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IM Week 2: Models of Innovation (Explain the rate, types and determinants…
IM Week 2: Models of Innovation
What are the learning objectives?
Explain the cyclical nature of technology and its implications for innovation
Reflect on the role of innovation plays in the society
Explain the dynamics of the technological development, by referring to the key concepts: dominant design, technological trajectory, rate of improvement, etc
Distinguish between the various types of innovation: sustaining v disruptive innovation, continuous v discontinuous innovation
Explain the rate, types and determinants of diffusion
Evaluate existing innovations in light of taught concepts
Explain the cyclical nature of technology and its implications for innovation
a. A historical overview: Long waves
b.And, what are the implications?
i. Technological change is cyclical in nature
ii. Each wave revolves around the evolution of a few transforming technologies, giving rise to innovations so wide-ranging in their impact that they cause major perturbations to the economic and social system
iii. Each phase of the cycle is characterised by different types of innovation; first phase: radical product/service, later stages: incremental innovations and process innovations
d. Technological paradigms
i.Technological paradigms= a general area or field of technology in which search for innovation is conducted by a significant group of innovators, within a historical context
ii. A technological paradigm therefore effectively delimits the field of enquiry within which innovation is pursued, in particular regards to the following:
The field of enquiry
The problems to be solved
The procedures used
The generic tasks to which it is applied
The properties it exploits
The materials technology it uses
Dosi (1982)
c.Stability and punctures
The punctuated equilibrium: Abernathy and Utterback (1978) used the distinction between incremental and radical innovations to show how industries go through periods of stability with changes confined to incremental innovations. The stability will eventually be broken by a radical innovation, bringing the stability and equilibrium to an end.
Reflect on the role of innovation plays in the society
Explain the dynamics of the technological development, by referring to the key concepts: dominant design, technological trajectory, rate of improvement, etc
i. Dominant design
a. What is dominant design?
A key technological design that becomes a de facto standard and is eventually adopted by all serious players
Tried out by many different companies
Alternative designs exist
May not be better than other designs but will incorporate a minimum required set of key features
b. The emergence of a dominant design
Invention – may bring about technological discontinuity
Divergent design – leads to variety of competing innovations in the market
Composite design – shake out leads to evolutionary improvement of narrow range of composite designs
Consolidation – possible emergence of single dominant design
Stretched design – once established, dominant design can be stretched through new materials, components, accessories etc
Design families – range of different families built on common platform of initial dominant design
c. Why does a dominant design emerge?
Consumer preference
Technological superiority
Industry regulation and government intervention
Strategic maneuvering at the firm level
Communication between producers and users
d. Sources of dominant design
Learning effects
i. As a technology is used, producers learn to make it more efficient and effective
ii. A firm’s prior experience influences its ability to recognise and utilise new information
Network externalities
i. The benefit from using a good increases with the number of other users of the same good
ii. Are common in industries that are physically networked
iii. Also arise when compatibility or complementary goods are important
e. A story: The Fable of the Keys
Why do we use a QWERTY keyboard?
Golfball typewriters: Typists were too fast for the mechanism and needed to be slowed down (c1900)
But why did this mechanism stay dominant?
ii. technological trajectory
a. technological trajectory = the path by which innovations in a given field occur.
Technology and industrial dynamics diagram
b. Diagram: The Dynamics of Innovation
iv. rate of improvement
iii. Technological S curves
Both the rate of a technology’s improvement, and its rate of diffusion to the market typically follow an S-shaped curve
Key points:
Technologies do not always get to reach their limits
May be displaced by new, discontinous technology
-A discontinous technology fulfills a similar market need by means of an entirely new knowledge base
-Technological discontinuity may initially have lower performance than incumbent technology
Distinguish between the various types of innovation: sustaining v disruptive innovation, continuous v discontinuous innovation
a.Sustaining and disruptive technologies
Sustaining innovation
and technology improve parameters of a product
Disruptive innovation
and technology introduce new product and service properties relevant for new customer segments
Disruptor: Personal computer Disruptee: Mainframe and mini computers
Disruptor: Discount retailers Disruptee: Full-service department stores
i. Classic Disruptive technology model
ii. Why does this cause disruption?
Firm behaviour
Leader in previous generation knew the disruptive technology existed, they just didn’t think it was relevant to their business model
Customers weren’t interested, but they asked existing customers, not new unserved customers.
It is easier to analyse a market that already exists than one that has yet to be created.
Standard myopia amongst leadership (not a necessary assumption given preceding 3 factors, but a possible one)
Sustaining & disruptive innovation and industrial dynamics
b. Are there still other sources of discontinuity?
New political regime
Running out of road
Kodak
Sea change in market sentiment
Deregulation/shift in regulatory regime
Fractures along fault lines
Unthinkable events
Business model innovation
Shifts in techno-economic paradigm
Architectural innovation
Explain the rate, types and determinants of diffusion
b. Types of adopters (Moore)
a. Types of adopters (Rogers)
c. Determinants of diffusion
Relative advantage
Compatibility
Complexity
Trialibility
Observability
Competing and complementary products
Installed base of new technology
d. CASE STUDY: Digital Audio Players
i. Digital Audio Players Sony = Failure
Archos = Failure
Apple = Success
Sony
Audio tape player = success
Digital audio player = failure
WHY?
No particular market segment
Lack of observability
Complementarities
Compatibility
Archos
Brand
Complementarities
Observability
Apple
Brand
Market segment
Design
Observability
Compatibility
Complementarities
e. What is the winning formula?
Cascading adoption of innovation Initial market segment is critical:
ii. . is small enough for adoption to be visible from within and outside the segment
i. has a large proportion of visionaries
iii. consumers in this segment have a close proximity to consumers in other segments
Evaluate existing innovations in light of taught concepts
