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

VCRElectricity

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

Knowledge Persuation Decision Implementation Confirmation

•Previous practice

•Felt needs

•Innovativness

•Social norms

•Mandate

•Peer review

•Relative advantage

•Compatibility

•Complexity

•Triability

•Observability

•YES

•NO

•Switch/change•Use

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.

• 1820 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?

Tonnage Timber Iron

1850 120,000 12,800

1860 147,000 65,000

1870 161,000 255,000

1880 20,000 495,000

Great age of sail ships 1860-1880

• Sail– Increase

cargo capacity (x2)

– Advances in oceanographyTrade winds: storms & Currents

– Steel wires

• Suez channel (1869)

Great age of sail ships 1860-1880

1880-> Decline?

Future?

Performance

Time

Sail

Steam

Nuclear

Oil

Dominant designs

• Early lead

• Network effect

• Scale

• Past investments

VHS Beta-Max

VHS Beta-Max

Niche markets

3 MW, 80M 50-10 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