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Technology and Innovation

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Title: Technology and Innovation


1
Technology and Innovation
  • Henry C. Co
  • Technology and Operations Management,
  • California Polytechnic and State University

2
Businessmen go down with their businesses because
they like the old way so well they cannot bring
themselves to change.
Henry Ford, My Life and
Times, 1922
3
Technology and Innovation
  • Technology
  • Knowledge of how to do things.
  • The system by which a society satisfies its
    needs and desires.
  • Capability that a firm needs to provide its
    customers the good and/or services the firm
    proposes to offer, now and in the future.
  • Innovation
  • A business process which brought inventions to
    commercial use.
  • Commercial Use.

4
Commercial Use
5
Who invented the vacuum cleaner?
  • J. Murray Spengler invented the vacuum cleaner
    originally called an electric suction sweeper.
    But it was W. H. Hoover who had a good idea of
    how to market and sell the product.

6
Who invented the sewing machine?
  • Elias Howe produced the worlds first sewing
    machine but it was Isaac Singer who stole the
    patent and built a successful business from it
    (Singer later was forced to pay Howe a royalty on
    all machines made).

7
Who invented the telegraph?
  • In 1830, Joseph Henry demonstrated the potential
    of a William Sturgeon device for long distance
    communication by sending an electronic current
    over one mile of wire to activate an
    electromagnet which caused a bell to strike. Thus
    the electric telegraph was born, however, other
    inventors made a commercial success of that
    invention.
  • Samuel Morse only invented the telegraph code,
    all the other inventions came from others. Morse
    combined marketing and political skills to secure
    state funding for development work, and to spread
    the concept of communication over vast distances
    on the continent of America.

8
Management of Innovation v.Management of
Technology
9
  • Idea Generation Problem-Solving ? Invention.
  • Invention Implementation ? Innovation.
  • 12-20 of inventions results in successful
    innovation.
  • Innovation Diffusion ? Economic Value.

10
  • Management of Innovation is the creation and
    development of new ideas.
  • Management of Technology is the acquisition and
    application of existing innovations (diffusion).
  • Links engineering, science, and management
    disciplines to plan, develop, and implement
    technological capabilities to shape and
    accomplish the strategic and operational
    objectives of an organization.

11
Definitions
  • Science is the discovery and explanation of
    natural phenomena for the sake of knowledge
    understanding
  • Technology is the knowledge and technique of the
    transformation of natural phenomena for human
    purpose
  • Engineering is the understanding and application
    of the scientific principles underlying
    technology and its transformation for human
    purpose bridges the gap between S T
  • Basic Research is exploring the domain of science
    for the fundamental principles and basic
    understanding of nature
  • Applied Research is taking scientific discoveries
    and generating technical inventions which may
    have potential for satisfying human purpose.

12
  • Developmental Research - that research necessary
    to develop the invention to level of functional
    capability desired
  • Invention - first documentation of an idea for a
    new device or process with features thought
    useful for human purpose
  • Innovation - the process whereby an invention is
    further researched, designed and engineered into
    a form suitable for the commercial marketplace or
    public-sector use
  • Incremental Innovation - modifications or
    extensions of existing products/services for
    improved performance at (usually) lower cost
  • Radical Innovation - achieving a brand-new
    functional capability that separates this
    product/service from its predecessors opens the
    possibility of totally new industries

13
Major Stages in the Innovation Process
  • Invention (Creation of Knowledge) Acquisition
    of new knowledge
  • Innovation (Transformation of Knowledge)
    Application of new knowledge
  • Diffusion (Utilization of Knowledge) Acceptance
    and adoption of new knowledge

14
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15
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16
Patterns of Innovation
17
Trajectory of Tech Innovation
Physical limit of technology
Performance
Effort (funds)
Technological performance often follows an
S-shaped curve
Foster, Innovation The Attackers Advantage,
Summit Books, 1986
18
Successive Tech Innovations
Performance
Physical limit of technology
Effort (funds)
Foster, Innovation The Attackers Advantage,
Summit Books, 1986
19
Product v. Process Innovation
20
The Model T
  • For 4 years, Ford developed, produced, and sold
    five different engines (2-6 cylinders) in a
    factory of trade craftsmen working with GP
    machines.
  • Out of this experience came a dominant design,
    the Model T.
  • Within 15 years, 2 million engines of this single
    design were produced each year in a
    mass-production facility. During that period,
    there were incremental (no fundamental)
    innovation in product.

21
Product v. Process Innovation
  • The fluid-pattern stage
  • During the early stages of the products life
    cycle, the level of prototype innovation is high.
    This is because firms modify, change, and update
    the product in an effort to establish a dominant
    design.
  • The transitional-pattern stage
  • Once a dominant design is established, emphasis
    shifts to process innovations in order to provide
    the capability to mass-produce the product. This
    typically requires a shift from GP to specialized
    equipment. During this period, the level of
    product innovation falls dramatically.
  • The specific-pattern stage
  • At this stage, incremental process innovations
    further specialize the production process to
    reduce cost, enhance quality, and make further
    improvements. This leaves firms with a rigid
    process and an aging product (highly inflexible,
    difficult to adapt to environmental changes).

22
Innovation and Development
23
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24
Windows of Opportunity
25
Life Span of the Computer
  • First generations (1950s) of IBM computers had a
    useful market life of more than a decade.
  • IBM 360 (mid 1960s), IBM maintained its dominant
    market position until the arrival of
    minicomputers. Then companies like Digital, Data
    General, etc., started challenging IBM from the
    low end of the business.
  • Useful market life of computers shrank from 10
    years to 8 years, then only 5 years, then 3, and
    2.
  • Desktop PCs and laptops useful market life
    dropped to less than a year.

26
The Classic Product Cash Flow
  • Window of opportunity the period in which the
    new product faces no or low competition in the
    market place.
  • The window of opportunity for market exploitation
    is constantly shrinking as the competition brings
    new products more and more frequently.

27
The High-Tech Product Cash Flow
  • Project A, which was introduced before the
    competition came up with an equivalent or better
    product, has been able to generate a positive
    cumulative cash flow, with a good return on
    investment during the RD cycle.
  • Project B was introduced at a time when some
    competition already existed, results in a
    negative cumulative cash flow.

28
Case Studies
  • The Case of the PowerPC
  • Somerset, a joint venture by IBM, Apple, and
    Motorola in 1991 to develop the PowerPC.
  • Time May Have Passed the PowerPC (Business
    Week, 4, March 1996), Ira Sager wrote
  • As it is, Somerset hasnt even come close to its
    goal of posing a serious challenge to Intel
    Corp.s dominance in microprocessors Somerset
    fell behind schedule on more powerful versions of
    the PowerPC chip Three years ago, they had it
    in their hands, says Jon Rubinstein, president
    of Firepower Systems Inc., one of the few
    companies outside the Somerset trio to use the
    PowerPC But technical difficulties, internal
    bickering, and management upheavals delayed
    successor chips by 18 months. Says Sun CEO Scott
    G. McNealy The PowerPC is on really shaky
    ground.
  • The case of the vanishing need
  • Stacker to double the hard disk space.

29
Knowledge Needs
  • How to integrate technology in the overall
    strategic objectives of the firm?
  • The allocation of resources to and within RD,
    engineering, and operations
  • Planning for technology development or
    acquisition, and
  • Other strategic questions.
  • How to get into and out of technologies faster
    and more efficiently?
  • The selection of new technologies
  • Prioritization
  • Timing of introduction
  • Discontinuation.

30
  • How to assess/evaluate technology more
    effectively?
  • Evaluating current and future competitiveness of
    a companys technology
  • The relative risk of in-house development v.
    acquisition,
  • The pace of future changes in technology and
    potential markets.
  • Potential returns on investment.
  • How best to accomplish technology transfer?
  • Transferring RD results to design and
    manufacturing,
  • Assimilating externally developed technology into
    the companys internal RD activities.

31
  • How to reduce new product development time? How
    can the links among design, engineering, and
    manufacturing be improved?
  • Greater coordination of these functions
  • Parallel efforts will reduce the lag between RD
    and market delivery.
  • How to manage large, complex, and
    interdisciplinary/inter-organizational projects?
  • Key is recognizing the interrelationship of
    functions in the total system and managing the
    organization as a system to meet budget,
    schedule, and performance goals.

32
  • How to manage the organizations internal use of
    technology?
  • Introduction and management of operations
    technologies.
  • How to leverage the effectiveness of technical
    professionals?
  • Motivation, measurement, training, supervision,
    obsolescence,
  • Integration of technical and non-technical issues
    and individuals.

33
Knowledge Needs
  • How to integrate technology in the overall
    strategic objectives of the firm?
  • The allocation of resources to and within RD,
    engineering, and operations
  • Planning for technology development or
    acquisition, and
  • Other strategic questions.
  • How to get into and out of technologies faster
    and more efficiently?
  • The selection of new technologies
  • Prioritization
  • Timing of introduction
  • Discontinuation.

34
  • How to assess/evaluate technology more
    effectively?
  • Evaluating current and future competitiveness of
    a companys technology
  • The relative risk of in-house development v.
    acquisition,
  • The pace of future changes in technology and
    potential markets.
  • Potential returns on investment.
  • How best to accomplish technology transfer?
  • Transferring RD results to design and
    manufacturing,
  • Assimilating externally developed technology into
    the companys internal RD activities.

35
  • How to reduce new product development time? How
    can the links among design, engineering, and
    manufacturing be improved?
  • Greater coordination of these functions
  • Parallel efforts will reduce the lag between RD
    and market delivery.
  • How to manage large, complex, and
    interdisciplinary/inter-organizational projects?
  • Key is recognizing the interrelationship of
    functions in the total system and managing the
    organization as a system to meet budget,
    schedule, and performance goals.

36
  • How to manage the organizations internal use of
    technology?
  • Introduction and management of operations
    technologies.
  • How to leverage the effectiveness of technical
    professionals?
  • Motivation, measurement, training, supervision,
    obsolescence,
  • Integration of technical and non-technical issues
    and individuals.

37
Disruptive Technology v. Sustaining Technology
38
Up-Market Impetus
  • Intersecting trajectories of customer need and
    technological trajectories.
  • Note that the slope of technological trajectory
    is steeper than the slope of the trajectories of
    customer need.
  • Product technologies that under-perform what key
    customer demand today may improve to squarely
    address what those same customers demand tomorrow.

39
Clayton Christensens Theory of Disruptive
Innovation
  • A disruptive innovation reaches the point where
    it can satisfy the least demanding customers
    least demanding customers drop the established,
    higher performing option on the basis of other
    factors (cost, convenience, etc.).
  • The established product exceeds the needs of the
    most demanding customers sustaining innovations
    now fuel performance oversupply.
  • The disruptive innovation meets the level of
    performance required by the most demanding
    customers those customers drop the established
    option on the basis of other factors.

40
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41
Trajectories of Customer Needs
  • Customers capacity to absorb technological
    improvement depends on
  • How much time customers have to learn how to use
    new products with new features.
  • How rapidly their work and lifestyles can change
    to utilize those capabilities,
  • Regulatory factors (e.g. speed limit).
  • Performance constraints created by insufficient
    complementary products or services.

42
Technology Trajectories
  • Technology trajectories are driven by managers
    efforts to address the need of the higher-end
    market (higher profit margin).
  • Toyota and Honda entered the North American
    market in its bottom tiers, with their Corona and
    CVCC models. Each moved aggressively up-market,
    that by 1998 their Lexus and Acura nameplate
    products had become major engine of profit.
  • In the 1990s, Compaq and Dell shifted from
    desktop PC to higher-end engineering workstations
    and network servers.
  • Nucor began as a maker of low-end concrete
    reinforcing bar. It has sequentially attacked
    higher-value markets for structural and then
    sheet steel, while de-emphasizing the original
    low-end products.

43
Sustaining Innovations
  • Maintain a trajectory of performance improvement
    that has been established in a market i.e., they
    give customers more and better in the attributes
    they already value.
  • Example Set of improvements in technologies to
    make conductor lines of ever finer width on the
    surface of silicon wafers, to help IC process
    more information at higher speed.

44
Disruptive Innovations
  • Introduce a very different package of attributes
    than the ones that mainstream customers value.
  • Often under-perform along traditional metrics of
    functionality initially Mainstream customers are
    unwilling and unable to use disruptive products
    in applications they know or understand.
  • Tend to be cheaper, simpler and more convenient
    to use, thus opening new markets.
  • Once disruptive innovators have secured a
    foothold in a low-end or emerging market,
    up-market impetus push the disruptive innovators
    to shift to the large mainstream market.

45
Disruptive Technology
  • A quantum change, not an incremental step, that
    finally affects mainstream operations
  • A technology that under performs established
    products at first
  • A technology that a fringe (new/young) customer
    values highly
  • Most companies do not realize the impact of this
    technology until it is too late and others have
    taken over their field/product
  • Characteristics
  • Markets that do not exist cannot be analyzed.
  • Products are cheaper, faster, simpler, more
    convenient to use.

46
Case Studies by Christensen
  • Computer disk drives.
  • Intel microprocessor speed increases about 20
    per year.
  • Eli Lily Purity of insulin improved from 50,000
    ppm in 1925 to 10 ppm in 1980 (by about 14 per
    year).
  • Manufacturers of hydraulic excavators increased
    by 15 per year the amount of earth their machine
    could heft in a single scoop from 0.25 cubic
    yard in 1948 to 10 cubic yards by 1974.

47
Performance v. Market Needs
48
Other Examples
  • Transistor Pocket Radios
  • Sonys early transistor pocket radios were a
    disruptive innovation relative to the Hi-Fi
    tabletop radios built with vacuum tubes.
  • Sonys innovation sacrificed sound fidelity but
    created a new market application in which its
    lower-performing product was valued for its
    small size, light weight, and portability.
  • Intel, Bloomberg Financial Markets, Honda,
    Charles Schwab, Wal-Mart, Intuit, Sony, Nucor,
    Sun, Cisco, JJ Lifescan, Staples, U.S. Surgical,
    and McDonalds are few examples of prominent
    firms that originally entered their industries as
    disruptive technologies.
  • More.

49
Revolutionary v. Evolutionary Innovation
50
Revolutionary Innovation
  • Major product/process breakthroughs which create
    or change an industry or creative symbiosis of
    previously unrelated technologies (e.g., CIM).
  • Typically, originate outside the firms in an
    industry by small, entrepreneurial individuals or
    organization (Exceptions IBM- system 360,
    RCA-color TV, TI-integrated circuits.)
  • Relatively rare.

51
Evolutionary Innovation
  • Incremental product/process improvements that
    occur within the firm.
  • Maintain competitive position within an
    industry.
  • Typically, originate within the firms in an
    industry.
  • Relatively common.
  • Improve operations of established firms.

52
Creation v. Application
53
  • Creation of knowledge Efforts at creating new
    capability may be focused on better satisfying
    the needs already being addressed or on
    responding to new needs (creating new business).
  • Includes basic research, applied research, and
    development.
  • Application of knowledge (Doing) Applying newly
    acquired capability or creative application of
    already available capability.
  • Includes product (design engineering), process
    (manufacturing engineering, quality control,
    fabrication, computer-integrated manufacturing),
    and market (application engineering, physical
    distribution, and product service).
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