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Kubiak, A. Korowicki, Gdansk University Press, Gdansk 2009, p. 212 220.

INNOVATION ANALYSIS IN SMALL AND MEDIUM IT FIRMS Micha ebrowski Kazimierz Wakowski
This article satisfies the demand for a systemic approach to SME-IT (Small and Medium Enterprises in IT sector) innovation management. It starts from a praxeological definition of IT innovation, which highlights the influence of innovation on changes in enterprise efficiency. It has been noticed, that innovation is a product of a corporate innovation strategy. It has been assumed, that an enterprise innovation system may be of main interest, as regards implementation of innovation strategy. Based on theoretical propositions, the conceptual design of information system supporting strategic innovation management is proposed the Open Repository of Innovation Strategy Patterns. innovation management, innovation strategy, small and medium enterprises, innovation support service, internet site

1. Introduction New solutions from IT firms are foundations of knowledge based economy and are a catalyst for organizational changes and innovations in different sectors. Most of IT firms in Poland (99,93%) are small and medium enterprises (SME-IT) [4]. Despite limited opportunities for market expansion (financial, human resources and organizational barrier), SME-IT have a great potential and a chance of development. Analysis of available bibliography leads us to a conclusion, that the complex research on SME-IT innovation is insufficient as regards needs of enterprises. Such research is purposeful, as SME-IT still have problems with innovation effectiveness and efficacy. Considering the important role of innovation to the firm and the economy, an innovation systems model has been designed using a systemic approach. The aim of the model is to enhance innovation activity in the manufacturing industrial sectors. This model reveals the implications of the firms strategic decisions and associates the national policy strategies and institutional support to the enterprises innovation activity. This papers objectives, however, are to introduce the concept of the innovation system and then to present the elements that constitute the model of the innovation system and innovation strategy under a systemic approach.

2. Systemic approach to innovation management 2.1. IT innovation The first important concept to define is the expected result of the innovation activity IT innovation. IT innovation is a conscious and purposeful introduction of newness in IT products or services offered, affecting the positive change in performance (in terms of praxeology) of an entity using IT product or service. IT innovation should bring benefits in a strategic time horizon to company adopting an innovation. Construction of IT innovation model, presented in Figure 1, includes: offered IT product, innovative change in IT product: a new aspect of existing product or a totally/brand new product; business processes support services resulting from IT product adoption, impact of innovative change to performance grow of entity adopting an innovation.

For an example, the IT innovation for chosen SME-IT was captured and is presented in Table 1. Table 1. Example of IT innovation in SME-IT Element of IT innovation IT Innovation (Product) Characteristics for the chosen company (AMMKOMPUTER) Virtual server hosting; novelty in introduction of virtualization based on Microsoft Virtual Server 2005 R2 Enterprise Edition Deployment and running of web sites Full access to virtual server environment with features: a wide range of possibilities in configuration, installation and running software Full control and independence in configuration of own virtual server

Business processes support service Innovative change in support service Impact of innovative change to performance of clients business processes Benefits from performance grow for clients

Cost-effective solution to meet the majority of hosting needs, Improvement of ability to make changes quickly, Achievement of better flexibility and performance of web site

2.2. Enterprise innovation system A comprehensive approach to enterprise organization and management using conceptual modeling resulted in the discipline of enterprise engineering. Enterprise engineering is based on the following assumptions [5]: enterprise may be treated as a system; a major aspect of an enterprise comprise of business processes; for enterprise transformation, engineering methods are used.

The role of abstraction and modeling is a major element in enterprise engineering. Enterprise engineering deals with the analysis, design, implementation and operation of an enterprise. Enterprise engineering with regard to innovation management, addresses design, construction, any decisions in this area and related methodological procedures, management functions in particular planning, control, monitoring, measurement and evaluation of the effects of innovations and innovation strategies [2, p. 21]. One of the approaches to systems analysis and modeling, proposed by S. Alter, is the work system theory and method [1]. Given by S. Alter, the definition of work system, is as follows: the work system is a system in which human participants and/or machines perform work using information, technology, and other resources to produce products and services for internal or external customers. The basic elements identified in the work system include: products and services, customers, activities, actors, strategies, infrastructure. Typical business organizations have many work systems: to obtain materials from suppliers, produce and deliver end products, find customers, create financial reports, hire employees, coordinate work across departments, and perform many other functions. The concept of innovation system takes as its starting point the concept of the work systems in organization. Any action in an enterprise must have well-defined, identifiable and measurable goals. Actions performed should be a service it must be referred to the recipient, the person for whom the result of an action will have meaning and value. For the whole enterprise, receiver is not only an external customer, but also a partner or supplier. The proposed definition of the enterprise innovation system states the following: the innovation system SIN is a subsystem within an enterprise, in which participants act in order to introduce innovation, with benefits for company in a strategic perspective, by use of innovation and funding sources. Basic elements of innovation system are identified as: Clients recipients of innovation, external (customer, partner) or internal (group, unit in a company). Innovation a significant novelty in products, services, processes, organization, operation; outcome of innovation system. Innovation activities everything that happens within an innovation system; all the activities taken to bring about innovation.

 Participants co-operative groups include people who carry out activities related to innovation in the enterprise, considered as independent entities or as groups of people. Sources of innovation origin of any idea or solution, as an essence of an innovation. Sources of funding source of funding for innovation. Innovation system identified in a real company can be described as a SIN model. SIN model can, in turn, be derived from a framework (common form) SIN scheme (SSIN). The following description summarizes SSIN: SSIN: ({SIN}, {rSIN}), where: {SIN} is a set of innovation system basic elements, {rSIN} is a set of relationships between innovation system elements. {SIN} = {CLN, INN, AIN, PAR, SRI, SRF}, where: CLN: the element Clients, INN: the element Innovation, AIN: the element Innovation activity, PAR: the element Participants, SRI: the element Sources of innovation, SRF: the element Sources of funding. {rSIN} : CLIN, ACIN, ACPA, ACSI, ACSF, where: CLIN: innovation for a client (Clients Innovation), Innovation

ACIN: outcome of an innovation activity (Innovation activity), ACPA: active participants (Innovation activity ACSI: origin of invention (Innovation activity ACSF: origin of funding (Innovation activity Participants),

Sources of innovation), Sources of funding).

2.3. Organizational innovation strategy The design of innovation and strategy lies in making the standard, known procedures in a new way, to deliver new value. Presentation of strategy for the purposes of management techniques, is best done by use of a systemic approach and designed as a model of strategy system. The strategy system, according to L. Berliski, can be defined as a logically structured set of elements of the strategy, as well as a set of principles, methods and procedures for strategy creation [3, p. 60].

Strategic apprehension of innovation system can be regarded as a view of a system, taking into account: innovation, vision, mission, objectives and development plans and offer, linked to innovation in enterprise. 3. Concept of internet service for innovation decision support 3.1. Innovation support internet services for SME The European Union (including Poland) provides support for innovation through a series of initiatives and actions aimed at providing financial support to innovators, as well as better innovation support services for SMEs, notably start-ups, by developing and testing new forms of business support and facilitating transnational cooperation with a view to mobilizing more resources for the creation of a European Innovation Space. Actors in the innovation space in Poland include government agencies implementing development strategies for regional innovation, technology transfer centers, scientific and technological parks, academic centers and enterprises. Innovation support parties concentrate their activity on developing entrepreneurship and innovation, providing services for enterprises [6]: dissemination of knowledge and skills through mentoring, training, guidance; assistance in a transfer and commercialization of new technologies in the technology transfer centers, financial assistance (seed capital) offered to new and young companies with no credit history (start-up); broad advisory assistance, technical and housing for the newly created small enterprises in the first period of operation in the entrepreneurial and technology incubators; creation of companies clusters and innovative environments.

A simple model of a logical area of innovation support services through internet sites is presented in the Figure 1. Support institutions perform their functions using many available forms of capturing enterprises attention. One of the best ways to reach a wide audience is internet site. Of the 20 web services reviewed, most focus on functions: promoting innovation, news and information, sharing knowledge, contacts in the area of innovation. Overview of internet services supporting and facilitating innovation management has been done. Reviewed services can not pay attention to strategic approach to innovation management. It was found that there is a lack for support particularly for SME. This idea could be introduced by making of internet service the Open Repository of Innovation Strategy Patterns.

Innovation support area

Functions of Internet sites Innovation support

provide work at

Support parties Innovation support services

satisfy

Enterprises needs for innovation support

Innovations

work at

Enterprises

Figure 1: Model area of innovation support services 3.2. Concept of the Open Repository of Innovation Strategy Patterns The practical outcome of the research is a conceptual design of an internet service the Open Repository of Innovation Strategy Patterns (ORISP). ORISP exists to help business to create and share innovation strategy. IT could be also regarded as an innovation research environment. ORISP provides services for examining, analyzing and planning of innovation strategy in SMEs. It gives an opportunity and virtual space for academic-business cooperation. Information system is a specific type of a work system, in which activities and results concern information. Information systems exist to support other work systems. ORISP is an information system supporting management functions in an enterprise innovation system. Information system development process should start from understanding business problem that would be resolved. This constitutes activities aim to problem domain definition. Problem domain is connected with solution domain through a set of required characteristics of information system. The next steps include design and implementation of working solution. Examination of the problem domain is carried out by analysis of issues from the selected area of business management. In the case of ORISP, problem domain is the strategic management of innovation. Analysis of the problem domain gives three models: innovation, framework of innovation system and system of innovation strategy. Through the analysis, it was determined the context of ORISP: ORISP provides services for entrepreneurs and managers with a tool assisting in the analysis of innovation and in formulating innovation strategy.

Having specified problem area and main goals, a general specification of a solution can be prepared. Specification involves use case model and logical model of ORISP. 3.3. ORISP main features The functional scope of ORISP is expressed in the form of use cases. ORISP use cases include the following situations:

Finding a pattern of innovation strategy:

The entrepreneur determines search parameters and receives a list of patterns from the repository that meet expectations. Chosen pattern is presented in details. Assessment of innovation strategy pattern: Entrepreneur assesses degree of patterns usefulness in a process of strategy formulating. Entrepreneur or researcher submits a new pattern.

Submitting of innovation strategy pattern: Defining a framework for innovation strategy:

The researcher defines a construction of an innovation strategy pattern. Understanding principles of innovation strategy formulation: Entrepreneur or manager gets access to the body of knowledge in innovation management through a wide variety of resources: e-learning courses, presentations, articles. Analyzing an enterprise innovation system: Manager, according to implemented scheme on the site (in the form of answers to the questions), defines a basic model of innovation system for his company. The model can then be enriched with available items in accordance with the implemented model. Browsing models of innovation companies: Executive searches and browses available models of innovation systems. Submitting models of enterprise innovation system: Executive or researcher submits a new model of enterprise innovation system. Defining a framework for innovation system: Researcher defines framework with its structure.

3.4. ORISP logical model ORISP logical model is based on the introduced concepts: IT innovation, innovation system and strategy innovation. Formal expression of theoretical proposals allows for the direct transition from theoretical concepts to the logical model of ORISP.

Logical model consists of general framework of SIN, framework of SIN in SME-IT and pattern of innovation strategy. Logical model of framework of innovation system for SME-IT (Figure 2) presents the base construct of SIN with its elements and relationships between them as introduced in 2.2. Logical model of innovation strategy pattern (Figure 3) presents general framework and its specific implementation for SME-IT.
SIN elements for SME-IT Logical model of general framework for innovation system Relationships for SIN in SME-IT

Clients

Relationship

SIN framework

Innovation for client

Relationship

Innovation

consists of

Outcome of innovation activity

Relationship

Innovation activity

SIN Element Activating participants

has

Participants

SIN Element's property

element 1. element 2.

Relationship

Origin of funding
Relationship

Sources of funding Sources of innovation

Origin of invention

Elements' relationships

Fig. 2. Framework of innovation system for SME-IT

Logical model of innovation strategy pattern Innovation strategy pattern Inovation strategy elements for SME-IT
components

Innovation strategy subject for SME-IT Concept of innovation

Vision of SIN

Construction of innovation strategy

elements

Matter of innovation strategy

problems

Sources of innovation Mission of SIN

Goals for SIN

Element of innovation strategy

Subject of innovation strategy

Sources of funding

Projects in SIN Property of SIN element Innovation in SIN

Innovation competence of employees Complience with enterprise development

Strategic domain for innovation activity Policies, programmes of innovation and competitiveness development

Innovation support services

Fig. 3. Logical model of innovation strategy pattern 4. Summary The regarding problem is significant from a scientific and practical point of view. Innovation in Poland is not accompanied by increase of global competitiveness in the polish IT sector. It is a relatively low degree of IT innovation - suitable only for the local market. Condition for the success of innovation activity is not only a high quality of current management, but also use of strategic approach. SMEs, focusing on current activities, disregard strategic management, what can reduce chance of success. There is a serious deficiency in web services facilitating innovation management. There is a need for a development and promoting a strategic approach in management of innovation, especially among SMEs. Recognizing the shortcomings in the management of innovation support services the Open Repository of Innovation Strategy Patterns can be offered. ORISP

conforms to four ideas of wikinomics: openness, peering, sharing, and acting globally [7]. ORISP is intended to activate different parties (including researchers and IT business representatives) around IT innovation. 5. Bibliography [1] Alter S., The work system method for understanding information systems and information systems research, Communications of the Association for Information Systems, 9 (9): pp. 90 104, 2002. [2] Berliski L., Projektowanie i ocena strategii innowacyjnych. Inynieria strategii przedsibiorstwa, AJG, Bydgoszcz, 2003. [3] Berliski L., Penc-Pietrzak I., Inynieria projektowania strategii przedsibiorstwa, Difin, Warszawa, 2004. [4] Eurostat. Services broken down by employment size classes NACE sections H to K (annex 1 of the SBS regulation) Reference year 2002 and onwards. [online], accsessed April 2009, Internet access: http://epp.eurostat.ec.europa.eu/. [5] Liles D. H., Presley A. R., Enterprise modeling within an enterprise engineering framework, 96 Winter Simulation Conference, San Diego, 1996. [6] Regionalna Strategia Innowacji dla Wielkopolski oraz Plan Dziaa na lata 2004 2006 ocena wstpnego etapu realizacji dziaa. Fundacja Uniwersytetu im. Adama Mickiewicza Poznaski Park Naukowo-Technologiczny, Pozna, 2006. [7] Tapscott D., Williams A. D., Wikinomics. How Mass Collaboration Changes Everything, Portfolio, New York, 2006. Research work was financed from science funding 2008-2009 as a research project.