Management of Product Innovation – summary of the textbook,
research papers, pre-recorded lectures and online sessions.
Brenda Giethoorn
05-05-2021
WEEK 1
Chapter 1: Introduction
In many industries technological innovation is now the most important driver of competitive success.
The increasing importance of innovation is due in part to the globalization of markets. Advances in
information technology (IT) also have played a role in speeding the pace of innovation. Product
lifecycles have become shorter.
The aggregate impact of technological innovation can be observed by looking at gross domestic
product (GDP, the total annual output of an economy, measured by final purchase price). Sometimes
technological innovation results in negative externalities, costs that are born by individuals other than
those responsible for creating them.
Study after study has revealed that successful
innovators have clearly defined innovation strategies
and management processes. Most innovative ideas do
not become successful new products. The innovation
process is thus often conceived of as a funnel, with
many new product ideas, but very few making it
through the development process. innovationfunnel
To improve innovation, a firm need:
- An in-depth understanding of the dynamics of innovation;
- A well-crafted innovation strategy;
- Well-designed processes for implementing the innovation strategy.
Chapter 2: Sources of Innovation
Innovation is the practical implementation of an idea into a
new device or process. An even more important source of
innovation does not arise from any one of these sources, but
rather the linkages between them. Networks of innovators
that leverage knowledge and other resources from multiple
sources are one of the most powerful agents of technological
advance. The sources of innovation as a system are →
Innovation begins with the generation of new ideas. The ability to generate new and useful ideas is
termed creativity. Creativity is defined as the ability to produce work that is useful and novel. The
degree to which a product is novel is a function both of how different it is from prior work and of the
audience’s prior experiences.
The personality traits deemed most important for creativity include self-efficacy, tolerance for
ambiguity, and a willingness to overcome obstacles and take reasonable risks. Intrinsic motivation has
also been shown to be very important for creativity. An environment that provides support and rewards
for creativity is also important.
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,An organization’s overall creativity level is not a simple aggregate of the creativity of the individuals.
The organization’s structure, routines, and incentives could thwart individuals creativity or amplify it.
One 10-years study of inventors concludes that the most successful inventors possess the following
traits:
1. They have mastered the basic tools and operations of the field in which they invent, but they have
not specialized solely in that field.
2. They are curious and more interested in problems than solutions.
3. They question the assumptions made in previous work in the field.
4. They often have the sense that all knowledge is unified.
While manufacturers typically create new products innovations in order to profit from the sale of the
innovation to customers, user innovations often have no initial intention to profit from the sale of their
innovation – they create the innovation for their own use.
Research can refer to both basic research and applied research. Basic research is effort directed at
increasing understanding of a topic or field without a specific immediate commercial application in
mind. Applied research is directed at increasing understanding of a topic to meet a specific need.
Development refers to activities that apply knowledge to produce useful devices, materials, or processes.
A firm’s R&D intensity has a strong correlation with its sales growth rate, sales from new products,
and profitability. There are two approaches to R&D:
- Science-push: this approach assumed that innovation proceeded linearly from scientific discovery
to invention etc.
- Demand-pull: this approach argued that innovation was driven by the perceived demand of
potential users.
Complementors are organizations that produce complementary goods.
Presuming doing in-house R&D helps to build the firm’s absorptive capacity, enabling it to better
assimilate and utilize information obtained externally.
To increase the degree to which university research leads to commercial innovation, many universities
have established technology transfer offices. Governments of many countries actively invest in
research through their own laboratories, the formation of science parks and incubators, and grants for
other public of private research entities.
There is a growing recognition of the importance of collaborative research and development networks
for successful innovation. Interfirm networks can enable firms to achieve much more than they could
achieve individually. The structure of the network is likely to influence the flow of information and
other resources through the network.
Technology clusters are regional cluster of firms that have a connection to a common technology, and
may engage in buyer, supplier, and complementor relationships, as well as research collaboration. One
primarily reason is the exchange of knowledge. Knowledge that is complex (many components) or tacit
(cannot be codified), may require frequent and close interaction to be meaningful. Closeness and
frequency of interaction can influence a firm’s willingness to exchange knowledge (trust).
Agglomeration economies are the benefits firms reap by locating in close geographical proximity to
each other. Studies have indicated that while many innovative activities appear to have some
geographical component, the degree to which innovative activities are geographically clustered,
depends on thing such as:
- The nature of the technology;
- Industry characteristics;
- The cultural context of the technology.
Knowledge brokers are individuals or organizations that transfer information from one domain to
another in which it can be usefully applied.
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,Technological spillovers occur when the benefits from the research activities of one firm spill over to
other firms. Spillovers are thus a positive externality of research and development efforts.
Chapter 3: Types and Patterns of Innovation
The path a technology follows through time is termed as its technology trajectory. Technology
trajectories are most often used to represent the technology’s rate of performance improvement or its
rate of adoption in the marketplace.
There are four dimensions that are used to categorize innovations:
- Product innovation versus process innovation
Product innovations are embodied in the outputs of an organization, and process innovations are
innovations in the way an organization conducts its business.
- Radical versus incremental
A radical innovation is an innovation that is very new and different from prior solutions. An
incremental innovation is an innovation that makes a relatively minor change from existing
practices. The radicalness of an innovation is relative, and may change over time of with respect to
different observers.
- Competence enhancing versus competence destroying
An innovation is competence enhancing when an innovation builds on existing knowledge and
skills. An innovation is competence destroying if the technology does not build on the firms existing
competencies or render them obsolete. An innovation can be competence enhancing to one firm,
while competence destroying for another firm.
- Architectural versus component
An innovation is considered a component innovation if it entails changes to one or more
components, but does not significantly affect the overall configuration of the system. An
architectural innovation entails changing the overall design of the system or the way that
components interact with each other.
Both the rate of a technology’s performance improvement and the
rate at which the technology is adopted in the marketplace
repeatedly have been shown to conform to an s-shape curve →
Many technologies exhibit an s-curve in their performance
improvement over their lifetimes. Performance improvement in
the early stages is slow because the fundamentals of the technology are poorly understood. As the
technology begins to reach its inherent limits, the cost of each marginal improvement increases, and the
s-curve flattens. If efforts is relatively constant over time, plotting performance against time will result
in the same characteristic curve as plotting performance against effort.
A discontinuous technology is a technology that fulfils a similar market need by building on an entirely
new knowledge base. In early stages, effort invested in a new technology may reap lower returns than
effort invested in the current technology, and firms are often reluctant to switch. New firms entering the
industry are likely to choose the disruptive technology, and incumbent firms face the difficulty of
trying to invest in the current technology or investing in new technology.
Why do some firms shift to new technology more slowly than others? The answer may lie in the
complexity of the knowledge underlying new technologies, and in the development of complementary
resources that make those technologies useful.
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, As prescriptive and predictive tool, the s-curve has several limitations. The limits are not known in
advance. The shape is not set in stone, and switching technologies is possible in any stage.
Creative destruction is the fact that the emergence of a new technological discontinuity can overturn
the existing competitive structure of an industry, creating new leaders. Schumpeter argued that it was
the key driver of progress in capitalist society.
The dominant design is a product design that is adopted by the majority of producers, typically creating
a stable architecture on which the industry can focus its efforts. Utterback and Abernathy termed this
phase the specific phase
because innovations are all
specific to the dominant design.
The technology cycle by
Utterback and Abernathy →
Technology diffusion is the
spread of a technology through a
population.
Chapter 4: Standards Battles and Design Dominance
A dominant design is a single product or process architecture that dominates a product category –
usually 50 percent or more of the market. A dominant design is a “de facto standard” meaning that
while it may not be officially enforced or acknowledged, it has become a standard for the industry.
Two of the primary sources of increasing returns and increasing dominance are:
1. Learning effects
The more the technology is adopted, the better it should become. One example of learning effects
is manifest in the impact of cumulative production on cost and productivity, the learning curve.
Performance increases and costs decreases when the output grows. The standard form of the learning
curve is formulated as y = ax-b, where y is the number of direct labor hours required to produce the
xth unit, a is the number of direct labor hours required to produce the first unit, x is the cumulative
number of units produced and b is the learning rate.
Cost decreasing performance increasing
A firm’s investment in prior learning can accelerate its rate of future learning by building the firm’s
absorptive capacity. Absorptive capacity refers to the ability of an organization to recognize,
assimilate and utilize new knowledge.
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