File 6: Adaptive vs. qualitative/discontinous innovation

Question 1

What is Schumpeter’s general argument on innovation?

Answer 1

He argues that discontinous qualitative innovation is the most important which requires firm to be large so that they can cover the cost of innovation and have monopoly power: which allows them to prevent of the gale of creative destruction and to survive the investments in RD of non useful innovations

Question 2

Explain the Xerox Case.

Answer 2

1. Chester Carlson was tired of paying a copy typist to copy his document.
2. Carlson interested in Batelle Dev. Cie a contract research company
3. Haloid (manuf for photogra[hic equipment) took over responsibility for product development
4. commercial viable copier was developped
5. @ the initial invention there was a risk that the work would lead nowhere: the cost was modest
6. Development stage was long and costly but diminished the risk.
7. the final development cost were modest for producing a comercially viable printer and Haloid was able to make 7 million dollars in an industry dominated by Kodak.

Question 3

What lessons can be extrapolated from the Xerox case?

Answer 3

1. Research: high uncertainty & risk, lower cost
   Development: low uncertainty&risk, high cost
2. Adaptive innovation is important: there are revolutionnary changes in technology and requires long period of change and cumulation of knowledge

Question 4

Give an example of adaptive change.

Answer 4

Steamboats:

1. Between civil war and development of railroad, river transportation was very important as steam boats were a major source of transportation of goods.
2. Due to small innovations which cumulatively improved productivity greatly: improvements were made to the design of the steamboat
   a) minor design change that allowed extra pounds of boilers
   b) improved machining to narrow parts of the boat to decrease leaking and loss of power from steam engine to paddle
   c) improved design for quicker cleaning

Question 5

What are components of adaptive innovation?

Answer 5

1. learning by doing: skills in production improve with experience which decreases labor cost as output rises
2. Embodied learning by using: after innovation goes into use, redesign it and improve it
3. Disembodied learning by using: no design change, experience leads to modifications to use of procedures

Question 6

Give an example of embodied learning by using.

Answer 6

aircraft:
1. cautious design bc of cost of failure and uncertainty in system complexitiy
2. w experience: metal fatigue indicates when design needs to be changed, evidence of no metal fatigue: stress of those components are increased => creation of strech 727 or DC8

Question 7

Give an example of disembodied learning by using.

Answer 7

maintenance of aircraft: 30% of operating cost bc requires partial disassembly and inspection for cracks but if after some take offs/landings, a model does not reveal a problem=> model will less frequent subject of inspection

Question 8

Why is learning by using important for complex systems?

Answer 8

bc it is hard to determine the requirements for optimal performance in advance

Question 9

What are the advantages to delay? (second users) (lower order)

Answer 9

1. second users profit from corrections brought to design of product from experience of first users (embodied learning by using)
2. prices paid are lower than first users
3. profit from knowledge about how to use new equipment (including maintenance) (disembodied learning by using)

Question 10

What is an example of disadvantage first user move?

Answer 10

Comet