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Technology Management 1
Technology Management
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Why MOT?

Rapidly changing technology which is changing every industry and every business

Rapidly increasing competition which will eventually envelop every market niche, no matter how sheltered.

Increasingly efficient financial markets requiring ever shorter term returns.

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Rate of Technological change 3
Rate of Technological change
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Interdisciplinary Nature of MOT

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Technology

Technology consists of three components

Hardware – The physical structure and logical layout of the equipment or machinery that is to be used to carry out the required tasks

Software – The knowledge of how to use the hardware in order to carry out the required tasks

Brainware – the reasons for using the technology in a particular way. This is referred to as know-why.

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Technology

The fourth component – Know-how

It encompasses all levels of technological achievements

The learned or acquired knowledge regarding how to do things well

It may be result of experience, transfer of knowledge or hands-on-practice

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Technology is

… driving changes in the business landscape

… no longer limited to supporting business

decisions

… breaking down traditional industrial

boundaries

… redefining a new era of competition

But still …

… people have been and will continue to

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express disbelief – here is how ,

..

Radio and Television Television will not be able to hold on to any market it captures
Radio and Television
Television will not be able to hold on to any market it
captures after the first six months. People will soon get
tired of staring at a plywood box every night.
-
Daryl F. Zanuck, Head of 20th Century-Fox, 1946
Communication
Well informed people know it is impossible to transmit the
voice over wires and that were it possible to do so, the thing
would be no practical value
-
Editorial in the Boston Post, 1865
Computers
There is no reason for any individual to have a computer in
their home
-Ken Olson, President of Digital Corporation , 1977
I think there is a world market of may be of five computers
-
Thomas Watson, Chairman, IBM, 1943
640 K (internal memory) ought to be enough for anybody
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-
Bill Gates, Microsoft, 1981

Management

Art of getting people together to

accomplish the desired goals

Management comprises

Planning Organizing Staffing Directing Controlling

Manages deployment and manipulation

of

human resources, financial resources,

technological resources and natural

resources

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Management of Technology

A discipline of management wherein an

organization leverages the technological

fundamentals to create competitive

advantage

An integrated application of

engineering, science and management

capabilities

Process of MOT includes

Identification of technologies Selecting Procurement Assimilation

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Exploitation of technologies for production of goods and services

Evolution of Management of Technology 1950 1970 1980 1990s R & D Management Management of Innovation
Evolution of Management of
Technology
1950
1970
1980
1990s
R & D
Management
Management of
Innovation
Technology
Strategy
Value Based
Management
Era of Plentiful Resources
Era of Accountability
New venture
divisions
Innovation Mgmt.
Linking to
business
Broader vision
of technology
Allocation of
Funds to projects
Different org.
arrangements
Outsourcing
Scientists &
Engineers
Tools to assess
values
Leadership
Internal Markets
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R & D Manager
Chief Technology officer

Perspectives in Management

Market Based Resource Based

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Market Based Vs Resource Based 13
Market Based Vs Resource
Based
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Key concepts of MOT

To develop ideas about the management of technology within an open system, four major concepts are employed:

Firms as value chain

Primary activities Support activities

Industries as competitive domains

Capacity driven Customer driven Knowledge driven

Forms of technological change

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Product Process

technology / production technology

Value creation and competitive advantages

Porters Model of Value Chain 15
Porters Model of Value Chain
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Classification of Industries 16
Classification of Industries
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Forms of Technological Change

Process Technology / Production Technology

Product Technology

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Evolution by Ages 18
Evolution by Ages
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Evolution of Production Technology 19
Evolution of Production
Technology
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Product Techology 20
Product Techology
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Value Creation and Competitive Advantage

Competitive advantage is the ability of the firm to outperform rivals on profitability

It depends on the how the firm is able to create for its customers value that exceeds the cost of creating a product

Value is what the customers are willing to pay, and superior value stems from offering

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Levels of Development Descriptive Flow chart  First level - Individual develops tacit knowledge  Second
Levels of Development
Descriptive
Flow chart
 First level -
Individual develops
tacit knowledge
 Second level – tacit
knowledge is
codified
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 Finally – there is a
level of
development
where the
knowledge is put to

Classification of technology

New Technology Emerging Technology High Technology Medium Technology Low Technology Appropriate Technology Codified Vs Tacit Technology

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Four Characteristics of MOT

Opportunity: The art of perceiving the triggering event for technology development; it is truly a human activity.

Appropriability: Where the technology development is due to economic motives, individuals will pursue development only to the extent that there is a reasonable assurance that the fruits of their labor will flow back to the developers.

Transferability: Technology or knowledge transfer is not smooth; knowledge is sticky.

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Resources: Technology development

The Creation-Application Spectrum 25
The Creation-Application
Spectrum
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Spinning out technology 26
Spinning out technology
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Core Knowledge needed for MOT 27
Core Knowledge needed for
MOT
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S Research Research Research Development Development Development C Design Design Manufacturin Manufacturin O g g Marketing
S
Research
Research
Research
Development
Development
Development
C
Design
Design
Manufacturin
Manufacturin
O
g
g
Marketing
Sales
P
Physical
Distribution
Customer
E
service
OF
M
O
T
Research
Development
Design
Manufacturin
g
Marketing
Sales
Physical
Distribution
Customer
service
Information
systems
Human
Resources
Finance
Purchasing
Patent and
Legal
Public
Relations
General
Administratio
n
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Research
Development
Design
Manufacturin
g
Marketing
Sales
Physical
Distribution
Customer
service
Information
systems
Human
Resources
Finance
Purchasing
Patent and
Legal
Public
Relations
General
Administratio
n
Customers
Suppliers
Other
influences
(Internal;
External)
Managerial function of MOT Business Strategy Technology Strategy Technology forecasts Knowledge Management Technology Development and utilization
Managerial function of MOT
Business Strategy
Technology Strategy
Technology
forecasts
Knowledge
Management
Technology
Development and
utilization
Information
Management
Technology acquisition
and transfer
R & D
Product and Process
Technology
NPD
Acqu
Identifi
isitio
cation
n
and
Commercialization
selecti
Expl
on
Value chain Management
Product Life cycle management
oitati
on
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Managerial functions of MOT Identification Selection Technology assessment  Pre selection Framework Technology / Market scanning
Managerial functions of MOT
Identification
Selection
Technology assessment
 Pre selection Framework
Technology / Market scanning
Information Management
Technology forecasting
 Benchmarking
Decision criteria and Process
Monitoring / Improvement
Protection
Exploitation
Identify options
Establish strategy
Monitor effectiveness
Acquisition
Customer – supplier Network
Internal R & D
 Incremental Development
 Product Management
 Complementary Assets
 Licensing and Joint ventures
 Organizational change
 Project Management
Technology Insertion
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Source: Gregory : 1995
Audit Forecasting Selection & Plan Acquisition Exploitation •Assess utilization of existing technology* •Assess the development trends
Audit
Forecasting
Selection &
Plan
Acquisition Exploitation
•Assess
utilization of
existing
technology*
•Assess the
development
trends of all
the
technologies
available*
•Analyze Cost;
•Obtain and
•Upgrade
Techno-
comprehend:
Technology
•Detail
Project Report
after
Induction*
•Identify the
gaps
•Document;
modify
Standard
•Priorities
areas for new
inputs in
technology
from:
Economics;
Adaptability;
Flexibility; Time
Frame; and
Competitors’
Strategy, for
the competing
alternative
technologies
Operating
Practice
–Incremental
Improvement
Schemes*
•Analyze
competing
alternatives;
Costs; Techno-
Economic;
Adaptability;
and
Environmental
Compatibility*
•Transfer to
market or in
house it after
up gradation
–Modernization
Program
–Major
Technology
•Compare
technology
from in-house
(R&D) and
external
sources *
•Match the
Corporate
Needs with the
Technologies
available and
identify the
gaps to be
bridged*
•Contract
•Manuals
•Training
•Commissioni
ng
•Assimilate
the
technology
procured
through use;
and
•Improve
Standard
Operating
Practice*
Development
Program*
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•Prepare a
comprehensive
‘Strategic
Technology
The Framework for Technology 32
The Framework for Technology
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System Model: Resources. Infrastructure and Activities Resources Infrastructure Activities People Intellectual Property Information Organizational characteristics Purposes
System Model: Resources.
Infrastructure and Activities
Resources
Infrastructure
Activities
People
Intellectual Property
Information
Organizational
characteristics
Purposes
Objectives
Strategies
Organizational
structure
Guiding principles
Business
Management
System
Project
Technology
Functional
Time
Policies and
practices
Group
Customers
Management
Individual
attitudes
Suppliers
Management
External
expertise
Plant and equipment
Support for
innovation
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Goals and strategies of a Firm

A firm’s goals and strategies represent the aggregate of its products, technologies, and services

For such goals to be credible they must be linked directly to the set of development projects the firm intends to undertake (referred to business architecture)

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A business architecture in MOT identifies what business parameters to address to make a good business decision regarding key problems encountered in achieving objectives and goals of the strategies of a new development project

Development Chain

The development of any product or service includes the following chain of acceptance steps:

The research and development of an idea or invention The competitive evaluation of the idea The research required in technologies to develop the idea

The transfer or purchase of a selected technology for support of a process, a component of a product, or a further development of the technology for its own marketability

The acceptance of a proposal to develop the product

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The acceptance of the design of the product and/ or technology

The acceptance of the product’s manufacturability i.e. at the volumes and specific quality levels required

Business Architecture

It is necessary to look at the general development steps and identify key check points in decision making that relate to business parameters

These steps have a business assessment criteria associated with them for which there must be a payoff

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MOT Flowchart  The flowchart shows the practice of technology management in responding to the business.
MOT Flowchart
 The flowchart shows
the practice of
technology
management in
responding to the
business.
 The model shows a
process that identifies
major development
steps starting with
technology research
leading to an ultimate
customer payoff
37

Business Architecture

There are two phases of architecture

Research and technology phase Product development phase

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Research and Technology Phase Technology Transfer Funding Transfer Pricing Technology Make Vs Customer Research Buy Requirements
Research and Technology
Phase
Technology
Transfer
Funding
Transfer
Pricing
Technology
Make Vs
Customer
Research
Buy
Requirements
Creativity and
Innovation
Technology
Risk
Forecasting
Analysis
Competitive
Competitive
Analysis
Reverse Engineering
Productivity
Advantage
Research /
Development
Analysis
Industry
Invention
Analysis
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Payoff
Technology Goals
Business Goals
Product Development Phase Market Market Revenue Acceptance Segmentation Software and Manufacturing Acceptance Parts, CIM, CFM Return
Product Development Phase
Market
Market
Revenue
Acceptance
Segmentation
Software and
Manufacturing
Acceptance
Parts, CIM,
CFM
Return on
Assets
Design / Tech
Acceptance
CAD /
Packaging
Customer
Requirement
Market Driven
Proposal
Acceptance
Business
Opportunity Analysis
Case
Payoff
Product Goals
Business Goals
40
Changing trends in Industry Factor Traditional New Life cycle Innovatio ns Long life cycles Few Short
Changing trends in Industry
Factor
Traditional
New
Life cycle
Innovatio
ns
Long life cycles
Few
Short life cycles
Continuous
Competit
ion
Stronger competition
Alliance with competitors
accepted
Market
Quality
Expected competition
Competitors are the
enemy
Cooperation non allowed
Expected market
Local market
Quality is desirable
Uncertain market
Global market
Imperative
Productio
n
Mass production
Produce in large lots
No commitment to
suppliers
Large inventories
Fixed manufacturing
Customized production
Produce in small lots
Suppliers are partners
Reduce inventories
Flexible manufacturing
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Old New Trends Reducing the direct costs of production should be primary focus of management concern
Old
New Trends
Reducing the direct
costs of production
should be primary focus
of management concern
The indirect costs of the
firm should be reduced
while improving
competitiveness is
viewed as a major
challenge
Production economies
require large volume
Single critical
technology-based
product lines will have
long product life cycles
Multi-core technology
product lines will have
shorter product life cycle
World markets can be
divided on a national
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basis, with national
firms dominant in domes
World markets are
technology are now
global and enterprise
should be globally

Strategic, Operational and Management Issues

Strategic Issues

  • 1. Understanding the scope of managing technology

  • 2. Managing Technology – different levels

  • 3. Adding value with technology

  • 4. Developing a technology policy

  • 5. Bridging the gap between technology policy and results

  • 6. Precursors to technology strategy

  • 7. Including technology in business strategy

  • 8. Rationalizing strategy and operations

  • 9. Managing the decision making process

    • 10. Systems thinking – the imperative

    • 11. Negative impact of single issue management

Strategic Issues

Understanding the role of technology in the business

A business, not technical responsibility Integrating resources, infrastructure and activities

Including Technology in business strategy

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Research Development Design Manufacturing Marketing Administration

Strategic Issues

Managing Technology – different levels

Globally Corporate, sector, group, division, strategic business unit Research, development, design, manufacturing, marketing, sales, physical distribution, customer service, all administrative and support functions Managing project at the project level, team level Managing technology by scientists, engineers and other professionals

Technology Managers – Who manages technology?

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At different levels – from executive to individual decision make

Description of role

Strategic Issues

Adding value with technology – leveraging available sources

Internal and worldwide External and worldwide

Developing a technology policy

Bridging the gap between technology policy and results

Transforming the thinkers into thinkers and doers Transforming the doers into doers and thinkers

Managing the decision making process – Practices and models

Consensus Quantitative and qualitative Intuitive

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Balanced

Operational Issues

  • 1. Idea and concept generation

  • 2. Forecasting

  • 3. Evaluating

  • 4. Justifying Investments

  • 5. Planning management

  • 6. Managing the project management process

  • 7. Managing discontinuities

  • 8. Descriptions – how, where and why?

  • 9. Resolving problems and exploring opportunities

    • 10. System cycle management

    • 11. Technological intelligence

    • 12. Innovation

    • 13. Entrepreneurship

    • 14. Technology transfer

    • 15. Information

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Operational Issues

  • 16. Functional Integration

  • 17. Investing in research

  • 18. Organizing for effective product development

  • 19. Market pull and or technology push

  • 20. Introducing new process

  • 21. Introducing new product

  • 22. Selecting, monitoring and terminating projects

  • 23. Integrating technology, products and markets

  • 24. Linking purposes, objectives and strategies

  • 25. Focussing on value adding activities

  • 26. Resolving the information paradox

  • 27. Effectiveness, efficiency and economic use of resources

  • 28. Analysis followed by synthesis determines results

Operational Issues

  • 30. Eliminating the barriers to effective management of technology

  • 31. Developing and using business unit technology plans

  • 32. Organizing and allocating resources

  • 33. Developing as-is profiles

  • 34. Closing the gaps from competence to capability to competitive advantage

  • 35. Implementing activity based management

  • 36. Implementing the project approach at all levels

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  • 37. Auditing research, development, technologies and potential new products and processes

Operational Issues

Idea and concept generation

Forecasting Technologies Products Markets Productivity and Performance

Technological Intelligence

Developing a process: Internal and external Recognizing emerging technologies Using technological intelligence for technology leadership

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Operational Issues

Innovation

Description and scope Organizational environment Role of creativity

In all business functions – not just science and enginering

Innovating on schedule

Technology Transfer

Within the organization, business units, functions, individuals

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Academia and industry Government agency and industry Global opportunities Consortium

Operational Issues

Investing in Research

Corporate or operational Internal and external

Organizing for effective product development

Requirement – total system The process Limitations of formalized structure Need for flexibility Balancing freedom and constraints Balancing stability and change

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Creating an appropriate environment

Management Issues

People related Developing competent personnel Overcoming objections and resistance to change Competencies and capabilities Productivity and performance Specialization and segmentation Providing a balanced environment Educating the organization Focusing the organization Integrating business functions Achieving gains from technology management Facing realities

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Management Issues

Achieving the gains from Technology Management

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Automation of work in all functions Computer-integrated manufacturing Computer aided design, engineering, manufacturing and others Concurrent and simultaneous engineering Information systems that provide information Using technology and business models and simulations Using other computer-aided technologies such as artificial intelligence, expert systems, chaos theory etc. Business related processes

Further Classification of Technologies

State of the art technologies : Those technologies

that equal or surpass the competitors

Proprietary technologies: those technologies

protected by patents or secrecy agreements that provide a measurable competitive advantage

Known technologies: those technologies that may be common to many organizations but are used in unique ways

Core technologies: those technologies that are essential to maintain a competitive position

Leveraging technologies: those technologies that

support several products, product line, or classes of products

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Further Classification of Technologies

Supporting technologies: technologies that support the core technology

Pacing technologies: technologies whose rate of development controls the rate of product or process development

Emerging technologies: technologies that are

currently under consideration for future products or processes

Scouting technologies: formal tracking of potential product and process technologies for future study or application

Idealized unknown basic technologies:

technologies that, if available, would provide a

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significant benefit in some aspect of life

Technology Environment 57
Technology Environment
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Introduction

1. Technological environment can be viewed as a network of organizations consisting of developers and facilitators.

2. Technology development occurs in stages. Each stage then provides the basis for development in ensuing stages.

3.The way in which technology develops is not determined solely by a developer. National and often international, political considerations will drive technological development.

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Scope

  • 1. What is meant by environment and technological environment in particular?

  • 2. Who are the main actors in the technological environment?

  • 3. How do changes occur in the technological environment?

  • 4. What are some of the major current developments in the technological environment?

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Technology Environment What is meant by environment and technological environment in particular? 60
Technology Environment
What is meant by environment
and technological environment in
particular?
60
Levels of Environments 61
Levels of Environments
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Task Environment

It refers to the set of customers, suppliers, competitors and other environmental agencies directly related to the firm

The task environment is more or less specific to a firm and is not necessarily shared by its competitors

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Competitive Environment

It comprises of the firm and its competitors New entrants, substitute products, suppliers, customers and competition influence what happens in an industry The factors affect different competitors differently

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Macro Environment 64
Macro Environment
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Technological Environment

Technology environment is the most visible and pervasive macro-environmental segment in a society:

1.Brings new products, processes and material

2.Directly impacts every aspect of the society around us (entertainment, communications, health care, Transportation modes)

3.Alters the rules of global trade and

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competition

Technology Environment

It comprises two institutions

New knowledge (Science)

The application of the knowledge to develop new products, processes and materials (Technology)

Thus, Technology Development consists of two sets of activities

Creation of knowledge and Application of that knowledge

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Creation of Knowledge

The knowledge base of technology is derived from basic research

The basic research focuses on generating scientific knowledge and deal with fundamental question of science

Scientific research is often cumulative

Research questions begin in some current state of scientific knowledge; these questions stimulate research projects from which scientific results are published in scientific literature

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Application of Knowledge

Scientific knowledge is put into practice to design an innovation that will solve a perceived need or problem.

Researches involved in application are the main consumers of basic research

The end result of their efforts is often a product prototype that may have commercial potential

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Application of knowledge

Activities of application knowledge:

Applied Research: consists of scientific investigations of known phenomena that do not typically advance scientific knowledge

Development: reduces the knowledge to practice in workable prototype form

Engineering: defines the knowledge for commercial exploitation or other practical end users

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Commercialization: includes activities such as manufacturing that finally put the technology to use till it becomes adopted and used by

others

Technology Environment Who are the main actors in the technological environment? 70
Technology Environment
Who are the main actors in
the technological
environment?
70
Types of actors in the environment 71
Types of actors in the
environment
71

Roles of corporations

1.As technology developers, they are drivers of change in the technology environment

2.Beneficiaries of technology change initiated by others.

3.Facilitate technology development by others external to the firm through investments in their research projects.

4.Corporations may also be the victims of technology change created by others.

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Innovation Networks

In the technological environment, inter- linkages develop between numerous organizations.

Interconnections among technology developers

Industry-university linkages Alliances

Interconnections among technology developers and facilitators

Incubation Government agencies

Cross National differences among networks

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Innovation Networks

Networks facilitate the flow of information, resources, personnel and other inputs necessary for technology development and diffusion

Networks speed technology development for several reasons

Assist in the diffusion of technology

Create a critical mass of skill that speed knowledge development

Provide a social safety net for individuals. Because technology development in risky

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Technology Environment 3. How do changes occur in the technological environment? 75
Technology Environment
3. How do changes occur in
the technological
environment?
75

Changes in Technological Environment

Changes in the technological environment often come about in two interrelated ways:

Induced changes

Represents the technological consequences created by social, political, or economic forces.

Autonomous changes

These changes are initiated by technology developers but are largely independent of the forces in other macro-environmental segments.

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Influence of Regulatory Environment

The influence of the political/regulatory environment is felt in at least three ways:

1.It influences the thrust of major basic research

2.It can facilitate or impede every phase of technology development

3.It can act as a facilitator of private sector technology development

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Autonomous Changes

Autonomous changes in technology are drivers of fundamental social and economical change

Social change

The first stage corresponds to agriculture

The second stage corresponds to machine production

The third stage refers to the information revolution triggered by advances in computer technology.

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Long wave theory of Economic change

A reciprocal linkage exists between technological and economic segments Long wave theory works as follows

First, discoveries in science trigger technological innovation

Second, new industries are formed around these markets, and continued innovations in these newly formed industries expand the markets

Third, as technology matures, many competitors enter internationally, eventually creating excess capacity that in turn decreases profitability

Finally, business failures, unemployment, and attendant economic turmoil in financial markets may lead to depressions

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A Comparison of Toffler’s Three Waves Technological Development 80
A Comparison of Toffler’s Three
Waves
Technological
Development
80
Technology Environment 4. What are some of the major current developments in the technological environment? 81
Technology Environment
4. What are some of the
major current developments
in the technological
environment?
81

Overview of Trends in Technology Environment

Globalization

Resource allocated to technology development Changing location of manufacturing facilities Rise of multinationals Comparative advantage of nations

Time Compression

Shortened product life cycles Shortened development times Decreasing payback periods

Technology Integration

Combining technologies to develop new products Combining technologies to commercialize

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products

The Impact of Trends on Institutions 83
The Impact of Trends on
Institutions
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The Technology Cycle Need driven expectations TECHNOLOGY AWARENESS Of marketable inventions justificati on TECHNOLOGY ABANDONMENT Obsolescencing
The Technology Cycle
Need driven
expectations
TECHNOLOGY
AWARENESS
Of marketable
inventions
justificati
on
TECHNOLOGY
ABANDONMENT
Obsolescencing
External and
Internal
Environment
TECHNOLOGY
ACQUISITION
by self-generation or
transfer
Demolition
Installation
TECHNOLOGY
ADVANCEMENT
Innovation involving
major modifications of
acquired technology
Promotion
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TECHNOLOGY
ADAPTATION
Minor modifications
of acquired
technology
Process of Technology Change 88
Process of Technology Change
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Technology Change

Technology change consists of two closely linked processes:

Innovation

Diffusion

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Focus of Technology change

What are the different types of innovation?

What are the dynamics of technology evolution?

What are the characteristics of innovative firm?

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Invention and innovation

Invention is a new combination of preexisting knowledge

Innovation includes:

A technological change new to both enterprise and the economy

A change that has diffused into the economy and is adopted by the firm

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Dynamics of Technological Change

Firm Level

Technology Level

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Firm Level

Technological change may be described as a process of problem solving.

Four stages in the process of problem solving

1.Problem Recognition 2.Technology Selection 3.Solution Development 4.Commercialization / implementation

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A model of problem solving 94
A model of problem solving
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Technology Level

Technological change displays evolutionary dynamics that are not controlled by a single firm

Actors of these changes

1.Technology developers, which typically are firms involved in innovation in their pursuit of competitive advantage

2.Technology facilitators, who may provide the resources for financing and executing the innovation efforts

3.Customers who are interested in the fruits of technology development and who will shape the direction of development

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4.Regulatory agents, the governmental bodies and others who shape the form of products and processes by establishing standards or specifications and

5.Other stakeholders, who may be the beneficiaries or

Implications for the MOT

1.Innovation, imitation and adoption

2.The role of technology and market factors

3.The centrality of learning

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Innovation, Imitation and Adoption  When a firm innovates, two different groups of players respond to
Innovation, Imitation and
Adoption
 When a firm innovates,
two different groups of
players respond to the
innovation
 Customers – makes
decisions to adopt or
not to adopt the
innovation
 Competitors – may
decide to copy the
innovation. This is
referred as imitation
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 Innovation and
Imitation are supply-
side concepts
 Diffusion is a demand-
The role of technology and market factors  For a technological change to be successful the
The role of technology and
market factors
 For a technological
change to be
successful the firm
has to manage two
related processes
 Finding effective
solutions to a
problem and
 Gaining acceptance
of the solution in
the market place
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The centrality of learning

Three major mechanisms of learning

Environmental surveillance through technical and market intelligence.

Experimentation within firms whereby firms can learn problem solving by simulation and by trial and error.

Imitation through competitive intelligence.

Multifaceted Learning lies at the core of Technological change

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Technological Change

Technological change consists of two closely linked processes:

Innovation Diffusion

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Innovation

What is innovation? What are the different types of innovation? What are the dynamics of technology evolution? What are the characteristics of innovative firms?

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What is Innovation

Innovation includes both:

A technological change new to both enterprise and the economy.

A change that has diffused into the economy and is adopted by the firm

Innovation refer both to the output and

the process of arriving at a

technologically feasible solution to a

problem triggered by a technological

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opportunity or customer need

Process and Output:

Innovation

Process

–Innovation refers to the process by which individuals or organizations arrive at a technical solution.

Output

–Innovation to refer to a product or service i.e. the output of the innovation process

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Components of Innovation

As outputs all technological innovations have three components:

A hardware component consisting of the material or physical aspects of the innovation

A software component consisting of the information base that is needed to use the innovation

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An evaluation information component consisting of the information that is useful for decisions related to the adoption of the innovation

Components of Innovation

The components form a system.

If any component of a specific innovation is changed, other components will need to be changed also so as to render the innovation user friendly.

The hardware and software components are intrinsic to the technological innovation.

Domination of the component: Hardware dominant/ Software Dominant

Third component is not intrinsic and refers to the information accompanying an innovation that enables firms or individuals to evaluate its usefulness.

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Firm level innovation 106
Firm level innovation
106

Drivers of Innovation

Environmental Factors

Market factors

Appears to have a primary influence on innovation.

Input factors

Rising costs of inputs, trigger innovations aimed at reducing the use of the expensive inputs

Autonomous factors

Intellectual curiosity Technological possibility

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Definitions

Technical innovations – Are about improved products, services, or processes or completely new ones

Administrative innovations – Pertain to organizational structure and administrative processes and may or may not affect technical innovation

Radical innovations – Provide a brand new functional capability, which is a discontinuity in the current technological capabilities

Incremental innovations – Improve the existing functional capability of an existing technology

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by improving performance and quality and lowering cost

Definitions

Architectural innovations - Use the firm’s existing knowledge of components but revolutionize when those component parts are put together

Modular innovations - Build on that knowledge of how to link components but change the components themselves

Product innovations – Are new products or services introduced to meet an external and market need

Process innovations – Are new elements introduced into an organization's production or

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service operations used to produce a product or render a service

Definitions

Autonomous innovations – Are those, which can be introduced without modifying other components or items of equipment

Systemic innovations – Are those, which require significant readjustment to other parts of the system

Systems innovations – Provide new functional capabilities but are based on reconfiguring existing technologies

Regular innovations – Preserve production competencies and market competencies

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Definitions

Niche-creation innovations – Preserve production competencies but disrupt market competencies

Revolutionary innovations – Obsolete (phase out) production competencies but preserve market competencies

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Process of Innovation

Two types of innovation process 1.Market pull

Is the advancement of technology oriented primarily toward a specific market need, and only secondarily toward increased technical performance.

2.Technology push

Is the advancement of technology oriented primarily toward increased technical performance, and only secondarily toward specific market needs.

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Types of Innovation outputs

Two dimensions to classify an innovation 1.Degree to which specific technologies in an innovation depart from earlier ones, or what we will call component knowledge 2.Degree to which configurations among

technologies in an innovation depart from earlier one, or what we will call

component configuration

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Four major types of innovation

Incremental innovations: Requires only minor

improvements to the existing system

Modular innovations: refer to significant changes in elements of products. The implementation requires would require an understanding of the new components of the system

Architectural innovations: It requires the new

knowledge on how existing components can be configured into a new system. No significant knowledge is required concerning the components themselves

Radical innovations: They are non-aligned with organizational skills and capabilities of the firm

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114
Classification of Innovations Process 115
Classification of Innovations
Process
115
for Products, process and services 116
for Products, process and
services
116

Innovation

The process of innovation

Long term vs. short term, inside vs. outside the organization

The economic impact of innovation

Potential for wealth creation

The role of a manager in the Innovation process

Long term technological vision vs. planned and managed

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Models of Innovation

Two classifications Based on Iterativeness and Adoption

Iterativeness : Linear model &Interactive model Adoption: Static model & dynamic model

Iterative models look at the interactions of the people involved in the innovation process

Adaptive models examine the feedback after the innovation is accepted in the market

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Adaptation Models

Static models

Abernathy-Clark Model Henderson-Clark Model Value added chain Model

Dynamic models

Utterback-Abernathy Model Tushman-Rosenkopf Model S Curve models

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Iterative models

Novick’s functional model Bright’s 8 process model Technology push v/s market pull Vijay Jolly’s integrated model

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120
The Process of Technology Innovation 121
The Process of Technology
Innovation
121
Technology Evolution 122
Technology Evolution
122

Characteristics of Technological Change

S-curve of technological evolution Technology progression Level of technology development Technology change agent Evolutionary characteristic of technological change Uncertainty and technological insularity

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123

S Curve of technology evolution

Technology evolution refers to the changes in the performance characteristics of a specific technology over time

Phases of S-curve

Emergence when the technology has come into existence but shows little improvement in its performance characteristic

Rapid improvement when the performance characteristic improves at an accelerating pace

Declining improvement when the pace of

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124

improvement declines

Maturity when further improvements become very difficult to achieve

The Industry Life Cycle as an S curve Performance Maturity Takeoff Time 125
The Industry Life
Cycle as an S curve
Performance
Maturity
Takeoff
Time
125

Why S-curve for evolution?

Learning Processes

In the first stage, the learning generates a more or less reliable design and production process

In the second stage, the learning curve effects produce rapid improvement in the performance characteristics

Technology Limits

Technology is constrained by physical limits Improvements beyond physical (technology) limits are harder to come by

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126
The S-curve Maps Major Transitions Maturity Performance Discontinuity Takeoff Ferment 127 Time
The S-curve Maps Major
Transitions
Maturity
Performance
Discontinuity
Takeoff
Ferment
127
Time
existing organizations severely Cumulate share of sales of photolithographic alignment equipment, 1962-1986, by generation Contact Proximity
existing organizations
severely
Cumulate share of sales of photolithographic alignment
equipment, 1962-1986, by generation
Contact
Proximity Scanner
S&R (1)
S&R (2)
Cobilt
44
<1
Kasper
17
8
7
Canon
67
21
9
P-Elmer
78
10
<1
GCA
55
12
Nikon
70
Total
61
75
99+
81
82+
128

But they also create major opportunity

Corning glass

Cookware to optical fiber

HP

Instrumentation to computers

IBM

Mainframes to PCs to Services

Eli Lilly

“Random” drug discovery to genetics and genomics

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Technology Progression

Technology progression describes the process by which new technologies emerge to make existing technologies obsolete.

Technology evolution represents the incremental evolution of technology over time.

Technology progression represents the radical breakthroughs that significantly replace current technology

Technology progression may be described using a series of S-curves

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130
Technology Progression 131
Technology Progression
131

Levels of Technology Management

Basic research – conducted without a practical application or a problem at hand

Applied research – basic research result have to ‘age’ before they can be packaged into a useful innovation

Development – Major technological advances required a cluster of innovations

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Technology change agents

Innumerable

Vary significantly across the levels of technological change

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Evolutionary characteristics of technical change

Simultaneous development of innovations at multiple levels by numerous change agent present evolutionary characteristics on technological development

Those who are involved in technology development the so called radical changes will be seen as an accumulations of incremental innovations

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Uncertainty and technological insularity

Great degree of uncertainty

They cope with this uncertainty by engaging in a process of learning, gathering information, experimentation and imitation. Innovation development requires information concerning:

The performance of innovation they are seeking to create or adopt

Materials and components they are fabricating into the innovation

Competitors innovations, the nature of existing patents, and government policies affecting their proposed innovation; and

The problems faced by consumers in the market and how the proposed innovation might solved certain of these perceived problems

Innovation process is driven by the exchange of

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technological, market and other environmental information in the face of high uncertainty

Technical Insularity

The search for or dissemination of technical information embedded in an innovation is governed by the principle of technological insularity

The principle of technological insularity suggest that a characteristic feature of technical know-how is that it is not easily transmitted

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Reasons for Technical Insularity

Technology evolves – evolves because of accumulated experience of the individuals. Thus first hand knowledge is crucial to the evolution of performance characteristics. Knowledge is not easily transferred

Technical know-how is not easily accepted by individuals not involved in its production. Such know-how requires abandoning of old concepts or concepts that have not been proved useful

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Uncertainty and technological insularity

Technology insularity leads to

Spatial clustering

Temporal clustering

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Characteristics of innovation firms

Entrepreneurial innovation

Occurs when new technologies and

scientific development yield economic

opportunities for proactive

entrepreneurs

Managed innovation

Large firm vs. small firm – who is more

innovative?

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139
process of innovation in organizations 140
process of innovation in
organizations
140
Summary of factors stimulating innovation 141
Summary of factors
stimulating innovation
141
Integrating Technology Push and Market pull to Stimulate Innovation Opportunities for Technology Push Innovati on Opportunities
Integrating Technology Push and
Market pull to Stimulate Innovation
Opportunities for
Technology Push
Innovati
on
Opportunities for
Market Pull
• Scientific discoveries
• Applied Knowledge
•Recognized needs
•Intellectual capital
(scientists and
engineers)
•Market demand
•Proliferation of
application areas
•Recognized needs
•Opportunities for
increased profitability,
quality, productivity
•Entrepreneurs
142

Influence of environmental trends on innovation

Three environmental trends

Globalization Time compression Technology integration

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Three key managerial implications

Successful management of technology requires that the problem solving within the firm should take into account both technical and market considerations.

Learning through environmental intelligence, innovation and imitation are central to effective problem solving.

Development of problem solutions can be accomplished either in-house, in collaboration with other or simply by adopting innovations from outside.

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Critical factors in managing technology

The creativity factor The link between science and technology Types of innovation Creativity and innovation Bringing innovation to market Technology-price relationship The timing factor

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145
Process of Technology Change Diffusion 146
Process of Technology Change
Diffusion
146

Diffusion

What is diffusion? What are the dynamics of diffusion? What attributes of an innovation facilitate or hinder diffusion? What factors drive the process of diffusion?

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147
T-M Matrix 148
T-M Matrix
148

What is diffusion

Diffusion is the process by which an innovation is propagated through certain channels over time among the units of a system.

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149
Diffusion Vs Imitation 150
Diffusion Vs Imitation
150

Misconceptions about new technology

  • 1. “Best Possible” determines the choice of technology

  • 2. Choice of technology results from rational analysis

  • 3. Technological advances or discoveries usually are adopted eventually

  • 4. The biggest hurdle is making the original discovery

the downstream development is just a matter of applying the necessary effort

  • 1. Technology have intrinsic value

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Misconceptions about new technology

6. Radically new advances will win

7. The power of new technology

determines its success

8. Progress in technology comes

principally from continuing to improve

performance

9. A new technology can be grafted onto

an existing business

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Realities

  • 1. Good enough is the basis for choice

  • 2. Choice is strongly influenced by convention and past practice

  • 3. Most don’t succeed –and shouldn’t

  • 4. Most of what is not yet known about a new discovery is probably bad and requires creativity to overcome

  • 5. The customer determines value

  • 6. New is not necessarily better

  • 7. The infrastructure required to support it is often the determining factor

  • 8. Progress requires establishing standards, imposing constraints and achieving routine

Dynamics of Diffusion

S-curve of diffusion

Rate of diffusion Potential set of adopters

Reinvention during diffusion Mechanisms of diffusion

Technology substitution Bandwagon effect

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Four Phases of diffusion

1.Emergence characterized by a slow advance in the beginning, suggesting that adoption proceeds slowly at first when there are few adopters.

2.A rapid growth phase, when adoption rate accelerates until half of the individuals in the system have adopted.

3.A slow growth phase, where the rate of growth declines, but adoption continues.

4.Maturity, the final stage, where the diffusion almost comes to a halt, either as a result of market saturation or the introduction of a new

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product, process, or service into the market that replaces the existing innovation.

Differences in diffusion speed 156
Differences in diffusion speed
156
Formulation of S-curve – Bass Model 157
Formulation of S-curve –
Bass Model
157
S-curve diffusion 158
S-curve diffusion
158

Reinvention

Reinvention refers to the dynamics by which an innovation is changed or modified by the users as they adopt and use it.

Four ways in which reinvention occurs:

Improvement in the design and performance characteristics of an innovation may be necessity for its further adoption by adopters (dominant design)

As an innovation diffuses, a standard model may emerge and speed the adoption process (standard process)

Requirement for complementary products/process for widespread diffusion

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Possible new applications: adoption beyond the originally conceived scope of its application

Mechanisms of Diffusion

Two mechanisms by which an innovation propagates through an adopter population

Technology substitution Bandwagon effect

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Technology Substitution

Explains why an innovation is adopted

Technology substitution is key that unlocks the doors of an adopter population for the propagation of an innovation.

Technology substitution refers to actual substitution of a new technique for the old.

A new technology or an innovation displaces an already existing technology during the process of being adopted

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Bandwagon Effect (BE)

BE is useful for explaining the speed of diffusion.

BE refers to the strategy of information collection employed by adopters

It focuses on the dynamics by which later adopters, in their decision to adopt an innovation, imitate the behavior of earlier adopters.

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Mechanisms of Diffusion

Technology Substitution and Bandwagon effect underscore the roles of

Knowledge and learning in the diffusion process

Uncertainty and information

Tech Substitution and Bandwagon effect refers to the different facets of learning

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A Model of Innovation adoption 164
A Model of Innovation adoption
164

Steps involved in innovation

Awareness Attitude formation Decision Implementation Confirmation

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165
Stages in decision to adopt Trialability Observability 166
Stages in decision to adopt
Trialability
Observability
166
the stages of Adoption Decision 167
the stages of Adoption
Decision
167

Shifting characteristics of adopters over time

Adopters categories depending on their speed of adoption:

1.Innovators: very eager to try new ideas

2.Early adopters: Opinion leadership

3.Early majority: deliberate in its decision to adopt new ideas

4.Late majority: adopts new ideas just after the average member of a system

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5.Laggards: last among a population to adopt an innovation

Selected differences among adopter categories 169
Selected differences among
adopter categories
169

Relative importance of decision stage

Adoption is difficult in organizations

A number of individuals are usually involved in the innovation-decision process, and the implementers are often a different set of people from the decision makers.

The organization structure that gives stability and continuity to an organization often resists the implementation of an innovation.

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Factors that drive the process of diffusion

Attributes of an innovation Community effects and network externalities Characteristics of the population

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Attributes of an innovation

Five attributes of an innovation that influence the process of diffusion

1.Relative advantage – is the degree to which an innovation is perceived as being better than the idea that it supercedes

2.Compatibility is the degree to which an innovation is perceived as being consistent with existing values or past experiences and needs of potential adopters

3.Complexity – is the degree to which an innovation is perceived as being difficult to understand and use

4.Trialability – is the degree to which an innovation may be experimented with on a limited basis

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5.Observability – is the degree to which the results of

an innovation are available to others

Components and Attributes of an innovation 173
Components and Attributes
of an innovation
173

Community Effects

Community adoption level affect value and risks of adoption.

Increase in returns comes from Learning by using (means that a technology’s performance ratio improves rapidly as a community of adopters)

Network benefits (Positive Externalities)

Technological interrelatedness (a large base of compatible products needed to make a technology worthwhile)

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Community effects

Major factors that drive community effects

Prior technology drag Irreversibility of investments Sponsorship Expectations

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Characteristics of the population

Three facets of the system

Communications Opinion leaders Cultural norms

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Influence of environmental trends on diffusion

Globalization

Adopters are located all over the world

Time Compression

Swifter pattern of innovation

Rapid response in redesign of information component of innovation, adjustment in marketing strategies and adoption of innovations

Technology Integration

Institutionalization of organizational mechanism for innovation

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INNOVATION PROCESS

INNOVATION STRATEGY

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Innovation Process

COMMERCIALLY SUCCESSFUL CHANGE

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IN

TECHNOLOGY /

BUSINESS MODEL /

BOTH

BUSINESS PERSPECTIVE

CUSTOMER –CENTRIC

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INNOVATIVE

Vs

STATIC ORGANIZATION:

FAILURE vs INACTION

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Rules of Innovation

Integrating with Business Strategy Balancing creativity &value capture Neutralizing organizational antibodies Networking Devising metrics & rewards INTERDEPENDENT

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How A Company

Creates Sells Delivers Value to Customers

Covers

Supply Chain Targeted Customer Segments

Customers’ perception of delivered value

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BUSINESS MODEL INNOVATION

3 Levers

Value proposition ( What) Supply Chain ( How) Target Customer ( Whom)

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SOURCES OF TECHNOLOGY INNOVATION

Product & Service

Process

Enabling Technologies

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INTEGRATING INNOVN MODEL

Business Model & Technologies Heavy emphasis on one

Changes to BM & T managed at separate locations

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6 LEVERS OF INNOVATION

3 in Business Model

3 in Technology

Innovation involves changes in one or more

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Innovation Levers 188
Innovation Levers
188

3 TYPES OF INNOVATION

Incremental Semi-radical Radical

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INCREMENTAL INNOVN

Leads to small improvements No major investments. Clear goals Sustainable for long periods >80% of total investment Cornerstone. Provides protection from competitive erosion Constrained creativity Spiral of rampant incrementalism

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SEMI-RADICAL

INNOVATION

Asymmetric w r t BM & Technology Change in one linked to the other Innovation in one creates opportunities in the other Huge potential. Big challenge Simultaneous management needed

WAL-MART, SOUTHWEST AIRLINES

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RADICAL INNOVATION

Results in new product/service Fundamental changes in competitive env.

Leads to series of cascading innovations

Huge investments. Low probability Too much investment wasteful Balanced portfolio –a key

DISPOSABLE BABY DIAPERS

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Summary

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