Chapter 3 - Types and patterns of innovation

Question 1

What is the technology trajectory?

Answer 1

• the performance improvement a technology follows through time
• s-curve pattern
  
  • same as technology diffusion pattern

Question 2

Types of innovation (classes)

Answer 2

• Commonly categorized by:
  
  • product versus process innovation
  • radical versus incremental
  • competence enhancing versus competence destroying
  • architectural versus component
• not indipendent

Question 3

Product versus Process Innovation

Answer 3

• product innovation -> products or services
• process innovation -> business processes
• can influence one another
  
  • often occur simultaneously

Question 4

Radical versus Incremental Innovation

Answer 4

• differ in base of
  
  • radicalness, degree of newness
  • diversity of the innovation wrt previous ones, incremental -> minor change
  • amount of risk associated -> radical -> high
• innovation is often risky because of uncertainty in technology and customers needs
• radicalness may change over time or for different firms

Question 5

Competence-Enhancing versus Competence-Destroying Innovation

Answer 5

• enhancing, builds on the existing knowledge base

* destroying, does not build on existing competencies or renders them obsolete

Question 6

Architectural versus Component Innovation

Answer 6

• component
  
  • change to one or more components but not overall system
• architectural
  
  • change to overall design or system interactions
  • often more radical and competence destroying
  • often requires chenges in components

Question 7

Technology S-curves

Answer 7

• maps the performance of a technology (performance/effort) and its diffusion rate (adopters/time)
  
  • slow initial improvement, lack of understanding of the technology, unfamiliarity
  • accelerated improvement, deeper understanding of the technology
  • diminishing improvement, technology reaches its limits, market saturated mo new adoptions
• not always reach their limit
  
  • displaced by new, discontinuous technology
• firms may be reluctant to adopt new technology because initial improvement is slow and costly
• technology diffusion takes longer than information diffusion
  
  • may require complex knowledge or experience
  • may require complementary resources
• diffusion is in part due to performance
  
  • better developed, cost reduces, more useul
• some severe limitations as a prescriptive tool
  
  • limits of tec may be unknown
  • shape of S an be infuenced by changes in market, competitors, complementary
  • switch of technology could be too soon or too late

Question 8

discontinuous technology

Answer 8

• fulfills a similar market need with entirely new knowledge base
• sometimes may initially have a lower performance and lower returns than existing technologies
  
  • may make incumbent firms reluctant to switch
• if disruptive technology has a steeper s-curve or higher performance limit the returns may become much higher wrt existing technologies
  
  • with this conditions, new likely to displace the incumbent technology

Question 9

Adopter Categories

Answer 9

• Innovators
  
  • first to adopt an innovation (2.5%)
  • adventurous, confortable with uncertainty, with financial resources
• Early Adopters
  
  • next 13.5% to adopt innovation
  • missionaries for new products or processes (looked up)
• Early Majority
  
  • next 34%
  • innovation before average adopters
• Late Majority
  
  • next 34%
  • skeptical, only until technology is diffused, may have scarce resources
• Laggards
  
  • last 16%
  • skeptical, must feel certain that an innovation will not fail before adopting it

Question 10

When to adopt an innovation?

Answer 10

• Depends on:
  
  • advantages offered by new technology
  • effort required to switch
  • fit with firm’s current abilities (effort to develop new competencies)
  • possession of complementary resources needed
  • innovations affect on competitive dynamics (adoption rate)

Question 11

Do technology improvement trajectories always follow the trajectory of customers demands?

Answer 11

• No, they are often steeper
  
  • firms rise higher price tiers to maintain margins
  • mass market may feel like it is overpaying features it does not value
  • time needed tu assimilate new features may be higher than that of development
• low-end technologies can eventually meet the needs of the mass market (segment zero)

Question 12

What patterns follows technological change?

Answer 12

• Cyclical pattern
  
  • rapid improvement
  • diminishing returns
  • technology is displaced by another
• technological discontinuity or creative destruction can result in significant changes in the competitive structure of an industry
• can be divided into phases based on the degree of uncertainty
  
  • Era of Ferment (fluid phase), uncertainty about technology and market, competition of different products, new technological discontinuity
  • Dominant Design (specific phase), dominant design emerges
  • Era of Incremental Change (specific phase) incremental improvements
    
    • efficiency and market penetration, cease investments in learning

Question 13

Why do incumbent firms resist the transition to a new technology?

Answer 13

• focuses on its current capabilities
  
  • less able to identify and respond to major architectural innovations
• if heterogeneity is valued, dominant design is undesirable