Tuesday, January 23, 2018
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Need to Focus on Innovation System


– Dr. R. B. Smarta
Nutraceutical industry is moving forward with the advent of new scientific technologies and
innovations. Innovation along with product quality is fundamental to long term growth & success of
any business. Certain products are marketed unchanged for years, this way certain organisations
have been able to survive with very limited innovation. In such cases, the focus is on providing
quality products and simply updating the products to a level that sustains their competitiveness in
the market. This process applies to certain products with long lifecycles and few opportunities for
innovation. But if any organisation wants to achieve significant growth in the business, innovation is
essential to expand the product portfolio. So far in Nutraceuticals the innovations have been mainly
in the areas of delivery formats, bioavailability, shelf–life extension, enhancement of flavour etc.
Need/Importance of Innovation
Innovation is important as it is one of the key ways to differentiate a product from its competition.
The business would stand out with innovative products and ideas for marketing if competing on
price becomes difficult.
Innovation in the business can also be driven by the extent of innovation from its competitors. Being
the first to market with a new product can prove to be a significant advantage in terms of building a
customer base. It is difficult to compete if the products are seen as out-dated. However, when
investing in innovation we need to keep in mind that many businesses survive by copying and
adapting the innovations of others and benefit from others hard work.
Looking at this from a wider angle, innovation is important for the advancement of society around
the world. New and innovative products can increase the standard of living and provide people with
opportunities to improve their lives. Innovations in the areas of medicine and technology have
significantly improved the standard of living around the world. Innovation has also lead to significant
improvements in the way businesses operate and has closed the gaps between different markets.
“Innovation distinguishes between a leader and a follower”
Steve Jobs
Trends/Driving forces
Some forces driving innovation are:
External forces
 Outsourcing & Globalisation
There is an increased impetus to improve efficiency and effectiveness of the organisation.
Organisations need more than good products to survive and grow; they require innovative
processes and management that can drive down costs and improve productivity.
 Consumers
Consumer expectations drive innovation in the market. Consumers are used to products that
continually improve and make their life easier. Today’s consumers are more aware & informed
and have more options in terms of what they buy and who they buy it from.
 Competitors
Competitors innovation is an essential driving factor for innovation. In any business there is a
need to be the first to launch a new concept, product, process etc.
Internal forces
 Business growth
Innovation in products will lead to an improved product portfolio thereby, empowering the
organisation to further accelerate business growth.
Innovation System (IS)
The main idea of an innovation system is the flow of technology and information among
organization and people. Initiatives and institutions are the key to an innovative process. The
innovation system mainly involves the interaction between the key players who are needed in order
to turn an idea into a process, product or service in the market.
Different perspectives of innovation have been evolved in this system. The Innovation System model
consists of following components:
– Demand – this includes demand from Producers and Consumers, demand is linked to Industrial
system, Education & Research and Political system, which are interlinked together.
– Framework Conditions – the framework conditions that are directly linked to political system are
financial environment, taxation, incentives (subsidies) etc.
– At the base of all these aspects we have the Infrastructure which involves innovation & business
support (R&D), standards, rules & regulations, IPR, capital & banking support.
Represented below is the National Innovation System Model for products

In this model, demand for a product, technology or innovation emerges. The framework conditions
of an Innovation System are the aspects in which the players of the innovation system operate. The
political system consists of the national as well as regional governments, the governance, research
and technological development policies. These political aspects have a profound influence on the
framework conditions. The political system affects infrastructure through research & development,
policies, IPR etc. The infrastructure in turn supports education and research and the industrial
system in the development of technology and innovation.
Functions of the Innovation System
 Commercial Activities
Commerce and commercial activities are essential for an IS because without them there would
be no innovation and the innovation system would not exist (Negro, 2007). In these activities
the potential of new knowledge, networks and markets is converted into actions which will
generate new business opportunities (Hekkert et al., 2007).
 Knowledge Development & Diffusion
Knowledge development is crucial for any innovation process. Therefore R&D and knowledge
development are essential within the innovation system. R&D activities are mainly performed
by researchers but even other players can be responsible for knowledge development.
Knowledge can be diffused through various networks. Adequate diffusion of knowledge helps
the policy decisions to be consistent with the latest technological insights and R&D agendas to
be affected by changing norms and values (Hekkert et al., 2007).
 Market Formation
New technologies often struggle to compete with existing technologies because the new
technology is still in the development phase and not yet well adapted to existing standards and
the functions it has to perform, resulting in slow diffusion. A protected space for new
technologies can overcome this, and can be created by temporary niche markets, favorable tax
regimes or minimal consumption quotes, and activities in the sphere of public policies.
Way Forward
By adhering to such innovation system, existing as well as start-up organisations could get a great
boost in their businesses. As the innovation system involves finance, policies and standards the
organisations will find it easy to manage their businesses and innovations.
Considering this, is it that we would like to create more facilities like we have done in
pharmaceuticals? From business point of view, it will commoditise the entire business and it would
not remain at branding, marketing or selling level but it will go down to trading level.
Countries around the world who have already ventured into Nutraceutical specific innovation
systems are USA and some European countries. The concept of innovation system is necessary for
understanding the holistic approach of innovation process and formulation of appropriate policies.
Question is can this innovation system be customized according to needs of different countries
and used to understand & evaluate the innovation processes in nutraceutical industry for the
growth of industry?
– Published in NuFFooDS Spectrum Magazine
 Innovation Module in Organisation, http://toolkit.smallbiz.nsw.gov.au/part/14/69/291
 Emerging European Nutraceutical Innovation System, Jef Pennings, Universiteit Utrecht
 Innovation systems – Different perspectives, Prof. Dr. Knut Koschatzky