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 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.

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.

Types & Patterns of Innovation

Types & Patterns of Innovation

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?