Technology and Innovation Leeds School of Business University of Colorado Boulder, CO 80309-0419 Professor Stephen Lawrence

Course Outline Technology and Innovation Introduction to OM Productivity Linear programming Quality SPC tools Timeliness Queueing Theory Flexibility Inventory Theory Technology and Innovation Project Management Operations Strategy Business Performance Excellence Charles Sheeler Suspended Power 1939

Agenda Competing with technology S-Curve analysis Disruptive technologies Innovation in history Normal vs. revolutionary innovation Paradigms Managing Technology Technological Forecasting

The Value Equation Product Innovation Process Innovation

Henry Ford Businessmen go down with their businesses because they like the old way so well they cannot bring themselves to change. …Seldom does the cobbler take up with a new fangled way of soling shoes and seldom does the artisan willingly take up with new methods of his trade. Henry Ford, My Life and Times, 1922

Product vs. Process Innovation

Competing with Process Innovation Value to Customer Competing with Marketing Capabilities Competing with Operational Capabilities Price Quality Timeliness Flexibility Competing with Technological Capabilities Process Enhancements Product Enhancements

Technology at GM (1980’s)

Patterns of Innovation

Evolution of Product/Process Innovation Product Innovation high Process Innovation Rate of Innovation Evolution of Product/Process Innovation In contrast with product innovation, process innovation typically comes later in the life-cycle of a product. As a product matures and becomes standardized, there is less opportunity to differentiate the product with product features alone, and the competitive battlefield shifts to the production of the product. Process innovation therefore becomes increasingly important. A good example of this phenomena is the automobile industry. Early in the 20th century, there occured a great deal of product innovation in the auto industry. No one had a clear idea just what an automobile was (horseless carriage?), what is should look like (three wheels, four wheels), or how it should be powered (steam, gasoline, electricity, diesel, Sterling engine, …). By the end of the 20th century, the automobile is well-standardized, and there is little significant product innovation in the industry. Most product “innovation” is in the form of evolutionary product development (such as four-valve engine cylinders) and marketing-driven style changes. In constrast, many of the important battles in the auto industry are now being waged within the factories of auto manufacturers. The most successful producers are driving down costs (productivity), increasing quality, improving flexibility, and speeding the design cycle (timeliness) faster than the competition. Significant innovation in the auto industry is now with processes, more than with product. low early late Stage of Product Life-cycle

Trajectory of Tech Innovation Physical limit of technology Performance Performance Progression of Technological Innovation A well accepted phenomena in the evolution of technological innovation is that innovation generally follows an “S-curve.” Initially, considerable effort, money, and resources are expended in developing a new technology, but usually for little performance improvement. As knowledge about the technology accumulates, progress becomes more rapid and relatively small increments of effort result in significant performance gains. Finally, the technology begins to approach its physical limits, and further pushing the performance of the technology becomes increasingly difficult. Most, or perhaps all, technologies inherently have an upper performance bound, often determinied by the laws of physics. For example, semiconductor performance has been increasing exponentially for decades, but many observers believe that semiconductor performance will be flattening soon due to the physical limitations of making smaller and smaller components squeezed more and more tightly together on a silicon wafer. These forecasters predict that early in the next century, semiconductor performance will begin to stagnate. Effort (funds) Technological performance often follows an S-shaped curve Foster, Innovation: The Attackers Advantage, Summit Books, 1986

Silicon Slowdown: Scientists are Battling to Surmount Barriers in Microchip Advances

Successive Tech Innovations Disruptive Technology Performance Physical limit of technology Performance Progression of Technological Innovation The performance of the newer technology initially is lower than that of the older technology, but because of their relative positions on their respective S-curves, the performance of the newer technology soon surpasses that of the older. A fascinating example of this phenomena occured in the U.S. when electric lighting was first introduced in the 19th century. Gas lighting was the standard means of lighting homes and buisinesses in the latter part of the 1800’s (having earlier supplanted whale oil). When electric lighting was first introduced, it was relatively inefficient, difficult to install, and an infrastruture for delivering electricity was lacking. Initially, it was not at all obvious that electric lighting would prevail in its competition with gas. The gas lighting industry did not idly sit by to watch its markets be stolen by electricity, but undertook a renewed campaign of innovation (very common for threatened technologies). For example, it had been known for decades in the theater industry that putting a piece of lime in a gas flame created a much brighter light (hence the term “limelight”). This innovation was transfered to residential lighting with good effect. However, in the end, the benefits of electric lighting (cost, safety, convenience, cleanliness) prevailed as the technology developed, and gas lighting was eventually completed supplanted by electric lighting. Effort (funds) Foster, Innovation: The Attackers Advantage, Summit Books, 1986

IBM Develops Copper Chip; Seen as Industry Breakthrough

Technological Progress in History Patterns in History Unorderly not an orderly process of research and development; few elements of planning or cost-benefit analysis. Breaks constraints. Technological change involves an attack by an individual on a constraint that is taken as a given by everyone else. Unexplained timing. Often no good reason why an invention was made at a particular time and not centuries earlier (e.g. wheelbarrow and stirrup in Medieval times). Technological Progress in History Further clues regarding patterns of technological evolution and diffusion can be found by observing technological progress in history. Historians who have undertaken such study find few patterns. Supporting the notion that technological evolution is chaotic, technology in history is unorderly and unpredictable. Unlike the common notion that “progress marches on” in an inevitable and regular cadence, history shows that innovation is irregular and lumpy. In order for technological progress to occur, very often familiar and widely-accepted constraints must be cast aside. For example, many of the leading scientific authorities of the early 20th century were convinced that heavier-than-air flight was impossible. They were proven wrong when a couple of bicycle mechanics from Dayton flew the first powered and manned airplane. Many of the innovations in history build on other innovations. For example, personal computers would be impossible without semiconductor technology. But some technical innovations are (relatively) independent of prior innovation. Examples include both the wheelbarrow and the stirrup. The wheelbarrow made construction immeasurably easier, and the stirrup made mounted soldiers much more effective in battle. Both of these innovations were made in Mediaeval Europe, but could have occurred centuries earlier. The timing of innovation is often inexplicable. Moykr, The Lever of Riches: Technological Creativity and Economic Progress, Oxford University Press (NY), 1990.

Stages of Technical Evolution Invention: Acquisition of new knowledge Innovation: Application of new knowledge Diffusion: Acceptance and adoption of new knowledge Analogy to Evolution Invention = Mutation Innovation = Adaptation to Environment Diffusion = Evolutionary Success Lesson: dead ends have value Stages of Technical Evolution Another perspective on the evolution of technology comes from biology. In this view, there are three distinct phases in the progression of technical innovation: invention, innovation, and diffusion. Invention is analogous to mutation in biology. Invention is the process of discovering or developing new knowledge, knowledge which did not previously exist. Invention is often the province of the pure sciences, or of the “research” part of “research and development.” Innovation is analogous to environmental adaptation in biology. Innovation is the process of adapting existing ideas and knowledge to new applications and new products. Innovation is often the province of the engineering disciplines, and is the “development” part of “research and development.” The final evolutionary stage is diffusion, where new knowledge is widely disseminated and adopted in the form of new products and processes. The biological equivalent of diffusion is the survival and expansion of a species. In economics, diffusion is equivalent to economic survival and expansion of markets and market share. A good current example of the evolution of technology are “high-temperature” super-conductors (where high-temperature means the temperature of liquid nitrogen. This technology has been invented, but it remains to be seen if useable products and processes can be developed from it (innovation), and if so, if these products and processes will be successful in the marketplace (diffusion).

Normal vs. Revolutionary Innovation Normal Innovation innovation with an accepted “paradigm” incremental in nature increasing specialization required Revolutionary Innovation often a response to “intellectual crisis” often proceeded by competing theories and ideas changes the world view of a discipline establishes a new paradigm Technical Innovation A third perspective on the innovation of technology comes from a very influential book published in the early 1960’s, The Structure of Scientific Revolutions, by Thomas Kuhn. Kuhn asserted that innovation comes in two flavors: normal innovation and revolutionary innovation. Normal innovation occurs with an accepted “paradigm.” A paradigm is an accepted world view or set of assumptions about how the world works. Normal innovation is incremental in nature, and as normal innovation progresses, it demands increasing specialization from its participants. In contrast, revolutionary innovation reinvents the prevailing paradigm and forms a new paradigm. Often, revolutionary innovation is a response to an intellectual crisis of some kind. There are often a number of competing theories and ideas, and proponents of the old paradigm assiduously attempt to prop up the old world-view. The classic example of a paradigm shift was Copernican revolution of the Sixteenth Century. Prior to Copernicus, the paradigm in Europe (enforced by religious orthodoxy) was that the earth was the center of the universe and did not move. This created an intellectual crises of sorts in that it was very difficult to calculate the orbits of planets, moons, and the sun around the earth. Copernicus proposed that the sun was the center of the solar system, which made orbits much easier to calculate and forecast, and reconciled theory and observation. Proponents of the old paradigm (principally the Church) resisted this change in paradigm vigorously. However, the new theory was too powerful and useful to ignore, and eventually prevailed as the new paradigm. Kuhn, T.S., The Structure of Scientific Revolutions, Univ of Chicago Press, 1962.

Paradigms Paradigm – a set of rules and regulations (written or unwritten) that does two things: Establishes or defines boundaries Governs how to behave inside the boundaries in order to be successful

Examples of Paradigms Everything that can be invented has been invented Charles H. Duell, Commissioner, U.S. Office of Patents, 1899. Louis Pasteur's theory of germs is ridiculous fiction. Pierre Pachet, Professor of Physiology at Toulouse, 1872 Airplanes are interesting toys but of no military value. Marechal Ferdinand Foch, Professor of Strategy, Ecole Superieure de Guerre. There is no reason anyone would want a computer in their home. Ken Olson, president, founder of Digital Equipment Corp., 1977 640K ought to be enough for anybody. Bill Gates, 1981

Path Dependence and Self-Reinforcement Innovation as Chaos Path dependent and self-reinforcing Initial conditions are critical Small perturbations in initial environment can have a large subsequent in eventual technological evolution Inherent randomness (unpredictable) Positive feedback reinforces an evolutionary path Example: Beta vs. VHS video tapes Example: PC operating system Path Dependence and Self-Reinforcement Chaotic systems are terribly difficult to characterize or describe, but have several distinctive features. First, the initial conditions of chaotic systems are critical. Small perturbations in starting conditions can cause large changes in consequent outcomes. For example, chaos theorists suggest that a butterfly flapping its wings in Asia may be the start of a storm in North America. In technological evolution, chaos theory suggests that the trajectory a technology follows may be highly influenced by its origins, and by relatively random events along the way. For example, where would personal computers be today if two college drop-outs (Steve Wozniak and Steve Jobs) had stayed in school and taken traditional jobs instead of tinkering with “toy” computers in their garage. We certainly would have personal computers, but they might look very different, and the PC industry might be structured very differently. Once a technology begins to develop, its path is often self-reinforcing. Once a critical mass of users of a technology are using a particular variation of the technology, it becomes difficult or impossible to move to an alternative variation. A good example of this phenomena occurred with the competition between Beta and VHS videotape formats. Even though the Beta format was arguably better than VHS, VHS began to enjoy a larger customer base (perhaps for random reasons), and as its customer base grew, it became increasingly difficult, and then impossible, for Beta to continue in the market. Chaos theory thus helps to explain the random and seemly unreasonable evolution of technology often observed.

Chaos in the Movies

Path Dependence The US standard railroad gauge (distance between the rails) is 4 ft 8 1/2 in (1.44m). That's an exceedingly odd number. Why is that gauge used? Because that's the way they built them in England, and the US railroads were built by English ex patriots.

Path Dependence Why did the English build 'em like that? Because the first rail lines were built by the same people who built the pre-railroad tramways, and that's the gauge they used. Why did “they” use that gauge then? Because the people who built the tramways used the same jigs and tools as they used for building wagons, which used that wheel spacing.

Path Dependence OK! Why did the wagons use that wheel spacing? Well, if they tried to use any other spacing the wagons would break on some of the old, long distance roads, because that's the spacing of the ruts. So who built these old rutted roads? The first long distance roads in Europe were built by Imperial Rome for the benefit of their legions. The roads have been used ever since.

Path Dependence And the ruts? The initial ruts, which everyone else had to match for fear of breaking their wagons, were first made by Roman war chariots. Since the chariots were made by or for Imperial Rome they were all alike in the matter of wheel spacing (ruts again).

Path Dependence Thus we have the answer to the original question. The United States standard railroad gauge of 4 ft 8 1/2 in derives from the original military specification for an Imperial Roman army war chariot...

Path Dependence So why this wheel spacing for war chariots?? The width of a chariot was set to be equal to the combined width of the rear ends of the two horses pulling it!

Path Dependence When we see a Space Shuttle sitting on its launch pad, there are two big booster rockets attached to the sides of the main fuel tank. These are solid rocket boosters, or SRBs. The SRBs are made by Thiokol at their factory in Utah. The engineers who designed the SRBs might have preferred to make them a bit fatter, but the SRBs had to be shipped by train from the factory to the launch site. The railroad line from the factory had to run through a tunnel in the mountains. The SRBs had to fit through that tunnel. The tunnel is slightly wider than the railroad track. So, the major design feature of what is arguably the world's most advanced transportation system was determined over two thousand years ago by the width of a horse's arse.

Technology Forecasting The Past 1969 Lockheed Delphi Study

Technology Forecasting The Future

The Future? What disruptive technologies are currently evolving that are fundamentally changing the way we produce and deliver goods and services? What paradigms are being broken?

TECHNOLOGY No Place for Wimps!