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Innovation Powered By Docstoc
					Technology and Operations
Invention, Innovation, and
Innovation is the specific tool of entrepreneurs,
the means by which they exploit change as an
opportunity for a different business or service

– Peter Drucker, Innovation and Entrepreneurship

Companies achieve competitive advantage
through acts of innovation

– Michael Porter, The Competitive Advantage of Nations

Invention and Innovation

   Idea Generation + Problem-Solving  Invention.

   Invention + Implementation  Innovation.
     12-20% of inventions results in successful innovation.

   Innovation + Diffusion  Economic Value.

              Who invented the vacuum


   J. Murray Spengler invented
    the vacuum cleaner originally
    called an ‘electric suction

   It was W. H. Hoover who had a
    good idea of how to market and
    sell the product.

              Who invented the sewing


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


   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

Commercialization and Diffusion

   Invention to Innovation (commercialization)

   Innovation to wide-spread use (diffusion)

Innovation vs. Invention

    Invention is only the first step in a long process in bringing a
    good idea to widespread and effective use.

   Vacuum Cleaner                        Windows
       Inventor – J Murray Spengler          Inventor – Xerox
       Marketer – W H Hoover                 Marketer – Apple

   Sewing Machine                        MS-DOS
       Inventor – Elias Howe                 Inventor – Tim Paterson
       Marketer – Isaac Singer               Marketer – Bill Gates
Diffusion of Technology
When was the Internet invented?
When was fax-machine technology

When was the Internet invented?
ARPAnet, the predecessor to the modern Internet was
developed in 1969 by Department of Defense.

26 computers hooked up to the
ARPANET by 1971; around
1,000 computers by 1984.
Now a large, growing,
connection of over 10,000
networks and 30+ million users
in over 60 countries.
NUA Survey: As of February
2002, 544.2 million on-line.

When was fax technology invented?
What was the purpose of the fax machine?
Why did it take so long for the fax machine to diffuse?
Why has the fax machine been so successful lately?
What are some characteristics that help
explain success and failure of innovations?

1.   Perceived Attributes

2.   Relative advantage

3.   Compatibility

4.   Complexity

5.   Trialability

6.   Observability

Relative Advantage

          Beginning                        Later ...
   Very slow                    Faster and cheaper to fax
                                  than to mail a letter
   Hand operated telegraph       (especially overnight).
    and telephone system         More reliable to fax than to
   Missing network
                                 Clearer message than
                                  phone call

                                 More convenient than phone
                                  call given different time


           Beginning                       Later ...
   Stand alone invention in      Compatible with copiers
    systemic technology
                                  Compatible with phones
   Compatible with
    telegraphs                    Compatible with
   Telegraphs not as widely
    spread as phones later.


           Beginning                       Later ...
   Assistance needed             As easy to use as the
   Transmission by
    telegraph or radio-wave.      As easy to use as a


           Beginning                          Later ...
   Very expensive to adopt          Rent, try, buy

   User has to be convinced         Special trial offers
    of adopting the fax               (supported by phone
    machine before investing          companies)
    so much money
                                     Gifts to certain groups
   No critical mass to try out       (schools, universities).
    using the fax machine.


           Beginning                       Later ...
   Hardly anybody used it,       Early adopters spread the
    no observation possible.       use

                                  Students learn about it in

                                  Everybody has it
                                   (business cards).
Major Stages in the Innovation
   Invention (Creation of Knowledge): Acquisition of new knowledge

   Innovation (Transformation of Knowledge): Application of new knowledge

   Diffusion (Utilization of Knowledge): Acceptance and adoption of new

Three Major Stages of the
Innovations Process

Life-Cycle Phases of the
Technological Innovation Process
Patterns of Innovation

                                       Physical limit of technology

                                                     Effort (funds)

        Technological performance often follows an S-shaped curve
                                 Foster, Innovation: The Attackers Advantage, Summit Books, 1986
Successive Tech Innovations

                  Physical limit of technology

                                                                    Effort (funds)

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

Product v. Process Innovation
The Model T
 For 4 years, Ford developed, produced, and sold
 five different engines (2-6 cylinders) in a factory of
 trade craftsmen working with GP machines.

 Outof this experience came a dominant design,
 the Model T.

       15 years, 2 million engines of this single
 Within
 design were produced each year in a mass-
 production facility. During that period, there were
 incremental (no fundamental) innovation in

Product v. Process Innovation

   The fluid-pattern stage
       During the early stages of the product’s 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 stage
       Once 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 stage
       At 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).

Innovation and Development

Windows of Opportunity
Life Span of the Computer
      generations (1950s) of IBM computers had a
 First
 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
 Usefulmarket life of computers shrank from 10
 years to 8 years, then only 5 years, then 3, and 2.
 DesktopPCs and laptops: useful market life
 dropped to less than a year.

The Classic Product Cash Flow

   Window 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.

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.

Case Studies

   The Case of the PowerPC
       Somerset, 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 hasn’t 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 need
       “Stacker” to double the hard disk space.

Market Pull v. Technology Push

          Market Pull                  Technology Push
   Market needs create new        New discovery triggering
    product opportunities           a sequence of events
    which in turn stimulate          R&D Production
    R&D to determine if a             Marketing Market
    solution is possible              Need
     Market Need                   Some innovations may
      Marketing R&D                 have no market
      Production                      potential.
     Problem: Find new              Problem: Find or create
      technology to fit need!         a market!

Disruptive v. Sustaining Technology

   The slope of technological trajectory is steeper than the slope of the
    trajectories of customer need.

   Disruptive Technology that under-performs what key customer
    demand today may improve to squarely address what those same
    customers demand tomorrow.
Hard and Soft Technology

       Hard technology                  Soft technology
   Hard technology refers to      Soft technology is the
    equipment and devices           application of the Internet,
    that perform a variety of       computer software, and
    tasks in the creation and       information systems to
    delivery of goods and           provide data, information,
    services.                       and analysis and to facilitate
                                    the accomplishment of
                                    creating and delivering
                                    goods and services.
Integrated Operating System (IOS)

   Integrate hard and soft technology across the
    organization, allowing managers to make better decisions
    and share information across the value chain.

   Computer integrated manufacturing systems (CIMS),
    enterprise resource planning (ERP) systems, and
    customer relationship management (CRM) systems are
Computer-Integrated Manufacturing
   Computer-integrated manufacturing systems (CIMS)
    represent the union of hardware, software, database
    management, and communications to automate and
    control production activities.

   A robot is a programmable machine designed to handle
    materials or tools in the performance of a variety of tasks.

   CAD/CAE enables engineers to design, analyze, test,
    simulate, and “manufacture” products before they
    physically exist.

   CAM involves computer control of the manufacturing

   Flexible manufacturing systems (FMS) consist of two or
    more computer-controlled machines linked by automated
    handling devices.
Enterprise Resource Planning

   Enterprise Resource Planning (ERP) systems integrate
    all aspects of a business—accounting, customer
    relationship management, supply chain management,
    manufacturing, sales, human resources—into a unified
    information system and provide more timely analysis and
    reporting of sales, customer, inventory, manufacturing,
    human resource, and accounting data.
Enterprise Resource Planning
   Two prominent vendors of ERP software are SAP and

   ERP allows departments to share information and
    communicate with each other easily.

   ERP is not about software, but about changing the way
    the organization and its operations are managed.
Customer Relationship
Management Systems
   Customer relationship management (CRM) is a business
    strategy designed to learn more about customers’ wants,
    needs, and behaviors in order to build customer
    relationships and loyalty, and ultimately enhance
    revenues and profits.
What is e-Business?
If you were asked to define business using
a single word, what would it be?

What is e-Business?

   Application of electronic network technology to relevant
    business processes.

   Replacement of paper-based, human-agent based or
    telephone-based personal transaction.

E-business is not e-commerce

   E-commerce involves exchanges among customers,
    business partners and the vendor. For example, a
    supplier interacts with a manufacturer, customer interacts
    with sales representatives and shipment providers
    interact with distributors.

   E-Business includes
     External-oriented processes (e-commerce)
     Internal processes like production, inventory
      management, product development, risk management,
      finance, strategy development, knowledge
      management and human resources.
                    Andrew Bartel, vice president and research leader of e-commerce trends
                    Giga Information Group, Inc.
Andrew Bartel, vice president and research leader of e-commerce trends
Giga Information Group, Inc.
                                                EC2: Global EC Infrastructure
                                                 • Security
                                                 • Digital Payment
                                                 • E. Banking
                                                 • Legal Issues
                                                 • E. Market Formation
                                                 • Human/Computer Interface
                                                 • National/Global Information

              EC5: Linking with Suppliers       EC1: Enterprise Management        EC4: Linking with Distributors
                                                 • Product Development            • Market Response
             • Product Sourcing                  • Logistics and Supply-Chain     • Inventory Replenishment
             • Product Information Collection      Support
                                                 • Human Resource Mgmt.           • Product Information
             • Purchase Process Mgmt.                                               Distribution
             • Supplier Mgmt.                    • Training and Conferencing      • Order Fulfillment
             • Account Payable Mgmt.             • Manufacturing Mgmt.            • Account Receivable Mgmt.
                                                 • Accounting                     • Parts Services and Contract
                                                 • Financial Planning               Mgmt.

                                                EC3: Interface with Consumers
                                                • Web Marketing
                                                • E Shopping
Source: E-Commerce:                             • Information &On-Line Services
                                                • Entertainment on Demand
State of the Art (Shaw)                         • Trading in E Markets
                                                • Customer Services & Sales
                                                • Market Intelligence, Consumer
                                                  Information Gathering

Suppliers            Distributors
                                               Enterprise                        Provider
                                                            • Knowledge
                                                            • Internal
          Srvices                                             Communication
                                                            • Project
                                               Intranet       Management

                     Electronic            Business          Customer          Information
                     Storefront          Intelligence        Services         Dissemination
 Source: E-Commerce: State of the Art (Shaw)
Technology in Value Chains

   Four major types of business relationships:
     B2B: Business to Business
     B2C: Business to Customer
     C2C: Customer to Customer
     G2C: Government to Customer

   Electronic transaction capability allows all parts of the
    value chain to immediately know and react to changes in
    demand and supply.


e-Business Changes …
   Information flows
   Internal and external processes
   Relationships
   Power

BUT, it does not change need for …
   Quality products
   Excellent service
   Cost effective delivery
   Valued relationship

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