Lecture 3 Innovation Management GM0401 Johan Brink

Today's lecture Diffusion of innovation Development of technologies Dominant design Technologies as systems

Innovation as a process Perhaps the best definition is that: ”Innovation process is as much a journey as a destination” (Van de Van et al. 1999). It means that: ”the more we know about this journey, the more rewarding it is likely to be”.

Product diffusion Innovation adoption How does a new product diffuse in society?

Percentage ownership Internet Cell phones PC Television Micro- wave Radio VCR Electricity Airplanes Telephones Automobiles

Rogers empirical Innovators: 2.5% Early Adopters: 13.5% Early majority: 34% Late majority 34% Laggards 16% E. Rogers, Diffusion of Innovations (1962)

Rogers model KnowledgePersuationDecisionImplementationConfirmation Previous practice Felt needs Innovativness Social norms Mandate Peer review Relative advantage Compatibility Complexity Triability Observability YES NO Switch/changeUse

Bass model A theoretical model dN(t)/dt= [p+q*N(t)/m]*[m- N(t)] N(t)=Cumulative units in the market m=total market size (saturation) p= nonimitation (internal) q= imitation (external) That is when N(t)=m the market is saturated

Crossing the chasm & the tipping point

Technology What is technology?

Radical vs. Incremental Radical innovations –include breakthroughs that change the nature of products and services –contribute to the technological revolutions –usually requires greater investment in basic research –may follow different diffusion patterns Incremental innovations –include minor changes to existing products, which cumulatively improve the performance or cost of products and services –Incremental innovation is the most common from and tends to reinforce the position of establish firms, allowing them to exploit what they know to help them do things better (Utterback, 1994).

Technology Performance Time

Competing technologies In 1794 the Earl of Stanhope built a steam-powered vessel named the Kent North sea 1830 Mediterranean sea 1840 Atlantic 1850 China Performance Time Sail Steam

Hulls Steam –Slow (fouling)- 10 knots compared to almost the double for sail –Reliable? TonnageTimberIron ,00012, ,00065, ,000255, ,000495,000

Great age of sail ships Sail –Increase cargo capacity (x2) –Advances in oceanography Trade winds: storms & Currents –Steel wires Suez channel (1869)

Great age of sail ships

1880-> Decline?

Future? Performance Time Sail Steam Nuclear Oil

Dominant designs Early lead Network effect Scale Past investments

VHS Beta-Max

Niche markets 3 MW, 80M kW, 10-20M

Attackers advantage! 1972->1992 –100Mb from 5400 to 8 cubic inch –from 5400$/MB to 5 $/MB

Technology as systems

Summary Diffusion of innovation Development of technologies Dominant design Technologies as systems