3. Technology Push (Innovation strategies) PDF

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Introduction 2 ways to purchase innovation: - Marketing - Technology - Change the Meaning (Verganti added the third) We are going to understand how to foster innovation Technology Push

When it’s the right time to jump to another technology? To start betting on something new? We need models to decide when to do that; the enabler factor is the technology. Our aim is: how can we use it to help our customer? Language = How can we work on this translation, from the technology to the need S-shape curves

Evolution trajectory of a technology X = time Y = performance Hypothesis: - Limited growth  After a limit the technology can’t evolve further - Three main phases (3 different returns in relation to investments) - Constant innovation effort (the investment is constant)

How the performance of this technology is going to evolve overtime? Why the evolution of a technology should have an S shape curve? Initiation  Lot of money and small return  I still need to understand the technology Development  I understood the technology, so my returns are growing Maturity  Returns start to decrease in relation to my investments How this model can help us in dealing with technology as managers? How can we use it? - Understand where we are, understand the possible return on that investment - If I see that the development phase is lasting from a lot of time, maybe we are going in the maturity phase. So maybe we need to jump to another technology, another curve. Big issue? This model considers only one performance USE of the curve: Useful to understand investment in technology evolution. When is the right time to change the curve and go towards another curve? - Medium period: Balance the investment policy on different technologies Understand how close this technology is near to reach its limit Drive the technology switch - Long period Different kind of technologies that help that kind of performance All the curves of different technologies that have improved a specific performance If I change the constant innovation effort? If I stop investing, my performance isn’t going to grow. If I put more money, I can change the shape of the curve (reach the limit sooner in time, but the limit will be the same) NB: I don’t know the limit, I just can predict it (analysing the growth rate)

Example of Petrol Vs Electric cars How can I use this model? The two technologies were there, but the market decided to invest on only one. Petrol was more available. There are other factors actually driving the choice  Allocation of investments Petrol investments HIGH, Electric investments LOW (so different speed of grow) In this case I look only on one performance, this is the limit of this model. I don’t look at sustainability, etc. How to overcome this limit? The best innovation bet? How could established companies know that a technology on a trajectory of ever increasing fidelity is going to be overtaken by a technology with less fidelity? Let’s consider the music industry. In the mid 90 there was the CD technology on the market. The companies start questioning themselves on how the technology can evolve. They were searching something to bet on and overcome the limit of the S curve. They created DVD audio and super audio CD. These 2 technologies stayed on the market few years because another technology entered in the market  MP3 Someone outside of the industry created a technology. The companies inside the industries weren’t able to bet on something totally different.

3 step process that may foresee the next breakthrough? - Identification of key dimensions. Attention to dimensions that I choose - How is my company located in relation to that technology? How the performance changes the utility of consumers. How the consumers are perceiving an improvement in that specific performance. And I position myself on every curve (every performance) - Determine your focus  From “what we do” to “how we need to go” Need to choose through 3 elements: Importance for customers, Room for improvement, Ease of improvement

Innovative market dynamics - Technology push, market pull innovation - Product, process innovation - Radical, incremental innovation How do they interact? Case of typewriter It was an innovation  Combination of existing technologies They improved the right performances We can use the Rogers Diffusion of Innovation Model Statistically the group of people of innovators is 2,5%  Very low Innovators  They don’t need to wait until the innovation prove its value to the market. It’s a small group. Then I have early adopters, early majority, late majority and laggards Laggards  They wait until they can’t use other tools, they are obliged to use this innovation. We can use to measure our success on the market, where we are on the diffusion curve.

Dominant design  After the presentation of the typewriter Underwood N°5, all the companies started to create typewriters based on that model. They introduced the qwerty keyboard  A standard This caused a change in the market, the number of firms in that market started to decrease a lot. They were able to define what is called a “dominant design”. They proposed a product leveraging on an architecture that dominate the market and gain all the market.

Characteristics of a dominant design: - Summarize the innovations previously introduced by other companies (best things on the market for the average customer) - Give an answer to the needs of average customers (even if I reduce some features that are important only for a little segment of people) - Architecture winning on the market - Set of features and constraints that the product has and permit it to win the market and the average customers

How to understand the dominant design (Standard wars and standards) War on what is the standard in the market? The dominant design is related to the value of the good itself. Without a standard the value is not at its maximum level Ex: Betamax reach the market before and keep the patent, VHS arrives later with its standard but gave it out for free. VHS was good but not as Betamax. So, they decided to give it out the right to use it (no royalties for who use this standard)  Faster distribution on the market  Network effects (relationship between how much valuable is a product and its diffusion)

How does the DD emerge?

Innovation Dynamics: Abernathy-Utterback Model Considers the dynamics of innovations It is based on three main phases: - Fluid phase - Transition - Specific On the Y I have the innovation rate from the product perspective On the X I have time

After I reach the dominant design, the innovation rate is going to decrease  Not good to make changes in the architecture for a while, need to change other things I can move to change the process  Process innovation From the 2 curves I can see that there is innovation rate in the process innovation after the dominant design. There is space to improve in the process. So, after the dominant design: - No product innovation rate increasing - Space for increase process innovation (I should improve this) Qualitative model that help us  On which should I bet? Product innovation or process innovation? Specific phase  Few products. In this stage they are unrecognizable (Ex: Fuels and salt). Not all products go through all the phases. Point of the model  Relate product and process innovation, distinguish them and when to use them.

Tushman Model (Cyclic model for Innovation) 2 level of cycle (Small and Big) At the beginning there is a dominant design (Incremental innovation). First cycle. (Small) Then there is a technology discontinuity that hit the market. In this case another dominant design will be reached. And so on.

Who does foster innovation? I have two kinds of firm: Incumbents and new entrants Which of this make more innovations? Incumbents maybe more incremental innovation. For them it’s easier (more investments possibility) The answer is: depends

Radical innovation usually made by new entrants Why is it difficult for incumbents to react to technological discontinuities? Because they underestimate other players (I’m the leader of the market, I’m the better) and they overestimate their room of improvement in that area. Disruptive Technologies Be careful. There are technologies that you are underestimating I have two kind of performance (one attract the lower end, one the high end) Is Whatsapp a disruptive innovation? Yes, but to explain it, it must fit the model Christensen model NB: In the exam I need to use the models to justify my responses Disruption is a process, is a way. It isn’t a kind of innovation. This model refers to the S shape curve model. You need an entry condition, the low performance level at the beginning (in order to be a disruptive innovation) Uber is not a disruptive innovation, they were offering a luxury service (in relation to a Taxi), high performance  Uber doesn’t have the entry condition of low performance Netflix is a disruptive innovation

Big Bang disruption Digital technologies  The competition changed a lot Ex: Airbnb The Rogers market segment are not true anymore with this technology I have only two classes: - Trial Users - Vast Majority...