Technology and InnovationHenry C. CoTechnology and Operations Management, California Polytechnic and State University

Management of Technology: Introduction (Henry C. Co)*Businessmen go down with their businesses because they like the old way so well they cannot bring themselves to change.

Henry Ford, My Life and Times, 1922

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Technology and InnovationTechnologyKnowledge of how to do things. The system by which a society satisfies its needs and desires. Capability that a firm needs to provide its customers the good and/or services the firm proposes to offer, now and in the future.InnovationA business process which brought inventions to commercial use.Commercial Use.

Management of Technology: Introduction (Henry C. Co)

Commercial Use

Who invented the vacuum cleaner?J. Murray Spengler invented the vacuum cleaner originally called an electric suction sweeper. But it was W. H. Hoover who had a good idea of how to market and sell the product.

Who invented the sewing machine?Elias Howe produced the worlds first sewing machine but it was Isaac Singer who stole the patent and built a successful business from it (Singer later was forced to pay Howe a royalty on all machines made).

Who invented the telegraph?In 1830, Joseph Henry demonstrated the potential of a William Sturgeon device for long distance communication by sending an electronic current over one mile of wire to activate an electromagnet which caused a bell to strike. Thus the electric telegraph was born, however, other inventors made a commercial success of that invention.

Samuel Morse only invented the telegraph code, all the other inventions came from others. Morse combined marketing and political skills to secure state funding for development work, and to spread the concept of communication over vast distances on the continent of America.

Management of Innovation v.Management of Technology

Management of Technology: Introduction (Henry C. Co)*Idea Generation + Problem-Solving Invention. Invention + Implementation Innovation. 12-20% of inventions results in successful innovation.Innovation + Diffusion Economic Value.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Management of Innovation is the creation and development of new ideas.Management of Technology is the acquisition and application of existing innovations (diffusion).Links engineering, science, and management disciplines to plan, develop, and implement technological capabilities to shape and accomplish the strategic and operational objectives of an organization.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*DefinitionsScience is the discovery and explanation of natural phenomena for the sake of knowledge & understandingTechnology is the knowledge and technique of the transformation of natural phenomena for human purposeEngineering is the understanding and application of the scientific principles underlying technology and its transformation for human purpose; bridges the gap between S & TBasic Research is exploring the domain of science for the fundamental principles and basic understanding of natureApplied Research is taking scientific discoveries and generating technical inventions which may have potential for satisfying human purpose.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Developmental Research - that research necessary to develop the invention to level of functional capability desiredInvention - first documentation of an idea for a new device or process with features thought useful for human purposeInnovation - the process whereby an invention is further researched, designed and engineered into a form suitable for the commercial marketplace or public-sector use:Incremental Innovation - modifications or extensions of existing products/services for improved performance at (usually) lower costRadical Innovation - achieving a brand-new functional capability that separates this product/service from its predecessors; opens the possibility of totally new industries

Management of Technology: Introduction (Henry C. Co)

Major Stages in the Innovation ProcessInvention (Creation of Knowledge): Acquisition of new knowledgeInnovation (Transformation of Knowledge): Application of new knowledgeDiffusion (Utilization of Knowledge): Acceptance and adoption of new knowledge

Management of Technology: Introduction (Henry C. Co)*

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*

Management of Technology: Introduction (Henry C. Co)

Patterns of Innovation

Trajectory of Tech InnovationTechnological performance often follows an S-shaped curvePerformanceEffort (funds)Physical limit of technology

Foster, Innovation: The Attackers Advantage, Summit Books, 1986

*Performance Progression of Technological InnovationA well accepted phenomena in the evolution of technological innovation is that innovation generally follows an S-curve. Initially, considerable effort, money, and resources are expended in developing a new technology, but usually for little performance improvement. As knowledge about the technology accumulates, progress becomes more rapid and relatively small increments of effort result in significant performance gains. Finally, the technology begins to approach its physical limits, and further pushing the performance of the technology becomes increasingly difficult.Most, or perhaps all, technologies inherently have an upper performance bound, often determinied by the laws of physics. For example, semiconductor performance has been increasing exponentially for decades, but many observers believe that semiconductor performance will be flattening soon due to the physical limitations of making smaller and smaller components squeezed more and more tightly together on a silicon wafer. These forecasters predict that early in the next century, semiconductor performance will begin to stagnate.

PerformanceEffort (funds)Physical limit of technologyFoster, Innovation: The Attackers Advantage, Summit Books, 1986Successive Tech Innovations

*Performance Progression of Technological InnovationThe performance of the newer technology initially is lower than that of the older technology, but because of their relative positions on their respective S-curves, the performance of the newer technology soon surpasses that of the older.A fascinating example of this phenomena occured in the U.S. when electric lighting was first introduced in the 19th century. Gas lighting was the standard means of lighting homes and buisinesses in the latter part of the 1800s (having earlier supplanted whale oil). When electric lighting was first introduced, it was relatively inefficient, difficult to install, and an infrastruture for delivering electricity was lacking. Initially, it was not at all obvious that electric lighting would prevail in its competition with gas.The gas lighting industry did not idly sit by to watch its markets be stolen by electricity, but undertook a renewed campaign of innovation (very common for threatened technologies). For example, it had been known for decades in the theater industry that putting a piece of lime in a gas flame created a much brighter light (hence the term limelight). This innovation was transfered to residential lighting with good effect.However, in the end, the benefits of electric lighting (cost, safety, convenience, cleanliness) prevailed as the technology developed, and gas lighting was eventually completed supplanted by electric lighting.

Product v. Process Innovation

Management of Technology: Introduction (Henry C. Co)*The Model TFor 4 years, Ford developed, produced, and sold five different engines (2-6 cylinders) in a factory of trade craftsmen working with GP machines. Out of this experience came a dominant design, the Model T. Within 15 years, 2 million engines of this single design were produced each year in a mass-production facility. During that period, there were incremental (no fundamental) innovation in product.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Product v. Process InnovationThe fluid-pattern stage During the early stages of the products life cycle, the level of prototype innovation is high. This is because firms modify, change, and update the product in an effort to establish a dominant design. The transitional-pattern stageOnce a dominant design is established, emphasis shifts to process innovations in order to provide the capability to mass-produce the product. This typically requires a shift from GP to specialized equipment. During this period, the level of product innovation falls dramatically.The specific-pattern stageAt this stage, incremental process innovations further specialize the production process to reduce cost, enhance quality, and make further improvements. This leaves firms with a rigid process and an aging product (highly inflexible, difficult to adapt to environmental changes).

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Innovation and Development

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*

Management of Technology: Introduction (Henry C. Co)

Windows of Opportunity

Management of Technology: Introduction (Henry C. Co)*Life Span of the ComputerFirst generations (1950s) of IBM computers had a useful market life of more than a decade.IBM 360 (mid 1960s), IBM maintained its dominant market position until the arrival of minicomputers. Then companies like Digital, Data General, etc., started challenging IBM from the low end of the business. Useful market life of computers shrank from 10 years to 8 years, then only 5 years, then 3, and 2.Desktop PCs and laptops: useful market life dropped to less than a year.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*The Classic Product Cash FlowWindow of opportunity: the period in which the new product faces no or low competition in the market place.The window of opportunity for market exploitation is constantly shrinking as the competition brings new products more and more frequently.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*The High-Tech Product Cash Flow

Project A, which was introduced before the competition came up with an equivalent or better product, has been able to generate a positive cumulative cash flow, with a good return on investment during the R&D cycle. Project B was introduced at a time when some competition already existed, results in a negative cumulative cash flow.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Case StudiesThe Case of the PowerPCSomerset, a joint venture by IBM, Apple, and Motorola in 1991 to develop the PowerPC.Time May Have Passed the PowerPC (Business Week, 4, March 1996), Ira Sager wrote:As it is, Somerset hasnt even come close to its goal of posing a serious challenge to Intel Corp.s dominance in microprocessors Somerset fell behind schedule on more powerful versions of the PowerPC chip Three years ago, they had it in their hands, says Jon Rubinstein, president of Firepower Systems Inc., one of the few companies outside the Somerset trio to use the PowerPC But technical difficulties, internal bickering, and management upheavals delayed successor chips by 18 months. Says Sun CEO Scott G. McNealy: The PowerPC is on really shaky ground.The case of the vanishing needStacker to double the hard disk space.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Knowledge NeedsHow to integrate technology in the overall strategic objectives of the firm?The allocation of resources to and within R&D, engineering, and operationsPlanning for technology development or acquisition, and Other strategic questions.How to get into and out of technologies faster and more efficiently?The selection of new technologiesPrioritizationTiming of introductionDiscontinuation.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*How to assess/evaluate technology more effectively?Evaluating current and future competitiveness of a companys technology The relative risk of in-house development v. acquisition, The pace of future changes in technology and potential markets.Potential returns on investment.How best to accomplish technology transfer? Transferring R&D results to design and manufacturing,Assimilating externally developed technology into the companys internal R&D activities.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*How to reduce new product development time? How can the links among design, engineering, and manufacturing be improved? Greater coordination of these functionsParallel efforts will reduce the lag between R&D and market delivery.How to manage large, complex, and interdisciplinary/inter-organizational projects? Key is recognizing the interrelationship of functions in the total system and managing the organization as a system to meet budget, schedule, and performance goals.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*How to manage the organizations internal use of technology?Introduction and management of operations technologies.How to leverage the effectiveness of technical professionals? Motivation, measurement, training, supervision, obsolescence, Integration of technical and non-technical issues and individuals.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Knowledge NeedsHow to integrate technology in the overall strategic objectives of the firm?The allocation of resources to and within R&D, engineering, and operationsPlanning for technology development or acquisition, and Other strategic questions.How to get into and out of technologies faster and more efficiently?The selection of new technologiesPrioritizationTiming of introductionDiscontinuation.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*How to assess/evaluate technology more effectively?Evaluating current and future competitiveness of a companys technology The relative risk of in-house development v. acquisition, The pace of future changes in technology and potential markets.Potential returns on investment.How best to accomplish technology transfer? Transferring R&D results to design and manufacturing,Assimilating externally developed technology into the companys internal R&D activities.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*How to reduce new product development time? How can the links among design, engineering, and manufacturing be improved? Greater coordination of these functionsParallel efforts will reduce the lag between R&D and market delivery.How to manage large, complex, and interdisciplinary/inter-organizational projects? Key is recognizing the interrelationship of functions in the total system and managing the organization as a system to meet budget, schedule, and performance goals.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*How to manage the organizations internal use of technology?Introduction and management of operations technologies.How to leverage the effectiveness of technical professionals? Motivation, measurement, training, supervision, obsolescence, Integration of technical and non-technical issues and individuals.

Management of Technology: Introduction (Henry C. Co)

Disruptive Technology v. Sustaining Technology

Management of Technology: Introduction (Henry C. Co)*Up-Market Impetus

Intersecting trajectories of customer need and technological trajectories.Note that the slope of technological trajectory is steeper than the slope of the trajectories of customer need.Product technologies that under-perform what key customer demand today may improve to squarely address what those same customers demand tomorrow.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Clayton Christensens Theory of Disruptive Innovation

A disruptive innovation reaches the point where it can satisfy the least demanding customers; least demanding customers drop the established, higher performing option on the basis of other factors (cost, convenience, etc.).The established product exceeds the needs of the most demanding customers; sustaining innovations now fuel performance oversupply.The disruptive innovation meets the level of performance required by the most demanding customers; those customers drop the established option on the basis of other factors.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Trajectories of Customer NeedsCustomers capacity to absorb technological improvement depends on How much time customers have to learn how to use new products with new features.How rapidly their work and lifestyles can change to utilize those capabilities,Regulatory factors (e.g. speed limit).Performance constraints created by insufficient complementary products or services.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Technology TrajectoriesTechnology trajectories are driven by managers efforts to address the need of the higher-end market (higher profit margin).Toyota and Honda entered the North American market in its bottom tiers, with their Corona and CVCC models. Each moved aggressively up-market, that by 1998 their Lexus and Acura nameplate products had become major engine of profit. In the 1990s, Compaq and Dell shifted from desktop PC to higher-end engineering workstations and network servers.Nucor began as a maker of low-end concrete reinforcing bar. It has sequentially attacked higher-value markets for structural and then sheet steel, while de-emphasizing the original low-end products.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Sustaining InnovationsMaintain a trajectory of performance improvement that has been established in a market; i.e., they give customers more and better in the attributes they already value.Example: Set of improvements in technologies to make conductor lines of ever finer width on the surface of silicon wafers, to help IC process more information at higher speed.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Disruptive InnovationsIntroduce a very different package of attributes than the ones that mainstream customers value.Often under-perform along traditional metrics of functionality initially; Mainstream customers are unwilling and unable to use disruptive products in applications they know or understand. Tend to be cheaper, simpler and more convenient to use, thus opening new markets.Once disruptive innovators have secured a foothold in a low-end or emerging market, up-market impetus push the disruptive innovators to shift to the large mainstream market.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Disruptive TechnologyA quantum change, not an incremental step, that finally affects mainstream operationsA technology that under performs established products at firstA technology that a fringe (new/young) customer values highlyMost companies do not realize the impact of this technology until it is too late and others have taken over their field/productCharacteristics:Markets that do not exist cannot be analyzed.Products are: cheaper, faster, simpler, more convenient to use.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Case Studies by ChristensenComputer disk drives.Intel: microprocessor speed increases about 20% per year.Eli Lily: Purity of insulin improved from 50,000 ppm in 1925 to 10 ppm in 1980 (by about 14% per year).Manufacturers of hydraulic excavators increased by 15% per year the amount of earth their machine could heft in a single scoop; from 0.25 cubic yard in 1948 to 10 cubic yards by 1974.

Management of Technology: Introduction (Henry C. Co)

Performance v. Market Needs

Management of Technology: Introduction (Henry C. Co)*Other ExamplesTransistor Pocket RadiosSonys early transistor pocket radios were a disruptive innovation relative to the Hi-Fi tabletop radios built with vacuum tubes. Sonys innovation sacrificed sound fidelity but created a new market application in which its lower-performing product was valued for its small size, light weight, and portability.Intel, Bloomberg Financial Markets, Honda, Charles Schwab, Wal-Mart, Intuit, Sony, Nucor, Sun, Cisco, J&J Lifescan, Staples, U.S. Surgical, and McDonalds are few examples of prominent firms that originally entered their industries as disruptive technologies.More.

Management of Technology: Introduction (Henry C. Co)

Revolutionary v. Evolutionary Innovation

Management of Technology: Introduction (Henry C. Co)*Revolutionary InnovationMajor product/process breakthroughs which create or change an industry or creative symbiosis of previously unrelated technologies (e.g., CIM).Typically, originate outside the firms in an industry by small, entrepreneurial individuals or organization (Exceptions: IBM- system 360, RCA-color TV, TI-integrated circuits.)Relatively rare.

Management of Technology: Introduction (Henry C. Co)

Management of Technology: Introduction (Henry C. Co)*Evolutionary InnovationIncremental product/process improvements that occur within the firm.Maintain competitive position within an industry.Typically, originate within the firms in an industry.Relatively common.Improve operations of established firms.

Management of Technology: Introduction (Henry C. Co)

Creation v. Application

Management of Technology: Introduction (Henry C. Co)*Creation of knowledge: Efforts at creating new capability may be focused on better satisfying the needs already being addressed or on responding to new needs (creating new business). Includes basic research, applied research, and development.Application of knowledge (Doing): Applying newly acquired capability or creative application of already available capability.Includes product (design engineering), process (manufacturing engineering, quality control, fabrication, computer-integrated manufacturing), and market (application engineering, physical distribution, and product service).

Management of Technology: Introduction (Henry C. Co)

*Performance Progression of Technological InnovationA well accepted phenomena in the evolution of technological innovation is that innovation generally follows an S-curve. Initially, considerable effort, money, and resources are expended in developing a new technology, but usually for little performance improvement. As knowledge about the technology accumulates, progress becomes more rapid and relatively small increments of effort result in significant performance gains. Finally, the technology begins to approach its physical limits, and further pushing the performance of the technology becomes increasingly difficult.Most, or perhaps all, technologies inherently have an upper performance bound, often determinied by the laws of physics. For example, semiconductor performance has been increasing exponentially for decades, but many observers believe that semiconductor performance will be flattening soon due to the physical limitations of making smaller and smaller components squeezed more and more tightly together on a silicon wafer. These forecasters predict that early in the next century, semiconductor performance will begin to stagnate.

*Performance Progression of Technological InnovationThe performance of the newer technology initially is lower than that of the older technology, but because of their relative positions on their respective S-curves, the performance of the newer technology soon surpasses that of the older.A fascinating example of this phenomena occured in the U.S. when electric lighting was first introduced in the 19th century. Gas lighting was the standard means of lighting homes and buisinesses in the latter part of the 1800s (having earlier supplanted whale oil). When electric lighting was first introduced, it was relatively inefficient, difficult to install, and an infrastruture for delivering electricity was lacking. Initially, it was not at all obvious that electric lighting would prevail in its competition with gas.The gas lighting industry did not idly sit by to watch its markets be stolen by electricity, but undertook a renewed campaign of innovation (very common for threatened technologies). For example, it had been known for decades in the theater industry that putting a piece of lime in a gas flame created a much brighter light (hence the term limelight). This innovation was transfered to residential lighting with good effect.However, in the end, the benefits of electric lighting (cost, safety, convenience, cleanliness) prevailed as the technology developed, and gas lighting was eventually completed supplanted by electric lighting.