2. An Overview Of Innovation Characterization, Models and Factors for Success 18 th of February 2002 Innovation and Knowledge Management Ana Sofia Mascarenhas Nuno David Kline, J. and Rosenberg, N (1986), “An Overview of Innovation”, in R. Landau and N. Rosenberg (eds), The Positive Sum Strategies: harnessing Technology for Economic Growth, Washington DC, National Academic Press, 00.275-305.

3. Presentation Overview  Introduction  Characterization  The linear model  The Chain-linked model  Uncertainty  Life cycle  Economics of innovation  Conclusions "Daring ideas are like chessmen moved forward; they may be beaten, but they may start a winning game." Johann Wolfgang von Goethe

4. Introduction Commercial innovation is controlled by two distinct sets of forces that interact: - Market forces - Forces of progress If we are indifferent to cost considerations, innovation could lead to failure Ex: Concorde We cannot satisfy the marketplace if we don’t have technology to back it up. Ex: metallurgical practice SUCCESSFUL INNOVATION  Technical and market needs must be satisfied  Right timing  Feedback signals from users are very important

5. Introduction (continued) Innovation  Sophisticated technology EX: Containerization

6. Characterization What is innovation? It can be a new product, a new process of production, substitution by cheaper material, reorganization of production leading to increased efficiency,... Economist inputs outputs Technologist Technological innovation Nature of the market problems and constraints State of knowledge Nature and the potential profitability of the output

7. Characterization Innovation is difficult to measure Ex: How can me measure the impact of computers or of metallurgy in the world economy? Effect of a rapidly expanding industry on it’s suppliers. Ex: Automobile Industry / Petroleum Refining Innovations will often generate benefits far from the industries where they originated. Innovation is not always of a visible sort. (Ex: alloys with higher melting points) Innovations go through drastic changes over their lifetime, these changes may transform there economic significance. Whether it is worth spending money on innovation depends also on the alternatives. Ex: Synthetic Rubber / Natural Rubber

8. The Linear Model Research Development Production Marketing The conventional “linear model” of the linkage of research to production This model distorts reality of innovation in several ways: There are no feedback paths from sales or individual users The central process of innovation is not science but a design. Innovation draws on science, but also forces the creation of science. Ex: Edison and the parallel circuit The notion that innovation is initiated by research is wrong most of the time. When the science is inexistent we can still create innovations. Ex: Bicycle The linear model shortchanges the importance of process innovations

9. The Chain-linked Model Potential Market Invent and/or produce analytic design Detailed design and test Redesign and produce Distribute and market Research Knowledge

10. The Chain-linked Model (explained)  Five major paths of activity Central-chain-of-innovation Feedback links (central chain & market feedback) Research path New science push Feedback from innovation

11. Uncertainty  Uncertainty has a major influence Low High Change auto color paint (GM) Moon Landing Drug development Evolutionary Revolutionary Q: But how to reduce it?  Market sampling, Proof of concept, pretest production methods, incorporate learning, testing... Uncertainty can be reduced at every feedback link!

12. Life cycle Early stages Later stages Lower-cost productionTechnical performance Focus Management Stabilize design Prevent loss of ability to create radical innovation Science Descriptive Predictive models Taxonomic Rules and hypotheses Set milestones/goals Rough overall time schedules and budgets Planning Detailed

13. Economics of Innovation  Rising development costs (ex: Boeing’s new aircraft)  Resistance to radical innovation (ex: Chemical Industry)  Financial Risks (ex: Some pharmaceutical products)  Coupling the technical and the economic (ex: Microsoft) Japan USA US and Japanese car production cycles Source: http://www.sprl.umich.edu/GCL/notes2/technol.pdf

14. Conclusions on Innovation  As a study it is new and as such it is still maturing.  Innovation is Inherently uncertain.  The initiating step is design rather than research.  Research is needed only when the available sources of knowledge are inadequate for the task at hand.  Personnel reduction, specialization, routinization drive revolutionary innovation almost impossible.  “Guided empiricism” methods are still essential since science lack predictive models in many areas.  Must be viewed as a process of change in technology, market environment, production facilities, knowledge and the social contexts of Innovating organizations.