Indíya Bruinsma
Premaster DBI 20-21
Digital Innovation & Virtual Organizing in a Global Setting
Lecture 1
Strategic importance of innovation:
Economies sustains growth and economic development.
Society helps solve sustainability challenges.
Firms ensures survival and competitiveness.
Early thoughts on innovation:
Theory of long waves, 1925 (Nikolai Kondratieff) economic cycles are born out
of technological innovation, which results in a long period of prosperity.
Creative destruction, 1942 (Joseph Schumpeter) radical innovative entry by
entrepreneurs is the primary driver of (long-term) economic development via
ensuring competition to monopoly power, who are compelled to invest in
innovation.
Innovation: the process of turning ideas into reality and capturing value from them.
Innovation models:
Generic phase model
Stage gate model
Technology trajectory: the path a technology takes through its lifetime. This path may
refer to its rate of performance improvement, its rate of diffusion, or other change of
interest.
Types of innovation:
Product vs. process – output vs. improving effectiveness or efficiency of (the process
of) production. Often occur in tandem: new processes may enable the production of
new products and new products may enable the development of new processes.
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Radical vs. incremental – sometimes defined in terms of risk and is relative, may
change over time and with respect to different observers.
o Incremental: makes a relatively minor change from existing practices.
Builds on existing knowledge base.
o Radical: innovation that is very new and different from prior solutions.
Requires completely new knowledge and resources
Architectural vs. component
o Architectural: innovation that changes the overall design of a system or
the way its components interact with each other.
o Component: innovation of a particular element of a system, to one or more
components that does not significantly affect the overall configuration of
the system.
Sustaining vs. disruptive target segmentation, what group you aim the innovation
at.
o Sustaining trajectory of product development: from lower and medium end
of the market to targeting high-end market, increasing margin. Making
better products, for higher prices, to attractive customers in existing
markets.
o Disruptive: simpler or more convenient products, for lower prices to new or
unattractive customers (lower quality!). This makes them move faster
towards the mainstream, while sustaining companies cannot easily go back
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to the lower segment market.
9 disruptive does not score well on resource allocation criteria:
- Best customers do not want disruptive innovations
- Do not offer profit margins sought
- Small markets do not solve growth needs of large companies (non-
existing markets cannot be analyzed)
- Financial investments tools are biased towards existing business.
Competence-enhancing vs. competence destroying: builds on (or renders obsolete)
existing knowledge and skills. Whether an innovation is competence enhancing or
destroying depends on whose perspective is being taken.
Technology S-curves:
S-curves in technological improvements Sidenote 1: based on
knowledge base
o Initial performance improvement is slow because the fundamentals of the
technology are poorly understood, as scientists or firms gain a deeper
understanding of the technology the improvement begins to accelerate and
gains legitimacy as a worthwhile endeavor, attracting other developers. As
the technology begins to reach its inherent limits the s-curve flattens.
Improvement is based on effort.
o Discontinuous technology: fulfills a similar market need by building on an
entirely new knowledge base will take away the opportunity of another
technology to reach its limits.
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