MBA 651: Management of Technology and Innovation Seminar 1: Introduction

1. MBA 651: Management of Technology and InnovationSeminar 1: Introduction Moses Acquaah 377 Bryan 334-5305

2. Outline • What is Innovation? • Importance of Technological Innovation • Impact of Technological Innovation on Society • Why Strategic Management of Technological Innovation? • Creativity and Innovation • Sources of Innovation • Models of Innovation Types

3. What is Innovation? • The act of introducing a new product, device, method or material for application to commercial or practical objectives • The creation of new knowledge that is applied to practical problems • Innovation is invention + commercialization • The new knowledge can be technological or market related • Technological – knowledge of components, linkages between components, methods, processes, and techniques that go into a product or service. • Market – knowledge of distribution channels, product applications, customer expectations, preferences, needs, and wants.

4. Importance of Technological Innovation • Technological innovation is the most important driver of competitive advantage in many industries • The increasing importance of technological innovation is due to (1) Globalization of markets (2) Advent of advanced technologies (CAD, CAM, flexible manufacturing technologies) (3) Advances in information technology

5. Impact of Technological Innovation on Society • Positive Effects • Fosters increased GDP • Enables greater communication and mobility • Improvements in medical treatments • Negative Effects • Pollution • Production technologies can create pollution that is harmful to surrounding communities • Depletion of resources • Agricultural and fishing technologies can result in erosion, elimination of natural habitats and depletion of ocean stocks • Other unintended consequences of technological change • Medical technologies can create antibiotic-resistant strains of bacteria • Positive effects > negative effects

6. Importance of Strategic Management of Technological Innovation • Most innovative ideas do not become successful new products • Improving a firm’s innovation success rate requires: (1) An in-depth understanding of the dynamics of innovation; (2) A well-crafted innovation strategy; and (3) A well-designed process for implementing the innovation strategy.

7. Creativity and Innovation • Innovation begins with creativity. • Creativity is the ability to generate new and useful ideas. It enables individuals and organizations to produce work that is useful and novel. • Individual creativity is a function of • Intellectual abilities • Knowledge • Thinking styles • Personality traits • Intrinsic motivation • Environment that provides support & rewards

8. Creativity and Innovation • Organizational creativity is a function of • Creativity of individuals within the organization • Social process & contextual factors that shape the way individuals interact and behave • Structure • Routines • Incentives • Ideas collection systems (suggestion boxes, Intranet)

9. Sources of Innovation (1) Individuals (a) Inventors – Characteristics of individual inventors include: • trained in multiple fields; • highly curious and interested in problems than solutions; • question previously made assumptions; • view all knowledge as unified; • have both inventive and entrepreneurial traits. • (b) Users • When users create solutions to their own needs.

10. Sources of Innovation (2) Organizations (a) In-house R&D by firms • Help build a firm’s absorptive capacity – ability to assimilate and utilize new knowledge and information obtained externally. (b) Collaborations with customers or other potential users of innovation. (c) Collaborations with external network of other firms that may include competitors, complementors, and suppliers. • Complementors are organizations or individuals that produce complementary goods or services (e.g., lightbulbs for lamps; DVD movies for DVD players; Camera films for Cameras). (d) Collaboration with other external sources of scientific and technical information (universities & government labs).

11. Sources of Innovations • (3) Universities and government-funded research • (a) Universities • Many universities have become active in setting up technology transfer offices to commercialize inventions of faculty. • Universities also contribute to innovations through the publications of research findings. • (b) Government-funded research • Invest in R&D through own laboratories • Formation of science parks & incubators • Grants for other public or private research entities

12. Sources of Innovation (4) Private non-profit organizations • Contribute to innovative activity in a variety of ways by conducting both in-house R&D, and funding development efforts of others • Non-profit hospitals (10 of top 20 US non-profit R&D performers in 1997) • Private research institutes • Private foundations • Professional or technical societies • Academic and industrial consortia • Trade associations

13. Sources of Innovation (5) Collaborative networks • Collaborative networks allow the leveraging of resources and capabilities across multiple firms or individuals. • Collaborative networks include joint ventures, licensing & second-sourcing agreements; research associations, government-sponsored joint research, value-added networks for technical or scientific interchange, & information networks. • Collaboration often facilitated by geographic proximity, which can lead to the creation of regional technology clusters (e.g., Silicon Valley – Semiconductor firms; Lower Manhattan – Multimedia firms; Modena, Italy – Knitwear firms). • Especially important in high-tech sectors.

14. Models of Innovation Types • (1) Product innovation vs. Process innovation • Product innovations are embodied in the outputs of a firm – its goods and services • Process innovations are often oriented toward improving the effectiveness or efficiency of producing or marketing goods or services (e.g., reducing defect rates). • New product innovations and process innovations often occur in tandem: • New processes may enable the manufacture of new products • New products may enable the development of new processes • A product innovation for one firm may simultaneously be a process innovation for another

15. Models of Innovation Types (2) Radical innovation vs. Incremental innovation • Radical innovation • An innovation that is very new and different from existing products and processes. • The most radical innovations • Are risky – they embody new knowledge, producers and customers • May be relative and may change over time or with respect to different observers. • Incremental innovation • An innovation that makes a relatively minor change from (or adjustment to) existing products and processes • It may not be particularly new or exceptional • It might have been previously known to the firm or industry

16. Models of Innovation Types (3) Competence Enhancing vs. Competence Destroying Innovation • Competence Enhancing Innovation • An innovation that builds on a firm’s existing knowledge base (e.g., generations of Microsoft Windows and Intel’s microprocessors). • Competence Destroying Innovation • An innovation that does not build on a firm’s existing competencies or renders them obsolete (e.g., typewriter vs. word processing; slide rule vs. calculators).

17. Types of Innovation (4) Architectural vs. Component Innovation • Most products and processes are made up of a hierarchically nested system of components. • Component Innovation • An innovation to one or more components that does not significantly affect the overall configuration of the system. • Architectural Innovation • An innovation that changes the overall design of a system or the way its components interact with each other. • Knowledge about a component is required to initiate or adopt a component innovation • To initiate and adopt an architectural innovation typically requires the architectural knowledge about how the components link and integrate to form the whole system.

18. Models of Innovation Types • The categories of innovation types described are not independent. • Each category shares relationships with others • Architectural innovations are often considered more radical and more competence destroying than component innovation. • The categorization of innovation into competence enhancing vs. destroying, architectural vs. component, or radical vs. incremental depends on the time frame and industry context from which it is considered.