Summary Strategic Management of Technology session 2-10

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