Forms and Models of Innovation PDF

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Subscribe to DeepL Pro to translate larger documents. Visit www.DeepL.com/pro for more information. Forms and models of innovation Innovation and Project Management Course M School of Engineering - University of Bologna Federico Munari [email protected] -1-  Agenda ▪ Definitions and models of innovation ▪ Evolutionary dynamics of new technologies ▪ S-curves ▪ Technology Readiness Levels ▪ Technological discontinuities and impact on the industry ▪ Disruptive Technologies and Industry 4.0 Federico Munari - University of Bologna 2-  Definitions and forms of innovation Federico Munari - University of Bologna 3-  Most Innovative Companies 2023 (BCG) Federico Munari - University of Bologna 4-  What technological innovation? The institutional definition "An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations." (Oslo Manual, OECD, 3rd Edition) Federico Munari - University of Bologna 5-  The course's vision of innovation ▪ Innovation as the ability to create new value To better serve existing and/or new customers ▪ Combination of invention (technological dimension) + exploitation commercial (size of market) Exploitation Invention Innovation commercial Federico Munari - University of Bologna 6-  A 360o view on innovation ▪ Too narrow a view of innovation can lead to ignoring opportunities for value creation and make one vulnerable to competitors. ▪ Shifting perspective to the value created for the customer has three implications: "Business Innovation is About New Value, Not New Things." "Business Innovation Comes in Many Flavors." "Business Innovation is Systemic" Source: Sawhney et al. (2006) MIT SMR. Federico Munari - University of Bologna 7-  Innovation can take on different shapes Forms of innovation Authors of reference PRODUCT and PROCESS Innovation Abernathy and Utterback RADICAL and INCREMENTAL innovation. Tushman and Anderson Innovation COMPETENCE DESTROYING and Tushman and Anderson COMPETENCE ENHANCING ARCHITECTURAL and MODULAR innovation. Henderson and Clark DISRUPTIVE and SUSTAINING innovation. Christensen For further study: Schilling M. Chapter 3 (READINGS) Federico Munari - University of Bologna 8-  Product vs. process innovation The nature innovation PRODUCT INNOVATIONS PROCESS INNOVATIONS Are incorporated into the are changes in the ways in which an goods or services made by an enterprise carries out its enterprise activities, to improve their efficiency or effectiveness A product innovation for a company can constitute process innovation for another  Radical vs. incremental innovation The intensity and degree of breadth innovation RADICAL INCREMENTAL INNOVATIONS INNOVATIONS The classification of an innovation into radical or incremental depends on the distance of the innovation from a pre-existing product or process Radical and incremental innovations thus lie along a continuum involving varying degrees of novelty and differentiation The radical nature of a technological innovation is relative, because it changes over time and according to the relevant perspective of analysis  Innovation competence destroying or competence enhancing The effect exerted on skills INNOVATION COMPETENCE INNOVATION COMPETENCE ENHANCING DESTROYING When it consists of an evolution when it does not flow from the of the knowledge base knowledge already pre-existing possessed or even makes it inadequate The characteristic of an innovation to be competence enhancing or competence destroying is also relative to the perspective of the enterprise and its knowledge base  Architectural or radical innovation Target scope innovation ARCHITECTURAL INNOVATION MODULAR INNOVATION means a change in the overall (or component) means. structure of the system or An innovation involving changes in Of the way the components one or more components of a interact with each other product system, without substantial changes to its overall configuration For example, the transition from gasoline car to electric For example, a bicycle seat in a new car. material  Innovation strategy: key questions and areas Federico Munari - University of Bologna 13- The Determinants of Successful Innovation (Cooper, 2017) According to Cooper (2017), the ability of firms to generate successful Innovation depends on 4 key factors: ✓ Innovation strategy ✓ Balancing the project portfolio ✓ Effective process from "Idea to Launch" ✓ Culture and leadership To these can be added rootedness in a dynamic Innovative Eco-System (Innovation Ecosystem) Innovation strategy: key questions The Innovation Strategy aims to clarify how the enterprise can create a sustainable competitive advantage position through innovation. ▪ It answers three key questions (Pisano, 2016 HBR): How will innovation create value for potential clients? What types of innovations will allow the company to create and capture value, and what resources should each type receive? How will the company capture a share of the value its innovations generate?  The Role Innovation Strategy ▪ Define an ambitious vision ("bold winning aspiration"), fueled by innovation, of how the enterprise can create value in the medium/long term (Innovation Ambition). " Our goal when we created Tesla a decade ago was the same as it is today: to accelerate the advent of sustainable transportation by bringing compelling mass market electric cars to market as soon as possible." ▪ Define in which areas (market and technological) to operate, to create new solutions that create unique and sustainable value (Innovation Domains). ▪ Identify required skills (internal and external) and pathways to Build them, integrate them, modify them Federico Munari -16- Innovation Strategy the business innovation development process Market/product strategy Analysis and forecasting market trends Innovation Innovative Project Post-project Business learning Strategy project Manage strategy portfolio ment Analysis and forecasting technology trends Technology strategy The definition of the company's Innovation Strategy should be supported by systematic analysis of technology and market trends relevant to the company (technology and market intelligence): S-curves are one of the tools that can serve this prposito  The analysis of technology trends: S-curves of technological performance Federico Munari - University of Bologna 18-  The Technology Intelligence process: objectives Technology Intelligence refers to the process of gathering, analyzing, and using information about technological developments and trends in order to make informed decisions and gain competitive advantages. It is an important antecedent for defining a company's Innovation Strategy. It involves monitoring advances in various fields of technology, understanding their implications for businesses and sectors, and strategically applying this knowledge to promote innovation, improve products or services, and stay ahead of the competition.  S-shaped technology curves It has been observed that both the rate of improvement in the performance of a technology and its rate of diffusion in the market tend to follow the pattern of an S-curve: The S-curve of technological improvement. At the initial stage, performance improvement is slow because the basic principles of the technology are only partially understood. Later, when knowledge of the technology increases, improvement begins to be more rapid. Finally, as technology approaches its natural limit, the curve tends to flatten.  An example of S-curves: the new technologies lighting http://www.voltimum.it/news/6670/cm/tecnologia-e-vantaggi-dei-led.html 21  Technological discontinuities and new opportunities: the S-curves Technologic al Emerging Performance technolog y (Examples: -MegaPixel -Lumen/Watt) Establishe Radical d technolog y Incremental Time  Can S-curves be predicted? The limits of technology Performance Technology Establishe emerging d technolog y Performance is not a linear function of : for mature technologies, increasingly intense efforts can lead to increasingly modest results. Conversely, improvements in emerging technologies can be surprisingly fast Time/Commitment to R&D  The natural limits of technology Upper limit? Performance Performance is ultimately limited by physical constraints (e.g., chemical-physical properties of matter). - Copper wires and transmission capacity data - Semiconductors electron velocity Time/Commitment to R&D  S-shaped technology curves Technologies do not always succeed in reaching their limit because: could be replaced by the advent of new discontinuous technologies firms may be reluctant to adopt a new technology because of performance improvements that are too slow and costly and significant investment in the existing technologies  Technology discontinuities and competitive impact Federico Munari - University of Bologna 26-  Innovation as "force creative destruction" Innovation as a process of CREATIVE DISTRUCTION. ("a perennial gale of creative destruction.") Joseph A. Schumpeter (1942) "Capitalism, socialism and democracy." Federico Munari - University of Bologna 27-  Technological innovation and the creation of new opportunities Technological innovation as a "creative force of destruction" (Schumpeter, 1942): ▪ results in the emergence of new industries and markets; ▪ changes the structure of existing industries, creates opportunities for the emergence of new ideas, products and businesses; ▪ Is the source of the competitive advantage; ▪ Changes the enterprise's distinctive resource and skill base.  iPhone launch: keynote speech by Steve Jobs It was observed that both the rate of improvement of the http://www.youtube.com/watch?v=ftf4riVJyqw&feature=rela ted  The disruptive effect of innovation Key Note by Steve Jobs of presentation of the iPhone (2007) "The problem is that they're not so smart and they're not so easy to use. What we want to do is make a leapfrog product that is way smarter than any mobile device has ever been, and super easy to use." [...] "Today Apple reinvents the phone." Federico Munari - University of Bologna 30-  S-curves for modeling the dynamics of technology substitution. Anderson and Tushman found that changes triggered by technological discontinuities proceed cyclically Each technological discontinuity first triggers a period of turbulence and uncertainty (era of turmoil), characterized fierce competition among alternative technological models and designs, until a dominant design is established. At this point, firms focus on incremental improvements (incremental era).  Some common elements in the technology cycle ▪ Entry of new enterprises in the early stage of an industry (as a result of technological discontinuity) ▪ Competition among different technology options in the initial turmoil ▪ Concentration in the maturity stage of an industry (and related "shake-out") ▪ Importance of establishing the dominant design (dominant design) as a watershed ▪ Effect of radical innovations on industry structure (frequent cases of failure of the Incumbent, i.e., previous leading firms, to the benefit of new entrants) The failure of incumbents in the face of technological discontinuities Main reasons for the failure of the Incumbents: ▪ Lack of economic incentives (cannibalization risks) ▪ Lack of expertise and organizational inertia ▪ Cognitive limitations ("These are not watches!!!") Incumbents' strategies in the face of technological discontinuities ▪ Having adequate "sensors" on the development of the new technology (exploration vs. exploitation) ▪ Keep "options" open on new technology (e.g., educational acquisitions) ▪ Fostering autonomy and entrepreneurship for the internal development of new technology (dual organization) ▪ Leveraging complementary resources to bridge any technological gap. Exploration and exploitation in Amazon: new technologies and new markets http://www.forbes.com/sites/greatspeculations/2015/10/06/heres-why-amazon-could-see- market-share-growth-in-the-international-markets/#31c910d6e12b  Appendix: Technology Readiness Levels Federico Munari - University of Bologna 36-  The degree of maturity of a technology: Technology Readiness Levels (TRLs) The Technology Readiness Levels (TRL) scale was developed by NASA. in the 1990s, as a tool to measure the degree of maturity of a new technology. It has been adopted in several Horizon 2020 funding programs. of the European Commission. It consists of 9 levels: TRL 1 - Basic principles observed TRL 2 - Technology concept formulated TRL 3 - Experimental proof of concept TRL 4 - Technology validated in lab TRL 5 - Technology validated in relevant environment (i.e. industrially relevant environment). TRL 6 - Technology demonstrated in relevant environment (i.e. industrially relevant environment). TRL 7 - System prototype demonstration in operational environment TRL 8 - System complete and qualified TRL 9 - Actual system proven in operational environment (i.e. competitive manufacturing) A representation of the TRL scale Example of TRL scale application for NASA  Reference readings ▪ Schilling, M. (2017) "Innovation management," McGraw-. Hill, 4ed, (ch. 3). ▪ Cooper, R. (2017) "We have come a long way baby!", Journal of Product Innovation Management Journal ▪ Reports on technology trends (Accenture, PWC, BCG, McKinsey) featured on the course website Federico Munari -40-