Management of Technology (OM476) Innovation Patterns and Types January 25, 2006 S. Fisher
Agenda • Types of innovation • Technology S-curves • Trajectory of performance improvement in technology • Exercise – evaluating innovation types
Types of Innovation • Product vs Process Innovation • Product innovations are embodied in the outputs of an organization – its goods or services. • Process innovations are innovations in the way an organization conducts its business, such as in techniques of producing or marketing goods or services. • Product innovations can enable process innovations and vice versa. • What is a product innovation for one organization might be a process innovation for another
Examples: Product or process? • Trident Splash • Candy coated gum in “pillow shaped pellets” with a liquid center • Sugarless • New flavors • Peppermint with vanilla • Strawberry with lime • Airlines allowing travelers to print their own boarding passes at home
Types of Innovation • Radical vs Incremental Innovation • The radicalness of an innovation is the degree to which it is new and different from previously existing products and processes. • Incremental innovations may involve only a minor change from (or adjustment to) existing practices. • The radicalness of an innovation is relative; it may change over time or with respect to different observers. • For example, digital photography is a more radical innovation for Kodak than for Sony.
Types of Innovation • Competence-Enhancing vs. Competence-Destroying Innovation • Competence-enhancing innovations build on the firm’s existing knowledge base. • Creating opportunities to increase sales or market penetration • Examples? • Competence-destroying innovations render a firm’s existing competencies obsolete. • Eliminating an entire product line or type of technology • Examples? • Would a firm ever want to destroy its own competence in an area?
Types of Innovation • Architectural vs Component Innovation • A component innovation (or modular innovation) creates changes to one or more components of a product system without significantly affecting the overall design. • Examples? • An architectural innovation entails changing the overall design of the system or the way components interact. • Examples?
Another way to think about innovation types: Risk • Lowest risk product innovations • Cost reduced version: Lower cost version of an existing product that has similar features and functions. • Product repositioning: Involves retargeting an old product into a new market segment or different application. • Innovation required?
Upgrades and extensions to existing products • Improvement to an existing product: Revision of existing product that offers greater value and improved performance over the older product. • Addition to an existing product line: New item to the company, but fits within an existing product line the company already manufactures. • Innovation required?
“Truly new products” Highest risk products. New product line: Product may not be new to the market, but is new to a company allowing entry into established market for the first time. New product: Product is the first of its kind and may create an entire new market. Highest levels of innovation required.
S-curves in Technological Improvement • Technology improves slowly at first because it is poorly understood. • Then accelerates as understanding increases. • Then tapers off as approaches limits.
Example: Hybrid engine technology • What type of innovation is this? • Product vs. process • Radical vs. incremental • Competence-enhancing vs. competence-destroying • Architectural vs. component
Business Impact of Innovation Types (or, Why does all of this matter?) • How will other business decisions be affected by the type of innovation? • Marketing • Human resources • Capital investments • R&D investments
For Monday • IDEO case deliverables • For Wednesday, Feb. 1: Technology diffusion • Read Ch. 3 pages 44-54 • What causes people to adopt technology at different rates? • What can firms do to promote diffusion of a new technology?