MT451-01
Managing Technological Innovation
Unit 3 - Types, Patterns and Standards of Innovation
John D. Cherry, PhD
Housekeeping
• Remember to post your discussion threads on
three different days.
• Be sure to engage in your assigned reading
prior to your posting. Most of the discussion
is directly from our e-text.
• Be careful about paraphrasing. Be sure to
use direct quotes when quoting your
company website.
2
Overview
• This unit will explore types of technological
innovations and the different opportunities
they pose for organizations and society. The
technology cycle will also be explored with a
focus on developing a dominant design
3
Unit Assignments
• Reading – Chapters 3 & 4
• Participate in the discussion board (20
Points)
• Complete and submit the unit assignment
(55 Points)
• Participate in the seminar or complete the
alternative assignment (15 Points)
• Complete the web fieldtrip discussion (10
Points)
4
Key Concepts
• Different types of technological innovations offer different
opportunities for organizations and society.
• One of the primary dimensions used to distinguish types of
innovation is the continuum between radical and
incremental innovation. Innovations can also be classified as
competence enhancing versus competence destroying.
• A dominant design is a single product or process
architecture that dominates a category and is a "de facto
standard," meaning that while it may not be officially
enforced or acknowledged, it has become a standard for the
industry.
5
Technology Trajectory Defined
• The path a technology takes through its lifetime.
• This path may refer to its rate of performance
• improvement, its rate of diffusion, or other change
of interest.
6
Types of Innovation
Four of the dimensions most commonly used to categorize
innovations:
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•
•
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product versus process innovation
radical versus incremental
competence enhancing versus competence destroying
architectural versus component.
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Product Innovation versus Process Innovation
• First, new processes may enable the
production of new products
• Second, new products may enable the
development of new processes.
• Product innovation for one firm may
simultaneously be a process innovation for
another.
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Radical Innovation versus Incrémental
Innovation
• Radical innovation: An innovation that is
very new and different from prior solutions.
• Incremental innovation: An innovation
that makes a relatively minor change from
(or adjustment to) existing practices.
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Competence-Enhancing Innovation versus
Competence-Destroying Innovation
• Competence-enhancing (-destroying)
• Innovation: An innovation that builds on
existing knowledge and skills. Whether an
innovation is competence enhancing or
competence destroying depends on whose
perspective is being taken. An innovation can be
competence enhancing to one firm, while
competence destroying for another.
10
Architectural Innovation versus
Component Innovation
•
Component (or modular) 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
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TECHNOLOGY S-CURVES
• Both the rate of a technology’s performance
improvement and the rate at which the
technology is adopted in the marketplace
repeatedly have been shown to conform to an
s-shape 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 the
technology, it typically shows slow initial
improvement, then accelerated improvement, then
diminishing improvement
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TECHNOLOGY CYCLES
• The s-curve model above suggests that technological change
is cyclical: Each new s curve ushers in an initial period of
turbulence, followed by rapid improvement, then
• diminishing returns, and ultimately is displaced by a new
technological discontinuity. The emergence of a new
technological discontinuity can overturn the existing
competitive structure of an industry, creating new leaders and
new losers
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Dominant Design
The technology cycle almost invariably exhibits a
stage in which the industry selects a dominant
design.
Once this design is selected, producers and
customers focus their efforts on improving their
efficiency in manufacturing, delivering, marketing,
or deploying this dominant design, rather than
continue to develop and consider alternative
designs.
14
Dominant Design
• Dominant design: A single product or process architecture
that dominates a product category—usually 50 percent or
more of the market. A dominant design is a “defacto
standard,” meaning that while it may not be officially
enforced or acknowledged, it has become a standard for the
industry.
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•
•
•
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Absorptive capacity: The ability of an organization to
recognize, assimilate, and utilize new knowledge.
Network externalities: Also termed positive consumption
externalities, this is when the value of a good to a user
increases with the number of other users of the same or
similar good.
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A Technology’s Stand-Alone Value
• “Buyer Utility Map.” It is important to consider six
different utility levers, as well as six stages of the
buyer experience cycle, to understand a new
technology’s utility to a buyer.
• The stages: are purchase, delivery, use,
supplements, maintenance, and disposal.
• The six utility levers: are customer productivity,
simplicity, convenience, risk, fun and image, and
environmental friendliness.
• Creating a grid with stages and levers yields a 36cell utility map. Each cell provides an opportunity to
offer a new value proposition to a customer.
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Summary
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Unit 4 Overview: Timing of Entry
• The timing of innovation can be crucial - a
technology that is adopted earlier than others may
reap tremendous benefits to the developer.
Conversely, the same factors that cause increasing
returns to adoption may make very early
technologies unattractive. A number of first-mover
advantages and disadvantages can shape how
timing of entry is related to the likelihood of
success. It is crucial, therefore, for a company to
recognize and understand the value of timing in
offering a new technology. First movers can reap
both great advantages and great disadvantages.
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Unit 4
• The timing of technological innovations is
crucial to their success. Entrants are divided
into three categories: first movers, early
followers, and late entrants. The research on
the timing of innovations yields conflicting
conclusions. Some studies indicate that first
movers have higher returns and survival
rates. Other research, however, suggests the
first to market is often the first to fail. This
unit looks closely at what factors determine
the optimal timing of entry and its
implications for a firm's entry strategy.
20
Unit 4 Assignments
• Read Chapter 5 - Strategic Management of
Technological Innovation
• Participate in the discussion board (20 points)
• Submit the unit assignment (55points)
• Participate in the seminar or complete the
alternative seminar assignment (15 points)
• Complete the web fieldtrip discussion (10 points)
21
Key Concepts
• Being a first mover may confer the advantages of
brand loyalty and technological leadership,
preemption of scarce assets, and exploitation of
buyer switching costs.
• Early entrants may accrue learning and network
externality advantages that are self-reinforcing
over time
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TIMING
• First movers: The first entrants to sell in a new
product or service category.
Early followers: Entrants that are early to market,
but not first.
• Late entrants: Entrants that do not enter the
• market until the time the product begins to
penetrate the mass market or later.
23
First Mover Advantages
• Brand Loyalty and Technological Leadership:
The company that introduces a new technology may
earn a long-lasting reputation as a leader in that
technology domain. Such a reputation can help
sustain the company’s image, brand loyalty, and
market share even after competitors have introduced
comparable products.
monopoly rents: The additional returns (either
• higher revenues or lower costs) a firm can make
• from being a monopolist, such as the ability to
• set high prices, or the ability to lower costs
• through greater bargaining power over suppliers.
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First Mover Advantages Continued
• Preemption of Scarce Assets: Firms that enter
the market early can preemptively capture scarce
resources such as key locations, government
permits, access to distribution channels, and
relationships with suppliers.
• Exploiting Buyer Switching Costs: If buyers
face switching costs, the firm that captures
customers early may be able to keep those
customers even if technologies with a superior value
proposition are introduced later.
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First Mover Advantages Continued
• Reaping Increasing Returns Advantages: a
technology that is adopted early may rise in market
power through self-reinforcing positive feedback
mechanisms, culminating in its entrenchment as a
dominant design.
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FIRST-MOVER DISADVANTAGES
• Incumbent inertia: The tendency for incumbents
to be slow to respond to changes in the industry
environment due to their large size, established
routines, or prior strategic commitments to
existing suppliers and customers.
Research and Development Expenses:
Undeveloped Supply and Distribution Channels
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FIRST-MOVER DISADVANTAGESCont.
• Immature Enabling Technologies and
Complements
Enabling technologies: Component
technologies that are necessary for the
• performance or desirability of a given
innovation.
• Uncertainty of Customer Requirements:
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To Be Continued:
• This will get you started with next week’s
discussion questions.
• For your assignment keep in mind the following
when addressing the company you selected:
• 1. Describe your selected organization's business
strategy including mission, values, and goals.
• 2. Based on the organization's strategy, describe
the role that technology and innovation play.
• 3. Has your organization adopted a first-mover or
a late-entrant approach to adopting technology?
• 4. What have been the advantages and
disadvantages of this strategy?
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Questions?
Thank you for attending!