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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
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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