3: Innovation, Technological Change & Adaptation Flashcards
Innovation in Industry Def by Van de Ven \+ 4 typical areas \+ 3 defining features of an innovative idea \+ 2 types \+ 1 association
= “Innovation is the development and implementation of new ideas by people who over time engage in transactions with others within an institutional order.”
innovation areas: § product § services § processes § Social, administrative, organizational
idea that is:
+ novel
+ useful
+ implemented!
types:
+ Radical = Create new knowledge and provide significant technological breakthroughs in products and processes
+ Incremental = Build upon existing knowledge base and provide small improvements in current product lines and processes
association:
+ with patterns of conduct and changes in competitive strategy (cost leadership – product differentiation)
Invention versus Innovation
converting cash into ideas
VS
converting ideas into cash
2 potential effects of innovation on production costs
- new tech may have a lower unit cost in function of volume
- new tech may have faster learning, and therefore a lower unit cost in function of cumulative production
Speed of Technological Change:
trend, seen how
accelerating, seen in time needed for use/ownership by 50% of population
7 Changes in sources of product differentiation
New product features Linkages between functions and complexity Timing New location and increased presence New product mix New links with other firms Enhanced reputation
innovation over the product life cycle in an industry
2 poles n 3 patterns (phases) in 8=2+2+2+2 dims:
product, then process innovation
patterns:
fluid/transitional/specific:
focus on functional performance, variation, cost cutting
driven by user needs/internal tech capabilities/pressure
change : from freq.ly major to increm. n cumul.
variability: from diverse to standardized
production process: from flexible to efficient but rigid
key prod. factor: from skilled labor to costly automation
plant: from small to large
materials: from general to specialized, w v. integration
Technological Discontinuities
cause
phenomenon
conseq. = strategic challenge
- RnD effort n inv. extend tech performance
- discontinuity = major shift in tech performance
- many firms lose market share, money, or independence
8=4+2+1+1 Rules of thumb to detect a tech discontinuity
§ RnD productivity appears to decline in firm n industry
§ RnD “new broom” managers underperform
§ RnD staff is divided by dissension
§ RnD misses deadlines
§ RnD expenses tend to vary a lot b/w firms
§ RnD inv. of smaller players goes into new tech
§ RnD refocuses from product to process
§ sales growth shifts into narrow segments
Disruptive technologies:
def by Christensen
+ innovation dilemma
+ 4=1+2+1 challenges
“Disruptive technologies are typically simpler, cheaper, more reliable, and convenient than established technologies.”
Investing in improvement of existing technologies or in emerging technologies
§ Firms in an industry depend on buyers and investors for resources
§ Small markets do not solve the need for revenue growth of large firms
§ Markets that yet do not exist cannot be analyzed and investment in building them are uncertain
§ Technology supply may not equal market demand
disruptive tech and high/low end markets
disruptive tech’s performance grows more steeply than established tech’s, therefore it typically conquers first the low-and then the high-end market due to different performance demands
disruptive tech on 6+1 entry barriers
overcome:
Economies of scale > New production technologies
Cost disadvantage > New production technologies
Product differentiation > Low-end market
Capital requirements > linked w RnD and manufacturing
Switching costs > 1st-time buyers
Distribution channels > new ones
remaining:
Government policies
Reverse Innovation:
goal
geographical implication
> Disrupt yourself!
> first in em., then in dev.ed countries
theory of disruptive tech:
4=2+1+1 critiques
§ Many case examples proved wrong later (iPhone would fail because competitors were very motivated to copy)
§ Disruptive innovation can reliably be seen only after the fact
§ Disruption is not always good
§ Disruption does not readily apply to all industries as claimed
disruption vs traditional thinking according to Eric Schmidt n Rosenberg
“Traditional, MBA-style thinking, dictates that you build up a sustainable competitive advantage over rivals and then close the fortress and defend it with boiling oil and flaming arrows.”
Open vs closed innovation:
3 key concepts
+ 6=3+2+1 principles
+ the firm commercializes both its own ideas and innovations from other firms and buyers.
+ The boundary between the firm and its environment is porous.
+ New markets are reached, too.
- make best use of internal n external ideas
- tap into other smart people’s knowledge
- exploit external RnD: buy it when needed, use it well
- reduce IP protection
- profit from others’ use of our intellectual property
- building a better business is more important than hitting the market first
