Innovation is perennially at the top of CEO agendas, yet many executives continue to be frustrated with their transformation programs' hit-or-miss pace and results. The problem isn’t usually a lack of good ideas. Initiatives take too long, non-strategic projects get greenlighted at the expense of game changers, and dynamic ideas remain captive in the heads of employees. Innovation contributes to competitive advantage for companies and therefore many researchers have sought to understand how to strengthen the company’s capability to innovate, as this makes enterprises more competitive and perform better financially (Henderson & Clark, 1990). What’s missing is a system of enablers that work together to support innovation. Our experience with industry leaders shows that when the right people, processes, and metrics come together in a “growth factory,” they can transform how innovation happens, galvanize employees’ creativity, and create long-term competitive advantage. Innovation is not inherently unpredictable and does not require a heavy dose of serendipity to succeed. When companies take a systems approach, they can pursue innovation in a way that reliably generates repeatable results.

1. Innovation Capability for Sustainable
Competitive Advantages
Seta A. wicaksana
Founder and CEO of
www.humanikaconsulting.com and hipotest.co.id

2. Seta A. Wicaksana
0811 19 53 43
wicaksana@humanikaconsulting.com
• Business Psychologist
• Pendiri dan Direktur Humanika Consulting dan hipotest.com
• Anggota Komite Nominasi dan Remunerasi Dewan Komisaris PT Askrindo
• Sekretaris Prodi MM Program Pasca Sarjana Universitas Pancasila
• Dosen Tetap dan Peneliti di Fakultas Psikologi Universitas Pancasila
• Pembina Yayasan Humanika Edukasi Indonesia
• Wakil Ketua Asosiasi Psikologi Forensik Indonesia wilayah DKI
• Penulis Buku: Sobat Way (2016), Industri dan Organisasi: Pendekatan Integratif dalam
menghadapi Perubahan (2020), Human Faktor Engineering: Integratif Desain Manusia
dan Lingkungan Kerja (2021), Psikologi Industri dan Organisasi (2021), Psikologi Umum
(2021), Manajemen Pengembangan Talenta (2021), PIODiagnostik: Pengukuran Psikologi
di Lingkungan Kerja (2021), Transformasi Digital: Perspektif Organisasi, Talenta dan
Budaya Organisasi (2021), Psikologi Pelayanan (2021) dan Psikologi Konsumen (2021).
• Dosen Tidak Tetap di: Program Pasca Sarjana Ekonomi di Univ. Pancasila, STP TRISAKTI,
Fakultas Psikologi Universitas Mercu Buana, STIKOM IMA
• Certified of Assessor Talent Management
• Certified of Human Resources as a Business Partner
• Certified of Risk Professional
• Certified of HR Audit
• Ilmu Ekonomi dan Manajemen (MSDM) S3 Universitas Pancasila
• Fakultas Psikologi S1 dan S2 Universitas Indonesia
• Sekolah ikatan dinas Akademi Sandi Negara

3. Background
• Innovation is perennially at the top of CEO agendas, yet many
executives continue to be frustrated with their transformation
programs' hit-or-miss pace and results. The problem isn’t usually
a lack of good ideas. Initiatives take too long, non-strategic
projects get greenlighted at the expense of game changers, and
dynamic ideas remain captive in the heads of employees.
• Innovation contributes to competitive advantage for companies
and therefore many researchers have sought to understand how
to strengthen the company’s capability to innovate, as this makes
enterprises more competitive and perform better financially
(Henderson & Clark, 1990).
• What’s missing is a system of enablers that work together to
support innovation. Our experience with industry leaders shows
that when the right people, processes, and metrics come
together in a “growth factory,” they can transform how
innovation happens, galvanize employees’ creativity, and create
long-term competitive advantage.
• Innovation is not inherently unpredictable and does not require a
heavy dose of serendipity to succeed. When companies take a
systems approach, they can pursue innovation in a way that
reliably generates repeatable results.

4. Definition of
Innovation
Innovation is the application of resources to
create value for the customer and the enterprise
by developing, improving and commercializing
new and existing products, processes and services
(Milé Terziovski, 2007)

5. Evolution of Innovation
(Rothwell, 1994)
• First generation innovation (1G) — technology push. This era of innovation
was the foundation for the Industrial Revolution. Innovation came with new,
technologically advanced products and means of production. Such products
were pushed onto the market.
• Second generation innovation (2G) — need pull. Innovation during this era
shifted to a market/customer focus, a focus where the customer determined
needs and production technology responded. Marketing took a pivotal role in
generating new ideas.
• Third-generation innovation (3G) — coupling model. This era of innovation
involved a coupling of the push and pull models. The market might need new
ideas, but production technology refined them. Alternatively, R&D developed
new ideas that marketing refined with market feedback. R&D and marketing
were linked.
• Fourth generation innovation (4G) — integrated model. An integrated model
of innovation saw a tight coupling of marketing and R&D activity, together with
strong supplier linkages and close coupling with leading customers.
• Fifth generation innovation (5G) — systems integration and networking model
(SIN). This model of innovation builds on the integrated model by including
strategic partnerships with suppliers and customers, using expert systems, and
having collaborative marketing and research arrangements. There is an
emphasis on flexibility and speed of development with a focus on quality and
other non-price factors.

6. Four components for
Innovation
• A growth blueprint that details the innovation type you
are pursuing, along with goals and guidelines for getting
there.
• Production systems that transform the raw materials of
innovation—ideas—into tangible new products and
services.
• Governance and controls that enable the management
structure to scale innovations to deliver impact and
growth.
• Leadership, talent, and culture that feature the right
people, in the right roles, doing and saying the right
things.

7. Question
What constitutes innovation
capability in organizations, and
how can it be developed and
exploited?

8. Innovation Capability
• Innovation capability of a company is linked to the internal efforts of human,
technological and organizational resources, combined with the ability to interact with
the external environment to pursue resources, knowledge, and skills to be
incorporated into the organization to create new products and processes that are
perceived and valued by stakeholders (Lawson & Samson, 2001).
• The operational viewpoint, building the capability of innovation is not a simple task, as
it requires a decision-making process that drives the company’s efforts towards
innovation and creates a culture of innovation among employees and within the
organization. Operationally, innovation capability implies a team of motivated staff to
build processes, products, and services that could be valued to customers and
suppliers (Henderson & Clark, 1990), bringing evidence to the company and
conditions of competitive advantage in the long term (Wernerfelt, 1984; Barney,
1991).
• the Dynamic Capabilities theory, proposes that not only the resources and skills of the
company could generate the competitive advantage, but also the processes of
learning, knowledge, coordination, and resource reconfiguration within the company
and in contact with the company’s external environment (Teece et al., 1997).
• Development of innovation capability in an organization is an essential study area that
has stimulated a considerable level of attention among academic researchers. This is
due to its contribution to the improvement of organizational performance and survival
(Migdadi et al., 2017; Saunila, 2016).

9. Several Dimensions Of
Innovation Capability
(Lawson and Samson, 2001)
• Vision and strategy;
• Harnessing the competence-base;
• Leveraging information and
organizational intelligence;
• Possessing a market and customer
orientation;
• Creativity and idea management;
• Organizational structures and
systems;
• Culture and climate;
• Management of technology.

10. Definition of
Innovation
Capability
• Teece, Pisano and Shuen (1997) define “dynamic
capabilities” as: … the firm’s ability to integrate,
build, and reconfigure internal and external
competences to address rapidly changing
environments (p. 516).
• Lawson and Samson (2001) define innovation
capability as: the ability to continuously transform
knowledge and ideas into new products, processes
and systems for the benefit of the firm and its
stakeholders (p. 8).
• Innovation capability is interpreted as a
combination of factors, internal and external to the
organization, which are linked to the organization’s
ability to continuously innovate.

11. Determinants Of
Innovation Capability
• The determinants of innovation capability
identified were culture and organizational climate,
leadership, structural organization, internal
knowledge development, external knowledge
exploration (suppliers, clients, partner companies,
technology parks, research institutes) strategy,
regeneration, and networking.
• These determinants could be applied to the context
of small companies (Saunila, 2016), the industrial
sector for product innovation (Fan, 2006), companies
that aim to identify the most determinant factors in
the export context (Vicente et al., 2015), for
innovation of processes (Romijn & Albaladejo, 2002;
Frishammar et al., 2012) and innovation in products
(Saunila, 2016; Slater et al., 2014; Romijn &
Albaladejo, 2002; Vicente et al., 2015; Fan, 2006).

12. Internal Factors of
Innovation Capability
• The internal aspects that contribute to the
high innovation capability in organizations,
three factors stand out in the literature:
• human resources,
• technological resources and
• culture for innovation.
• Thus, the results obtained suggest that the
combination of motivated human talents,
with an internal culture focused on
innovation, combined with technologies,
drives organizations in their innovation
capability

13. Internal Factors of Innovation
Capability
• Organizational Size - The relationship between organization size and innovation is complex,
as indicated by Damanpour (1992).
• Strategy - A business strategy addresses the question of how the company, or its business
units can compete in its businesses and industries (Wheelen & Hunger, 2002).
• Organizational Structure - An organization’s structure is “the formal setup of a business
corporation’s value chain components in terms of workflow, communication channels, and
hierarchy” (Wheelen & Hunger, 2002, p. G-5).
• Type of Organization - The predictors of innovation appear to depend on the type of
organization. For instance, Damanpour (1991) found that the standardization of work
processes facilitated innovation in manufacturing but hindered it in service organizations.
• Slack Resources - Past research found a relationship between “slack resources” and
innovation (e.g., Ahmed, 1998; Damanpour, 1991) in general, and NPD (Cooper &
Kleinschmidt, 1996) and technology innovation (Caldeira & Ward, 2003) in particular.
• Culture and Climate - A climate of creativity, welcoming of change, tolerant of risk and
failure, and democratic, is more likely to be linked to innovation than a culture that
discourages creativity, does not welcome change, is not tolerant of risk, and is autocratic
(e.g., Angle, 1989; Ahmed, 1998; Roberts, 1996).

14. Internal Factors of Innovation
Capability
• Communication - Internal and external communication have been found to be
related to innovation (e.g., Ahmed, 1998; Damanpour, 1991; Gleadle, 1999).
• Social Structures - Interpersonal relationships that facilitate innovation in
organizations are part of what we call “entrepreneurial networks” in this literature
30 I. Metz, M. Terziovski & D. Samson review.
• People and HRM - Angle (1989) looked at organizational innovation from a
psychological perspective and proposed that organizational innovation was a
combination of the members’ personal attributes and the organizational context.
• The Management of Technology - An OECD Policy Brief noted that firms’
investment in information and communication technologies (ICT) has increased in
recent years and that the services sector is the main purchaser of ICT equipment.
• Market Knowledge - The importance of market knowledge has been demonstrated
in the cases of winning strategies (Wheelen & Hunger, 2002) in general, and is
considered to be an important factor in the cases of NPD (e.g., Cooper, 1985; von
Hippel et al., 1999) and of technological innovation (e.g., Delaplace & Kabouya,
2001; Sharfman et al., 2000) in particular.

15. People and HRM
• Management and leadership - Leaders and managers influence what is done in organizations, as
well as how things are done.
• Knowledge - Having people with technical and professional knowledge, keeping knowledge in-
house, and being able to leverage it by sharing it appear to be important factors in innovation.
• Teams – Much of the past research indicates that the use of teams is beneficial to productivity,
organizational performance, accelerated NPD, and innovation.
• Incentives and rewards - Incentives and rewards are used to motivate people and channel efforts
toward the achievement of organizational and personal goals.

16. External Capability
For Innovation
• The external factors that contribute to
innovation capability, strategic alliances are
highlighted as a tactic for imparting
knowledge, although companies have more
facility to make strategic alliances for product
innovation than processes.
• The literature also shows that the ability to
interact with suppliers and customers
contributes to knowledge acquisition from
outside the organization, improving the ability
of the company to innovate.
• In addition, social networks, technology parks,
and communities of practice could be
managed to acquire expertise

17. External Capability For
Innovation
• Government Regulation - Government regulation can provide firms with
opportunities or constraints, depending on the context and how they approach it.
Although government regulation is not the only factor that can positively impact the
process of innovation, it is nevertheless an important one (Delaplace & Kabouya,
2001; Dunphy et al., 2003; Porter & Stern, 1999).
• Environmental Regulation – An enterprise’s sustainable development orientation
(SDO) reflects the influence of and ability to influence environmental, political, and
social factors.
• e-Commerce Regulation - Research indicates that e-Commerce regulation is
necessary for e-Commerce to flourish.
• Industry - The industry that an organization operates in can influence its ability to
successfully innovate.
• Customers and Competitors - Customers and competitors in a particular industry can
influence the innovation capability of organizations in that industry.
• Partnerships - Porter and Stern (1999, p. 17) found that “clusters” were strongly and
positively related to national innovativeness.

18. Enablers of Innovation
Capability
• Sustainable Development - Sustainability has clearly
begun to assert itself as a driver for innovation.
Organizations need to better understand how the
emergence of environmentalism and sustainable
development impacts an organization’s
opportunities and capability to innovate.
• Technology and Internet - The arrival of Technology
and the internet such as e-Commerce has driven
organizations to re-evaluate their entire way of
doing business, and in many cases, create entirely
new forms of competition.
• New Product Development - Research on NPD
indicates that many of the factors critical to
innovation, in general, are also linked to successful
NPD.
• Collaboration and Knowledge – Transfer The need
to be simultaneously efficient, flexible, and adaptive
has accelerated the evolution of the network form
of organization.

19. Organisation Innovation
Theories and Innovation
Capability
• Tuominen and Hyvönen (2004) developed a measure of
innovation capability based on organization innovation
theories, drawing on the literature addressing
organization’s strategy, structure, and competitive position
as well as on empirical evidence. The authors proposed
that organizations pursue two separate dimensions;
• the first is technological innovation (including 4 items
relating to the product and technical processes that
create value for customers) and
• The second is managerial innovation (including 6
items relating to strategy development and
organizational management that create value for the
organization).
• However, these are measures of the innovative behavior of
the organization rather than measures of its capability.

20. A Framework of
Innovation
Capability for
Sustainable
Competitive
Advantages
Learning
Culture and
Climate
Organization’s
Strategy and
Design
People and
HRM
Knowledge
and
Technology
Management
Sustainable Competitive
advantages
Customers and
Competitors
Technology and internet
Data Insight
Innovation
Capability
Wicaksana, 2022

21. Literature
• Ashoor, W., (2018), Developing Innovation
Capability in Small and Medium-Sized
Enterprises: A Conceptual Framework and
Research Propositions” Arab Journal for
Scientific Publishing (AJSP) ISSN: 2663-5798.
• Mile Terziovski (2007),Building Innovation
Capability In Organizations: An International
Cross-case Perspective, Series on Technology
Management, ISSN 0219-9823, Imperial
College Press
• Silva, J. J., & Cirani, C. B. S. (2020). The
capability of organizational innovation:
systematic review of literature and research
proposals. Gestão & Produção, 27(4), e4819.
https://doi.org/10.1590/0104-530X4819-20

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