process of technology change

7/30/2019 Process of Technology Change

1/78

Process of Technology Change

InnovationRole played by

developers


2/78

Technological Change

Technological change consists of two closely

linked processes:

Innovation

Diffusion


3/78

Figure 6-2

Technology

evolution

Innovation

dynamics

firm level

Innovation

dynamics

Technology

level


4/78

Scope of discussion

1. Dynamics of the technological change

2. What is innovation?

3. Innovation dynamics at the firm level4. Technology evolution


5/78

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


6/78

2. What is Innovation?

a) Definition

b) Process and Output: Innovation

c) Components of innovation


7/78

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


8/78

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


9/78

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


10/78

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


11/78

1. a) A model of problem solving


12/78

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


13/78

1. c) Implications for the MOT

A) Innovation, imitation and adoption

B) The role of technology and market factors

C) The centrality of learning


14/78

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


15/78

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


16/78

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


17/78

2. What is Innovation?

a) Definition

b) Process and Output : Innovation

c) Components of innovation


18/78

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


19/78

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


20/78

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


21/78

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.


22/78

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


23/78

3. a) Drivers of innovation

Input factors

Market factors

Autonomous

innovation

Market Pull

Technology Push

Incremental

Modular

Architectural

RadicalInnovations


24/78

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


25/78

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


26/78

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


27/78

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


28/78

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


29/78

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


30/78

3. c) Classification of Innovations

Process

Product


31/78

3. c) Classification of Innovations for

Products, process and services


32/78

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


33/78

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


34/78

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


35/78

The Industry Life Cycle as an S

curve

Performance

Takeoff

Maturity

Time


36/78

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


37/78

The S-curve Maps Major Transitions

Time

Ferment

Takeoff

Maturity

DiscontinuityPerformance


38/78

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


39/78

Technology Progression


40/78

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


41/78

4. d) Technology change agents

Innumerable

Vary significantly across the levels of

technological change


42/78

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


43/78

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


44/78

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


45/78

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


46/78

Uncertainty and technological

insularity

Technology insularity leads to

Spatial clustering

Temporal clustering

i fl i h f


47/78

Factors influencing the process of

innovation in organizations

S f f i l i


48/78

Summary of factors stimulating

innovation


49/78

Process of Technology Change

DiffusionRole played by adoptors


50/78

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


51/78

Adoption of Hybrid corn


52/78

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.


53/78

Diffusion Vs Imitation


54/78

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


55/78

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.


56/78

Differences in diffusion speed


57/78

S-curve diffusion


58/78

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


59/78

Mechanisms of Diffusion

Two mechanisms by which an innovation

propagates through an adopter population

Technology substitution

Bandwagon effect


60/78

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


61/78

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.


62/78

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


63/78

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.


64/78

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


65/78

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


66/78

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


67/78

Stages in decision to adopt

Trialability

Observability

Requisite Information over the stages


68/78

Requisite Information over the stages

of Adoption Decision

Shifting characteristics of adopters


69/78

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


70/78

Selected differences among adopter

categories


71/78

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


72/78

4. Factors that drive the process of

diffusion

1. Attributes of an innovation

2. Community effects and network

externalities3. Characteristics of the population


73/78

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


74/78

1. Components and Attributes of an

innovation


75/78

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)


76/78

2. Factors driving community effects

Prior technology drag

Irreversibility of investments

Sponsorship

Positive Expectations

Favors existing

technologies

Overcoming theabove forces


77/78

3. Characteristics of the Population

Communications

Opinion Leaders

Cultural norms


78/78

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

process of technology change

Documents