Lecture 02 SMTI 2024 Types and Patterns of Innovation PDF

STRATEGIC MANAGEMENT OF TECHNOLOGY & INNOVATION LECTURE 2: TYPES AND PATTERNS OF INNOVATION Hans Berends 1 SBE/ KIN Research Group/ SMTI 2023 AGENDA ▪ Types of innovation > Product, service and process innovation > Incremental and radical innovation...

STRATEGIC MANAGEMENT OF TECHNOLOGY & INNOVATION LECTURE 2: TYPES AND PATTERNS OF INNOVATION Hans Berends 1 SBE/ KIN Research Group/ SMTI 2023 AGENDA ▪ Types of innovation > Product, service and process innovation > Incremental and radical innovation > Modular and architectural innovation ▪ Technology trajectories > S-curves ▪ Sustaining and disruptive innovation See Schilling Chapter 3 & Christensen & Raynor (2003) 2 SBE/ KIN Research Group/ SMTI 2023  TYPES OF INNOVATION 3 SBE/ KIN Research Group/ SMTI 2023 TYPES OF INNOVATION ▪ Product, service and process innovation ▪ Incremental vs radical innovation ▪ Architectural vs component innovation ▪ Sustaining vs. disruptive innovation (Christensen & Raynor, 2003) 4 SBE/ KIN Research Group/ SMTI 2023 PRODUCT, SERVICE AND PROCESS INNOVATIONS Product Service Process What is the relation between product and process innovation? 5 SBE/ KIN Research Group/ SMTI 2023 LED-LIGHT RECIPES FOR HORTICULTURISTS 6 SBE/ KIN Research Group/ SMTI 2023 INCREMENTAL AND RADICAL INNOVATION ▪ Incremental innovation > An innovation that makes a relatively minor change from (or adjustment to) existing practices (Schilling, p.47) > Builds on existing knowledge and resources ▪ Radical innovation (~ discontinuous innovation): > An innovation that is very new and different from prior solutions > requires completely new knowledge and resources > significant performance differences (?) (Tushman & Anderson, 1986) ▪ Distinction can be applied at the level of the world; industry; firm; business unit; 7 SBE/ KIN Research Group/ SMTI 2023  INCREMENTAL AND RADICAL INNOVATION 8 SBE/ KIN Research Group/ SMTI 2023 ARCHITECTURAL VERSUS MODULAR INNOVATION 9 SBE/ KIN Research Group/ SMTI 2023 ARCHITECTURAL OR MODULAR? 10 SBE/ KIN Research Group/ SMTI 2023  TECHNOLOGY TRAJECTORIES 11 SBE/ KIN Research Group/ SMTI 2023 12 SBE/ KIN Research Group/ SMTI 2023 ONE TECHNOLOGY, MULTIPLE APPLICATIONS 13 SBE/ KIN Research Group/ SMTI 2023 TECHNOLOGY TRAJECTORIES ▪ Technology trajectory: “The path a technology takes through time” (Schilling, p.48) ▪ re-use of components ▪ recombination of components ▪ novel components 15 SBE/ KIN Research Group/ SMTI 2023 RE-USE & PATH DEPENDENCE 16 SBE/ KIN Research Group/ SMTI 2023 RECOMBINATION (1) Markus Kayser, Solar Sinter 17 SBE/ KIN Research Group/ SMTI 2023 RECOMBINATION (2) 18 Stephan Tarnier, SBE/ KIN Research Paris Group/ (1870s) SMTI 2023 NeoNurture – The Car Parts incubator (2010) NOVEL COMPONENTS (?) ▪ Using qubits in quantum computing? 19 SBE/ KIN Research Group/ SMTI 2023  TECHNOLOGY S-CURVES 20 SBE/ KIN Research Group/ SMTI 2023 TECHNOLOGY S-CURVE: RATE OF IMPROVEMENT (FOSTER, 1986; SCHILLING, P.53) Technology approaches its physical limits Performance Sustaining mastery over technology Pioneering science Major technical obstacle overcome Effort / Time 21 SBE/ KIN Research Group/ SMTI 2023 22 SBE/ KIN Research Group/ SMTI 2023 S-CURVES IN RENEWABLE ENERGY (SCHILLING & ESMUNDO, 2009) 23 SBE/ KIN Research Group/ SMTI 2023 PHOTOVOLTAIC TECHNOLOGIES: EFFORT VS. TIME 24 SBE/ KIN Research Group/ SMTI 2023 Dale & Scarpulla 2023 S-CURVES: UNCERTAINTY ABOUT LIMITS SOOD & TELLIS (2005) 25 SBE/ KIN Research Group/ SMTI 2023 MOORE’S LAW S-CURVE: TRANSITIONS Transition to a new technology Performance Effort / Time 27 SBE/ KIN Research Group/ SMTI 2023 TECHNOLOGY LIFE CYCLE (NEXT LECTURE) TUSHMAN & ANDERSON (1990) See Schilling Fig 3.10 28 SBE/ KIN Research Group/ SMTI 2023  DYNAMICS OF INDUSTRY PARTICIPATION Number of firms in industry Transistors T Tubes ICs V Auto Calculators Typewriters 1875 1900 1925 1950 1975 29 SBE/ KIN Research Group/ SMTI 2023 Utterback and Suarez 1993 USE OF TECHNOLOGY S-CURVE ▪ Understand the technology’s performance take-off > Where are you on the s-curve? > What is the rate of learning? ▪ Recognize the limits of specific technology > Is the learning flattening? > Do other technologies improve faster? ▪ Guide resource allocation into existing and new technologies > Do not wait until end of s-curve with investing > Exploration is long term, uncertain, interdependent 30 SBE/ KIN Research Group/ SMTI 2023 ADOPTION S-CURVES ▪ Adoption S-curves are not the same as technology S- curves! ▪ Adoption s-curves are about cumulative market penetration or sales ▪ Technology s-curves are about performance improvement of technology 31 SBE/ KIN Research Group/ SMTI 2023  SUSTAINING AND DISRUPTIVE INNOVATION 32 SBE/ KIN Research Group/ SMTI 2023 SUSTAINING AND DISRUPTIVE INNOVATION (2) ▪ Sustaining innovation: making better products, for higher prices, to attractive customers in existing markets ▪ Disruptive innovation: simpler or more convenient products, for lower prices, to new or unattractive customers > “an innovation which introduces a different set of features, performance, and price attributes relative to the existing product, an unattractive combination for mainstream customers at the time of product introduction because of inferior performance on the attributes these customers value and/or a high price—although a different customer segment may value the new attributes.” (Govindarajan and Kopalle, 2006; Christensen, 2006) Christensen (1997); Christensen & Raynor (2003); Schilling p.59-60 “segment zero” 33 SBE/ KIN Research Group/ SMTI 2023 DISRUPTIVE INNOVATION CHARACTERISTICS 1. New products with high performance on different package of attributes 2. Performs far worse on attributes that are important in existing products 3. Strong performance increase on these latter attributes 34 SBE/ KIN Research Group/ SMTI 2023 SOUTHWEST: LOW COST BUSINESS MODEL http://i580.photobucket.com/albums/ss241/MrBluJet/Southwest%20Airlines/WNB737-500N504SWPHX.jpg 35 SBE/ KIN Research Group/ SMTI 2023 WHICH DISRUPTIVE INNOVATIONS DO YOU KNOW? SMS 36 SBE/ KIN Research Group/ SMTI 2023 DISRUPTIVE INNOVATION How can it be that aggressive, innovative and customer focused organisations respond to late to strategically important technological innovations or even ignore them? 37 SBE/ KIN Research Group/ SMTI 2023 DISRUPTIVE INNOVATION How can it be that aggressive, innovative and customer focused organisations respond to late to strategically important technological innovations or even ignore them? ▪ Not because of myopia, a lack of interest or a lack of competences and expertise ▪ But because they were unable to change their strategy 38 SBE/ KIN Research Group/ SMTI 2023 SUSTAINING AND DISRUPTIVE INNOVATION (2) (4) (1) (3) 40 SBE/ KIN Research Group/ SMTI 2023 41 SBE/ KIN Research Group/ SMTI 2023  Sustaining Disruptive innovation Innovation Incremental innovation Radical innovation 42 SBE/ KIN Research Group/ SMTI 2023 LEARNING OBJECTIVES ▪ What is the role of recombination in technological innovation trajectories? Given an example. > What is the role of pathdependence in these trajectories? ▪ What is an S-curve and how it is useful for understanding technological trajectories? Explain the s-curve model, including what is on the two axes. ▪ What are the limitations of s-curves as a prescriptive tool? ▪ What is the difference between a technology development s-curve and a diffusion s-curve? ▪ What are the differences between radical vs. incremental; sustaining vs. disruptive; architectural and component; and product, service vs. process innovations? > Why is it difficult to apply these categories definitively on a real life example? ▪ Explain the process of disruptive innovation, indicating the key stages and moments in the disruption process. > Why do incumbents often fail to respond to disruptive innovations? > What is the difference between new-market vs. low-end disruptions? 43 SBE/ KIN Research Group/ SMTI 2023 NEXT YEAR ▪ Maybe add new market disruption ▪ Explain that every technology consists of multiple components and that multiple components have multiple performance dimensions. ▪ Innovations consits of multiple technologies 44 SBE/ KIN Research Group/ SMTI 2023 45 SBE/ KIN Research Group/ SMTI 2023