Strategic management of technology and innovation (E_MFEN_SMTI)
Summary
Lecture summary of Strategic Management of Technology and Innovation VU
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Course
Strategic management of technology and innovation (E_MFEN_SMTI)
Institution
Vrije Universiteit Amsterdam (VU)
Book
ISE Strategic Management of Technological Innovation
This summary contains content from the lectures from the course Strategic Management of Technology and Innovation, given at the Vrije Universiteit in Amsterdam.
This course is part of the third year curriculum of Science Business and Innovation but also part of the curriculum of the minor entrep...
Strategic management of technology and innovation (E_MFEN_SMTI)
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Strategic Management of Technology and Innovation
Lecture summary
WEEK 1
Technology is a means to fulfill a human purpose à Device or purpose
Technology consists of multiple components linked together.
Technology exploits phenomena to fulfill its purpose.
Innovation
Technological innovation is the act of introducing a new device, method, or material for application to commercial or
practical objectives.
“Innovation is the process of turning ideas into reality and capturing value from them”.
à Innovation = theoretical conception + technical invention + commercial exploitation.
Sources of innovation
- Inventors
- Users
- Firms
- Universities and government-funded research
- Private nonprofit organizations
Product vs. process innovation
• Product innovations are embodied in the outputs of an organization, it’s goods or services.
• Process innovations are innovations in the way an organization conducts its business, such as in techniques
of producing or marketing goods or services.
Incumbent vs. new entrant
• Incumbent = an organization with an established name in the market. Often, but not always, one of the first
organizations to serve the market.
• New entrant = an organization that is new to an already existing market.
Innovation success
How do you define innovation success?
- Market share? (Numbers of units sold/users).
- ROI? (Who owns the patent?)
- Profit?
- Many other options
The innovator’s dilemma
• Sustaining circumstances
When the race entails making better products that can be sold for more money to attractive customers.
• Disruptive circumstances
When the challenge is to commercialize a simpler, more convenient product that sells for less money and
appeals to a new or unattractive customer set.
Disruptive innovation model
The innovator’s dilemma identified three critical elements of disruption.
1. First, in every market there is a rate of improvement that customers can utilize or absorb, represented by
the dotted line.
2. Second, in every market there is a distinctly different trajectory of improvement that innovating companies
provide as they introduce new and improved products. This pace of technological progress almost always
outstrips the ability of customers in any given tier of the market to use it, as the more steeply sloping solid
lines suggest.
3. Third, is the distinction between sustaining and disruptive innovation.
1
, Range of performance that customers can utilize
A sustaining innovation targets demanding, high-end customers with better performance than what was previously
available. The established competitors almost always win the battles of sustaining technology. Because this strategy
entails making a better product that they can sell for higher profit margins to their best customers, the established
competitors have powerful motivations to fight sustaining battles. And they have the resources to win.
Disruptive innovations, in contrast, disrupt and redefine that trajectory by introducing products and services that
are not as good as currently available products. But offer other benefits. Once the disruptive product gains a
foothold or low-end markets, the improvement cycle begins. And because the pace of technological progress
outstrips customers’ abilities to use it, the previously not-good-enough technology eventually improves enough to
intersect with the needs of more demanding customers.
Disruption is a relative term.
An idea that is disruptive to one business may be sustaining to another. The article recommends a strict rule:
If your idea for a product or business appears disruptive to some established companies but might represent a
sustaining improvement for others, then you should go back to the drawing board.
You need to define an opportunity that is disruptive relative to all the established players in the targeted market, or
you should not invest in the idea. If it is a sustaining innovation relative to the business model of a significant
incumbent, you are picking a fight you are very unlikely to win.
WEEK 2
Technology life cycle
Technological trajectories
- Technological trajectory: “The path a technology
takes through time”.
- Re-use of components.
- Recombination of components.
- Novel components.
Technology S-curve Adoption S-curve
Technology S-curves are about performance Adoption S-curves are about cumulative market
improvement of technology. penetration or sales
2
, Types of innovation:
• Product, service, and process innovation.
• Architectural vs. component (modular) innovation.
• Incremental vs. radical innovation.
• Sustaining vs. disruptive innovation.
Incremental vs. radical innovation
Incremental innovation
- An innovation that makes a relatively minor change from (or adjustment to) existing practices.
- Builds on existing knowledge and resources
Radical innovation (= discontinuous innovation)
- An innovation that is very new and different from prior solutions.
- Requires completely new knowledge and resources.
- Significant performance differences.
What is radical?
à In terms of newness? In terms of differentness? In terms of risk? What was once radical is now incremental!
Sustaining vs. disruptive innovation
• Sustaining innovation: making better products, for higher prices, to attractive customers in existing markets.
• Disruptive innovation: simple or more convenient products, for lower prices, to new or unattractive
customers.
Disruptive innovation characteristics
1. New products with high performance on different package of attributes.
2. Performs far worse on attributes that are important in existing markets.
3. Strong performance increase on these latter attributes.
Stages of disruptive innovation:
1. Disruptive technologies were initially developed within the incumbent firms.
2. Marketing employees explored responses from important customers.
3. Incumbents chose to invest in sustaining innovations.
4. New companies were started that, through trial and error, found new markets.
5. These new companies and the performance of their products moved upwards.
6. The incumbent firms were too late to protect their market share.
How can it be that aggressive, innovative, and customer focused
organizations respond to late to strategically important
technological innovations or even ignore them?
à Not because of myopia, a lack of interest or a lack of
competences and expertise. But because they were unable to
change their strategy!
Innovation life cycle:
3
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