Last modified on 2 August 2012, at 08:40

Sport Innovation/IMG Combine360/Barriers to Innovation

Innovation is derived from the Latin word “Innovare” which means to “make new”. According to Drucker, “innovation is the means by which the entrepreneur either creates new wealth producing resources or endows existing resources with enhanced potential for creating wealth [13]. Arthur D. Little [14] has divided innovation further into three categories:

1) Product Innovation

2) Process Innovation

3) Organizational Innovation

Combine 360 represents a Product Innovation such that the creative development and commercialization of radically new products or services, uses new technology and is linked to unmet customer requirements. Despite their success and strength as two internationally large enterprises, IMG and Under Armour face challenges to make their products innovative and globally competitive.

Defining SME versus Large Enterprises Small and medium enterprises are companies whose headcount or turnover falls below certain limits. These definitions vary around the world. For example, Australia defines this as 50 employees whereas the United States of America use 250 to 500 employees to capture this category. A large enterprise (LE), therefore, represents more than boundaries mentioned above. For the purpose of this investigation it incorporates any enterprise with more than 50 members. Thus, IMG and Under Armour both fit those categories. Studies on market competition and firms’ innovative activities have a long history. It has been known as the Schumpeter/Arrow debate, over which firms--large or small--are more able and more likely to innovate is one of the oldest in political economics, and it continues to arouse controversy today.

These differences in innovation efforts and results can be explained by the advantages traditionally ascribed to large and small firms. The main relative strengths of SMEs, such as SKINS, lie in behavioural advantages, whereas those of large firms, IMG and Under Armour, reside in their resource advantages. Smaller firms generally enjoy internal conditions that encourage innovativeness, such as entrepreneurship, flexibility, and rapid response. This was confirmed by the case study on SKINS. On the other hand, the relative weaknesses of small firms compared to large ones lie in the constraints they face on gaining access to critical resources and capabilities for innovation. The advantages of scale and scope provided by the size of large firms make them better equipped for innovations that require large and specialized teams or sophisticated equipment. IMG and Under Armour are both international companies that have these specialised teams set up already. In the case of IMG Academies, this sophisticated equipment exists already. SMEs are also usually at a disadvantage when it comes to intangible resources, as they have access to a smaller range of knowledge and human capital skills than large firms. This was outlined in the struggle for SKINS in their distribution networks.

Research and Development Innovation for all enterprises, no matter how big or small, stresses the role of cooperative research and development in overcoming a lack of resources or improving innovativeness and competitiveness. IMG and Under Armour have already accomplished this, despite both being large enterprises. Furthermore, this was a suggestion in the case study of SKINS: to establish more partnerships with local apparel companies. This cooperative research & development in technological innovation is useful for information exchange, resource acquisition, technology transfer, and risk management. In collaborations such as for C360, this has an extremely impact.

Strategic Collaborations Individual enterprises cannot be good at everything. They must specialise and learn to combine their capabilities with those of other firms and organisations. These collaborations consist of identifying possible partners (e.g. clients or suppliers), providing them with appropriate information, setting up a common environment for communication and finally starting commercial operations.

“In the 21st century, competition will be between networks of collaborating enterprises (value chains) rather than individual enterprises”

International IFIP Conference, 1998

IMG and Under Armour have engaged in strategic collaborative relations. Although both companies are considered within the same sports industry, they offer very different services. Their strength in collaboration lies in the fact that they have similar target markets. As SAP CEO Henning Kagermann stated, “these collaborative arrangements are growing in popularity and power as products become more complex and competition widens globally.” Collaboration helps to increase technological diversity and combine complementary resources of potentially rival firms in developing new technologies and products. Even though IMG and Under Armour are both large enterprises, it is important to note that SKINS can and should engage in the same kind of collaborative agreements.

Resources One of the biggest differences between these two environments (C360 and SKINS) is the amount of resources available. This is not just in relation to money, but also availability of up-to-date equipment and expert consultants. Large companies such as IMG and Under Armour have very deep pockets, and money is annually committed to provide scientists with the best and most up to date technologies to perform their work. There are also a wide variety of experts in various fields including nutrition, exercise, and technology that they have access to if they need niche expertise, especially because both companies are in the “fitness and sport” industry.

In contrast, small enterprises such as SKINS do not necessarily have the capital to invest in large equipment or individuals for research. In some cases, SME’s can be relatively strong in innovations where effects of scale are not important and where they can make use of their flexibility and proximity to market demand, such as new products or improvements in existing ones for niche markets, and small-scale applications. Unfortunately for SKINS, price is a significant barrier and there is significant expansion of the market with respect to compression garments. 

Conclusion Organisations in the sporting industry today are knowledge based and their success and subsequent survival depend on creativity, innovation, discovery and inventiveness. An effective reaction to these demands leads to innovative change in the organization, ensuring their existence. The rate of changes is accelerating rapidly, as new knowledge idea, generation and global diffusion are increasing. Creativity and innovation have a bigger role in this change process for survival.

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