Technology Management

MS 325

Types and Patterns of Innovation

 Types and Patterns of Innovation

Invention and Innovation

Types of Innovation

Diffusion Process and Factors of Diffusion

Technology Trajectory

Technology S Curves and Stages

Types and Patterns of Innovation
 Types and Patterns of Innovation

Difference between Invention and Innovation

• Invention-is the creation of new products, processes and
technologies not previously known to exist.
• Innovation- is the transformation of creative ideas into useful
applications by combining resources in new or unusual ways
to provide value to society through improved products,
technology or services.
 Types and Patterns of Innovation

Difference between Invention and Innovation

 Types and Patterns of Innovation

Why Innovation is becoming more Important?

• Technology is changing fast, new products come from new
competitors.
• Fast changing environment, product lifetimes shorter, need to
replace products sooner.
• Products are increasingly difficult to differentiate.
• Customers are more sophisticated, segmented and demanding, and
expect more in terms of customization, newness, quality and price.
• Customers have more choice.
• Markets forming and changing fast.
• With markets and technology changing fast, and good ideas quickly
copied, there is continual pressure to devise new and better
products, processes and services faster.
 Types and Patterns of Innovation

Types of Innovation
Product vs Process Innovation
• Product innovation are embodied in the outputs of an organization—its goods
or services.
• For example, Honda’s development of a new hybrid electric vehicle is a
product innovation.
• Process innovation Process innovations are innovations in the way an
organization conducts its business, such as in the techniques of producing or
marketing goods or services.
• Process innovations are often oriented toward improving the effectiveness or
efficiency of production by, for example, reducing defect rates or increasing the
quantity that may be produced in a given time.
• For example, a process innovation at a biotechnology firm might entail
developing a genetic algorithm that can quickly search a set of disease-related
genes to identify a target for therapeutic intervention.
 Types and Patterns of Innovation

Types of Innovation
Incremental vs Radical Innovation
• Incremental innovation occurs when small improvements are made to a
product, or the processes used in manufacturing a product.
• These changes generally extend the competencies of the innovator
• strengthens the firms competitive position and entrenches the nature of
the industry.
• For example, changing the configuration of a cell phone from one that has an
exposed keyboard to one that has a flip cover or offering a new service plan
that enables more free weekend minutes would represent incremental
innovation
• Radical innovation occurs when major improvements are made to a product.
• These changes often make the competencies involved in the old
technologies obsolete
• sometimes require new marketing channels to be developed
• For example, The development of 3rd, 4th and 5th generation wireless
communication technology
 Types and Patterns of Innovation

Types of Innovation
Architectural vs Component Innovation
• A component innovation (or modular innovation) entails changes to
one or more components of a product system without significantly
affecting the overall design.
• adding gel-filled material to a bicycle seat
• An architectural innovation entails changing the overall design of the
system or the way components interact.
• transition from high-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
 Types and Patterns of Innovation

Types of Innovation
Competence-Enhancing vs Competence-Destroying Innovation
• Competence-enhancing innovations build on the firm’s existing
knowledge base
• Intel’s Pentium 4 built on the technology for Pentium III.
• Turbofans in jet engines, series of breakthroughs in mechanical watches
• Competence-destroying innovations renders a firm’s existing
competencies obsolete.
• Electronic calculators rendered Keuffel & Esser’s slide rule expertise
obsolete.
• Transistors destroyed vacuum tubes – or quartz watches killed (almost)
mechanical watches.
• Whether an innovation is competence enhancing or competence
destroying depends on the perspective of a particular firm.
 Types and Patterns of Innovation

Types of Innovation
Discontinuous Innovation
• Introduction of a pioneering product
• Discontinuous innovations lead to disruption of usage and consumption
behavior patterns.
• There is a change not only in the technology, but also requires consumers
to change to new behavioral patterns in terms of usage and consumption.
• For example, the postal mail giving way to email and internet, the
radio/record player giving way to portable music and sound, the telephone
giving way to the mobile phone, or the traditional glucose and diabetes
blood test giving way to the home kit.
 Introduction

Class Activity 1
Mention one example for each type of innovation.
• Incremental vs Radical Innovation
• Architectural vs Component Innovation
• Competence-Enhancing vs Competence-Destroying Innovation
• Discontinuous Innovation
 Types and Patterns of Innovation

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
 Types and Patterns of Innovation

Factors of Diffusion
Characteristics that appear to influence consumer acceptance.
• Researchers have identified five characteristics that appear to
influence consumer acceptance
1.Relative advantage
2.Compatibility
3.Complexity
4.Trialability
5.Observability
 Types and Patterns of Innovation

• Relative advantage
The degree to which potential consumers perceive a new product is
superior to 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 is consistent
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
 Types and Patterns of Innovation

• Trialability
The degree to which a new product is capable of being tried on 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); Use of celebrities and
athletes to wear/use products can enhance speed of adoption
Types and Patterns of Innovation

Diffusion Process for Technology

Types and Patterns of Innovation

Diffusion Process for Technology

 Types and Patterns of Innovation

Factors impacting High rate of Diffusion

 Types and Patterns of Innovation

Diffusion Enhancements Strategies

 Types and Patterns of Innovation

Technology S-Curves
• S-Curve is a measure of the life cycle/rate of adoption of an
innovation/technology.
• Technology S-curves are most often used to represent the
technology’s rate of performance improvement or its rate of adoption
in the marketplace
• S-Curves in Technological Improvement:
 Types and Patterns of Innovation

Stages of S-Curve
• Startup
• Survival, market validation, funding
• Growth - Scale
• Increasing market, expanding to new
geography, increased manufacturing,
hiring
• Maturation - Compete
• Increased number of competitors,
lower margins, heads down
• Decline - Transition
• Compromises to stay alive, staff
layoffs
 Types and Patterns of Innovation

Thickness of mechanical watches

 Types and Patterns of Innovation

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 from carbon copying to photocopying, or vinyl records
to compact discs
• Technological discontinuity may initially have lower
performance than incumbent technology.
• E.g., first automobiles were much slower than 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
 Types and Patterns of Innovation

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
 Types and Patterns of Innovation

Tesla Motors Case

1. Is the Tesla Model S a radical innovation or an incremental
innovation? Competence enhancing or destroying, and from
whose perspective? Is it a component or an architectural
innovation?
2. What factors do you think influence the rate at which
consumers have adopted (or will adopt) the Tesla Model S?
3. Where do you think electric vehicle battery technology is on the
technology s curve?
4. Do you think Tesla Motors will be profitable? Why or why not?