Chapter 1 Introduction

Question 1

Why is technological innovation the most important driver of competitive success?

Answer 1

In many industries, technological innovation is now the most important driver of competitive success. Firms in a wide range of industries rely on products developed
within the past five years for almost one-third (or more) of their sales and profits.

Question 1

What is technological innovation?

Answer 1

The act of intr­oducing a new device, method, or material for application to commercial or practical objectives.

Question 2

Why is technological innovation important?

Answer 2

The increasing importance of innovation is due in part to the globalization of markets. Foreign competition has put pressure on firms to continuously innovate in order to produce differentiated products and services. Introducing new products helps firms protect their margins, while investing in process innovation helps firms lower their
costs.

Question 3

How have advances in inofrmation technoology played a role in speeding the pace of innovation?

Answer 3

Computer-aided design and computer-aided manufacturing have made it easier and faster for firms to design and produce new products, while flexible manufacturing technologies have made shorter production runs economical and have reduced the importance of production economies of scale.1 These technologies help firms develop and produce more product variants that closely meet the needs of narrowly defined customer groups, thus achieving differentiation from competi-
tors.

Question 4

What have the flexible manufacturing technologies made possible?

Answer 4

Companies can use broad portfolios of product models to help ensure they can penetrate almost every conceivable market niche. While producing multiple product variations used to be expensive and time-consuming, flexible manufacturing technologies now enable firms to seamlessly transition from producing one product model to the next, adjusting production schedules with realtime information on demand. Firms further reduce production costs by using common components in many of the models.

Question 5

What does happen when firms like Toyota and Samsung adopt these new technologies?

Answer 5

As firms such as Toyota, Samsung, and others adopt these new technologies and increase their pace of innovation, they raise the bar for competitors, triggering an industry-wide shift to shortened development cycles and more rapid new prod-
uct introductions.

Question 6

What are the net results of the fact that firms like Toyota and Samsung adopt these new technologies?

Answer 6

The net results are greater market segmentation and rapid product obsolescence.

Obsolescence is a policy of planning or designing a product with an artificially limited useful life or a purposely frail design, so that it becomes obsolete after a certain pre-determined period of time upon which it decrementally functions or suddenly ceases to function, or might be perceived as unfashionable

Question 7

What is the product life cycle?
What are the cycles for software, computer hardware and large home appliances?

Answer 7

Product life cycles (the time between a product’s introduction and its withdrawal from the market or replacement by a next-generation product) have become as short as 4 to 12 months for software, 12 to 24 months for computer hard-
ware and consumer electronics, and 18 to 36 months for large home appliances.

Question 8

What do short product life cycles spur firms to do?

Answer 8

This spurs firms to focus increasingly on innovation as a strategic imperative—a firm that does not innovate quickly finds its margins diminishing as its products become
obsolete.

Question 9

What has innovation enabled?

Answer 9

Innovation enables a wider range of goods and services to be delivered to people worldwide. It has made the production of food and other necessities more efficient, yielded medical treatments that improve health conditions, and enabled
people to travel to and communicate with almost every part of the world.

Question 10

How can the aggregate impact of tehcnological innovation be observed?

Answer 10

The aggregate impact of technological innovation can be observed by looking at gross domestic ­
product (GDP)

Question 11

What is the GDP?

Answer 11

The gross domestic product of an economy is its total annual output, measured by final purchase price

Question 12

What is the Solow residual?

Answer 12

In a series of studies of economic growth conducted at the National Bureau of Economic Research, economists showed that the historic rate of economic growth in GDP could not be accounted for entirely by growth in labor and capital inputs. Economist Robert Merton Solow argued that this unaccounted-for residual growth represented technological change: Technological innovation increased the amount
of output achievable from a given quantity of labor and capital.

Question 13

What could technological innovation result into?

Answer 13

Sometimes technological innovation results in negative ­externalities.

1. Production technologies may ­create pollution that is harmful to the surrounding communities;
2. agricultural and fishing technologies can result in erosion, elimination of natural habitats, and depletion of ocean stocks;
3. medical technologies can result in unanticipated consequences such as antibiotic-resistant strains of bacteria or moral ­dilemmas regarding the use of genetic modification.

Question 14

What is technological innovation?

Answer 14

Technological innovation is thus the creation of new knowledge that is applied to practical problems

Question 14

Who put the majority of effort and money to technological innovation?

Answer 14

the majority of effort and money invested in technological innovation comes from industrial firms

Question 14

What is technology?

Answer 14

­knowledge to solve our problems and pursue our
goals

Question 14

Do innovative ideas become successful products?

Answer 14

Most innovative ideas do not become successful new products. Many studies suggest that only one out of several thousand ideas results in a successful new product: Many projects do not result in technically feasible products and, of those that do, many fail to earn a commercial return

Question 14

What does a firm need to do to be both technically and commercially successful?

Answer 14

A firm’s new product development process should maximize the likelihood of projects being both technically and commercially successful. To achieve these things, a firm needs (a) an in-depth understanding of the dynamics of innovation, (b) a well-crafted innovation strategy, and (c) well-designed
processes for implementing the innovation strategy

Question 14

With what should the firm’s innovation projects align?

Answer 14

A firm’s innovation projects should align with its resources and objectives, leveraging its core
competencies and helping it achieve its strategic intent.

Question 15

Why is innovation so important for firms to compete in many industries?

Answer 15

Innovation is crucial for firms to compete in many industries because it:

1. Drives Market Differentiation: Innovative products or services set firms apart from competitors, attracting customers and enhancing brand value.
2. Improves Efficiency: Innovations in processes and technologies can lead to cost reductions, increasing competitiveness.
3. Fosters Adaptability: Innovation helps firms adapt to changing market conditions and customer preferences, staying relevant over time.
4. Increases Profitability: Innovative solutions can create new revenue streams and opportunities for growth, boosting financial performance.
5. Enhances Customer Satisfaction: Meeting evolving customer needs through innovation builds loyalty and strengthens market positioning.

Question 16

What are some advantages and disadvantages of technological innovation?

Answer 16

Advantages of Technological Innovation:

Improved Efficiency and Productivity
Competitive Advantage
New Revenue Streams
Enhanced Quality of Life
Environmental Benefits
Disadvantages of Technological Innovation:

Job Displacement
High Initial Costs
Security and Privacy Concerns
Technological Dependence
Ethical and Social Issues

Question 17

Why do you think so many innovation projects fail to generate an economic return?

Answer 17

1. Inadequate Market Research: Failing to understand customer needs and market dynamics.
2. Poor Execution: Ineffective project management or implementation.
3. Insufficient Resources: Lack of funding or talent to sustain the project.
4. Competitive Pressure: Rapid changes or intense competition can render innovations obsolete.
5. Resistance to Change: Organizational resistance and cultural barriers hinder success.

Question 18

What is innovation?

Answer 18

The practical implementation of an idea into a new device or
process.

Question 19

What are the sources if innovation?

Answer 19

It can originate with individuals, research efforts of universities, government laboratories and incubators, or private nonprofit organizations. One
primary engine of innovation is firms

Question 20

Why are firms well suited to innovation activities?

Answer 20

because they typically have greater resources than individuals and a management system to marshal those resources toward a collective purpose. Firms also face strong incentives to develop differentiating new products and services, which may
give them an advantage over nonprofit or government-funded entities.

Question 21

What is a more important source of innovation?

Answer 21

An even more important source of innovation, however, does not arise from any one of these sources, but rather the linkages between them. Networks of innovators that leverage knowledge and other resources from multiple sources are one of the most
powerful agents of technological advance.

Question 22

What is creativity?

Answer 22

The ability to produce novel
and useful work.

Question 23

What are ideas?

Answer 23

Something imagined or pictured
in the mind.

Question 24

When is a product novel?

Answer 24

The degree to which a product is novel is a function both of how different it is from prior work (e.g., a minor deviation versus a major leap) and of the
audience’s prior experiences

The most creative works are novel at the individual producer level, the local audience level,
and the broader societal level

Question 25

What is reinvention?

Answer 25

product could be novel to the person who made it, but known to most everyone else

Question 26

What is the individuals creative ability?

Answer 26

An individual’s creative ability is a function of his or her intellectual abilities, knowledge, personality, motivation, and environment.

Question 27

What are the most important intellectual abilities for creative thinking?

Answer 27

he most important intellectual abilities for creative thinking include intelligence, memory, the ability to look at problems in unconventional ways, the ability to analyze which ideas are worth pursuing and which are not, and the ability to articulate
those ideas to others and convince others that the ideas are worthwhile

Question 28

What is primary process thinking?

Answer 28

intellectual ability for creativity is a person’s ability to let their mind engage in a visual mental activity