process of technology change
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Process of Technology Change
InnovationRole played by
developers
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Technological Change
Technological change consists of two closely
linked processes:
Innovation
Diffusion
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Figure 6-2
Technology
evolution
Innovation
dynamics
firm level
Innovation
dynamics
Technology
level
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Scope of discussion
1. Dynamics of the technological change
2. What is innovation?
3. Innovation dynamics at the firm level4. Technology evolution
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1. Dynamics of Technological change
a) Firm level
b) Technology level
c) Implications for the management oftechnology
Innovation, imitation, and adoption
The role of technology and market factors
The centrality of learning
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2. What is Innovation?
a) Definition
b) Process and Output: Innovation
c) Components of innovation
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3. Innovation dynamics at the firm
level
a) Drivers of innovation
Market factors and input factors
b) Process of innovation
Market pull
Technology push
c) Types of innovation outputs
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4. Technology evolution
a) S-curve of technology evolution
b) Technology progression
c) Levels of technology developmentd) Technology change agents
e) Uncertainty and technological insularity
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1. Dynamics of Technological change
a) Firm level
b) Technology level
c) Implications for the management oftechnology
Innovation, imitation, and adoption
The role of technology and market factors
The centrality of learning
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1. a) Firm Level
Technological change may be described as a
process of problem solving.
Four stages in the process of problem solving
1.Problem Recognition
2.Technology Selection
3.Solution Development4.Commercialization / implementation
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1. a) A model of problem solving
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1. b) Technology Level
Technological change displays evolutionary dynamics that are not controlledby a single firm
Actors of these changes
1.Technology developers, which typically are firms involved in innovation intheir pursuit of competitive advantage
2.Technology facilitators, who may provide the resources for financing andexecuting the innovation efforts
3.Customers who are interested in the fruits of technology development andwho will shape the direction of development
4.Regulatory agents, the governmental bodies and others who shape the
form of products and processes by establishing standards or specificationsand
5.Other stakeholders, who may be the beneficiaries or victims of thetechnology change
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1. c) Implications for the MOT
A) Innovation, imitation and adoption
B) The role of technology and market factors
C) The centrality of learning
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A) Innovation, Imitation and Adoption
When a firm innovates, twodifferent groups of players
respond to the innovation
Customers makes
decisions to adopt or not
to adopt the innovation Competitors may decide
to copy the innovation.
This is referred as imitation
Innovation and Imitation are
supply-side concepts
Diffusion is a demand-side
concept
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B) The role of technology and market
factors For a technological
change to besuccessful the firmhas to manage two
related processes Finding effective
solutions to aproblem and
Gaining acceptance ofthe solution in themarket place
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C) The centrality of learning
Three major mechanisms of learning
Environmental surveillance through technical and
market intelligence.
Experimentation within firms whereby firms can learnproblem solving by simulation and by trial and error.
Imitation through competitive intelligence.
Multifaceted Learning lies at the core of
Technological change
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2. What is Innovation?
a) Definition
b) Process and Output : Innovation
c) Components of innovation
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2.a) Definition
Innovation includes both:
A technological change new to both enterpriseand the economy.
A change that has diffused into the economy andis adopted by the firm
Innovation refer both to the output and theprocess of arriving at a technologically feasiblesolution to a problem triggered by a technologicalopportunity or customer need
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2. b) Process and Output: Innovation
Process
Innovation refers to the process by which
individuals or organizations arrive at a technical
solution.
Output
Innovation to refer to a product or service i.e. the
output of the innovation process
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As outputs all technological innovations havethree components:
A hardware component consisting of the
material or physical aspects of the innovation A software component consisting of the
information base that is needed to use theinnovation
An evaluation information component consistingof the information that is useful for decisionsrelated to the adoption of the innovation
2. c) Components of Innovation
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2. c) Components of Innovation
The components form a system.
If any component of a specific innovation is changed, other
components will need to be changed also so as to render the
innovation user friendly.
The hardware and software components are intrinsic to thetechnological innovation.
Domination of the component: Hardware dominant/ Software
Dominant
Third component is not intrinsic and refers to the informationaccompanying an innovation that enables firms or individuals
to evaluate its usefulness.
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3. Innovation dynamics at the firm
level
a) Drivers of innovation
Market factors and input factors
b) Process of innovation
Market pull
Technology push
c) Types of innovation outputs
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3. a) Drivers of innovation
Input factors
Market factors
Autonomous
innovation
Market Pull
Technology Push
Incremental
Modular
Architectural
RadicalInnovations
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3. a) Drivers of Innovation
Environmental Factors
Market factors
Appears to have a primary influence on innovation.
Input factors
Rising costs of inputs, trigger innovations aimed at
reducing the use of the expensive inputs
Autonomous factors Intellectual curiosity
Technological possibility
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3. b) Science technology push
Technology Scientific discoveryNuclear energy Based on Einstens 1905 paper, which established the
equivalence of mass and energy
Transistors Based on A.H. Wilsons 1931 theory ofsemiconductors
Electronics Based on Maxwells theory of electromagnetism, developed in
the 1880sGenetic engineering Followed Watson and Cricks 1952 discovery of the structure of
DNA
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3. b) Market Pull
Market pull is stimulated by the consumers
Most of the technological developments
stimulated by the market pull are of
Incremental in nature
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3.b) Integrating Technology Push and Market pull to
Stimulate Innovation
Opportunities for
Technology Push
Opportunities for
Market PullInnovation
Scientific discoveries
Applied Knowledge
Recognized needs
Intellectual capital
(scientists andengineers)
Market demand
Proliferation of
application areas
Recognized needs
Opportunities forincreased profitability,
quality, productivity
Entrepreneurs
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3. c) Types of Innovation outputs
Two dimensions to classify an innovation
1.Degree to which specific technologies in an
innovation depart from earlier ones, or what
we will call component knowledge
2.Degree to which configurations among
technologies in an innovation depart from
earlier one, or what we will call component
configuration
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3. c) Four major types of innovation
Incremental innovations: Requires only minor improvements to theexisting system
Modular innovations: refer to significant changes in elements ofproducts. The implementation requires would require an understanding
of the new components of the system Architectural innovations: It requires the new knowledge on how
existing components can be configured into a new system. No significant
knowledge is required concerning the components themselves
Radical innovations: They are non-aligned with organizational skillsand capabilities of the firm
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3. c) Classification of Innovations
Process
Product
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3. c) Classification of Innovations for
Products, process and services
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Innovation
The process of innovation
Long term vs. short term, inside vs. outside theorganization
The economic impact of innovation Potential for wealth creation
The role of a manager in the Innovation
process Long term technological vision vs. planned and
managed
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4. Technology evolution
a) S-curve of technology evolution
b) Technology progression
c) Levels of technology development
d) Technology change agents
e) Uncertainty and technological insularity
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4. a) S Curve of technology evolution
Technology evolution refers to the changes in theperformance characteristics of a specifictechnology over time
Phases of S-curve Emergencewhen the technology has come into existence but
shows little improvement in its performance characteristic
Rapid improvementwhen the performance characteristicimproves at an accelerating pace
Declining improvementwhen the pace of improvementdeclines
Maturitywhen further improvements become very difficult toachieve
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The Industry Life Cycle as an S
curve
Performance
Takeoff
Maturity
Time
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4. a) Why S-curve for evolution?
Learning Processes
In the first stage, the learning generates a more orless reliable design and production process
In the second stage, the learning curve effectsproduce rapid improvement in the performancecharacteristics
Technology Limits
Technology is constrained by physical limits
Improvements beyond physical (technology) limitsare harder to come by
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The S-curve Maps Major Transitions
Time
Ferment
Takeoff
Maturity
DiscontinuityPerformance
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4. b) Technology Progression
Technology progression describes the process bywhich new technologies emerge to make existingtechnologies obsolete.
Technology evolution represents the incrementalevolution of technology over time.
Technology progression represents the radicalbreakthroughs that significantly replace current
technology Technology progression may be described using a
series of S-curves
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Technology Progression
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4. c) Levels of Technology Management
Basic research conducted without a practical
application or a problem at hand
Applied research basic research result have
to age before they can be packaged into a
useful innovation
Development Major technological advances
required a cluster of innovations
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4. d) Technology change agents
Innumerable
Vary significantly across the levels of
technological change
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4. e) Evolutionary characteristics of
technical change
Simultaneous development of innovations at
multiple levels by numerous change agent
present evolutionary characteristics on
technological development
Those who are involved in technology
development the so called radical changes will beseen as an accumulations of incremental
innovations
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4 . e) Uncertainty and technological
insularity Great degree of uncertainty
They cope with this uncertainty by engaging in a process of learning,
gathering information, experimentation and imitation. Innovation
development requires information concerning:
The performance of innovation they are seeking to create or adopt
Materials and components they are fabricating into the innovation
Competitors innovations, the nature of existing patents, and government
policies affecting their proposed innovation; and
The problems faced by consumers in the market and how the proposed
innovation might solved certain of these perceived problems
Innovation process is driven by the exchange of technological,
market and other environmental information in the face of
high uncertainty
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Technical Insularity
The search for or dissemination of technical
information embedded in an innovation is
governed by the principle of technological
insularity
The principle of technological insularity
suggest that a characteristic feature of
technical know-how is that it is not easilytransmitted
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Reasons for Technical Insularity
Technology evolves evolves because of
accumulated experience of the individuals. Thus
first hand knowledge is crucial to the evolution of
performance characteristics. Knowledge is noteasily transferred
Technical know-how is not easily accepted by
individuals not involved in its production. Suchknow-how requires abandoning of old concepts
or concepts that have not been proved useful
d h l l
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Uncertainty and technological
insularity
Technology insularity leads to
Spatial clustering
Temporal clustering
i fl i h f
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Factors influencing the process of
innovation in organizations
S f f i l i
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Summary of factors stimulating
innovation
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Process of Technology Change
DiffusionRole played by adoptors
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1. What is diffusion?2. Dynamics of diffusion
S-curve of diffusion
Reinvention
Mechanism of diffusion Technology substitution
Bandwagon effect
3. A model of innovation adoption Shifting characteristics of adopters over time
4. Factors that drive the process of diffusion Attributes of an innovation
Components of an innovation
Community effects and network externalaties
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Adoption of Hybrid corn
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1. What is diffusion
Diffusion is the process by which an
innovation is propagated through certain
channels over time among the units of a
system.
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Diffusion Vs Imitation
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2. Dynamics of Diffusion
S-curve of diffusion
Rate of diffusion
Potential set of adopters
Reinvention during diffusion
Mechanisms of diffusion
Technology substitution
Bandwagon effect
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Four Phases of diffusion
1.Emergence characterized by a slow advance in the
beginning, suggesting that adoption proceeds slowly at first
when there are few adopters.
2.A rapid growth phase, when adoption rate accelerates until
half of the individuals in the system have adopted.
3.A slow growth phase, where the rate of growth declines, but
adoption continues.
4.Maturity, the final stage, where the diffusion almost comes
to a halt, either as a result of market saturation or the
introduction of a new product, process, or service into the
market that replaces the existing innovation.
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Differences in diffusion speed
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S-curve diffusion
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Reinvention
Reinvention refers to the dynamics by which an innovation is
changed or modified by the users as they adopt and use it.
Four ways in which reinvention occurs:
Improvement in the design and performance characteristics of an
innovation may be necessity for its further adoption by adopters(dominant design)
As an innovation diffuses, a standard model may emerge and speed
the adoption process (standard process)
Requirement for complementary products/process for widespread
diffusion
Possible new applications: adoption beyond the originally conceived
scope of its application
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Mechanisms of Diffusion
Two mechanisms by which an innovation
propagates through an adopter population
Technology substitution
Bandwagon effect
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Technology Substitution
Explains why an innovation is adopted
Technology substitution is key that unlocks the doors
of an adopter population for the propagation of an
innovation. Technology substitution refers to actual substitution
of a new technique for the old.
A new technology or an innovation displaces an
already existing technology during the process of
being adopted
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Bandwagon Effect (BE)
BE explains the speed of diffusion
BE refers to the strategy of information
collection employed by adopters
It focuses on the dynamics by which later
adopters, in their decision to adopt an
innovation, imitate the behavior of earlier
adopters.
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Mechanisms of Diffusion
Technology Substitution and Bandwagoneffect underscore the roles of
Knowledge and learning in the diffusion process
Uncertainty and information
Tech Substitution and Bandwagon effect refers
to the different facets of learning
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Process of adoption
The decisions of farmers to use hybrid corn were alsoinfluenced by economic considerations. Griliches concludedthat farmers evaluated the potential profitability of makingthe switch to hybrid corn by calculating the increase in yieldper acre due to using hybrid corn minus the cost
differences in the seed. Griliches' research demonstrated that the adoption of new
technologies like hybrid corn was not a single event, butwas instead a series of developments that occurred atdifferent rates across geographical space.
His study shed light on the numerous individual decisionsand economic calculations that drove new hybrid corntechnology forward.
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The Bass Diffusion Model
There is a pool ofM potential adopters Some of them adopt the new product on their own
(innovators) with probability p
Others are imitators, and their adoption probability
depends on
the imitation rate q multiplied by
how many people already use the product N.
))(( ttt NMqNpn
New
adopters
Cummulative
adoptersProportion who
will adopt on their
own
Proportion
who will
immitate
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The Bass Diffusion Model There is a pool ofM potential adopters
Some of them adopt the new product on their own(innovators) with probability p
Others are imitators, and their adoption probability
depends on
the imitation rate q multiplied by
how many people already use the product N.
))(( ttt NMqNpn
New
adopters
Cummulative
adoptersProportion who
will adopt on their
own
Proportion
who will
immitate
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3. A Model of Innovation adoption
Awareness : Firm or individual is exposed to aninnovations existence and understand how it functions
Attitude formation: Firm or individual forms a opinion
Decision: Actions that lead to the acceptance orotherwise of an innovation
Confirmation: Seeks the reinforcement of aninnovation that has already been made, but mayreverse the decision if exposed to conflicting messages
Implementation: When the firm puts the innovationinto use
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Stages in decision to adopt
Trialability
Observability
Requisite Information over the stages
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Requisite Information over the stages
of Adoption Decision
Shifting characteristics of adopters
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Shifting characteristics of adopters
over time
Adopters categories depending on their speed ofadoption: prevaricator
1.Innovators: very eager to try new ideas
2.Earlyadopters: Opinion leadership
3.Early majority: deliberate in its decision to adoptnew ideas
4.Late majority: adopts new ideas just after theaverage member of a system
5.Laggards: last among a population to adopt aninnovation
Selected differences among adopter
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Selected differences among adopter
categories
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Relative importance of decision stage
Adoption is difficult in organizations
A number of individuals are usually involved in
the innovation-decision process, and the
implementers are often a different set of peoplefrom the decision makers.
The organization structure that gives stability and
continuity to an organization often resists the
implementation of an innovation.
4 Factors that drive the process of
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4. Factors that drive the process of
diffusion
1. Attributes of an innovation
2. Community effects and network
externalities3. Characteristics of the population
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1. Attributes of an innovation
Five attributes of an innovation that influence the process ofdiffusion
i. Relative advantage is the degree to which an innovation isperceived as being better than the idea that it supercedes
ii. Compatibilityis the degree to which an innovation is perceived as
being consistent with existing values or past experiences and needs ofpotential adopters
iii. Complexity is the degree to which an innovation is perceived asbeing difficult to understand and use
iv. Trialability is the degree to which an innovation may beexperimented with on a limited basis
v. Observabilityis the degree to which the results of an innovation areavailable to others
1 Components and Attributes of an
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1. Components and Attributes of an
innovation
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2. Community Effects
Benefits of adopting an innovation largelydepend on the community of other adopters
Positive externalities (network benefits) theimmediate benefits of use are a direct function ofthe number of current adopters. (e.g. the use oftelephone, fax)
Technological interrelatedness refers to a large
base of compatible products needed to make thetechnology worthwhile (e.g. windows basedsoftware)
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2. Factors driving community effects
Prior technology drag
Irreversibility of investments
Sponsorship
Positive Expectations
Favors existing
technologies
Overcoming theabove forces
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3. Characteristics of the Population
Communications
Opinion Leaders
Cultural norms
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Managerial Implications
Significant attention should be devoted toobtaining market feedback over the course ofdiffusion in the case of new product or processintroduction
In the case of firms adopting an innovation,implementation is a challenging task
Product design and marketing strategy should
reinforce each other Managers should line up sponsors and create
expectations of a technology success
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