Science and technology from a business and economics perspective

1
Science and technology from a business and
economics perspective

• Lecture 1
• 2007-10-22
• Emelie Stenborg

2
Teaching week 1

• Monday 10-12 Creative destruction and industrial
  innovation
• Schumpeter Fagerberg (125-135, 141 f)
• Utterback (4, 2, 7, 10)
• Wednesday 10-12 Innovation in firms
• Tidd et al (1, 2, 12)
• Friday 10-12 Seminar with presentations

3
Information

• Week 1 Emelie Stenborg
• Week 2 Astrid Szogs
• Week 3 Lars Coenen
• Week 4 Home exam

4
The plan is then

• To start with the greatest influencer in
  evolutionary economics and see how he is relevant
  today
• Explain industrial dynamics in industries
• See how firms can manage innovation
• ? Hopefully we will be able to see both why
  innovation is important and how it can be managed
  in firms!

5
Schumpeter Creative destruction
6
Schumpeter

• First half of the 20th century
• Ideas resurfaced in the 1980s
• Influenced evolutionary economics and capitalist
  dynamics
• Was early in objecting to classical models
  (influenced by Marx)
• Still important as the holistic view still
  today often is not used

7
Schumpeters opinions (1)

• Argues against ideas of perfect competition
• ?
• Even under mono- or oligopolistic competition
  great advances are made
• Effects the standard of life for people
• Includes quality and marketing in the competitive
  advantage of firms

8
Schumpeters opinions (2)

• Also wants to move on from equillibrium models
• ?
• Sees them as nice ideal models
• Equillibrium would be destroyed by innovation
• New products, processes, organizations, markets
  poses the greatest threat
• Innovation only gives an initial advantage

9
Schumpeters opinions (3)

• Defies the static view of economics
• ?
• Firms are shaped by the past and by the future
• Have to see the context to understand the firm
• Firms are organic in their structure
• Uncertainty is a genuine concern constrains
  innovation

10
Schumpeters opinions (4)

• New way of looking at how innovation is produced
• ?
• New combinations of existing things not only
  technological
• The role of institutions
• Has to do with the non-technological issues
• From new entrants
• The role/characteristics of the entrepreneur

11
Creative destruction

• Replacive new technology creating a new
  industry, destroying an old
• Creates new proffesions
• Big firms are innovative but under constant
  threat by young firms
• Comes as business cycles
• Is a societal reality and concern
• Key factor cheap, universally available input,
  rapidly falling cost, used in many sectors ?
  pervasive!

12
Now, some discussions!

• Two and two, give example of creative
  destruction and (if you know) what happened to
  the old players and how has the industry changed?

13
About organizational innovation

• Discuss fordism and post-fordism in terms of
• efficiency
• culture
• how to make it work

14
Utterback Mastering the dynamics of innovation

• Chapter 4, 2, 7, 10

15
This model tries to

• Link innovation, market and industry
• The level of product and process innovation can
  be related to the stage of the industry
• Handels both incremental and radical innovation
• Explanatory, general model
• Academically very influental (together with
  Abernathy)

16
Innovation and Industrial Evolution

• Assembled products
• Not universal
• Links the following to the industry life cycle
• Product innovation
• Process innovation
• Organizational change
• Market
• Competition

17
Innovation in an assembly sector
http//www.zanthus.com/databank/innovation/docs/ab
ernathy_utterback.ppt
18
Keywords of different phases
19
What happens after the specific phase?

• New vawes of innovation
• Next generation
• Skip a generation
• Organisational innovation
• Japanese style
• Corporate ventures
• Networking organisation
• Mass customization

20
Dominant design

• The design that wins the competition
• Not based on technological superiority but
  instead on a mixture of market and organizational
  factors
• Creates
• What defines the product
• What is required by the product
• Meets the need of most customers
• New proffesions

21
How does it come about?

• Interplay between market and technology
• Important non-technological factors
• Collateral (Complementary) assets
• Policy
• Firm strategy
• Communication

22
Effects of dominant design

• Competition
• Shifts the basis from product to process
• Less and less firms
• Slower introduction of change (maybe less true
  these days)
• Implication ? Organisational change is necessary!

23
Organizational implications

• Leadership or followership
• Sets the boundaries for change (I thought about
  plastic waterbottles the other day)
• Constraints, users, habits, complementary assets
• Can we spot it? At least three variables
• Chance
• Technology
• Social process
• Disruptive change comes from outside of the
  industry (More on Wednesday)

24
Radical innovation

• In industries times of stability are disrupted by
  times of discontinuity
• Example of generations of the ice industry in the
  USA manually harvested ? mechanical ice-making
  ? refrigerators
• In this context we talk about replacive products

25
Performance of old and new technology
Product performance
t1
t2
t3
Time
Utterback, Mastering the Dynamics of Innovation
26
Dynamics of radical innovation

• First inferior to old ones but with potential
• Early, demanding users but has to have mass
  market potential
• Timing decline of improvements of old
  technology, rapid improvement of new
• Sailing ship old technology fights back

27
Old vs New firms

• Existing customers
• Existing products
• Resources (investments)
• Other stakeholders (shares, staff, funders)
• Existing organisational structure
• Bureaucracy
• Mindset emotionally comitted
• More?

28
So, how to be an innovative firm?(According to
Utterback) (1)

• Technology, markets and organisation
• 1) Support radical developments
• Wide experimentation
• Learning organisation
• External vision
• Developed and balanced core competences
• Strategies
• Alliances
• Accept change it will happen!

29
So, how to be an innovative firm?(According to
Utterback) (2)

• 2)The importance of incremental innovation!
• Improve and extend existing lines
• Parallell innovation
• Right structure
• Develop complementary assets

30
Summary

• Utterback
• Innovation, market and industry
• Industry life cycle
• Fluid, transitional and specific phases
• Dominant design
• Radical innovation
• Schumpeter
• Imperfect competition
• Innovation is the driver of the economy
• Dynamic economics
• Innovation and non-technological aspects
• Creatve destruction

31
Wednesday

• We will continue with how firms have to relate
  themselves to the management of innovation to
  stay in the business.

32
Seminar assignment

• Work in groups of 2 to 3 people. Choose a firm
  (possibly a technology of a firm) and relate it
  to concepts introduced today and on Wednesday
• Creative destruction
• Industrial dynamics
• Management of innovation
• Presentation (10-15 minutes) on Friday!