Understanding S-Curve Pattern & Competitive Advantage in Innovation & Tech Change - Prof. , Study notes of Introduction to Business Management

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Chapter 7 o Organizational innovation: the successful implementation of creative ideas in an organization o Creativity: form of organizational innovation, is the production of novel and useful ideas o Tents instead of buildings is a form of organizational innovation o Technology: knowledge, tools, and techniques used to transform inputs into outputs o Technology cycle: a cycle that begins with the birth of a new technology and ends when that technology reaches its limits and is replaced by a newer, substantially better technology o Technology cycle: fans air conditioning, wagon car, trains planes o S-curve pattern of innovation: a pattern of technological innovation characterized by slow initial progress, then rapid progress, and then slow progress again as a technology matures and reaches its limits o Intel follows S-curve pattern with it’s three-year cycle o After a technology has reached its limits, significant improvements usually come from radical new designs or performance-enhancing materials and is replaced by a 2nd S-curve o Technology cycle occurs whenever there are major advances or changes in the knowledge, tools and techniques of a field or discipline o One of the most important technology cycles was in 1859 when 1,300 miles of central sewer line were constructed in London to carry out human waste o Technological innovation not only can enable competitors to duplicate the benefits obtained from a company’s distinctive advantage but also can quickly turn a company’s competitive disadvantage o Kodak was the dominant producer of film and then created the digital camera^^ o Companies that want to sustain a competitive advantage must understand and protect themselves from the strategic threats of innovation o Innovation streams: patterns of innovation over time that can create sustainable competitive advantage o The best way for a company to sustain competitive advantage is to create a stream of its own innovative ideas and products year after year o Technological discontinuity: the beginning of an innovation stream, in which a scientific advance or a unique combination of existing technologies creates a significant breakthrough in performance or function o Discontinuous change: follows technological discontinuities and is the phase of a technology cycle characterized by technological substitution and design competition o Technological substitution: the purchase of new technologies to replace older ones o Design competition: competition between old and new technologies to establish a new technological standard or dominant design o Because of large investments in old technology, and because the new and old technologies are often incompatible with each other, companies and consumers are reluctant to switch to a different technology during a design competition o During design competition, the older technology usually improves significantly in response to the competitive threat from the new technologies; this response also slows the changeover from older to newer technologies o Dominant design: a new technological design or process that becomes the accepted market standard (follows the discontinuous change) o Critical mass: a particular technology can become the dominant design simply because most people use it (ex. MP3) o Solves a practical problem: example—QWERTY keyboard design o Independent standard bodies: example—international Telecommunications Union standardized equipment and instructions to make telecommunications simpler o Companies that bet on the new dominant design usually prosper o Technological lockout: a new dominant design prevents a company from competitively selling its products or makes it difficult to do so o More companies are likely to go out of business in a time of discontinuous change and changing standards than in an economic recession or slowdown o Incremental change: a phase in which companies innovate by lowering the cost and improving the functioning and performance of the dominant design o During discontinuous change, companies must find a way to anticipate and survive the technological changes that can suddenly transform industry leaders into losers and industry unknowns into powerhouses o After a new dominant design emerges following discontinuous change, companies must manage the very different process of incremental improvement and innovation o Companies that can’t manage incremental innovation slowly deteriorate as the fall further behind industry leaders o What works well when managing innovation during discontinuous change doesn’t work well when managing innovation during periods of incremental change (and vice versa) o Creative work environments: workplace cultures in which workers perceive that new ideas are welcomed, valued, and encouraged o Challenging work promotes creativity because it creates a rewarding psychological experience known as flow o flow: psychological state of effortlessness, in which you become completely absorbed in what you’re doing and time seems to fly o skills and task challenges must be balanced to create creativity o organizational encouragement: management encourages risk taking and new ideas, supports and fairly evaluates new ideas, rewards and recognizes creativity, and encourages the sharing of new ideas throughout different parts of the company o supervisory encouragement of creativity: supervisors provide clear goals, encourage open interaction with subordinates, and actively support development teams’ work and ideas