunity to acknowledge different mindsets in order to overcome the channel and come up
with creative thinking ability. Companies like Procter and Gamble have effective connect and
develop the Open innovation platform that offer opportunity to external parties in terms to better
suggest the operations.
Maintain transparency: On the basis of application of this innovation the
interconnectivity between the internal and external stakeholders gets improved due to which
company gets wider platform in terms to maintain the transparency. Here even the customer
considers them as valuable pat of entity (Van Lancker, Wauters and Van Huylenbroeck, 2016).
Benefit
 Here rather than hiring the expert and incorporate out huge time to resolve the challenges
participation of diverse stakeholders are encouraged leading to diverse thinking ability.
 The internal representative can filter the relevant solution and tale out time to incorporate
them. This helps in maintain the long term relationship shared between company and its
employees.
Limitation
 Diverse idea can at times create confusion and involve huge amount of time in terms to
bring out innovation within stipulated time frame.
 Along with that it is necessary that employees and customer does not find concern or
interest in terms to present their opinion in favor of company. Reason being they may not
be loyal towards the particular company or brand due to which they hardly take out time
to post their opinion considerably.
Design thinking: This is the other popular innovation theory where focus is given to
resolve complex problems for which the clients work together to come up with desirable
solutions. Being solution focused rather than problem focused makes the methodology more
productivity as within this efforts are carried out to promote the preferred future (Jaw, Chen and
Chen, 2012). As the organization participates in dynamic environment which keep on changing

due to which different type’s problems are addressed for which Design thinking fits suitable
enough. It involves the processes under which sketches and graphics are designed which
represent different stages of the problem. Future, collection of desirable information generate
better understanding on the basis of which needs of user are accompanied through innovative
solutions.
Principles
There are basically four principles of Design thinking that helps in successfully bringing
out as well as implementation of innovation (Owen, Bessant and Heintz, 2013). These principles
are listed down below:
The human rule: This rule states that all innovation are designed by keeping human or
customer as a centric point of view due to which all the activities incorporated by an organization
needs to be social in nature. As it helps in the balanced growth and development by maintain
customer as the central part of unit.
The ambiguity rule: Here the design thinker generates the ability to thinking differently
or out of box to bring unique concept as well as innovation. Focus is given to experiment the
knowledge to desirable limits in order to land up better procedure.
The redesign rule: Under these principles all the existing designs are redesigned with the
desire to derive out innovation (Lundsted and Colglazier, 2013). Emphasize is given to change
the existing technology as well as social circumstances that helps in tapping out untapped needs
and generate new awareness amongst market.
The tangibility rule: This concept is used to make the prevailing idea needs to be
tangible enough in order to facilitate the communication. Along with that this principle facilitates
the designer to consider prototype as an effective communication media.
Benefit:
 Immense efforts are made to analyze the existing situation of the organization and rather
than investment time in the issue efforts are made to come up with challenging solution
(Wu, Lii and Wang, 2015). Application of Decision thinking theory helps to make the
position of an organization in different climates or circumstances.

 Innovation are promoted on the continuous basis due to which after specific time frame
efforts are made to redesign or brining favorable modification in the existing plan in
order to gain the advantage of long term sustainable development.
Limitation:
 This method is less likely practiced by small and medium enterprises as it involve huge
efforts in terms to allocate the time, effort as well as expenditure in eth investment in new
technology. So it is not the feasible form of innovation for all entities.
 As it is used to define the ill problem due to which less emphasize is given to collect the
idea and gather suggestion from employee. Along with that it involves residence from
personnel in terms to change their working pattern and investment their time to acquire
new skill (Poblete and Spulber, 2017).
Application of innovative theory in the historical development
Overview of company: Funding Circles is a public company whose headquarter is in
London and started its operations in the year 2010. It has basically created marketplace for peer
to peer lending that allow the public to extend credit limit directly to the small as well as medium
businesses in terms to incorporate smooth business operations. Existence of such public entity
immensely helps the start up to explore easy accessibility of funds in terms to carry out their
operations without any delay. This has effectively help the company to generate revenue around
£141.9 million in the year 2018 and offer huge employment in terms to expand the business loan
process for commercial as well as industrial purpose. As the company successfully operates in
countries like US, UK, Germany and Netherland due to which it has effectively adopted
Community banking model. Based on this model Funding circles consider whole community
as a single unit due to which it offers funds for the small and medium businesses through micro
financial capacity. Application of this model extensively helps NGOs as well other organizations
to gain financial assistance and incorporate out diverse activities of an organization successfully.
Along with that due to the extensive size they help in the larger development of community
program in order to incorporate out all the actions smoothly (Prange and Schlegelmilch, 2018).
Along with that Cooperative model is the other model used by company as here autonomous
association is used by person to meet the common social, economic, as well as culture needs
through democratically controlled enterprises. In promotes to peer to peer financing as well as
timely deposition of funds for the convenience of commercial and industrial requirements.

Business canvas model: This tool is mainly designed by an organization to develop the
innovation and overcoming challenges while framing out new offerings that suitably fit the
requirements of different stakeholders. It focuses on the different aspects of the offerings and
analyse how components fits together in order to formulate desirable business model (Business
model of Funding Circle, 2020). Application of this model allows Funding Circle to determine
the potential hurdles or gaps which needs to be addressed by building up desirable strategy in
terms to overcome the potential gaps within prevailing market. Further, it widely works in the
initial stage of operation when the representative of an organization needs to overview the detail
picture based on which respected model can fit together (Koch, 2012). Thus, it acts as a useful
way to exactly determine values proposition for the customer.
Key
Partners
 Referral
partners
 Franchis
e
partners
 Brand
partners
Key Activities
 Lending and
deposit of
funds
 Maintain as
well as
update the
platform
between
borrower as
well as
investor
Value
Propositions
 Accessibility
 Convenience
 Performance
 Brand/Status
Customer Relationships
 Company offer viable
resource in firm of
articles, video and
report to undergo
lending process.
 Personal assistance
through contact
details and email
address.
Customer
Segments
 Borrower
 Investor
Key Resources
 Risk
calculating
technology
 Customer
service staff
Channels
 Website
 Traditional
advertisement
 Email
Cost Structure Revenue Streams

 Low cost value proposition by
minimize the expenses
associated with marketing and
selling.
 Transaction Fees
 Penalty Fees
Historical development: In 2010 within UK the small businesses struggled a lot due to
the financial crises which immensely affected the circulation of funds within an economy. Many
companies look out different sources of funds in order to maintain their long term growth
objective due to which they strive hard to maintain its position (Funding Circle, 2020). Funding
circle launches its business in the year 2010 to significantly respond towards market needs. It is
basically online lending marketplace that analyze the creditworthiness of an organization and
accordingly extend credit limits. It gained immense attention because it seeks out the help of
business during the time of financial crises (Košmrlj, Širok and Likar, 2015). Application of the
innovation theory design thinking helps the company to analyze existing situation of eth market
when it incorporated the operation. In addition to that it accordingly structures the activities of an
organization and launch preferable services significantly. Similarly, as the open function through
online platform due to which it comprises of help line and customer services support where the
query and suggestion of internal and external stakeholders are entertainment for the better
functioning of financial institute. Therefore, it’s led to the continuous development of the
organization as well as its offering.
Innovation theory in future development context
It is vital for the organization to plan out processes for its future development in terms to
maintain the inserts of customer, retain employee as well as compete amongst rivalries. The
future development is solely based on the innovation that can help company to integrate its
efforts and build up better growth and development experience for the customer. Some of the
future development plans of Funding Circle Company for 2020 onwards are listed down below:
Services: As introducers are the main partners of an organization that helps in deriving
out the profitable business. So the internal response has planned to more focus in terms of
building and enriching the desirable experience of introducers (Zeyen, Beckmann and Akhavan,
2014). Focus is given to optimize all the touch points for better implementation of plans for

client. This will help in sharing the relationship between company representatives and small
businesses.
Technology: Technology will remain a crucial priority for Funding Circle as well as its
team due to which efforts will be made in 2020 as well as upcoming future to include finest-in-
class solutions that is used to provide more authentic and quick decisions for convenience of
introducers. It is widely expect to promote lot of changes for the optimum delivery of services.
People: As the lending plans is expected to constantly expand in 2020, due to which
focus is given to develop challenging team by investing preferable amount of time with the
personnel and allocate training and development session (Laine, 2012). The aim for future
development is to hire potential staff from a variety of backgrounds and needs to have desirable
experiences. This practice promotes the outstanding service for all introducers. Company is to
looking to enhance the size of members that can serve the growth of market growth by
developing innovating thinking ability.
Amongst different plans people that is the employees plays an essential role in terms to
avail the advance knowledge and skill due to which they can simultaneously practice to bring out
innovation. Based on the above chosen theory which is Open innovation and design thinking the
future planning associated with people plays an essential role. According to Open innovation the
internal personnel due to training and experience derive from different environment can help to
generate desirable mindset and personality. Usually such kind of circumstances helps to respond
against the challenges and immensely benefit the future growth and functioning of an
organization (Bowers and Khorakian, 2014). Along with that solicit feedbacks can be generated
from internal employee to better anticipate the future and carry out desirable actions. Similarly
on other side Design thinking innovation theory can immensely help Finding Circle to find the
solution of wicked or tricky problems through the desirable investment on people. Moreover,
support of knowledgeable, technical and competitive team members support the organization to
explore the opportunities and add immense values in the lives of customer. Thus, focus on
People plan can extensively assist company to maintain the present as well as future
development of the entity successfully.

CONCLUSION
From the above report it has been determined that innovation is an essential part of an
organization that help to continuously improve the operation of an organization in terms to
remain competitive. This is the main elements that helps in leading the unique solution of the
problem and immensely gain the competitive advantage. So there are various theories of
innovation like Design thinking which needs to be effectively implemented by an organization.
This helps in better addressing the problem and maintains the interest of internal and external
stakeholders. Further, it helps in the flourish the business operations by leading the existing and
future growth and development of an organization.

REFERENCES
Books and Journal
Biemans, W., 2018. Managing innovation within networks (Vol. 7). Routledge.
Seebode, D., Jeanrenaud, S. and Bessant, J., 2012. Managing innovation for sustainability. R&D
Management. 42(3). pp.195-206.
Tidd, J. and Bessant, J., 2014. Strategic innovation management. John Wiley & Sons.
Van Lancker, J., Wauters, E. and Van Huylenbroeck, G., 2016. Managing innovation in the
bioeconomy: An open innovation perspective. Biomass and Bioenergy. 90. pp.60-69.
Jaw, Y. L., Chen, C. L. and Chen, S., 2012. Managing innovation in the creative industries–A
cultural production innovation perspective. Innovation. 14(2). pp.256-275.
Lundstedt, S. B. and Colglazier, E. W. eds., 2013. Managing Innovation: the social dimensions
of creativity, invention and technology. Elsevier.
Wu, L. W., Lii, Y. S. and Wang, C. Y., 2015. Managing innovation through co-production in
interfirm partnering. Journal of Business Research. 68(11). pp.2248-2253.
Prange, C. and Schlegelmilch, B. B., 2018. Managing innovation dilemmas: The cube
solution. Business Horizons. 61(2). pp.309-322.
Koch, A. H., 2012. Authority and managing innovation: a typology of product development
teams and communities. Creativity and Innovation Management. 21(4). pp.376-387.
Košmrlj, K., Širok, K. and Likar, B., 2015. The art of managing innovation problems and
opportunities. Koper: Faculty of Management.
Zeyen, A., Beckmann, M. and Akhavan, R., 2014. Social entrepreneurship business models:
Managing innovation for social and economic value creation. In Managementperspektiven für
die Zivilgesellschaft des 21. Jahrhunderts (pp. 107-132). Springer Gabler, Wiesbaden.
Laine, K., 2012. Chapter 12 Managing Innovation for Growth in High Technology Small
Firms. Aard Groen, Ray Oakey, Peter Van Der Sijde, Gary Cook, in (ed.) New Technology-
Based Firms in the New Millennium (New Technology-Based Firms in the New Millennium,
Volume 9), Emerald Group Publishing Limited. pp.173-185.
Bowers, J. and Khorakian, A., 2014. Integrating risk management in the innovation
project. European Journal of innovation management.
Poblete, J. and Spulber, D., 2017. Managing innovation: Optimal incentive contracts for
delegated R&D with double moral hazard. European Economic Review. 95. pp.38-61.
Owen, R., Bessant, J. R. and Heintz, M. eds., 2013. Responsible innovation: managing the
responsible emergence of science and innovation in society. John Wiley & Sons.
Online
Important Innovation Theories. 2020. [Online]. Available
through:<https://www.ideatovalue.com/inno/nickskillicorn/2017/07/15-most-important-
innovation-theories-your-company-should-be-using/>
Funding Circle. 2020. [Online]. Available through:< https://www.fundingcircle.com/uk/about-
us/>
Business model of Funding Circle. 2020. [Online]. Available
through:<https://www.cleverism.com/company/funding-circle/>