1. THE S-CURVE MODEL IN TECHNOLOGY IMPROVEMENT
Numerous studies of innovation have revealed recurring patterns in how technologies emerge,
evolve and are adopted and displaced by other technologies. Both the rate of technology’s
performance improvement and the rate at which the technology is adopted in the marketplace
have been shown to conform to an S-shaped curve. Many technologies exhibit an S-curve in their
performance improvement over their lifetimes. When a technology’s performance is plotted
against the amount of effort and money invested in technology, it typically shows a slow initial
improvement, then accelerated improvement and then diminishing improvement.
S-Curves in Technology improvement
Limit of Technology
Performance
Effort
Performance improvement in early stages of a technology is slow because the fundamentals of
the technology are poorly understood. Thus great effort is required to understand paths of
improvements or drivers for improvements. Also if the technology is different from previous
technology, there may not be enough routines for evaluation available. It may also be difficult to
attract other researchers in its development. However, as they get a better and deeper
understanding of the technology, improvement begins to accelerate. The technology gains
legitimacy thus attracting attention from other researchers and scientists. Measures to assess the
technology are developed and researchers target their attention to those activities that reap the
greatest improvement per unit of effort. The performance thus increases rapidly. However, at
some point, as the technology begins to reach its inherent limits, diminishing returns to efforts
begin to set in. The cost of each marginal improvement increases and the S-curve flattens. Often
a technology’s S-curve is plotted with performance (speed, capacity, or power) against time. But
this must be approached with care. If the effort invested is not constant over a period of time, the
resulting S-curve can obscure the true relationship. If the effort is relatively constant over a
period of time, plotting performance against time will result in the same characteristic curve as
plotting performance against effort.
However, if the amount of effort invested in a technology decreases or increases over a period of
time, the resulting curve could appear to flatten much quickly or not flatten at all. S-curves are
often used to describe the diffusion of a technology. Unlike S-curves in technology
performances-curves in technology diffusion are obtained by plotting the cumulative number of
adopters of the technology against time. This yields an S-shaped curve as adoption is initially
slow when an unfamiliar technology is introduced in the market. It accelerates as technology is
better understood and utilized by the mass and eventually the market is saturated so the rate of
new adoptions decline. There is a belief that managers can use S-curve model as a tool for
predicting when a technology will reach its limits and as a prescriptive guide for whether and
when a firm should move to a new, more radical technology. Firms can use data on the
investment and performance of their own technologies, or data on the overall industry investment
in technology and the average performance achieved by multiple producers. Managers could
then use these curves to assess whether a technology appears to be approaching its limits or to
identify new technologies that might be emerging on S-curves that will intersect the firm’s
technology S-curve. Managers could then switch S-curves by acquiring or developing the new
technology. However, as a prescriptive tool, the S-curve model has several limitations.
The S-Curve Framework
The S-Curve emerged as a mathematical model and was afterwards applied to a variety of fields
including physics, biology and economics. It describes for example the development of the
embryo, the diffusion of viruses, the utility gained by people as the number of consumption
choices increases, and so on.
In the innovation management field the S-Curve illustrates the introduction, growth and
maturation of innovations as well as the technological cycles that most industries experience. In
the early stages large amounts of money, effort and other resources are expended on the new
technology but small performance improvements are observed. Then, as the knowledge about the
technology accumulates, progress becomes more rapid. As soon as major technical obstacles are
overcome and the innovation reaches a certain adoption level an exponential growth will take
place. During this phase relatively small increments of effort and resources will result in large
performance gains. Finally, as the technology starts to approach its physical limit, further
pushing the performance becomes increasingly difficult, as the figure below shows.
Consider the supercomputer industry, where the traditional architecture involved single
microprocessors. In the early stages of this technology a huge amount of money was spent in
research and development, and it required several years to produce the first commercial
prototype. Once the technology reached a certain level of development the know-how and
expertise behind supercomputers started to spread, boosting dramatically the speed at which
those systems evolved. After some time, however, microprocessors started to yield lower and
lower performance gains for a given time/effort span, suggesting that the technology was close to
its physical limit (based on the ability to squeeze transistors in the silicon wafer). In order to
solve the problem supercomputer producers adopted a new architecture composed of many
microprocessors working in parallel. This innovation created a new S-curve, shifted to the right
of the original one, with a higher performance limit (based instead on the capacity to co-ordinate
the work of the single processors).
Usually the S-curve is represented as the variation of performance in function of the time/effort.
Probably that is the most used metric because it is also the easiest to collect data for. This fact
does not imply, however, that performance is more accurate than the other possible metrics, for
instance the number of inventions, the level of the overall research, or the profitability associated
with the innovation.
One must be careful with the fact that different performance parameters tend to be used over
different phases of the innovation, as a result the outcomes may get mixed together, or one
parameter will end up influencing the outcome of another. Civil aircraft provides a good
example, on early stages of the industry fuel burn was a negligible parameter, and all the
emphasis was on the speed aircrafts could achieve and if they would thus be able to get off the
ground safely. Over the time, with the improvement of the aircrafts almost everyone was able to
reach the minimum speed and to take off, which made fuel burn the main parameter for assessing
performance of civil aircrafts.
Overall we can say that the S-Curve is a robust yet flexible framework to analyze the
introduction, growth and maturation of innovations and to understand the technological cycles.
The model also has plenty of empirical evidence, it was exhaustively studied within many
industries including semiconductors, telecommunications, hard drives, photocopiers, jet engines
and so on.
Limitations of S-curve model as a Prescriptive tool
1. First, it is very rare that true limits of a technology are known in advance, and there is
considerable disagreement among firms about what a technology’s limits will be.
2. Secondly, the shape of a technology’s S-curve is not set in stone. Unexpected changes in
the market , component technologies, or complementary technologies can shorten or
extend the life cycle of a technology.
3. Furthermore, firms can influence the shape of the S-Curve through their development
activities.
2. FORMULATION AND IMPLEMENTATION OF TECHNOLOGICAL
INNOVATION STRATEGY
Strategic or institutional management is the conduct of drafting, implementing and evaluating
cross-functional decisions that will enable an organization to achieve its long-term objectives. It
is the process of specifying the organization's mission, vision and objectives, developing policies
and plans, often in terms of projects and programs, which are designed to achieve these
objectives and then allocating resources to implement the policies, and plans, projects and
programs. A balanced scorecard is often used to evaluate the overall performance of the business
and its progress towards objectives.
“Strategic management is an ongoing process that evaluates and controls the business and the
industries in which the company is involved; assesses its competitors and sets goals and
strategies to meet all existing and potential competitors; and then reassesses each strategy
annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it
has succeeded or needs replacement by a new strategy to meet changed circumstances, new
technology, new competitors, a new economic environment., or a new social, financial, or
political environment.”
Strategy formulation
Strategic formulation is a combination of three main processes which are as follows:
Performing a situation analysis, self-evaluation and competitor analysis: both internal and
external; both micro-environmental and macro-environmental.
2. Concurrent with this assessment, objectives are set. These objectives should be parallel to a timeline; some are in the short-term and others on the long-term. This involves crafting vision
statements (long term view of a possible future), mission statements (the role that the
organization gives itself in society), overall corporate objectives (both financial and strategic),
strategic business unit objectives (both financial and strategic), and tactical objectives.
3. These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan
provides the details of how to achieve these objectives.
1.
Marketing action plan
1.
2.
3.
4.
5.
Placement and execution of required resources are financial, manpower, operational support,
time, technology support.
Operating with a change in methods or with alteration in structure.
Distributing the specific tasks with responsibility or moulding specific jobs to individuals or
teams.
The process should be managed by a responsible team. This is to keep direct watch on result,
comparison for betterment and best practices, cultivating the effectiveness of processes,
calibrating and reducing the variations and setting the process as required.
Introducing certain programs involves acquiring the requisition of resources: a necessity for
developing the process, training documentation, process testing, and imalgation with (and/or
conversion from) difficult processes.
As and when the strategy implementation processes, there have been so many problems arising
such as human relations, the employee-communication. Such a time , marketing strategy is the
biggest implementation problem usually involves , with emphasis on the appropriate timing of
new products. An organization, with an effective management, should try to implement its plans
without signaling this fact to its competitors.
In order for a policy to work, there must be a level of consistency from every person in an
organization, specially management. This is what needs to occur on both the tactical and
strategic levels of management.
Strategy evaluation
Measuring the effectiveness of the organizational strategy, it's extremely important to conduct a SWOT
analysis to figure out the strengths, weaknesses, opportunities and threats (both internal and external) of
the entity in question. This may require to take certain precautionary measures or even to change the
entire strategy.
In corporate strategy, Johnson and Scholes present a model in which strategic options are
evaluated against three key success criteria:
1.
2.
3.
Suitability (would it work?)
Feasibility (can it be made to work?)
Acceptability (will they work it?)
Suitability
Tools that can be used to evaluate suitability include:
1.
2.
3.
Ranking strategic options
Decision trees
What-if analysis
Feasibility
Feasibility is concerned with whether the resources required to implement the strategy are
available, can be developed or obtained. Resources include funding, people, time and
information.
Tools that can be used to evaluate feasibility include:
1.
2.
3.
cash flow analysis and forecasting
break-even analysis
resource deployment analysis
Acceptability
Acceptability is concerned with the expectations of the identified stakeholders (mainly
shareholders, employees and customers) with the expected performance outcomes, which can be
return, risk and stakeholder reactions.
Return deals with the benefits expected by the stakeholders (financial and non-financial). For
example, shareholders would expect the increase of their wealth, employees would expect
improvement in their careers and customers would expect better value for money.
2. Risk deals with the probability and consequences of failure of a strategy (financial and nonfinancial).
1.
Tools that can be used to evaluate acceptability include:
1.
2.
what-if analysis
stakeholder mapping
1. Information- and technology-driven strategy
The underlying theory is that a company's ability to gather, analyze, and use information is a
necessary requirement for business success in the information age. In order to do this, Senge
claimed that an organization would need to be structured such that:
1.
2.
3.
4.
People can continuously expand their capacity to learn and be productive,
New patterns of thinking are nurtured,
Collective aspirations are encouraged, and
People are encouraged to see the “whole picture” together.
Senge identified five disciplines of a learning organization. They are:
1.
2.
3.
4.
5.
Personal responsibility, self reliance, and mastery — We accept that we are the masters of our
own destiny. We make decisions and live with the consequences of them. When a problem needs
to be fixed, or an opportunity exploited, we take the initiative to learn the required skills to get it
done.
Mental models — We need to explore our personal mental models to understand the subtle effect
they have on our behaviour.
Shared vision — The vision of where we want to be in the future is discussed and communicated
to all. It provides guidance and energy for the journey ahead.
Team learning — We learn together in teams. This involves a shift from “a spirit of advocacy to a
spirit of enquiry”.
Systems thinking — We look at the whole rather than the parts. This is what Senge calls the
“Fifth discipline”. It is the glue that integrates the other four into a coherent strategy.
The technology sector has provided some strategies directly. For example, from the software
development industry agile software development provides a model for shared development
processes. Access to information systems have allowed senior managers to take a much more
comprehensive view of strategic management than ever before.
2. Knowledge-driven strategy
In a post-industrial world these operationally focused business strategies hinge on conventional
sources of advantage have essentially been eliminated:
Scale used to be very important. But now, with access to capital and a global marketplace, scale is
achievable by multiple organizations simultaneously. In many cases, it can literally be rented.
2. Process improvement or “best practices” were once a favored source of advantage, but they were
at best temporary, as they could be copied and adapted by competitors.
3. Owning the customer had always been thought of as an important form of competitive advantage.
Now, however, customer loyalty is far less important and difficult to maintain as new brands and
products emerge all the time.
1.
A company must own the thing that differentiates it from competitors. Without IP ownership
and protection, any product, process or scale advantage can be compromised or entirely lost.
Competitors can copy them without fear of economic or legal consequences, thereby eliminating
the advantage.
3. TYPES AND PATTERNS OF INNOVATION
MEANING OF INNOVATION
Significance
Innovation is the activity of people and organizations to change themselves and the environment. It
means breaking routines and dominant ways of thinking, introducing new things and behaviours,
launching new standards. It is together an individual stance, an organizational process, a social
movement.
Kinds of innovations
Out of several cases, innovation can basically be:
1. a product innovation (e.g. new goods or services put on sale);
2. a process innovation, which changes the way a given good is produced within the firm or across a
supply chain;
3. a behavioural innovation, when an organizational routine is replaced with new ones.
Relevant is also the environment with respect to which something is said to be an innovation. Thus,
we have innovation with respect simply to past achievements of the innovator or to the (local) market or
to the world frontier. In the first two cases, it is possible to obtain the innovation just by imitating worldclass practises.
In other words, the crucial players in the innovation are, at least, the following:
Technology innovations are often categorized into different types such as radical versus incremental.
Different types of innovation require different kinds of underlying knowledge and have different impacts
on the industry’s competitors and customers. Four of the dimensions most commonly used to categorize
innovations are described here: product versus process innovation, radical versus incremental,
competence enhancing versus competence destroying, and architectural versus component.
PRODUCT INNOVATION AND PROCESS INNOVATION:
1. Product innovations are blended in the production of goods or services of an
organizations. Process innovations are innovations in the way an organization conducts
its business, such as in the techniques of producing or marketing goods or services.
2. Process innovations are often oriented towards improving the effectiveness or efficiency
of productions by reducing defect rates or increasing the quantity or enhancing the
product utility so as to make the product utility so as to make the product more salable.
New product innovations and process innovations often go hand in hand.
3. First, new processes may enable the production of new products. Second, new products
may enable the developments of new processes.
4. Finally, a product innovation of one firm may be a process innovation for another firm.
Though product innovations are often more visible than process innovations, both are
extremely important to an organizations because it helps the firm to be more competitive.
RADICAL INNOVATING AND INCREMENTAL INNOVATION:
1. The term has been defined in many ways. Radical innovation may mean as the
combination of something new and the degree and differences. A technology could be
new to the world, new to an industry, new to a firm or new merely to an adopting business
unit.
2. A technology could be significantly different from existing products and processes or may
be marginally different.
3. The most radical innovations would be new to the world and exceptionally different from
existing products and processes. The introduction of wireless telecommunication products
are an example of such innovation.
4. New technologies that requires new manufacturing and service process is also a radical
one. An incremental innovation might not be particularly new or exceptional. It might
have been previously known to the firm or industry, and involve only a minor change
from existing practices.
5. The radicalness of innovation is also sometimes defined in terms of risk. Since radical
innovations often embody new knowledge, producers and customers will vary in their
experience and familiarity with the innovation, and in their judgement of its usefulness or
reliability.
6. The development and use of third generation telephony (3G) in the telecom sector is an
example of such innovation. Also, the innovation of ongoing HYDRO CAR which will
use water as fuel is also an example of such innovation. Radicalness of an innovation is
relative, and may change over time or with respect to different application.
7. An innovation that was once considered radical may eventually be considered incremental
as the knowledge of that innovation becomes more common. In contrast, an innovation
that is radical to one firm may seem incremental to another.
COMPETENCE
INNOVATION
ENHANCING
INNOVATION
AND
COMPETENCE
DESTROYING
1. An innovation is considered to be competence enhancing if it built on the firm’s existing
knowledge-base. An innovation is considered to be competence destroying from the
perspective of a particular firm if the technology does not build on the firms existing
competencies or renders them obsolete.
2. For example, a company builds a much better calculator then the one existing and the one
which was just a base one will be considered as competence enhancing innovation when
a new hybrid calculator is made by the firm.
ARCHITECTURAL INNOVATION AND COMPONENT INNOVATION
1. Most products and processes are hierarchically set up which means that at any unit of
analysis, the entity is a system of components, and each of those components is in turn a
system of finer components, until a point is reached at which the components are
elementary particles.
2. An innovation may change the individual components to the overall architecture within
which those components operate or both. An innovation is considered a component
innovation if it changes to one or more components, but does not significantly affecting
the overall system.
3. In contrast, an architectural innovation will change the overall design of the system or the
way that components interact with each other. An innovation that is strictly architectural
may reconfigure the way that components link together in the system, without changing
the components themselves.
4. Most architectural innovations, however, create changes in the system that integrate with
its design, requiring changes in the underlying components in addition to changes in the
ways those components interact.
5. Architectural innovations often have a far-reaching and complex influences on industry
competitors and technology users and it changes the overall product.
6. For a firm to adopt component innovation, it may require the firm to have knowledge
only about that component. However, for a firm to initiate or adopt an architectural
innovation typically requires that the firm have architectural knowledge about the way
components link and integrate to form the whole system.
7. Firms must be able to understand how the attributes of components interact, and how
changes in some system features might trigger the need for changes in many other design
features of the overall system or the individual components. Each of the dimensions
shares relationships with others.
8. Usually architectural innovations are often considered more radical and more competence
destroying than component innovations. Where an innovation lies on the dimension of
competence enhancing versus destroying, architectural versus component, on radical
versus incremental depends on the time frame and industry context from which it is
considered.
9. Thus, while the dimensions are valuable for understanding innovation, they should be
considered relative dimensions whose meaning is dependent on the context in which they
are used. Studies of innovation have shown recurring patterns in hoe new technologies
emerge, evolve and are adopted, and are displayed by other technologies.
10. Complex technologies often give a firm an increasing returns. A technology that is
adopted usually generates revenue that can be used to further develop and refine the
technology.
11. As the technology is used, greater knowledge and understanding of the technology
accrue, which may then enable improvements both in the technology itself and in its
applications.
12. As a technology becomes more widely adopted, complementary assets are often
developed that are specialized to operate with the technology. These effects can result in
a self reinforcing mechanism that increases the dominance of a technology regardless of
its superiority or inferiority to competing technologies.