TechnologyManagement

Types andPatterns ofInnovation

 TechnologyTrajectory

• Thepatha technology follows through time is termed itstechnologytrajectory

• Technology trajectories are most often used to represent the technology’s rate
ofperformanceimprovementor its rate ofadoptioninthe marketplace

• Trajectories can be observed in:

– Technological change
– Firms
– Sectors/industries
– Countries
 Classification of Innovation

• Continuous innovation
– Introduction of amodifiedproduct rather than a totally new product
Examples?
Redesigned automobile (new Beetle)
Latest version of software program
low-fat version of food product
Improvements in laser jet printers, digital TV
Other examples: a change from VCDs to DVDs was illustrative of better technology, better picture quality
– Little or no changein technology
– Has theleast disruptiveinfluence on established usage patterns
– Symbolic innovationstend to be continuous
Symbolic innovations convey new social or psychologicalmeanings
Examples?
designer jeans, skin care products for men, specialty coffees
 Dynamically continuous innovation

• May involve a new product or modification of an existing product

• Some technical advances

• Still does not disrupt or alter consumer buying and usage patterns

• Examples

• CD players; antilock brakes; disposable diapers; laptops; electric toothbrushes

• What about cell phones?

• Other example: the walkman giving way to the portable CD player, or the semi-automatic washing machine giving way to the

fully automatic one.

 Discontinuous innovation

• Introduction of apioneeringproduct
• Discontinuous innovations lead todisruptionof usage and consumption behavior patterns.
• There is a change not only in the technology, but alsorequires consumers to changeto new
behavioral patterns in terms of usage and consumption.
• For example, thepostal mailgiving way toemailand internet, theradio/record playergiving
way toportable music and sound, thetelephonegiving way to themobile phone, or
thetraditionalglucose and diabetes bloodtestgiving way to thehome kit.
 Characteristics that appear to influence consumer acceptance

• Researchers have identified five characteristics thatappearto influence consumer acceptance

1. Relative advantage
2. Compatibility
3. Complexity
4. Trialability
5. Observability
 Characteristics that appear to influence consumer acceptance

• Relative advantage
The degree to which potential consumers perceive a new product issuperiorto existing substitutes
Examples? Cell phone over pager; fax machine over delivery services; Vinyl records to cassette to CD; Floppy disks to
CD’s
• Compatibility
The degree to which potential consumers feel a new product isconsistent with their present needs, values and practices
Examples? Gillette’s Mach 3 razor has become very popular…But unlikely men will accept a depilatory cream designed to
remove facial hair (because incompatible with daily shaving practices)
• Complexity
The degree to which a new product is difficult to understand or use
Examples? Cameras--drop-in film auto focus, built-in flash, etc. all added to make cameras easier to use
 Characteristics that appear to influence consumer acceptance

• Trialability
The degree to which a new product iscapable of being triedon a limited basis
Examples? Free trial (free 1 month subscription of Netflix);money-back guarantees
• Observability
The ease with which a product’s benefits or attributes can be observed, imagined or described to potential consumers
Examples? Fashions and jewelry (worn in public) vs. soap or deodorant; Use ofcelebritiesandathletesto wear/use products can enhance
speed of adoption
 Types of Innovation

• Product innovationresults inneworimprovedproducts. An example of this might be a new type ofrazor bladethat is sharper and
lasts longer than previous blades., orHonda’sdevelopment of a newhybridelectric vehicle is aproduct innovation.

• Process innovationoccurs when the manufacturingprocesses are improvedto make the production of existing products cheaper, or
whennew processesare developed specifically for making a new or improved product.
• Market Innovation:Opening of anew market
• Resource Innovation:Change insources of raw materialsupply
• Organizational Innovation:Change incharacteristicsof organizationstructure
 Product vs. Process Innovation

• New processes may enable the production of new products

– A newmetallurgicaltechniqueenabled the development of the bicycle chain which in turn enabled the
development of multiple-gear bicycles
• New products may enable the development of new processes
– The development of advanced workstations enabled the implementation ofcomputer-aided-
manufacturing processesthat increase the speed and efficiency of production
• What is a product innovation for one organization might be a process innovation for another
– UPScreated a new distribution service (product innovation) that enables its customers to distribute their
goods more widely or more easily (process innovation)
 Types of Innovation according to Its Process - Extend of Innovation

Innovation can take many forms regarding to its process:

• Evolutionary-Revolutionary

• Incremental-Radical-Modular-Architectural

Incremental

Evolutionary

Modular

Radical

Revolutionary

Architectural
 Types of Innovation

• Incremental innovationoccurs whensmallimprovements are made to a product, or the processes used in manufacturing a product.

– These changes generallyextend the competencies of the innovator

– strengthens thefirmscompetitive position and entrenches the nature of theindustry.

• For example, changing the configuration of acell phonefrom one that has anexposedkeyboardtoone that has aflip coveror
offering anew service planthat enables morefree weekend minuteswould represent incrementalinnovation

• Radical innovationoccurs whenmajorimprovements are made to a product.

– These changes often make the competencies involved in theold technologies obsolete

– sometimes require new marketing channels to be developed

• For example,The development ofthird & 4thgeneration3G & 4G wireless communicationtechnology
• Development of new phones greater display andmemorycapabilities as well as a stronger battery and/or better power
utilization
RadicalvsIncremental Innovation

• Radicalness is also defined in terms ofrisk

– 3G wireless technology required
» Investmentin new networking equipment and infrastructure
» Developmentof new phones greater display and memory capabilities as well as a stronger battery and/or
better power utilization
» Degree of useracceptanceof the technology was unknown
• Incremental innovations may involve only aminor changefrom (or adjustment to) existing practices.
• The radicalness of an innovation is relative; it may change over time or with respect to different observers.
 digital photographya more radical innovation forKodak(chemical photography expertise) than forSony(electronics
expertise).
Types of Innovation: New Classification

1. Hardware vs. Software Innovation

2. Use-based vs. Function-based vs. Design-based

3. Disruptive vs. Sustaining Innovation

 Hardware vs. Software Innovation

Hardware Innovation
Innovation is done in physical and tangible thing whether it is product or process

- Change in size, design(appearance)

- Change component or redesign architect

Examples: MobilePhone Automobile Digital camera

Software Innovation
Innovation is done in non-physical thing, mostly referred to computer program or User Interface

Examples:

Siri in iPhone 4S Android OS Samsung’s wi-fi camera

 Use- vs. Function- vs. Design-based Innovation

Use-based Innovation
Use-based Innovation is done by finding the new way of using product

Example:Aspirin Example:Finasteride

- Originallymanufactured as pain-killer - Originally produced for curing prostatic hypertrophy.

- Research: effect ofpreventing heartdisease. - Research: effect of curing depilatory(hair loss)

- New Use: Peoplestart to take aspirin for their potential heart disease. - New Use: Medicine for men’s hair loss

Function-basedInnovation

Function-based Innovation is done by changing how it works, it can be done by two ways: by adding new function or optimizing its existing function’s performance

Example:

Eggtoaster: adding new function Teflon pan: optimizing current function

- People often make egg-dishes while using toaster

- Eggs get scorched and stick to the plate of the pan while cooking eggs.
- Added egg cooker in toaster
- Laminate pan with Teflon
 (Use- vs. Function- vs.) Design-based Innovation

Design-based Innovation

Design-based innovation is innovation done by changing its appearance or structure with same function to have more value.

- Design foraesthetic purpose:

EX) “Extreme slim”, the thinnest LCD TV panel by LG

- Wall-mounting TVdesign to make living room more stylish and more spacy than living room with previous TV models.
- Similar examples:Ceiling-mountedair conditioner

- Design for usability:

EX) Herman Miller’s Chair

- Chair designed for people who works for hours at computers.

- Continuously adjusting automatically to sitter’s shifting positions, keeping sitter’s spine aligned and healthy.

- $2000 per one chair (ten times of a normal chair)

- Design forefficiency:

EX)Square watermelon in Japan

- Watermelon cultivated in glass box

- Logistics and also makes storage becomes more efficient and convenient.

- Sold for 10,000 yen each (double of a normal watermelon in Japan)

 Disruptive vs. Sustaining Innovation

DisruptiveInnovation

-Innovation by Improvinga product or service in ways that the market does not expect

- Usually done by new entrants in the market (They need to change the rule of game)

Example:iPhone3(the first iPhone model)

iPhone3 has many features that havenever beenseen before with novel design.(all touch screen without one button, new UI include bounce-back)

Apple become a major mobile phone supplier after launching iPhone3, even though they were new entrant.

Sustaining Innovation

- Innovation by evolvingonly existingonewith better value, allowing firms within to compete against each other’s sustaining improvements.

Example: Current iPhone series

Current model of iPhone’s feature and design is mainly based on iPhone3 but better quality in terms of display, performance and

energy efficiency.
 Competence-EnhancingvsCompetence-Destroying Innovation

– Competence-enhancinginnovations build on the firm’sexisting knowledge base

• Intel’s Pentium 4built on the technology for Pentium III.
• Turbofans in jet engines, series of breakthroughs in mechanical watches
– Competence-destroyinginnovations renders a firm’sexisting competencies obsolete.
• Electronic calculatorsrenderedKeuffel&Esser’sslide rule expertise obsolete.
• Transistors destroyed vacuum tubes – orquartz watcheskilled (almost) mechanical watches.
– Whether an innovation is competence enhancing or competence destroying depends on the perspective
of a particular firm.
 ArchitecturalvsComponent Innovation

• ArchitecturalvsComponent Innovation

– Acomponent innovation(or modular innovation)entails changes to one or more componentsof a product systemwithout

significantly affecting the overall design.

• addinggel-filled materialto a bicycle seat

– Anarchitectural innovationentails changing the overall designof the system or the way components interact.

• transition fromhigh-wheel bicycle to safety bicycle.

– In the 1800s, the front wheel of a bicycle has a very large circumference in order to provide speed; gears did not

exist yet

– When gears and chains were invented, the bicycle took on a whole new design

– .Most architectural innovations require changes in the underlying components also

The High Wheel Bicycle

• In 1870 the first all metal machine appeared. The pedals were still attached
directly to the front wheel. Solid rubber tires and the long spokes of the large
front wheel provided a much smoother ride than its predecessor.
– The front wheels became larger and larger as makers realized that the larger the wheel, the farther you
could travel with one rotation of the pedals.

• Safety issue: because the rider sat so high above the center of gravity, if the front
wheel was stopped by a stone or rut in the road, the entire apparatus rotated
forward on its front axle, and the rider was dropped unceremoniously on his head.
The Hard-Tired Safety

• Improvements in the metals used in the bicycle, enabled the manufacturing of small chains
and sprockets and were light enough for a human being to power.
• The design with two wheels of the same size returned, with speed provided through the use
of gears instead of large wheels.
• They were safer than the high-wheelers but lacked the long, shock-absorbing spokes of the
high-wheelers.
– Buyers had to choose between safety and comfort until, a few years later, when Dr. Dunlop developed the pneumatic
tire for his child’s bike.
 th
11 Feb Case: Bank of America

1. Present an overview of the case. How would you categories

Bank of America’s new system for developing services? Focus
on its process, organization, management and culture.
2. Compare Bank of America’s approach to other product
development systems. What are the differences? What are the
similarities? Does it matter if it isa productor service that is
being developed?
3. What is the role of experimentation? How can companies
maximize learning from experimentation?
4. Discuss the point: Should Butler and Brady accept ten
traditional branches into the experimentation portfolio? Why or
why not?
 Technology S-Curves
• S-Curve is a measure of thespeed of adoptionof an innovation.

• First used by in 1903 by GabrielTarde, who first plotted the S-shaped diffusion curve.

• This process has been proposed as the standard life cycle of innovations can be described using the ‘S-Curve‘.

Technology improves slowly at first because it is poorly

understood.

Then accelerates as understanding increases.

Then tapers off as approaches limits.

 Stages of the S-Curve

• Startup
• Growth - Scale
• Maturation - Compete
• Decline - Transition
• Innovation is different at each stage

 Challenges
• Startup
– Survival, market validation, funding
• Scale
– Increasing market, expanding to new geography, increased manufacturing, hiring
• Compete
– Increased number of competitors, lower margins, heads down
• Transition
– Compromises to stay alive, staff layoffs
Innovation within a Company - Apple
Thickness of mechanical watches
 Technology S-Curves

• Technologies do not always get to reach their limits

– May be displaced by new,discontinuous technology.
• A discontinuous technology fulfills a similar market need by means of an entirely new knowledge
base.
– E.g., switch fromcarbon copyingtophotocopying, orvinyl recordsto compactdiscs
• Technological discontinuity may initially have lower performance than incumbent technology.
– E.g., first automobiles were muchslowerthan horse-drawn carriages.
– Firms may be reluctant to adopt new technology because performance improvement is initially slow and
costly, and they may have significant investment in incumbent technology
 Discontinuous Technology

• If the returns to effort invested in new technology are much higher than effort invested in the incumbent technology, in the long-

run it is more likely to displace the incumbent technology

Disruptive technology has an s-curve that increases to a higher

Disruptive technology has a steeper s-curve
performance limit

P Incumbent P

e technology e Incumbent

technology
r r

f f

o o

r r

m m New technology

a a

n n

c New technology c

e e

Effort Effort
 As a technology reaches its mature stage, it becomes increasingly vulnerable to substitute technologies
• Example: Mechanical and Electronic Calculators
 The diffusion process

• Diffusion is the process by which

– the acceptance of an innovation--a new product, service, idea or practice
– is spread by communication--mass media, salespeople, or word-of-mouth
– to members of a social system--target market
– over a period of time
 Four basic elements of the diffusion process:
1. The innovation
2. The channel of communication
3. The social system
4. Time
 S-Curves in Technology Diffusion (spread of technology through a population

– Adoptionis initiallyslowbecause the technology is unfamiliar.

– Itacceleratesas technology becomes better understood.
– Eventually market issaturatedand rate of new adoptions declines.
– Technologydiffusiontends to take far longer thaninformationdiffusion.
• Technology may require acquiringcomplexknowledge or experience.
• Technology may require complementary resources to make it valuable (e.g., electric lights didn’t
become practical until development of bulbs and vacuum pumps, cameras not valuable without
film).
 S-Curves in Technology Diffusion

• Many technologies become valuable to a wide range of potential users only after
a set of complementary resources are developed for them.
Example
while the first electric light was invented in 1809 byHumphryDavy, an English chemist, it did
not become practical until the development of bulbs within which the arc of light would
be encased (first demonstrated by James Bowman Lindsay in 1835) and vacuum pumps
to create a vacuum inside the bulb (the mercury vacuum pump was invented by
HermanSprengelin 1875). These earlylightbulbsburned for only a few hours. Thomas
Alva Edison built on the work of these earlier inventors when, in 1880, he invented
filaments that would enable the light to burn for 1,200 hours
 S-Curves in Technology Diffusion

• S-curves of diffusion are in part a function of s-curves in technology improvement: as technologies are better developed, they

become more certain and useful to users, facilitating their adoption

• Furthermore, as learning curve and scale advantages accrue to the technology, the price of finished goods often drops, further

accelerating adoption by users

 S-Curves as a Prescriptive Tool

• Managers can use data on investment and performance of their own technologies or data on overall
industry investment and technology performance tomaps-curve.
• While mapping the technology’s s-curve is useful for gaining a deeper understanding of itsrate of
improvement or limits, its use as a prescriptive tool is limited.
– True limits of technology may be unknown
– Shape of s-curve can be influenced bychanges in the market,component technologies,
orcomplementary technologies.
– Firms thatfollow s-curve model too closelycould end up switching technologies too soon or too
late.
 Limitations of S-Curve Model as a Prescriptive Tool

• First, it is rare that the truelimitsof a technology are known in advance, and there is often considerable disagreement among firms
about what a technology’s limits will be.
• Second, the shape of a technology’s s-curve isnot set in stone. Unexpected changes in the market, component technologies, or
complementary technologies can shorten or extend the life cycle of a technology.
• Furthermore, firms can influence the shape of the s-curve through theirdevelopment activities. For example, firms can
sometimesstretchthe s-curve through implementing new development approaches or revamping the architecture design of the
technology
Diffusion of Innovation & Adopter Categories
 Diffusion of Innovation & Adopter Categories
• Everett M. Rogers created a typology of adopters:
– Innovatorsare the first2.5%of individuals to adopt an innovation. They are adventurous, comfortable with a high degree of
complexity and uncertainty, and typically have access to substantial financial resources. 
– Early Adoptersare the next13.5%to adopt the innovation. They are well integrated into their social system, and have great
potential foropinion leadership. Other potential adopters look to early adopters for information and advice, thus early
adopters make excellent "missionaries" for new products or processes. 
– Early Majorityare the next34%.They adopt innovations slightly before the average member of a social system. They are
typicallynot opinion leaders, but they interact frequently with their peers.
– Late Majorityare the next34%.They approach innovation with a skeptical air, and may not adopt the innovation until they
feelpressure from their peers. They may have scarce resources.
– Laggardsare the last16%.They base their decisions primarily on past experience and possess almost no opinion leadership.
They are highly skeptical of innovations and innovators, and must feel certain that a new innovation will not fail prior to
adopting it.
 Technology Cycles

• Technological change tends to be cyclical:

– Each new s-curve ushers in an initial period ofturbulence, followed by rapidimprovement, then
diminishingreturns, and ultimately isdisplacedby a new technological discontinuity.
– Utterbackand Abernathy characterized the technology cycle into two phases:
• Thefluid phase(when there is considerable uncertainty about the technology and its market;
firms experiment with different product designs in this phase)
• After adominant designemerges (bringing a stable architecture to the technology),
thespecific phasebegins (when firms focus on incremental improvements to the design and
manufacturing efficiency).
 Technology Cycles

– Anderson andTushmanalso found that technological change proceeded cyclically.

• Each discontinuity inaugurates a period of turbulence and uncertainty (era of ferment) until a dominant design is

selected, ushering in an era of incremental change.

 Technology Cycles

– Anderson andTushmanfound that:

• A dominant design always rose to command the majority of market share unless the next
discontinuity arrived too early.
• The dominant design was never in the same form as the original discontinuity, but was also
not on the leading edge of technology. It bundled the features that would meet the needs of
the majority of the market.
– During the era of incremental change, firms oftencease to invest in learning about alternative
designsand instead focus on developing competencies related to the dominant design.
– This explains in part why incumbent firms may have difficulty recognizing and reacting to a
discontinuous technology.