Chapter 10: Limits of Learning Curve by Abernathy and Wayne.

The Learning Curve ( Known As Start Up Function or Progress Function) Many companies have built successful marketing and production strategies around the learning curve--- The learning curve is a graphical representation that shows the negative relationship between product/manufacturing costs and volume of quantity produced by labour workers only. That is, as the volume of the quantity produced increases, the production cost declines.

Graphical Representation of the Learning Curve Cost of Production Volume (Quantity Produced)

Productivity and the Learning Curve The learning curve shows that increasing a company’s product volume and market share will lead to having a cost advantages over the competition. Cost Advantage means that the organisation can produce its goods and services with a cost lower than its competitors.

Learning Curve Process Efficiency of production As organisations get more experienced at a task, they usually become more efficient at it. Learning Process A learning process is developed; task become easier and then harder as one approaches a certain limit. Cost Advantage As the quantity of item produced doubles, costs of production decrease at a steady and predictable rate.

But is this really the case???? A Decrease in Cost Production Might Lead to Some Disadvantages such as: Reduced flexibility A loss of innovative capability Higher Volumes, higher than expected, meaning that they will need more room for storage. Reaching the point where increasing volume expansion prevents any further cost reduction

Difference between the Learning Curve and the Experience Curve? The experience curve is different than the learning curve become it takes into consideration more than just labour time. It states that the more a good is produced, the lower will be the total cost of doing it. Each time cumulative volume doubles, total costs (including administration, marketing, distribution, and manufacturing) fall by a constant and predictable percentage.

Graphical Representation of the Experience Curve

Chapter Eleven Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms—by Rebecca M. Henderson & Kim B. Clark

Important Definitions Definition of Innovation: 'The adoption of ideas that is new to the organisation‘ or bringing out an invention that is new and successful to the market. An innovated product is defined by: - Lower costs of production - Improved features and characteristics of products.

Main Argument of the Chapter The main argument of the chapter: The traditional categorisation of innovation as either incremental or radical is incomplete. The difference between competence-destroying and competence-enhancing innovations should be made clear. Architectural Innovation has many problems when it is implemented.

Incremental/Sustaining Radical/Disruptive Incremental and Radical Innovation Involve Two Extreme Ends of Innovaiton Incremental/Sustaining Radical/Disruptive

Difference Between Incremental and Radical Innovation Incremental innovation Radical Innovation (Disruptive Innovation) It is an internal dimension based on the knowledge and resources involved. An incremental innovation will involve moderate technological changes and the existing products on the market will remain competitive. Ex. New car models everywhere from the same brands. Radical innovation on the other hand, is an externally dimensional one. It will require completely new knowledge and/or resources. Radical innovation will instead involve large technological advancements, rendering the existing products non-competitive. Ex. From air fan to air conditioner

Incremental Versus Radical Innovation in terms of Capabilities and Competence Incremental Innovation Radical Innovation An incremental innovation will build upon existing knowledge and resources within a certain company- this means it is a competence enhancing innovation (innovating already existing capabilities) Thus, it will be a competence destroying innovation of all the old knowledge (coming up with new skills and capabilities) It keeps large companies competitive only in the short run-not sustainable. Creates new markets Leads to rapid growth Low risk Very high risk

Other Types of Innovation Modular Innovation Architectural Innovation It is innovation that changes only the core design concepts of a certain product. This is innovation that changes a products architecture but leaves the core design concepts unchanged. For example, changing from an analog telephone to a digital one. (this is a change in the core concept of the product-but not a change in the architecture/design of the product! IT IS STILL A TELEPHONE)

A framework for defining innovation: Core concepts of Product Reinforced/Updated Overturned/Completely Changed Unchanged Incremental Innovation ONE Modular Innovation TWO Architectural Innovation THREE Radical Innovation FOUR Product Design/Architecture Changed

Example Assume that our product is the electronic air fan with a hidden motor for lower noise. Improvement in the motor Incremental A move to central air conditioning. Radical Introduction of a portable air fan Architectural Changing air fan from an electronic one to a solar one. Modular.

Problems Created by Architectural Innovation: Established organizations require significant time and resources to identify particular innovation as architectural. - Radical innovation is easier to acknowledge than architectural innovation since it involves a complete elimination of old skills and information. There is a need to build and to apply new architectural knowledge effectively. This will require additional time, work, effort, and capabilities. A sudden architectural change would mean the failure of the organisation in implementing such change. The organisation must first switch to a new mode of learning, then invest time and resources in learning about the new architecture they are going to use. The organisation may want to modify the channels, filters, and strategies that already exist rather than to experience significant fixed costs