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INNOVATION



  Prof. F. Belussi
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          Science vs. technology
• What is science?

•   The world is understandable
•   Science explains and predict
•   The world can change (science is humble and not authoritarian)
•   Scientific knowledge is durable
                                              3



             Doing science
• The scientific method

• An enormous juggernaut, a huge bulldozer-
  slow, tedious, lumbering, laborious, but
  invincible

• Robert Pirsig
• Zen and the art of Motocycle maintemnance
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    Scientific method what is?
• A particular way of asking and answering
  questions
• Evidence
  – Data (choosing variables; manipulating; controlling the ones not
    chosen because noise and bias repetition experiments under
    different conditions, instrumental bias, sample bias, mothodology
    bias, researcher bias)
• Logic
  – Inductive and deductive reasoning
• Imagination
  – Hypothesis and/or theories (need a story)
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        Science is discovery
• Science



• from an object of wonder and surprise
• to an useful social thing
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                             Innovation
Innovation has been studied in a variety of contexts, including in relation
to technology, commerce, social systems, economic development, and
policy construction. There are, therefore, naturally a wide range of
approaches to conceptualising innovation in the literature.

The classic definitions of “innovation” include:
• “the process of making improvements by introducing something new”.
• “the act of introducing something new: something newly introduced”.
  (The American Heritage Dictionary of the English Language)
• “the introduction of something new”. (Merriam-Webster Online)
• “a new idea, method or device”. (Merriam-Webster Online)
• “the successful exploitation of new ideas”. (Department of Trade and
  Industry,UK)
• “change that creates a new dimension of performance”. Peter Drucker
  (Hesselbein, 2002)
• “a creative idea that is realized”. Frans Johansson (Harvard Business
  School Press, 2004)
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                            Innovation

Many authors point out that invention - the creation of new tools or the
novel compilation of existing tools - is often confused with innovation.


Current business literature blurs the concept of innovation with value
creation, value extraction and operational execution.
In this view, an invention is not an innovation until someone successfully
implements carry it to the market and makes money from it. (C. Freeman)
Note that innovation occurs when someone uses an invention - or uses
existing tools in a new way – to change how people work and/or how
organize themselves, and how they conduct their lives.
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                           Innovation
1. Innovation processes involve the exploration and exploitation of
   opportunities for a new or improved product, process or service, based
   either on an advance in technical practice (“know-how”), or a change
   in market demand, or a combination of the two. It is therefore
   essentially a matching process. The classic paper on this subject is by
   Mowery and Rosenberg (1979).
2. Innovation is inherently uncertain, given the impossibility of predicting
   accurately the cost and performance of a new artefact, and the
   reaction of users to it. It therefore inevitably involves processes of
   learning through either experimentation (trial and error) or improved
   understanding (theory).
3. Some (but not all) of this learning is firm specific. In these
   circumstances, the processes of competition in capitalist markets can
   be seen as one of purposive experimentation through competition for
   user acceptance between alternative products, systems, processes
   and services, and the technical and organisational processes that
   deliver them.
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                 Innovation is related to

1. The production of scientific and technological knowledge: since
   the industrial revolution, the production of scientific and
   technological knowledge has been increasingly specialised, by
   discipline, by function and by institution.

2. The transformation of knowledge into working artefacts (theory
   remains an insufficient guide to technological practice, given the
   growing complexity of technological artefacts, and of their links to
   various fields of knowledge). Technological and business history
   has made major contributions here and, more recently, the
   cognitive sciences.
                                                                            10



                  Innovation is related to

                                (Continue)

3. Responding to and creating market demand: this involves a continual
   process of matching working artefacts with users’ requirements. The
   nature and extent of the opportunities to transform technological
   knowledge into useful artefacts vary amongst fields and over time, and
   determine in part the nature of products, users and methods of
   production.

4. In the competitive capitalist system, corporate technological and
   organisational practices co-evolve with markets (creation of new
   sectors). These processes are central concerns of scholars in
   management, economics and marketing studies.
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              Models of creativity

• Individual inventors (serendipity)

• R&D laboratories (firms) (deliberate investments)

• Linkages with universities (government investiments)

• Networks
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            Technology Innovation
Process innovation involves the implementation of a new
or significantly improved production or delivery method.
Examples: new machineries, instruments, methodologies.
Consequences: costs reduction; increase of quantity/quality
of products; increase of flexibility.


Product innovation involves the introduction of a new
good or service that is new or substantially improved. This
might include improvements in functional characteristics,
technical abilities, ease of use, or any other dimension.

       RADICAL VS INCREMENTAL INNOVATION
                                                               13


            Managerial Innovation

Business Model innovation: involves changing the way
business is done in terms of capturing value e.g.
Marketing innovation: is the development of new
marketing methods with improvement in product design or
packaging, product promotion or pricing.
Organizational innovation: involves the creation or
alteration of business structures, practices and models, the
management of staff and may therefore include process,
marketing and business model innovation.
                                                                             14


  Innovation between technological
convergence and vertical disintegration
        Underling tech.    Type of convergence           Knowledge
           advance                                      disintegration
  Metal cutting and       Production operation in   Machine tools makers
  forming                 many sectors
  Chemical firms          Process control           Machinery makers and
                                                    plant contractors
  Computing               Waffer design             CAD and robot
                                                    producers
  ICT                     Software applications     Kibs and contractor
                          OEM producers             manufactures
  New materials           Advances in material      Rapid prototype firms
                          science
  Biotech                 Interdisciplinarity of    DBF and pharmaceutical
                          science and technology    firms
                                      15



Innovations and patents



      Inventions not in use


      Patents            Inventions
                                                                                            16



     Models of knowledge appropriability




Knowledge as public good   Localised knowledge             Proprietary knowledge




                              IDs                Industrial secrets
    Costly to absorb        Networks             Patents (totally protected or partially)
                             CoPs                Non protected (continuous innovation)
                                                           17


          SOURCES of Innovation


INSTITUTIONAL “PIPELINE” (BIG FIRMS) : R&D




NON ISTITUTIONAL “PIPELINE” (SME):      CLIENTS, SUPPLY,
PATENTS, COLLABORATION WITH UNIVERSITIES, STPs, OTHER
FIRMS (DISTRICTS, CLUSTERS).
                                                     18


The principal phases of implementation of an
innovative project :

1. Idea generation
2. Screening
3. Revision within the group
4. Sponsoring and definition of the project leader
5. Planning of the various phases
6. Implementation
7. Commercialisation
                                                                               19

The principal phases of implementation of an innovative
project :
                        Example: Drug Development

   1         2           3        4         5           6         7       8

         10.000         250                         5         1
1. Identification and validation of target structure (cause of disease)
2. Identification and validation of biotech application (possible treatment)
3. Pre-clinical tests
4. Clinical tests, phase 1
5. Clinical tests, phase 2
6. Clinical tests, phase 3
7. Registration and production
8. Commercialisation
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                    Linear model
 In the past, the linear model as representation of the innovative
 process:                              (V. Bush, 1950)

 Science          Technology              Firms
 BASIC                    APPLIED
                                                  DEVELOPMENT
RESEARCH                RESEARCH


  COMMERCIALIZATION                             PRODUCTION
 Ignored:
 • Market questions
 • Educational system / training (school, univ., prof. training.)
 • relations/exchanges information/knowledge between actors of
   innovation sistem
                                                         21


              NON-linear models
           Technology           Science
           (es: biotech or new material)

Chain-linked Model           (Kline e Rosemberg, 1986)

 Key factors are the interaction and relationships:
 • Inside the firm
 • Between firms
 • Between the different actors inside the innovation
   system (firms, Univ., STPs, public administration)
                                                                                              22
                   Chain-linked model                                         (CONTINUE)



      New
                         Needs/Necessities of persons/society
     Needs




   Idea
                development           production            Marketing/comm.         Markets
Generation




          New
                              Scientific and technological state of the art
      Ideas
                                                        23
                Triple Helix model
H. Etzkowitz   (2000)            Tri-lateral networks
                                         and
                                Hybrid organizations
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                     OPEN INNOVATION

CLOSED innovation VS OPEN innovation H. CHESBROUGH (2003)
 The firms can and should utilize ideas (and technologies) that are
 outise of them in the same way/time they utilize the ones that are
 inside them.
  Firms need to use pipeline outside the core business through:
   start-up
   licensing agreements
   joint ventures

 In the same time ideas arise outside research labs of the firm are
 carried inside to be developed and/or commercialized.
         The firm define new strategies to capitalize the notions of
         the open innovation.
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  Scientists or entrepreneurs?

• Bush/Rosenberg/List - investing in science
• Schumpeter - heroic innovators
• von Hayek - discovering opportunities
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             Stylised facts about innovation

• Uncertainty
• Opportunity
• Complexity
• Learning
• Lock-in
• Access of various sources
• Clustering and links with science institutions (spillovers)
• Users
• Diffusion (S-shaped curves) (lagged-risk adverse innovators or risk-
 bearing)
• Dominant design vs. product differentiation and customisation
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  Degrees of uncertainty in the innovative activity:
      a map of the two principal dimensions

                     2                              1
                     Engineering applications       Exploring Basic Research
              High
                     (applied reasearch)
Uncertainty
  of the             4                              3
innovative           Market researches.             Development
  output             Activity of incremental
                     improvement of the
              Low    technologies.
                     Combination of already
                     existing technological
                     knowledges.


                              Low                                High

                          Uncertainty on the modalities of the process

                             Source: our elaboration from Pearson (1991)
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