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Innovation

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					Technology and Operations
Invention, Innovation, and
Diffusion
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
                                                           4

Invention and Innovation

nIdea Generation + Problem-Solving  Invention.

nInvention + Implementation  Innovation.
 n12-20% of inventions results in successful innovation.

nInnovation + Diffusion  Economic Value.
Question



           n Who invented the vacuum
             cleaner?
                                   6

Answer



n J. Murray Spengler invented
  the vacuum cleaner originally
  called an ‘electric suction
  sweeper.’

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



           n Who invented the sewing
             machine?
                                                                                  8

Answer




                                         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?
                                               10

Answer


         n Samuel Morse only invented
           the telegraph code, all the other
           inventions came from others.

         n 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.
                                               11

Commercialization and Diffusion

nInvention to Innovation (commercialization)



nInnovation to wide-spread use (diffusion)
                                                                    12

Innovation vs. Invention


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

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

n Sewing Machine                  n MS-DOS
 n Inventor – Elias Howe            n Inventor – Tim Paterson
 n Marketer – Isaac Singer          n Marketer – Bill Gates
Diffusion of Technology
When was the Internet invented?
When was fax-machine technology
invented?
                                                      14




When was the Internet invented?
ARPAnet, the predecessor to the modern Internet was
developed in 1969 by Department of Defense.
                                 15




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.
                                                          16




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
                                                18

Relative Advantage

                           Later ...
                          Beginning
                 n Faster and cheaper to fax
                 nVery slow
                   than to mail a letter
                   (especially overnight).
                 nHand operated telegraph
                   More reliable to system
                 n and telephone fax than to
                   mail.
                 nMissing network
                 n Clearer message than
                   phone call

                 n More convenient than phone
                   call given different time
                   zones.
                                             19

Compatibility

                         Later ...
                        Beginning
                nCompatible invention in
                nStand alonewith copiers
                 systemic technology
                nCompatible with phones
                nCompatible with
                nCompatible with scanners.
                 telegraphs

                nTelegraphs not as widely
                 spread as phones later.
                                         20

Complexity

                      Later ...
                     Beginning
             nAssistance use as the
             nAs easy to needed
              phone
             nTransmission by
              telegraph or radio-wave.
             nAs easy to use as a
              photocopier.
                                               21

Trialability

                         Later ...
                        Beginning
               nRent, try, buy
               nVery expensive to adopt

               nSpecial trial offers
               nUser has to be convinced
                of adopting by phone
                (supported the fax
                companies)
                machine before investing
                so much money
               nGifts to certain groups
                (schools, mass to try
               nNo criticaluniversities).out
                using the fax machine.
                                              22

Observability

                          Later ...
                         Beginning
                nEarly adopters spread the
                nHardly anybody used it,
                 no observation possible.
                 use

                nStudents learn about it in
                 schools

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

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

n Diffusion (Utilization of Knowledge): Acceptance and adoption of new
  knowledge
                            24

Three Major Stages of the
Innovations Process
                                   25

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


                                       Physical limit of technology
    Performance




                                                     Effort (funds)

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




                  Physical limit of technology




                                                                    Effort (funds)

                                       Foster, Innovation: The Attackers Advantage, Summit Books, 1986
                                                          28

Product v. Process Innovation
The Model T
nFor 4 years, Ford developed, produced, and sold
 five different engines (2-6 cylinders) in a factory of
 trade craftsmen working with GP machines.
nOut of this experience came a dominant design,
 the Model T.
nWithin 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.
                                                                                    29

Product v. Process Innovation

n The fluid-pattern stage
  n 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.
n The transitional-pattern stage
  n 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.
n The specific-pattern stage
  n 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).
                             30

Innovation and Development
                                                       31

Windows of Opportunity
Life Span of the Computer
nFirst generations (1950s) of IBM computers had a
 useful market life of more than a decade.
nIBM 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.
nUseful market life of computers shrank from 10
 years to 8 years, then only 5 years, then 3, and 2.
nDesktop PCs and laptops: useful market life
 dropped to less than a year.
                                                                                32

The Classic Product Cash Flow

n Window of opportunity: the period in which the new product faces
  no or low competition in the market place.
  n The window of opportunity for market exploitation is constantly shrinking
    as the competition brings new products more and more frequently.
                                                                               33




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.
                                                                                   34

Case Studies

n The Case of the PowerPC
 n Somerset, a joint venture by IBM, Apple, and Motorola in 1991 to
   develop the PowerPC.
 n “Time May Have Passed the PowerPC” (Business Week, 4, March
   1996), Ira Sager wrote:
   n 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.”

n The case of the vanishing need
 n “Stacker” to double the hard disk space.
                                               35

Market Pull v. Technology Push

                         Market Pull
                       Technology Push
                  nNew discovery triggering
                  nMarket needs create new
                   product opportunities
                   a sequence of events
                   which in turn stimulate
                   nR&D Production
                   R&D to determine if a
                     Marketing Market
                   solution is possible
                     Need
                   nSome Need
                   nMarketinnovations may
                     Marketing R&D
                     have no market
                     Production
                     potential.
                   nProblem: Find new
                   nProblem: Find or create
                     technology to fit need!
                     a market!
                                                                           36

Disruptive v. Sustaining Technology




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

n 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

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

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

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

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

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

nCAM involves computer control of the manufacturing
 process.

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

nEnterprise 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
(ERP)
nTwo prominent vendors of ERP software are SAP and
 Oracle.

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

nERP is not about software, but about changing the way
 the organization and its operations are managed.
Customer Relationship
Management Systems
nCustomer 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?
                                                            45

What is e-Business?

nApplication of electronic network technology to relevant
 business processes.

nReplacement of paper-based, human-agent based or
 telephone-based personal transaction.
                                                                                           46

E-business is not e-commerce

nE-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.

nE-Business includes
 nExternal-oriented processes (e-commerce)
 nInternal 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.
Source: E-Commerce:
State of the Art (Shaw)
Source: E-Commerce: State of the Art (Shaw)
Technology in Value Chains

nFour major types of business relationships:
 nB2B: Business to Business
 nB2C: Business to Customer
 nC2C: Customer to Customer
 nG2C: Government to Customer

nElectronic transaction capability allows all parts of the
 value chain to immediately know and react to changes in
 demand and supply.
                                    51

e-Business




BUT, it does not change
e-Business Changes … need for …
  Quality products
n Information flows
  Excellent service
n Internal and external processes
  Cost effective
n Relationships delivery
  Valued
n Power relationship

				
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