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1 1 CPET 575 Management Of Technology Lecture and Discussion on Reading II - 1 Patterns of Industrial Innovation, William J. Abernathy and James M. Utterback Source: MIT Technology Review, 1978 Paul I - Hai Lin, Professor http:// www.etcs.ipfw.edu /~lin A specialty course for M.S . in Technology - IT and Advanced Computer Applications Purdue University Fort Wayne Campus Prof. Paul Lin 2 Patterns of Industrial Innovation Critical Questions A Spectrum of Innovators A Transition from Radical to Evolutionary Innovation Managing Technological Innovation Fostering Innovation by Understanding Transition Consistency of Management Action Conclusion Prof. Paul Lin

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Page 1: CPET 575 Management Of Technology - IPFWlin/CPET575_MangOfTech/2015Fall/1-Lectures/CP… · CPET 575 Management Of Technology ... Top Innovations from IBM Research, https: ... Liquid

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CPET 575 Management Of Technology

Lecture and Discussion on Reading II-1

Patterns of Industrial Innovation, William J. Abernathy and James M. Utterback

Source: MIT Technology Review, 1978

Paul I-Hai Lin, Professor

http://www.etcs.ipfw.edu/~lin

A specialty course for M.S. in Technology - IT and Advanced Computer Applications

Purdue University Fort Wayne Campus

Prof. Paul Lin

2

Patterns of Industrial Innovation

Critical Questions

A Spectrum of Innovators

A Transition from Radical to Evolutionary

Innovation

Managing Technological Innovation

Fostering Innovation by Understanding

Transition

Consistency of Management Action

Conclusion

Prof. Paul Lin

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Patterns of Industrial Innovation:

Five Critical Questions

How does a company’s innovation − and its response to

innovative ideas − change as company grows and

mature?

Are there circumstances in which a pattern generally

associated with successful innovation is in fact more

likely to be associated with failure?

Under what circumstances will newly available

technology, rather than the market, be the critical

stimulus for change?

Prof. Paul Lin

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Patterns of Industrial Innovation:

Five Critical Questions

When is concentration on incremental innovation and

productivity gains likely to be of maximum value to a

firm?

In what situations does this strategy instead cause

instability and potential crisis in an organization?

Prof. Paul Lin

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History of Industrial Innovations

3M History, http://solutions.3m.com/wps/portal/3M/en_US/3M-

Company/Information/Resources/History/

AT&T History of Innovation, http://historyofinnovation.att.com/#/

Boeing History, http://www.boeing.com/history/

GE Innovations 1957-1970,

https://www.ge.com/content/innovations-1957-1970

Top Innovations from IBM Research,

https://www.research.ibm.com/about/top_innovations_history.shtml

Intel Timeline: A History of Innovation,

http://www.intel.com/content/www/us/en/history/historic-timeline.html

Prof. Paul Lin

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History of Industrial Innovations

Seven Technologies to thank the 1970 for: Microprocessors,

Video Games, Liquid Crystal Display, First Word Processor,

Email, the First Digital Camera, the Pocket Calculators,

http://www.techradar.com/us/news/world-of-tech/7-technologies-to-

thank-the-1970s-for-657269/2

Manufacturing Innovation: Lessons from Japanese Auto

Industry, Oct. 15, 1988,

http://sloanreview.mit.edu/article/manufacturing-innovation-lessons-

from-the-japanese-auto-industry/

Prof. Paul Lin

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Lessons Learned from Industrial Innovations

How GM Lost – And Found – The Path to Innovation, by Joann

Muller, Forbes, Jan 13, 2013,

http://www.forbes.com/sites/joannmuller/2013/01/13/how-gm-lost-

and-found-the-path-to-innovation/

2012 Technology Innovation Awards,

http://www.wsj.com/public/page/technology-innovation-awards-

10162012.html

Prof. Paul Lin

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A Spectrum of Innovators

A Small Technology based Firm vs. Large Organizations

producing standard products

A product innovation (small technology-based firm) => process equipment adopted by a large firm to improve its high-volume

production of a standard products

Examples of high volume standard products

• Incandescent light bulbs, Paper, Steel, Standard chemicals, Internal-

combustion engines

Characteristics of high volume standard products

• Markets – well defined

• Profit margin – low

• Production technology – efficient

• Equipment – highly integrated, intensive & specialized

• Competition – price

• Incremental innovation: cost of system/process change => very highProf. Paul Lin

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A Spectrum of Innovators (cont.)

High-Volume Production Industries

• Industries with countless minor system engineering and

product improvement

• Major incentives – cost reduction, performance

improvement

• Major system advances and innovations

Specialized systems

Lost flexibility, dependent on high-volume production to

cover its fixed costs

Vulnerable to changed demand and technical

obsolescence

Prof. Paul Lin

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A Spectrum of Innovators (cont.)

Examples (major systems innovations – incremental in

nature: cost reduction, performance and quality

improvement)

• Rayon in plants of E. I. du Pont de Nemours,

http://www2.dupont.com/Heritage/en_US/related_topics/ray

on.html

• Petroleum refining processes

• Larger railroad cars and unit trains

• GM

• Ford 150 – All Aluminum (alloy) + Steel Truck: 2015 F-150,

http://www.ford.com/trucks/f150/2015/

• Intel: 80386, 80486, Pentium, etc

• Microsoft: Windows 95, 98, 2000, XP, Vista, 7, 8, 10, etc

• Apple iPhone: 4, 4S, 5, 5S, 6, 6S, etc …

Prof. Paul Lin

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A Spectrum of Innovators (cont.)

Major New Products (Large firms)

• Not consistent with this pattern – incremental improvement

• Require reorientation of corporate goals

• Production facilities tend to originate outside organizations

devoted to a “specific” production system

• Originate within a firm? => Rejected, disapproved

New Product Innovation & Change Pattern

• Emerging needs

• A new way to meet an existing need

• Competitive advantage: superior performance

• Higher unit profit margin

• Performance criteria

Initially very vague

User may play a major role in suggesting ultimate form

of the innovationProf. Paul Lin

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A Spectrum of Innovators (cont.)

New Innovative Product from Small and Adaptable Firms

Advantages

• Flexible technical approach

• Good external communication

Historical evidence supports “hypothesis”: advantages

John Tilton argues that new enterprises led in the

application of semiconductor technology, often

transferring into practice technology from more

established firms and laboratories.

Economies of scale – not importance; production

technology designed for a particular product is rapidly

made obsolete

Prof. Paul Lin

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A Transition from Radical to Evolutionary

Innovation

Incremental improvement• Incremental change => Rigid => Efficient production

• Did not prove to be an effective competitive stance

• Established firms (from 1950-1968) – in 18 years, made more process innovations than product innovations:

Divisions of General Electric, www.ge.com

Philco, http://en.wikipedia.org/wiki/Philco

RCA, http://en.wikipedia.org/wiki/RCA

Radical innovation

• From 1950 – 1968 (vacuum tube => semiconductor): Fairchild Semiconductors,

http://en.wikipedia.org/wiki/Fairchild_Semiconductor

IBM, www.ibm.com

Texas Instruments, www.ti.com

Prof. Paul Lin

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A Transition from Radical to Evolutionary

Innovation (cont.)

Product and Process Evolution

• Aircraft and Airline Industry: DC-3,

http://en.wikipedia.org/wiki/Douglas_DC-3

• Electric Light Bulb, LED Light

• Henry Ford Model T,

http://www.hfmgv.org/exhibits/showroom/1908/model.t.html

4 years: developed, produced, and sold: 5 different

engines ( 2 to 6 cylinders)

15 years: dominant design: incremental change, no

fundamental innovation

• Robert Buzzell and Robert Nourse, Product Innovation in

Food Processing 1954-1964, Harvard University

Prof. Paul Lin

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A Transition from Radical to Evolutionary

Innovation (cont.)

Common thread - radical to evolutionary design

• Development of a dominant product design

• Accompanied by heightened price competition

• Increased emphasis on process innovation

Consistent, predictable changes

• Innovation pattern

• Production process

• Scale and production capacity

Prof. Paul Lin

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Managing Technological Innovation

If it is true that the nature and goals of an

industrial unit’s innovation change as that unit

mature from pioneering to large-scale producer,

what does this imply for the management of

technology?

Prof. Paul Lin

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Managing Technological Innovation (cont.)

The goals of Innovation - as firm moves toward large-

scale production

• Change from ill-defines and uncertain targets to well-

articulated design objectives

• Issues on product performance requirements &

design criteria

• Impacts of regulatory constraints

• Impacts of R&D efforts:

Two sources of ambiguity: target uncertainty and technical

uncertainty

• As the firm develops

Reduced uncertainty about markets and targets

Justified larger R&D investments

Prof. Paul Lin

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Fostering Innovation by Understanding

Transition

Assuming the validity of the model for the

development of the innovative capacities of a

productive unit, how can it be applied to further

our capacity for new products and to improved

our productivity?

Exhibit 1 The Changing Character of Innovation and Its

Changing Role in Corporate Advance (page 257)

• Seeking to understand the variables that determine

successful strategies for innovation

• Three stages in the evolution of a successful enterprise:

Period of Flexibility, Intermediate years, Full maturity

Prof. Paul Lin

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Fostering Innovation by Understanding

Transition: Exhibit 1 (cont.)

Competitive emphasis on

• Functional product performance

• Product variation

• Cost reduction

Innovation stimulated by

• Information on users, needs and users, technical inputs

• Opportunities created by expanding internal capability

• Pressure to reduce cost and improve quality

Product line

• Diverse, often including custom designs

• Includes at least one product design stable enough to have

significant production volume

• Mostly undifferentiated standard products

Prof. Paul Lin

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Fostering Innovation by Understanding

Transition: Exhibit 1 (cont.)

Production process

• Flexible and inefficient; major changes easily

accommodated

• Becoming more rigid, with changes occurring in major

steps

• Efficient, capital-intensive, and rigid; cost of change high

Equipment

• General-purpose, requiring highly skilled labor

• Some sub-processes automated, creating “islands of

automation”

• Special-purpose, mostly automatic with labor tasks mainly

monitoring and control

Prof. Paul Lin

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Fostering Innovation by Understanding

Transition: Exhibit 1 (cont.)

Materials

• Inputs limited to generally available materials

• Specialized materials perhaps demanded from some

suppliers

• Specialized materials demanded; if not available, vertical

integration extensive

Plant

• Small-scale, located near user or source of technology

• General-purpose with specialized sections

• Large-scale, highly specific to particular products

Organizational control is

• Informal and entrepreneurial

• Through liaison relationships, project and task group

• Through emphasis on structure, goals, and rulesProf. Paul Lin

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Consistency of Management Action

Unsuccessful innovation

• Reasons why?

• How to improve the chance of success?

Managerial questions

• Can a firm increase the variety and diversity of its product

line while simultaneously realizing the highest possible

level of efficiency?

• Is a high rate of production innovation consistent with an

effort to substantially reduce costs thorough extensive

backward integration?

• Is government policy to maintain diversifies markets for

technologically active industries consistent with a policy

that seeks a high rate of effective product innovation?

Prof. Paul Lin

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Consistency of Management Action (cont.)

Managerial questions

• Would a firm’s action to restructure its work environment

for employees so that tasks are more challenging and less

repetitive be compatible with a policy of mechanization

designed to reduce the need for labor?

• Can the government stimulate productivity by forcing a

young industry to standardize its products before dominant

design has been realized?

Prof. Paul Lin

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Conclusion

Prof. Paul Lin