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Technology and Innovation Henry C. Co Technology and Operations Management, California Polytechnic and State University Businessmen go down with their businesses because they like the old way so well they cannot bring themselves to change. … Henry Ford, My Life and Times, 1922
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Technology and Innovation Henry C. Co Technology and Operations Management, California Polytechnic and State University
Businessmen go down with their businesses because they like the old way so well they cannot bring themselves to change. … Henry Ford, My Life and Times, 1922 Management of Technology: Introduction (Henry C. Co)
Technology and Innovation • Technology • “Knowledge of how to do things.” • “The system by which a society satisfies its needs and desires.” • “Capability that a firm needs to provide its customers the good and/or services the firm proposes to offer, now and in the future.” • Innovation • “A business process which brought inventions to commercial use.” • “Commercial Use.” Management of Technology: Introduction (Henry C. Co)
Who invented the vacuum cleaner? J. Murray Spengler invented the vacuum cleaner originally called an ‘electric suction sweeper.’ But it was W. H. Hoover who had a good idea of how to market and sell the product.
Who invented the sewing machine? Elias Howe produced the world’s first sewing machine but it was Isaac Singer who stole the patent and built a successful business from it (Singer later was forced to pay Howe a royalty on all machines made).
Who invented the telegraph? In 1830, Joseph Henry demonstrated the potential of a William Sturgeon device for long distance communication by sending an electronic current over one mile of wire to activate an electromagnet which caused a bell to strike. Thus the electric telegraph was born, however, other inventors made a commercial success of that invention. Samuel Morse only invented the telegraph code, all the other inventions came from others. Morse combined marketing and political skills to secure state funding for development work, and to spread the concept of communication over vast distances on the continent of America.
Idea Generation + Problem-Solving Invention. • Invention + Implementation Innovation. • 12-20% of inventions results in successful innovation. • Innovation + Diffusion Economic Value. Management of Technology: Introduction (Henry C. Co)
Management of Innovation is the creation and development of new ideas. • Management of Technology is the acquisition and application of existing innovations (diffusion). • Links engineering, science, and management disciplines to plan, develop, and implement technological capabilities to shape and accomplish the strategic and operational objectives of an organization. Management of Technology: Introduction (Henry C. Co)
Definitions • Science is the discovery and explanation of natural phenomena for the sake of knowledge & understanding • Technology is the knowledge and technique of the transformation of natural phenomena for human purpose • Engineering is the understanding and application of the scientific principles underlying technology and its transformation for human purpose; bridges the gap between S & T • Basic Research is exploring the domain of science for the fundamental principles and basic understanding of nature • Applied Research is taking scientific discoveries and generating technical inventions which may have potential for satisfying human purpose. Management of Technology: Introduction (Henry C. Co)
Developmental Research - that research necessary to develop the invention to level of functional capability desired • Invention - first documentation of an idea for a new device or process with features thought useful for human purpose • Innovation - the process whereby an invention is further researched, designed and engineered into a form suitable for the commercial marketplace or public-sector use: • Incremental Innovation - modifications or extensions of existing products/services for improved performance at (usually) lower cost • Radical Innovation - achieving a brand-new functional capability that separates this product/service from its predecessors; opens the possibility of totally new industries Management of Technology: Introduction (Henry C. Co)
Major Stages in the Innovation Process Invention (Creation of Knowledge): Acquisition of new knowledge Innovation (Transformation of Knowledge): Application of new knowledge Diffusion (Utilization of Knowledge): Acceptance and adoption of new knowledge
Trajectory of Tech Innovation Physical limit of technology Performance Effort (funds) Technological performance often follows an S-shaped curve Foster, Innovation: The Attackers Advantage, Summit Books, 1986
Successive Tech Innovations Performance Physical limit of technology Effort (funds) Foster, Innovation: The Attackers Advantage, Summit Books, 1986
The Model T • For 4 years, Ford developed, produced, and sold five different engines (2-6 cylinders) in a factory of trade craftsmen working with GP machines. • Out of this experience came a dominant design, the Model T. • Within 15 years, 2 million engines of this single design were produced each year in a mass-production facility. During that period, there were incremental (no fundamental) innovation in product. Management of Technology: Introduction (Henry C. Co)
Product v. Process Innovation • The fluid-pattern stage • During the early stages of the product’s life cycle, the level of prototype innovation is high. This is because firms modify, change, and update the product in an effort to establish a dominant design. • The transitional-pattern stage • Once a dominant design is established, emphasis shifts to process innovations in order to provide the capability to mass-produce the product. This typically requires a shift from GP to specialized equipment. During this period, the level of product innovation falls dramatically. • The specific-pattern stage • At this stage, incremental process innovations further specialize the production process to reduce cost, enhance quality, and make further improvements. This leaves firms with a rigid process and an aging product (highly inflexible, difficult to adapt to environmental changes). Management of Technology: Introduction (Henry C. Co)
Innovation and Development Management of Technology: Introduction (Henry C. Co)
Life Span of the Computer • First generations (1950s) of IBM computers had a useful market life of more than a decade. • IBM 360 (mid 1960s), IBM maintained its dominant market position until the arrival of minicomputers. Then companies like Digital, Data General, etc., started challenging IBM from the low end of the business. • Useful market life of computers shrank from 10 years to 8 years, then only 5 years, then 3, and 2. • Desktop PCs and laptops: useful market life dropped to less than a year. Management of Technology: Introduction (Henry C. Co)
The Classic Product Cash Flow • Window of opportunity: the period in which the new product faces no or low competition in the market place. • The window of opportunity for market exploitation is constantly shrinking as the competition brings new products more and more frequently. Management of Technology: Introduction (Henry C. Co)
The High-Tech Product Cash Flow • Project A, which was introduced before the competition came up with an equivalent or better product, has been able to generate a positive cumulative cash flow, with a good return on investment during the R&D cycle. • Project B was introduced at a time when some competition already existed, results in a negative cumulative cash flow. Management of Technology: Introduction (Henry C. Co)
Case Studies • The Case of the PowerPC • Somerset, a joint venture by IBM, Apple, and Motorola in 1991 to develop the PowerPC. • “Time May Have Passed the PowerPC” (Business Week, 4, March 1996), Ira Sager wrote: • As it is, Somerset hasn’t even come close to its goal of posing a serious challenge to Intel Corp.’s dominance in microprocessors … Somerset fell behind schedule on more powerful versions of the PowerPC chip … “Three years ago, they had it in their hands,” says Jon Rubinstein, president of Firepower Systems Inc., one of the few companies outside the Somerset trio to use the PowerPC … But technical difficulties, internal bickering, and management upheavals delayed successor chips by 18 months. Says Sun CEO Scott G. McNealy: “The PowerPC is on really shaky ground.” • The case of the vanishing need • “Stacker” to double the hard disk space. Management of Technology: Introduction (Henry C. Co)
Knowledge Needs • How to integrate technology in the overall strategic objectives of the firm? • The allocation of resources to and within R&D, engineering, and operations • Planning for technology development or acquisition, and • Other strategic questions. • How to get into and out of technologies faster and more efficiently? • The selection of new technologies • Prioritization • Timing of introduction • Discontinuation. Management of Technology: Introduction (Henry C. Co)
How to assess/evaluate technology more effectively? • Evaluating current and future competitiveness of a company’s technology • The relative risk of in-house development v. acquisition, • The pace of future changes in technology and potential markets. • Potential returns on investment. • How best to accomplish technology transfer? • Transferring R&D results to design and manufacturing, • Assimilating externally developed technology into the company’s internal R&D activities. Management of Technology: Introduction (Henry C. Co)
How to reduce new product development time? How can the links among design, engineering, and manufacturing be improved? • Greater coordination of these functions • Parallel efforts will reduce the lag between R&D and market delivery. • How to manage large, complex, and interdisciplinary/inter-organizational projects? • Key is recognizing the interrelationship of functions in the total system and managing the organization as a system to meet budget, schedule, and performance goals. Management of Technology: Introduction (Henry C. Co)
How to manage the organization’s internal use of technology? • Introduction and management of operations technologies. • How to leverage the effectiveness of technical professionals? • Motivation, measurement, training, supervision, obsolescence, • Integration of technical and non-technical issues and individuals. Management of Technology: Introduction (Henry C. Co)
Knowledge Needs • How to integrate technology in the overall strategic objectives of the firm? • The allocation of resources to and within R&D, engineering, and operations • Planning for technology development or acquisition, and • Other strategic questions. • How to get into and out of technologies faster and more efficiently? • The selection of new technologies • Prioritization • Timing of introduction • Discontinuation. Management of Technology: Introduction (Henry C. Co)
How to assess/evaluate technology more effectively? • Evaluating current and future competitiveness of a company’s technology • The relative risk of in-house development v. acquisition, • The pace of future changes in technology and potential markets. • Potential returns on investment. • How best to accomplish technology transfer? • Transferring R&D results to design and manufacturing, • Assimilating externally developed technology into the company’s internal R&D activities. Management of Technology: Introduction (Henry C. Co)
How to reduce new product development time? How can the links among design, engineering, and manufacturing be improved? • Greater coordination of these functions • Parallel efforts will reduce the lag between R&D and market delivery. • How to manage large, complex, and interdisciplinary/inter-organizational projects? • Key is recognizing the interrelationship of functions in the total system and managing the organization as a system to meet budget, schedule, and performance goals. Management of Technology: Introduction (Henry C. Co)
How to manage the organization’s internal use of technology? • Introduction and management of operations technologies. • How to leverage the effectiveness of technical professionals? • Motivation, measurement, training, supervision, obsolescence, • Integration of technical and non-technical issues and individuals. Management of Technology: Introduction (Henry C. Co)
Up-Market Impetus • Intersecting trajectories of customer need and technological trajectories. • Note that the slope of technological trajectory is steeper than the slope of the trajectories of customer need. • Product technologies that under-perform what key customer demand today may improve to squarely address what those same customers demand tomorrow. Management of Technology: Introduction (Henry C. Co)
Clayton Christensen’s Theory of Disruptive Innovation • A disruptive innovation reaches the point where it can satisfy the least demanding customers; least demanding customers drop the established, higher performing option on the basis of other factors (cost, convenience, etc.). • The established product exceeds the needs of the most demanding customers; sustaining innovations now fuel “performance oversupply.” • The disruptive innovation meets the level of performance required by the most demanding customers; those customers drop the established option on the basis of other factors. Management of Technology: Introduction (Henry C. Co)
Trajectories of Customer Needs • Customers’ capacity to absorb technological improvement depends on • How much time customers have to learn how to use new products with new features. • How rapidly their work and lifestyles can change to utilize those capabilities, • Regulatory factors (e.g. speed limit). • Performance constraints created by insufficient complementary products or services. Management of Technology: Introduction (Henry C. Co)
Technology Trajectories • Technology trajectories are driven by manager’s efforts to address the need of the higher-end market (higher profit margin). • Toyota and Honda entered the North American market in its bottom tiers, with their Corona and CVCC models. Each moved aggressively up-market, that by 1998 their Lexus and Acura nameplate products had become major engine of profit. • In the 1990s, Compaq and Dell shifted from desktop PC to higher-end engineering workstations and network servers. • Nucor began as a maker of low-end concrete reinforcing bar. It has sequentially attacked higher-value markets for structural and then sheet steel, while de-emphasizing the original low-end products. Management of Technology: Introduction (Henry C. Co)
Sustaining Innovations • Maintain a trajectory of performance improvement that has been established in a market; i.e., they give customers more and better in the attributes they already value. • Example: Set of improvements in technologies to make conductor lines of ever finer width on the surface of silicon wafers, to help IC process more information at higher speed. Management of Technology: Introduction (Henry C. Co)
Disruptive Innovations • Introduce a very different package of attributes than the ones that mainstream customers value. • Often under-perform along traditional metrics of functionality initially; Mainstream customers are unwilling and unable to use disruptive products in applications they know or understand. • Tend to be cheaper, simpler and more convenient to use, thus opening new markets. • Once disruptive innovators have secured a foothold in a low-end or emerging market, up-market impetus push the disruptive innovators to shift to the large mainstream market. Management of Technology: Introduction (Henry C. Co)
Disruptive Technology • A quantum change, not an incremental step, that finally affects mainstream operations • A technology that under performs established products at first • A technology that a fringe (new/young) customer values highly • Most companies do not realize the impact of this technology until it is too late and others have taken over their field/product • Characteristics: • Markets that do not exist cannot be analyzed. • Products are: cheaper, faster, simpler, more convenient to use. Management of Technology: Introduction (Henry C. Co)
Case Studies by Christensen • Computer disk drives. • Intel: microprocessor speed increases about 20% per year. • Eli Lily: Purity of insulin improved from 50,000 ppm in 1925 to 10 ppm in 1980 (by about 14% per year). • Manufacturers of hydraulic excavators increased by 15% per year the amount of earth their machine could heft in a single scoop; from 0.25 cubic yard in 1948 to 10 cubic yards by 1974. Management of Technology: Introduction (Henry C. Co)
Other Examples • Transistor Pocket Radios • Sony’s early transistor pocket radios were a disruptive innovation relative to the Hi-Fi tabletop radios built with vacuum tubes. • Sony’s innovation sacrificed sound fidelity but created a new market application in which its “lower-performing” product was valued for its small size, light weight, and portability. • Intel, Bloomberg Financial Markets, Honda, Charles Schwab, Wal-Mart, Intuit, Sony, Nucor, Sun, Cisco, J&J Lifescan, Staples, U.S. Surgical, and McDonald’s are few examples of prominent firms that originally entered their industries as disruptive technologies. • More. Management of Technology: Introduction (Henry C. Co)
Revolutionary Innovation • Major product/process breakthroughs which create or change an industry or creative symbiosis of previously unrelated technologies (e.g., CIM). • Typically, originate outside the firms in an industry by small, entrepreneurial individuals or organization (Exceptions: IBM- system 360, RCA-color TV, TI-integrated circuits.) • Relatively rare. Management of Technology: Introduction (Henry C. Co)
