Session 2 : Disruptive vs Sustainable innovation
TECHNOLOGICAL INNOVATIONS
Impact can be both good and bad
GOOD: innovation = change & improvement => create value
BAD : the use of AI and robotizing may reduce jobs
Example:
In the past: ice was used to keep things cold
Refrigerator invented
Way better for transport
But companies lost their business model
Importance of technological innovation:
Positive correlation between R&D investment and growth
Example: Apple almost bankrupt
Big investment of Bill gates 1997
Now highest ranked company
THREE PROBLEMS OF INNOVATION
Uncertainty
1. Technical uncertainty
Feasibility of the idea
Not sure if what we want is possible due to technical problems
How to cope with technical uncertainty?
Calculate P(TS) = chance on technical succès for all phases
Try to estimate the costs of failure during the process
, 2. Commercial uncertainty
We don’t know the demand/WTP/sales/real costs/…
Important to estimate with market research
3. Regulatory uncertainty
Rules of government may change
For example: barometers used ‘Kwik’ but became forbidden
Large R&D costs
Only 5% of projects ends in success
Big investments with often a big risk
Spillover and property problems
Information leakage from employees quitting their job
Halfway a new project, big loss
Freeriden = companies that benefit from others R&D
SOLUTION = Management of Technological Innovation
INNOVATION TYPOLOGY
‘Innovations are systems of technological components’
ECOSYSTEM OF INNOVATION
See other class : TTO
Co-innovation and adoption chain risk
Innovation doesn’t work if complemental components, suppliers, intermediates can’t
keep track
Invest and collaborate with other players in ecosystem
Examples:
inventor of car on hydrogen
Invests in thank stations to supply hydrogen
Nokia 6650 ( first phone with 3G)
No success because other components couldn’t follow
,TECHNOLOGY LIFECYCLE
Emerging phase
Launched but not optimized
Takes time to find the best performing product Technical Uncertaincy
Looking for dominant design
Growth phase
After putting together all best characteristics
Dominant design is found => focus on process innovation
Example : bike
Seat with suspension
Air in tires
2 identical wheels
Mature phase
Process and product are both optimized
Almost maximized utilization rate
DISRUPTIVE CHANGE
Typical form of a lifecycle curve:
Disruptive change might lift/change the curve
Can be caught up and replaced if emerging phase takes too long
, SUSTAINING & DISRUPTIVE INNOVATION
1. Sustaining Innovation
existing markets
keep up with the times
stay competitive
incremental improvements
2. Low-end disruption
Target overshot customers
Lower-cost business model
Example: Seiko Watches
First watch using kwarts as oscillating material
Only just met necessary requirements
3. New Market Disruption
New market and New customers
Examples: Wii
Sony and xbox had duopoly
Wii came up with whole other idea of moving controller
INNOVATION GAMES
Empirical study on innovation strategies:
Balanced innovation strategy outperforms focusing on exploration or exploitation
168 firms followed from 1995-2003
KIP = Tobin’s Q index regarding the share of technology exploration
TECHNOLOGICAL INNOVATIONS
Impact can be both good and bad
GOOD: innovation = change & improvement => create value
BAD : the use of AI and robotizing may reduce jobs
Example:
In the past: ice was used to keep things cold
Refrigerator invented
Way better for transport
But companies lost their business model
Importance of technological innovation:
Positive correlation between R&D investment and growth
Example: Apple almost bankrupt
Big investment of Bill gates 1997
Now highest ranked company
THREE PROBLEMS OF INNOVATION
Uncertainty
1. Technical uncertainty
Feasibility of the idea
Not sure if what we want is possible due to technical problems
How to cope with technical uncertainty?
Calculate P(TS) = chance on technical succès for all phases
Try to estimate the costs of failure during the process
, 2. Commercial uncertainty
We don’t know the demand/WTP/sales/real costs/…
Important to estimate with market research
3. Regulatory uncertainty
Rules of government may change
For example: barometers used ‘Kwik’ but became forbidden
Large R&D costs
Only 5% of projects ends in success
Big investments with often a big risk
Spillover and property problems
Information leakage from employees quitting their job
Halfway a new project, big loss
Freeriden = companies that benefit from others R&D
SOLUTION = Management of Technological Innovation
INNOVATION TYPOLOGY
‘Innovations are systems of technological components’
ECOSYSTEM OF INNOVATION
See other class : TTO
Co-innovation and adoption chain risk
Innovation doesn’t work if complemental components, suppliers, intermediates can’t
keep track
Invest and collaborate with other players in ecosystem
Examples:
inventor of car on hydrogen
Invests in thank stations to supply hydrogen
Nokia 6650 ( first phone with 3G)
No success because other components couldn’t follow
,TECHNOLOGY LIFECYCLE
Emerging phase
Launched but not optimized
Takes time to find the best performing product Technical Uncertaincy
Looking for dominant design
Growth phase
After putting together all best characteristics
Dominant design is found => focus on process innovation
Example : bike
Seat with suspension
Air in tires
2 identical wheels
Mature phase
Process and product are both optimized
Almost maximized utilization rate
DISRUPTIVE CHANGE
Typical form of a lifecycle curve:
Disruptive change might lift/change the curve
Can be caught up and replaced if emerging phase takes too long
, SUSTAINING & DISRUPTIVE INNOVATION
1. Sustaining Innovation
existing markets
keep up with the times
stay competitive
incremental improvements
2. Low-end disruption
Target overshot customers
Lower-cost business model
Example: Seiko Watches
First watch using kwarts as oscillating material
Only just met necessary requirements
3. New Market Disruption
New market and New customers
Examples: Wii
Sony and xbox had duopoly
Wii came up with whole other idea of moving controller
INNOVATION GAMES
Empirical study on innovation strategies:
Balanced innovation strategy outperforms focusing on exploration or exploitation
168 firms followed from 1995-2003
KIP = Tobin’s Q index regarding the share of technology exploration
