6 - Technology based industries & management of innovation Flashcards
Invention is
the creation of new products and processes through the development of new knowledge or from new combinations of existing knowledge
Innovation is
the initial commercialization of an invention
; producing and marketing a new good or service or by using a new method of production
The profitability of an innovation to the innovator depends on
- the value created by the innovation and
2. the share of that value that the innovator is able to appropriate
The term regime of appropriability is
the conditions that influence distribution of returns to innovation.
strong regime of appropriability→substantial share of value
Four factors are critical in determining the extent to which innovators are able to appropriate the value of their innovation
- property rights,
- the tacitness and complexity of the technology,
- lead‐time and
- complementary resources
Several areas of intellectual property
- PATENTS - the lightbulb, bluetooth
- COPYRIGHTS - books, movies, music
- TRADEMARKS - the symbol of the golden arches of McDonalds, Coco Chanel’s name
- TRADE SECRETS - Coca Cola’s secret recipe, KFC’s secret recipe
In the absence of effective legal protection, the extent to which an innovation can be imitated by a competitor depends on
the ease with which the technology can be comprehended and replicated. This depends, first, on the extent to which the technical knowledge is codifiable.
Codifiable knowledge is
that which can be written down
Tacitness (understood without being openly expressed) and complexity do not provide lasting barriers to imitation, but they do offer the innovator
time.
Innovation creates a temporary competitive advantage that offers a window of opportunity for the innovator to build on the initial advantage.
The innovator’s lead time is
the time it will take followers to catch up.
Bringing new products & processes to market requires not just invention but also
COMPLEMENTARY RESOURCES: diverse resources & capabilities needed to finance, produce it
what are the alternative strategies to exploiting innovation
- licensing
- outsourcing certain functions
- strategic alliance
- joint venture
- internal commercialization
choice of strategy mode depends on 2 main sets of factors:
- characteristics of the innovation ( the extent to which a firm can establish clear property rights in an innovation) &
- resources and capabilities of the firm (different strategies require different resources and capabilities)
emerging industries are risky. there are 2 main sources of uncertainty
- TECHNOLOGICAL uncertainty: arise from unpredictability of technological evolution
- MARKET uncertainty: relates to size and growth rates of markets for new products
useful strategies for limiting risk include
- COOPERATING WITH LEAD USERS: careful monitoring of and response to market trends and customer requirements is essential to avoid major errors in technology and design
- LIMITING RISK EXPOSURE: financial and operational practices that minimize a firm’s exposure to adversity
- FLEXIBILITY
a standard is
a format, an interface or a system that allows interoperability (the ability of computer systems or software to exchange and make use of information)
standards can be
PUBLIC - those that are available to all either free or for a nominal charge
and
PRIVATE - those where the technologies and designs are owned by companies or individuals
Standards emerge in markets that
are subject to network externalities.
A network externality exists whenever the value of a product to an individual customer depends on the number of other users of that product.
The classic example of network externality is the telephone.
Since there is little satisfaction to be gained from talking to oneself on the telephone, the value of a telephone to each user depends on the number of other users connected to the same telephone system.
The implication of network externalities is that
they create positive feedback. Once a technology or system gains market leadership, it attracts a growing proportion of new buyers. This process is called tipping: once a certain threshold is reached, cumulative forces become unstoppable
Creativity requires management systems that
are quite different from those appropriate for efficiency.
They desire to work in an EGALITARIAN culture characterized by:
- provide the opportunity to be spontaneous,
- experience freedom and have fun in the performance of a task
- praise, recognition
- opportunities for education & professional growth
Organizational initiatives aimed at stimulating new product development and the exploitation of new technologies include:
1.CROSS‐FUNCTIONAL PRODUCT DEVELOPMENT TEAMS have proven to be highly effective mechanisms for integrating creativity with functional effectiveness.
2.PRODUCT CHAMPIONS provide a means, first, for incorporating individual creativity
within organizational processes and, second, for linking invention to subsequent commercialization.
3.BUYING INNOVATION: Recognition that small, technology‐intensive start‐ups have advantages in the early stages of the innovation process, while large corporations have superior capabilities, has encouraged large companies to enhance their technological performance by acquiring innovation from other firms.
4.OPEN INNOVATION: The shift from vertically integrated systems of innovation where companies develop their own technologies in‐house, then exploit them internally, to more market‐based systems where companies buy in technology while also licensing out their own technologies, has given way to ideas of open innovation.
5.CORPORATE INCUBATORS are business developments established to fund and nurture new businesses, based upon technologies that have been developed internally but have limited applications within a company’s established businesses.
