FREE ESSAY ON INNOVATION IN BUSINESS

INNOVATION IN BUSINESS

Introduction
The growth of franchising in America and Europe since the 1970s[1-4] has led to this
business form assuming increasing impor-tance in a number of academic debates, including
the fields of law, marketing, organi-zation theory, services growth, etc. One of the most
interesting issues here is the potential of franchising to provide self-employment
opportunities. After all, not only are most franchisees small businesses, but so are most
franchisors. For instance, in Britain, half of the franchise systems in existence in 1995
were less than five years old and 43 per cent had ten outlets or less[5]. Franchises are
based, ideally, on a proven and tried-and-tested recipe for business success. The
importance of replication and standardization which this implies would appear to offer a
short-lived licence for success in a world undergoing an ever-accelerating rate of
change. Thus, the question arises - how do franchise organizations innovate and cope with
change? An adjunct to this question is the issue of the role of franchisees who, while
not independent in the sense of the conventional small business person, certainly do not
see themselves as conventional employees either, and have certain expectations of
participation in the processes of which they are an integral part. In today's environment
of rapid technological and market change, shortening product life cycles and changing
customer tastes, the strategic management of innovation has attracted increased attention
among researchers, particularly pertaining to innovation management and implementation.
For example, recent strategic management discourse has been emphatic on how sustainable
competitive advantages and superior economic rents derive from the process of innovation.
Much of this debate has concentrated on structural, environmental and individual
correlates of innovation, rather than developing an eclectic or multidimensional model of
the correlates of innovation.Further, while this stream of research and debate has added
to the level of understanding of the process of innovation within organizations
generally, few texts have examined the causes of, and barriers to, innovation within
franchises specifically. This article begins to redress this issue. In particular, it
suggests that franchisee autonomy can have a major influence on rates of franchise system
innovation. The article represents a distilled overview of what the authors see as the
key literature relating to the overridingly important challenge of franchise system
innovation.
It does not claim to offer franchise practitioners prescriptive check-lists and
quick-fix
solutions to their everyday operational problems,though it does point in the direction of
broader policy directives. It presents 12 general propositions, distilled from a welter
of research conducted, largely, on operational franchise systems, and is intended as a
step forward in the task of developing a general model of franchising.
Innovation
It has been inferred by agency theorists[14,15] that franchising, in itself, is a form of
innovation deriving from resource constraints[16].This arises from two perspectives.
Initially,franchising permits the parent company to overcome problems of shirking and
motivation,and thus is a method of reducing the costs associated with managing
employees.Others argue that, of ultimate significance to the franchisor, is that
franchising is a hybrid capital market[17]. Franchising not only entails semi-ownership,
without incurring costs, but provides a constant stream of finance to the franchisor.
There are a variety of definitions of innovation and the relevant literature usually
draws a distinction between innovation and invention[18,19]. Invention usually implies
breakthrough (often of a technical nature),while innovation implies successful commercial
use of such an invention, or some novel administrative use of a previously established
body of knowledge. Obviously innovations can vary in scale and, for the purposes of this
paper, even very modest innovations are of relevance since the cumulative effects of
continuous small-scale innovation, multiplied across many business units, can bestow
significant competitive advantage[8,20,21]. Technical innovation involves ideas for new
products, processes or services. Administrative
innovations permeate fields such as recruitment policies, allocation of resources
and the social structure of organizations. On occasions, the two may be inextricably
interlinked[22]. For instance, the early successes of the McDonald brothers in their San
Bernardino fast-food restaurant in the 1950s combined strong elements of both technical
and administrative innovation.Initially the McDonald brothers sought technical
innovations designed to save labour and speed up the process of delivery to the customer.
They began inventing the essential tools of the early fast-food industry[23] such as the
hand-held stainless steel pump dispenser
which required just a single squeeze to dispense the required amount of ketchup and
mustard evenly on a bun - a variation of this device is still in use in McDonald's
burger
bars today. Boas and Chain[24], claimed: Each innovation made the service more uni-form;
each refinement served the cause of standardization, volume and profit. Speed 
constituted the essence of Hamburger Science.Allied to this level of technical innovation
came a move away from cooking being a personalized art form, towards the construction of
a factory-styled, Fordist, assemblyline working like a crack drill team[23]. Factory
production techniques and principles, Fordism and Taylorism, had been around for some
time but their disciplined application to an antiquated restaurant trade which had
traditionally operated on a largely ad hoc and highly personalized basis was truly
innovative and initiated the industrialization of service[25]. To some degree, the
cultural aspects of managing franchisees are, in themselves, highly relevant to
innovation. The franchise literature argues that effective management of franchisees
requires a multitude of skills and an organizational culture which is suited to
franchising[26]. Franchise management inevitably entails administrative innovation since
it requires different skills from those required to manage employees. For some, this is a
potential source of conflict since the
franchisor is unable to alter the organizational climate sufficiently to encompass the
rigours of franchisee management and the changing nature of the franchisor-franchisee
relationship over time.
Bibliography
Trutko, J., Trutko, J. and Kostecka, A., Franchising's
Growing Role in the US Economy,1975-2000, US
Small Business Administration, Washington, DC,
1993.
Dant, R.P., "Motivations for franchising - rhetoric
versus reality", International Small Business Journal,
Vol. 14 No. 1, 1995, pp. 10-32.
British Franchise Association (BFA), British Franchise
Association Franchise Survey, BDO Stoy Hayward,
London, 1995.
Purdy, D., Stanworth, J. and Hatcliffe, M., Franchising
in Figures, University of Westminster Press, London,
1966.