8/13/2019 Sample Chapter Ch03 http://slidepdf.com/reader/full/sample-chapter-ch03 1/26 Chapter Three Types and Patterns of Innovation Honda and Hybrid Electric Vehicles 1 Honda was founded in Hamamatsu, Japan, by Soichiro Honda in 1946 as Honda Technical Research Institute. The company began as a develope engines for bicycles, but by 1949 it had produced its first motorcycle, called Dream. In 1959, Honda entered the U.S. automobile and motorcycle marke opening the American Honda Motor Company. A few years later, in 1963, Ho released its first sports car, the S500, in Japan. Honda Motor Co. Inc. grew idly to become one of the largest automobile companies in the world. Its ” calization” strategy of building factories around the world that would meet needs of local customers had resulted in a total worldwide presence of more 100 factories in 33 countries. Furthermore, while other auto manufactu engaged in a frenzy of merger and acquisition activities in the late 1990s, Ho steadfastly maintained its independence. Honda has grown into one of world’s largest automobile manufacturers and has also evolved into one of most respected global brands. In 1997, Honda Motor Company introduced a two-door gas/electric hy vehicle called the Insight to Japan. The Insight’s fuel efficiency was rated a miles per gallon in the city, and 68 miles per gallon on the highway, and its tery did not need to be plugged in to an electrical outlet for recharging. By 1 Honda was selling the Insight in the United States, and winning accolades f environmental groups. In 2000 the Sierra Club gave Honda its Award Excellence in Environmental Engineering, and in 2002 the Environme Protection Agency rated the Insight the most fuel-efficient vehicle sold in United States for the 2003 model year. By August 2005, Honda had sol 100,000th hybrid to retail customers. 2
Honda was founded in Hamamatsu, Japan, by Soichiro Honda in 1946 asHonda Technical Research Institute. The company began as a developeengines for bicycles, but by 1949 it had produced its first motorcycle, calledDream. In 1959, Honda entered the U.S. automobile and motorcycle markeopening the American Honda Motor Company. A few years later, in 1963, Horeleased its first sports car, the S500, in Japan. Honda Motor Co. Inc. grew idly to become one of the largest automobile companies in the world. Its ”calization” strategy of building factories around the world that would meetneeds of local customers had resulted in a total worldwide presence of more
100 factories in 33 countries. Furthermore, while other auto manufactuengaged in a frenzy of merger and acquisition activities in the late 1990s, Hosteadfastly maintained its independence. Honda has grown into one ofworld’s largest automobile manufacturers and has also evolved into one ofmost respected global brands.
In 1997, Honda Motor Company introduced a two-door gas/electric hyvehicle called the Insight to Japan. The Insight’s fuel efficiency was rated amiles per gallon in the city, and 68 miles per gallon on the highway, and its tery did not need to be plugged in to an electrical outlet for recharging. By 1Honda was selling the Insight in the United States, and winning accolades fenvironmental groups. In 2000 the Sierra Club gave Honda its Award
Excellence in Environmental Engineering, and in 2002 the EnvironmeProtection Agency rated the Insight the most fuel-efficient vehicle sold inUnited States for the 2003 model year. By August 2005, Honda had sol100,000th hybrid to retail customers.2
38 Part One Industry Dynamics of Technological Innovation
Developing environmentally friendly automobiles was not a new strategy forHonda. In fact, Honda’s work on developing cleaner transportation alternativeshad begun decades earlier. Honda had achieved remarkable technological suc-cesses in its development of solar cars and electric cars and was an acknowl-edged leader in the development of hybrid cars. Gaining mass-marketacceptance of such alternatives, however, had proved more challenging. Despite
apparent enthusiasm over environmentally friendly technologies, market adop-tion of environmentally friendly vehicles had been relatively slow, making it diffi-cult for automakers to achieve the economies of scale and learning-curve effectsthat would enable efficient mass production. Some industry participants felt thatthe market was not ready for a mass-market hybrid; Honda and Toyota were bet-ting otherwise, and hoping that their gamble would pay off in the form of lead-ership in the next generation of automobiles.
Hybrid Electric Vehicles
Hybrid electric vehicles (HEVs) have several advantages over gasoline vehicles,
such as regenerative braking capability, reduced engine weight, lower overallvehicle weight, and increased fuel efficiency and decreased emissions. First, theregenerative braking capability of HEVs helps to minimize energy loss and recoverthe energy used to slow down or stop a vehicle. Given this fact, engines can alsobe sized to accommodate average loads instead of peak loads, significantlyreducing the engine weight of HEVs. Additionally, the special lightweight mate-rials that are used for the manufacture of HEVs further reduce the overall vehicleweight of the vehicle. Finally, both the lower vehicle weight and the dual powersystem greatly increase the HEV’s fuel efficiency and reduce its emissions. As of2004, gas-electric hybrid engines were delivering, on average, fuel economygains of about 25 percent over regular combustion engines.
Honda’s Hybrid Engine
While Toyota was the first to market hybrid cars (Prius debuted in Japan in 1997),Honda was the first to market hybrids in the U.S. The Insight was released in1999 and quickly won accolades.3 Though both vehicles use a combination ofelectricity and gasoline for power, they do not use identical hybrid designs.Honda’s hybrid models are designed for fuel-efficiency, in contrast to Toyota’shybrid vehicles, which are designed for reduced emissions. These differences indesign goals translate into very different hybrid engine architectures.
The Honda Insight was designed as a “parallel” hybrid system, where the elec-trical power system and the gasoline power system run in parallel to simultane-ously turn the transmission, and the transmission then turns the wheels.4 Theelectric motor in the Insight aids the gas engine by providing extra power whileaccelerating or climbing, and supplements braking power. The electric motor canalso start the engine, obviating the need for a traditional starter component. TheInsight’s electric engine is not powerful enough alone to propel the car; therefore,the gas engine must be running simultaneously. The Insight mileage ratings were
61 mpg in cities and 70 mpg on highways, with 0–60 miles per hour accelerain approximately 11 seconds. At lower speeds the electrical components prothe extra horsepower to propel the car, reducing the gas engine’s effort and saving fuel. The batteries are regenerated by capturing energy during brakinslowing and through standard electricity-generation provided by the traditigenerator component in a standard car engine. Therefore, one does not hav
plug in the Insight, or any of Honda’s hybrids, to recharge the batteries.In contrast to the parallel system configuration, a “series” hybrid syste
designed to have a gas-powered engine turn a generator, which in turn powan electric motor that rotates the transmission or recharges the batteries. gas-powered engine does not directly power the vehicle.5 The Toyota Prius designed to reduce emissions during urban driving, and its design incorporboth parallel and series system elements. To reduce emissions, the Prius utilizpower-train design in which the car runs at its most efficient speed by virtue “power split device” that links the gas engine and electric motor through the erator with a parallel system design, but allows the car to run exclusively on trical power at lower speeds, like to a “pure” series system design. Conseque
no gas is burned and emissions are negligible under these conditions.6 Thuslow-speed urban traffic, the Prius meets its engine design goal of reduced esions, with better mileage ratings than the heavier Honda Insight. In additunlike the Insight, the Prius is a four-door midsize sedan with back seats for epassengers, something that the original two-door Honda Insight lacked, but later offered on hybrid Civic and Accord models.
Obstacles to the Adoption of Hybrids
Though the hybrid market had exhibited rapid growth (see Table 3.1), the nbers of hybrid vehicles sold were still very small compared to traditional autobiles. Adoption of hybrid designs by consumers and by U.S. auto manufactuhad been slow because of uncertainty about the direction engine design wogo in the next few years. Would one hybrid design rise to dominate the othWould hybrids be quickly displaced by other alternative fuel technologies sucfuel cells or hydrogen combustion? Many people believed that hybrids woula short-lived phenomenon, quickly replaced by fuel-cell-powered vehiDaimlerChrysler, for example, commented in one of its recent SEC filings thamanagers “regard hybrid vehicles as an intermediate step, as a bridge betwthe combustion engine and the fuel cell.”7 Sales of hybrids were further hindby consumer ignorance regarding hybrid technology: as of 2004, 50 percenU.S. consumers still believed that hybrid cars require battery regenerationelectric plug.8
Hybrid cars were also expensive to produce relative to traditional automobWhile Honda charged a sales price for the Insight that was comparable to its nhybrid counterparts—around $20,000, depending on options—it was estimthat Honda lost as much as $8,000 per car when the hybrids were originlaunched, as a result of insufficient volume to achieve economies of scale.9
40 Part One Industry Dynamics of Technological Innovation
Strategy at Honda
At Honda, being an environmental leader means never uttering the words, ”Itcan’t be done.” That’s why for more than two decades Honda has led the way inbalancing what consumers want with what the environment needs. Technologieschange over time—but our commitment to the environment never will.
Honda Corporate Website, August, 2003
Honda’s strategy had consistently emphasized innovation, independence, andenvironmental friendliness. In 1972, Honda introduced the Civic, which becamean immediate success, ranking first in U.S. fuel-economy tests for four consecu-tive years starting in 1974. Through the 1980s and 1990s, Honda made a num-ber of advances in environmentally friendly transportation. In 1986, it developedthe first mass-produced four-cylinder car that could break the 50 miles per gal-lon barrier, the Civic CRX-HF. In 1989, it became the first auto manufacturer inthe U.S. to use solvent-free paint in its mass production facilities. In 1996, Hondaintroduced a record-breaking solar-powered car (a prototype not designed for
commercial production), and in 1998 it introduced a completely electric vehicle.Though the electric car was not a commercial success, developing the electricvehicle built a foundation of expertise that Honda would later employ in its devel-opment of fuel cell technology. Fuel cells were considered to offer great poten-tial for the eventual replacement of combustion engines (DOE, January 2002).
In Honda’s research and development of its hybrid engine system, manage-ment decided to keep collaboration to a minimum, essentially “going solo” witha risky—but potentially profitable—strategy to change basic automotive powerdesign for the first time in a century. Honda’s decision to not collaborate stoodin stark contrast to the licensing and joint venture strategies pursued by Toyota.Toyota had aggressively pursued collaboration agreements for its hybrid technol-
ogy and had accrued over 1000 patents on hybrid-related technology as of 2006.Toyota also promoted its hybrid technology design by licensing the technology toFord and Nissan.11 While some industry observers were perplexed by Honda’sdecision to avoid collaboration, others pointed out that Honda’s independenceboth gave it more control over its technological direction and ensured that theaccumulated learning remained in-house. Consistent with this, Honda’s manage-ment insisted that keeping development exclusively in-house compelled Honda
Year Unit sales
2000 9,367
2001 20,287
2002 35,9612003 47,525
2004 83,153
TABLE 3.1Total Hybrid Electric Passenger Vehicle Sales in United States, 2000–2004
to understand all aspects of a technology, from its strengths to its weaknesThis in-house know-how could lead to sources of competitive advantage were difficult for competitors to imitate.
By the end of 2005, Toyota’s hybrids were outselling Honda’s hybrids by abthree-to-one, causing many analysts to question Honda’s staunch positionpursuing a different hybrid technology from Toyota and to not collaboratlicense with other auto producers.
The Future of Hybrids
By the end of 2005, hybrid electric vehicles were widely believed to have the potial to allow continued growth in the automotive sector, while also reducing crresource consumption, dependence on foreign oil, air pollution, and traffic gestion. The success of hybrids, however, was far from assured. While the techogy’s capabilities held great promise, the widespread penetration of hybrids hinon the economics of producing a complex hybrid power system. The hybrid’s cplexity, and the fact that some of the necessary complementary technologies (as storage and conversion systems) still had room for improvement, caused oions to be mixed on the hybrids’ ultimate impact in the marketplace. Some in
try analysts believed that the success of hybrids would require convergence osingle hybrid standard that could gain economies of scale through productiomultiple producers. Others felt that automakers should not bother with hytechnology at all—it was a diversion of R&D funds away from better long-talternatives such as fuel cells or hydrogen combustion engines.
Hydrogen Fuel Cells and Hydrogen Combustion
Hydrogen is the most abundant resource on earth and its combustion prodonly water vapor as an emission. Many environmentalists and industry papants thus believed that the auto industry should focus its investment on tnologies that utilized hydrogen as the fuel source. The two primary technolo
under consideration were fuel cells and hydrogen combustion. Fuel cells confuel to electricity that is stored in a large battery. By converting chemical endirectly into electrical energy, fuel cells had been known to achieve a converefficiency of better than 50 percent—twice the efficiency of internal combusengines. Hydrogen combustion works much like traditional engines except hydrogen is used instead of gasoline in an internal combustion engine. Emethod results in only water vapor being produced as an emission. However
42 Part One Industry Dynamics of Technological Innovation
development and commercialization of fuel-cell powered vehicles has been sig-nificantly hindered by the state of battery technology.13 Furthermore, widespreadadoption of either alternative would first require building an almost entirely newfuel infrastructure. There was also speculation that fuel cell or hydrogen com-bustion vehicles would be dangerous since the hydrogen fuel (a highly com-bustible substance) would have to be stored under great pressure.
Honda had developed fuel cell vehicles in parallel with its hybrid development.In July 2002, Honda succeeded in manufacturing the first fuel cell vehicle to receivecertification by the U.S. Environmental Protection Agency (EPA) and the CaliforniaAir Resources Board (CARB) by meeting all applicable standards. This new fuel cellvehicle, called the FCX, was certified as a Zero Emission Vehicle and by the EPA asa Tier-2 Bin 1 National Low Emission Vehicle (NLEV), the lowest national emissionrating. In 2005, Honda’s FCX became the very first fuel cell vehicle in the world tobe sold to an individual consumer (a family in southern California).
While Honda claimed that its work in hybrids helped it create internal knowl-edge of component design and manufacture that improved its options withrespect to fuel cell technologies, some questioned whether it made sense to
invest simultaneously in both technologies. Did it make sense for Honda to aban-don fuel cell development in favor of spending more on promoting hybrids?Alternatively, should Honda abandon its hybrids to focus solely on fuel cells? Oris it important for Honda to pursue synergies (and preserve its options) by devel-oping and promoting both?
Discussion Questions
1. Are hybrid electrical vehicles a radical innovation or an incremental innovation?Are they competence enhancing or competence destroying, and from whoseperspective? How would you answer these questions for fuel-cell vehicles?
2. What factors do you think will influence the rate at which hybrid electricvehicles are adopted by consumers?
3. What would be the advantages or disadvantages of Honda and Toyotausing the same engine standard?
4. Is Honda’s strategy of producing a different engine standard than Toyotaand not collaborating or licensing to other automakers a good one? Whatwould you recommend?
5. Why do you think Honda is simultaneously developing both hybrid vehiclesand fuel-cell vehicles?
OVERVIEW
The previous chapters pointed out that technological innovation can come from manysources and take many forms. Different types of technological innovations offer dif-ferent opportunities for organizations and society, and they pose different demandsupon producers, users, and regulators. While there is no single agreed-upon taxonomyto describe different kinds of technological innovations, in this chapter we will reviewseveral dimensions that are often used to categorize technologies. These dimensions
are useful for understanding some key ways that one innovation may differ another.
The path a technology follows through time is termed its technology trajectTechnology trajectories are most often used to represent the technology’s rate offormance improvement or its rate of adoption in the marketplace. Though manytors can influence these technology trajectories (as discussed in both this chapter
the following chapters), some patterns have been consistently identified in technotrajectories across many industry contexts and over many periods. Understanthese patterns of technological innovation provides a useful foundation that we
build upon in the later chapters on formulating technology strategy.The chapter begins by reviewing the dimensions used to distinguish types of i
vations. It then describes the s-curve patterns so often observed in both the rattechnology improvement and the rate of technology diffusion to the market. In thesection, the chapter describes research suggesting that technological innovationlows a cyclical pattern composed of distinct and reliably occurring phases.
TYPES OF INNOVATION
Technological innovations are often categorized into different types such as “radversus “incremental.” Different types of innovation require different kinds of unding knowledge and have different impacts on the industry’s competitors and tomers. Four of the dimensions most commonly used to categorize innovationsdescribed here: product versus process innovation, radical versus incremental, comtence enhancing versus competence destroying, and architectural versus compon
Product Innovation versus Process InnovationProduct innovations are embodied in the outputs of an organization—its goodservices. For example, Honda’s development of a new hybrid electric vehicle is a puct innovation. Process innovations are innovations in the way an organization ducts its business, such as in the techniques of producing or marketing goodservices. Process innovations are often oriented toward improving the effectiveneefficiency of production by, for example, reducing defect rates or increasing the qtity that may be produced in a given time. For example, a process innovation
biotechnology firm might entail developing a genetic algorithm that can qusearch a set of disease-related genes to identify a target for therapeutic interventiothis instance, the process innovation (the genetic algorithm) can speed up the fiability to develop a product innovation (a new therapeutic drug).
New product innovations and process innovations often occur in tandem. First, processes may enable the production of new products. For example, as discussed in the chapter, the development of new metallurgical techniques enabled the devement of the bicycle chain, which in turn enabled the development of multiple-gear bcles. Second, new products may enable the development of new processes. For examthe development of advanced workstations has enabled firms to implement compaided-manufacturing processes that increase the speed and efficiency of producFinally, a product innovation for one firm may simultaneously be a process innovafor another. For example, when United Parcel Service (UPS) helps a customer dev
a more efficient distribution system, the new distribution system is simultaneously a product innovation for UPS and process innovation for its customer.
Though product innovations are often more visible than process innovations, bothare extremely important to an organization’s ability to compete. Throughout theremainder of the book, the term innovation will be used to refer to both product and
process innovations.
Radical Innovation versus Incremental InnovationOne of the primary dimensions used to distinguish types of innovation is the contin-uum between radical versus incremental innovation. A number of definitions have
been posed for radical innovation and incremental innovation, but most hingeon the degree to which an innovation represents a departure from existing practices.14
Thus radicalness might be conceived as the combination of newness and the degree of differentness. A technology could be new to the world, new to an industry, new to afirm, or new merely to an adopting business unit. A technology could be significantlydifferent from existing products and processes or only marginally different. The mostradical innovations would be new to the world and exceptionally different from exist-
ing products and processes. The introduction of wireless telecommunication productsaptly illustrates this—it embodied significantly new technologies that required newmanufacturing and service processes. Incremental innovation is at the other end of thespectrum. An incremental innovation might not be particularly new or exceptional; itmight have been previously known to the firm or industry, and involve only a minor change from (or adjustment to) existing practices. For example, changing the config-uration of a cell phone from one that has an exposed keyboard to one that has a flipcover or offering a new service plan that enables more free weekend minutes would represent incremental innovation.
The radicalness of innovation is also sometimes defined in terms of risk. Since rad-ical innovations often embody new knowledge, producers and customers will vary in
their experience and familiarity with the innovation, and in their judgment of its use-fulness or reliability.
15 The development of third generation (3G) telephony is illustra-tive. 3G wireless communication technology utilizes broadband channels. Thisincreased bandwidth gives mobile phones far greater data transmission capabilitiesthat enable activities such as videoconferencing and accessing the most advanced internet sites. For companies to develop and offer 3G wireless telecommunicationsservice required a significant investment in new networking equipment and an infra-structure capable of carrying a much larger bandwidth of signals. It also required developing phones with greater display and memory capabilities, and either increas-ing the phone’s battery power or increasing the efficiency of the phone’s power uti-lization. Any of these technologies could potentially pose serious obstacles. It was also
unknown to what degree customers would ultimately value broadband capability in awireless device. Thus, the move to 3G required managers to assess several differentrisks simultaneously, including technical feasibility, reliability, costs, and demand.
Finally, the radicalness of an innovation is relative, and may change over time or withrespect to different observers. An innovation that was once considered radical mayeventually be considered incremental as the knowledge base underlying the innovation
becomes more common. For example, while the first steam engine was a monumental
44 Part One Industry Dynamics of Technological Innovation
innovation, today its construction seems relatively simple. Furthermore, an innovathat is radical to one firm may seem incremental to another. Although both KodakSony introduced digital cameras for the consumer market within a year of each o(Kodak’s DC40 was introduced in 1995, and Sony’s Cyber-Shot Digital Still Camwas introduced in 1996), the two companies’ paths to the introduction were quiteferent. Kodak’s historical competencies and reputation were based on its experti
chemical photography, and thus the transition to digital photography and vrequired a significant redirection for the firm. Sony, on the other hand, had beeelectronics company since its inception, and had a substantial level of expertise inital recording and graphics before producing a digital camera. Thus, for Sony, a tal camera was a straightforward extension of its existing competencies.
Competence-Enhancing Innovation versus Competence-Destroying InnovationInnovations can also be classified as competence enhancing versus competedestroying. An innovation is considered to be competence enhancing from thespective of a particular firm if it builds on the firm’s existing knowledge base.example, each generation of Intel’s microprocessors (e.g., 286, 386, 486, PentPentium II, Pentium III, Pentium 4) builds on the technology underlying the prevgeneration. Thus, while each generation embodies innovation, these innovations leage Intel’s existing competencies, making them more valuable.
An innovation is considered to be competence destroying from the perspective particular firm if the technology does not build on the firm’s existing competencirenders them obsolete. For example, from the 1600s to the early 1970s, no respecting mathematician or engineer would have been caught without a slide Slide rules are lightweight devices, often constructed of wood, that use logarscales to solve complex mathematical functions. They were used to calculate evthing from the structural properties of a bridge to the range and fuel use of an aircSpecially designed slide rules for businesses had, for example, scales for doing calculations or determining optimal purchase quantities. During the 1950s and 19Keuffel & Esser was the preeminent slide-rule maker in the United States, produ5,000 slide rules a month. However, in the early 1970s, a new innovation relegateslide rule to collectors and museum displays within just a few years: the inexpenhandheld calculator. Keuffel & Esser had no background in the electronic componthat made electronic calculators possible and was unable to transition to the new tnology. By 1976, Keuffel & Esser withdrew from the market.
16Whereas the inexpen
handheld calculator built on the existing competencies of companies such as HewPackard and Texas Instruments (and thus for them would be competence enhancingKeuffel & Esser, the calculator was a competence destroying innovation.
Architectural Innovation versus Component InnovationMost products and processes are hierarchically nested systems, meaning that atunit of analysis, the entity is a system of components, and each of those componis, in turn, a system of finer components, until we reach some point at which the c
ponents are elementary particles.17 For example, a bicycle is a system of componsuch as a frame, wheels, tires, seat, brakes, and so on. Each of those componen
also a system of components: the seat might be a system of components that includesa metal and plastic frame, padding, a nylon cover, and so on.
An innovation may entail a change to individual components, to the overall archi-tecture within which those components operate, or both. An innovation is considered a component innovation (or modular innovation) if it entails changes to oneor more components, but does not significantly affect the overall configuration of the
system.18 In the example above, an innovation in bicycle seat technology (such as theincorporation of gel-filled material for additional cushioning) does not require anychanges in the rest of the bicycle architecture.
In contrast, an architectural innovation entails changing the overall design of the system or the way that components interact with each other. An innovation that isstrictly architectural may reconfigure the way that components link together in the sys-tem, without changing the components themselves.
19Most architectural innovations,
however, create changes in the system that reverberate throughout its design, requir-ing changes in the underlying components in addition to changes in the ways thosecomponents interact. Architectural innovations often have far-reaching and complexinfluences on industry competitors and technology users.
For example, the transition from the high-wheel bicycle to the safety bicycle wasan architectural innovation that required (and enabled) the change of many compo-nents of the bicycle and the way in which riders propelled themselves. In the 1800s,
bicycles had extremely large front wheels. Because there were no gears, the size of thefront wheel directly determined the speed of the bicycle since the circumference of thewheel was the distance that could be traveled in a single rotation of the pedals.However, by the start of the 20th century, improvements in metallurgy had enabled the
production of a fine chain and a sprocket that was small enough and light enough for a human to power. This enabled bicycles to be built with two equally sized wheels,while using gears to accomplish the speeds that the large front wheel had enabled.Because smaller wheels meant shorter shock-absorbing spokes, the move to smaller
wheels also prompted the development of suspension systems and pneumatic (air-filled) tires. The new bicycles were lighter, cheaper, and more flexible. This architec-tural innovation led to the rise of companies such as Dunlop (which invented the
pneumatic tire) and Raleigh (which pioneered the three-speed, all-steel bicycle), and transformed the bicycle from a curiosity into a practical transportation device.
For a firm to initiate or adopt a component innovation may require that the firmhave knowledge only about that component. However, for a firm to initiate or adoptan architectural innovation typically requires that the firm have architectural knowl-edge about the way components link and integrate to form the whole system. Firmsmust be able to understand how the attributes of components interact, and howchanges in some system features might trigger the need for changes in many other
design features of the overall system or the individual components.Though the dimensions described above are useful for exploring key ways that one
innovation may differ from another, these dimensions are not independent, nor do theyoffer a straightforward system for categorizing innovations in a precise and consistentmanner. Each of the above dimensions shares relationships with others—for example,architectural innovations are often considered more radical and more competencedestroying than component innovations. Furthermore, where an innovation lies on thedimension of competence enhancing versus destroying, architectural versus component,
46 Part One Industry Dynamics of Technological Innovation
or radical versus incremental depends on the time frame and industry context fwhich it is considered. Thus, while the dimensions above are valuable for understing innovation, they should be considered relative dimensions whose meanindependent on the context in which they are used.
We now will turn to exploring patterns in technological innovation. Numerous ies of innovation have revealed recurring patterns in how new technologies eme
evolve, are adopted, and are displaced by other technologies. We begin by examitechnology s-curves.
TECHNOLOGY S-CURVES
Both the rate of a technology’s performance improvement and the rate at whichtechnology is adopted in the marketplace repeatedly have been shown to conforman s-shape curve. Though s-curves in technology performance and s-curves in tnology diffusion are related (improvements in performance may foster faster adopand greater adoption may motivate further investment in improving performan
they are fundamentally different processes. S-curves in technology improvemendescribed first, followed by s-curves in technology diffusion. This section explains that despite the allure of using s-curves to predict when new phases of a tnology’s life cycle will begin, doing so can be misleading.
S-curves in Technological ImprovementMany technologies exhibit an s-curve in their performance improvement over lifetimes.
20When a technology’s performance is plotted against the amount of e
and money invested in the technology, it typically shows slow initial improvement,accelerated improvement, then diminishing improvement (see Figure 3.1). Performimprovement in the early stages of a technology is slow because the fundamenta
the technology are poorly understood. Great effort may be spent exploring diffe
48 Part One Industry Dynamics of Technological Innovation
1970 1975 1980 1985 1990 1995 2000
Year
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
T r a
n s i s t o r D e n s i t y
Year Transistors Intel CPU
1971 2,250 4004
1972 2,500 8008
1974 5,000 8080
1978 29,000 8086
1982 120,000 286
1985 275,000 386™
1989 1,180,000 486™ DX
1993 3,100,000 Pentium®
1997 7,500,000 Pentium II1999 24,000,000 Pentium III
2000 42,000,000 Pentium 4
FIGURE 3.2Improvements in Intel’s Microprocessor Transistor Density over Time
paths of improvement or different drivers of the technology’s improvement. If the tech-nology is very different from previous technologies, there may be no evaluation rou-tines that enable researchers to assess its progress or its potential. Furthermore, untilthe technology has established a degree of legitimacy, it may be difficult to attractother researchers to participate in its development.21 However, as scientists or firmsgain a deeper understanding of the technology, improvement begins to accelerate. The
technology begins to gain legitimacy as a worthwhile endeavor, attracting other devel-opers. Furthermore, measures for assessing the technology are developed, permittingresearchers to target their attention toward those activities that reap the greatestimprovement per unit of effort, enabling performance to increase rapidly. However,at some point, diminishing returns to effort begin to set in. As the technology beginsto reach its inherent limits, the cost of each marginal improvement increases, and thes-curve flattens.
Often a technology’s s-curve is plotted with performance (e.g., speed, capacity, or power) against time, but this must be approached with care. If the effort invested is notconstant over time, the resulting s-curve can obscure the true relationship. If effort isrelatively constant over time, plotting performance against time will result in the same
characteristic curve as plotting performance against effort. However, if the amount of effort invested in a technology decreases or increases over time, the resulting curvecould appear to flatten much more quickly, or not flatten at all. For instance, one of the more well-known technology trajectories is described by an axiom that becameknown as Moore’s law. In 1965, Gordon Moore, cofounder of Intel, noted that thedensity of transistors on integrated circuits had doubled every year since the inte-grated circuit was invented. That rate has since slowed to doubling every 18 months,
but the rate of acceleration is still very steep. Figure 3.2 reveals a sharply increasing performance curve.
FIGURE 3.3Graph of Transistor Density versus Cumulative R&D Expense, 1972–2000
However, Intel’s rate of investment (research and development dollars per year)also been increasing rapidly, as shown in Figure 3.3. Not all of Intel’s R&D expgoes directly to improving microprocessor power, but it is reasonable to assumeIntel’s investment specifically in microprocessors would exhibit a similar patterincrease. Figure 3.4 shows that the big gains in transistor density have come at acost in terms of effort invested. Though the curve does not yet resemble the traditi
s-curve, its rate of increase is not as sharp as when the curve is plotted against yeMost estimates (including those of Gordon Moore himself) predict that transminiaturization will reach its physical limits about 2017.
Technologies do not always get the opportunity to reach their limits; they marendered obsolete by new, discontinuous technologies. A new innovatiodiscontinuous when it fulfills a similar market need, but does so by building oentirely new knowledge base.
22For example, the switch from propeller-b
planes to jets, from silver-halide (chemical) photography to digital photogra
from carbon copying to photocopying,and from vinyl records (or analog cas-settes) to compact discs were all tech-nological discontinuities.
Initially, the technological discontinu-ity may have lower performance than the
incumbent technology. For instance, oneof the earliest automobiles, introduced in1771 by Nicolas Joseph Cugnot, wasnever put into commercial production
because it was much slower and harder tooperate than a horse-drawn carriage. Itwas three-wheeled, steam-powered, and could travel at 2.3 miles per hour. A num-
ber of steam- and gas-powered vehicleswere introduced in the 1800s, but it wasnot until the early 1900s that automobiles
began to be produced in quantity.In early stages, effort invested in a
new technology may reap lower returnsthan effort invested in the current tech-nology, and firms are often reluctant toswitch. However, if the disruptive tech-
nology has a steeper s-curve (see Figure 3.4a) or an s-curve that increases to a higher performance limit (see Figure 3.4b), there may come a time when the returns to effortinvested in the new technology are much higher than effort invested in the incumbenttechnology. New firms entering the industry are likely to choose the disruptive tech-nology, and incumbent firms face the difficult choice of trying to extend the life of
their current technology or investing in switching to the new technology. If the dis-ruptive technology has much greater performance potential for a given amount of effort, in the long run it is likely to displace the incumbent technology, but the rate atwhich it does so can vary significantly.
S-curves in Technology DiffusionS-curves are also often used to describe the diffusion of a technology. Unlike s-curvesin technology performance, s-curves in technology diffusion are obtained by plot-ting the cumulative number of adopters of the technology against time. This yields ans-shape curve because adoption is initially slow when an unfamiliar technology isintroduced to the market, it accelerates as the technology becomes better understood
and utilized by the mass market, and eventually the market is saturated so the rate of new adoptions declines. For instance, when electronic calculators were introduced tothe market, they were first adopted by the relatively small pool of scientists and engi-neers. This group had previously used slide rules. Then the calculator began to pene-trate the larger markets of accountants and commercial users, followed by the stilllarger market that included students and the general public. After these markets had
become saturated, fewer opportunities remained for new adoptions.23 One rather curiousfeature of technology diffusion is that it typically takes far more time than information
50 Part One Industry Dynamics of Technological Innovation
For example, Mansfield found that it took 12 years for half the populof potential users to adopt industrial robots, even though these potential users waware of the significant efficiency advantages the robots offered.
25If a new tech
ogy is a significant improvement over existing solutions, why do some firms shiit more slowly than others? The answer may lie in the complexity of the knowlunderlying new technologies, and in the development of complementary resourcesmake those technologies useful. Although some of the knowledge necessary to utilnew technology might be transmitted through manuals or other documentation, oaspects of knowledge necessary to fully realize the potential of a technology migh
built up only through experience. Some of the knowledge about the technology migtacit and require transmission from person to person through extensive contact. M
potential adopters of a new technology will not adopt it until such knowledge is aable to them, despite their awareness of the technology and its potential advantages
Furthermore, many technologies become valuable to a wide range of potential uonly after a set of complementary resources are developed for them. For examwhile the first electric light was invented in 1809 by Humphry Davy, an Engchemist, it did not become practical until the development of bulbs within whicharc of light would be encased (f irst demonstrated by James Bowman Lindsay in 1and vacuum pumps to create a vacuum inside the bulb (the mercury vacuum pumpinvented by Herman Sprengel in 1875). These early lightbulbs burned for only ahours. Thomas Alva Edison built on the work of these earlier inventors when, in 1he invented filaments that would enable the light to burn for 1,200 hours. The rocomplementary resources and other factors influencing the diffusion of technoloinnovations are discussed further in Chapters 4, 5, and 13.
Finally, it should be clear that the s-curves of diffusion are in part a function os-curves in technology improvement: as technologies are better developed, they becmore certain and useful to users, facilitating their adoption. Furthermore, as learcurve and scale advantages accrue to the technology, the price of finished goods odrops, further accelerating adoption by users. For example, as shown in Figures 3.53.6, drops in average sales prices for video recorders, compact disc players, and
phones roughly correspond to their increases in household penetration.
S-curves as a Prescriptive ToolSeveral authors have argued that managers can use the s-curve model as a tool fordicting when a technology will reach its limits and as a prescriptive guide for wheand when the firm should move to a new, more radical technology.
27Firms can
data on the investment and performance of their own technologies, or data on the oall industry investment in a technology and the average performance achieved by mtiple producers. Managers could then use these curves to assess whether a techno
appears to be approaching its limits or to identify new technologies that mighemerging on s-curves that will intersect the firm’s technology s-curve. Managers cthen switch s-curves by acquiring or developing the new technology. However,
prescriptive tool, the s-curve model has several serious limitations.
Limitations of S-curve Model as a Prescriptive Tool
First, it is rare that the true limits of a technology are known in advance, and theoften considerable disagreement among firms about what a technology’s limits
52 Part One Industry Dynamics of Technological Innovation
FIGURE 3.5Average Sales
Prices of
Consumer
Electronics
Source: Consumer
ElectronicsAssociation.
$0
$800
$600
$400
$200
$1,000
1 9 8 8
1 9 9 0
1 9 8 4
1 9 8 6
1 9 8 0
1 9 8 2
1 9 9 2
1 9 9 4
1 9 9 6
1 9 9 8
2 0 0 0
2 0 0 2
2 0 0 4
VCR CD Player Cell Phone
FIGURE 3.6Penetration of
Consumer
Electronics
Source: Consumer
Electronics
Association.
VCR CD Player Cell Phone
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%10.00%
0.00%
1 9 8 8
1 9 9 0
1 9 8 4
1 9 8 6
1 9 8 0
1 9 8 2
1 9 9 2
1 9 9 4
1 9 9 6
1 9 9 8
2 0 0 0
2 0 0 2
2 0 0 4
P e r c e n t o f U . S .
H o u s e h o l d s
be. Second, the shape of a technology’s s-curve is not set in stone. Unexpected changesin the market, component technologies, or complementary technologies can shorten or extend the life cycle of a technology. Furthermore, firms can influence the shape of the s-curve through their development activities. For example, firms can sometimesstretch the s-curve through implementing new development approaches or revampingthe architecture design of the technology.
28
Christensen provides an example of this from the disk-drive industry. A disk drive’scapacity is determined by its size multiplied by its areal recording density; thus, den-sity has become the most pervasive measure of disk-drive performance. In 1979, IBMhad reached what it perceived as a density limit of ferrite-oxide-based disk drives. It
Research Brief The Diffusion of Innovation and Adopter
Categories
S-curves in technology diffusion are oftenexplained as a process of different categories of
people adopting the technology at differenttimes. One typology of adopter categories that
gained prominence was proposed by Everett M.Rogers.29 Figure 3.7 shows each of Rogers’
adopter categories on a technology diffusions-curve. The figure also shows that if the noncu-
mulative share of each of these adopter groups isplotted on the vertical axis with time on the hor-
izontal axis, the resulting curve is typically bellshaped (though in practice it may be skewed
right or left).
INNOVATORSInnovators are the first individuals to adopt aninnovation. Extremely adventurous in their pur-
chasing behavior, they are comfortable with ahigh degree of complexity and uncertainty.
Innovators typically have access to substantialfinancial resources (and thus can afford the losses
incurred in unsuccessful adoption decisions).Though they are not always well integrated into
a particular social system, innovators play an
extremely important role in the diffusion of aninnovation because they are the individuals who
bring new ideas into the social system. Rogersestimated that the first 2.5 percent of individuals
to adopt a new technology are in this category.
EARLY ADOPTERSThe second category of adopters is the early
adopters. Early adopters are well integrated intotheir social system and have the greatest poten-
tial for opinion leadership. Early adopters arerespected by their peers and know that to retain
that respect they must make sound innovationadoption decisions. Other potential adopters
look to early adopters for information andadvice, thus early adopters make excellent mis-sionaries for new products or processes. Rogers
estimated that the next 13.5 percent of individu-
als to adopt an innovation (after innovators) ain this category.
EARLY MAJORITYRogers identifies the next 34 percent of individals in a social system to adopt a new innovatio
as the early majority. The early majority adopinnovations slightly before the average memb
of a social system. They are typically not opinioleaders, but they interact frequently with the
peers.
LATE MAJORITYThe next 34 percent of the individuals in a socisystem to adopt an innovation are the late majo
ity, according to Rogers. Like the early majoritthe late majority constitutes one-third of th
individuals in a social system. Those in the latmajority approach innovation with a skeptical a
and may not adopt the innovation until they fepressure from their peers. The late majority ma
have scarce resources, thus making them relutant to invest in adoption until most of the unce
tainty about the innovation has been resolved.
LAGGARDSThe last 16 percent of the individuals in a socisystem to adopt an innovation are termelaggards. They may base their decisions primarupon past experience rather than influence fro
the social network, and they possess almost nopinion leadership. They are highly skeptical o
innovations and innovators, and they must fecertain that a new innovation will not fail befo
In many industries—including microprocessors, soft-
ware, motorcycles, and electric vehicles—the slopeof technology improvement has been steeper than
the slope of the trajectory of customer needs.30
Firms often add features (speed, power, etc.) toproducts faster than customers’ capacity to absorbthem. Why would firms provide higher performancethan that required by the bulk of their customers?
The answer appears to lie in the market segmenta-tion and pricing objectives of a technology’s
providers. As competition in an industry drives pricesand margins lower, firms often try to shift sales into
progressively higher tiers of the market. In thesetiers, high performance and feature-rich products
can command higher margins. Though customersmay also expect to have better-performing products
over time, their ability to fully utilize such perform-ance improvements is slowed by the need to learn
how to use new features and adapt their work andlifestyles. Thus, while both the trajectory of technol-ogy improvement and the trajectory of customer
demands are upward sloping, the trajectory fortechnology improvement is steeper (for simplicity,
the technology trajectories are drawn in Figure 3.8as straight lines and plotted against time in order to
compare them against customer requirements).In Figure 3.8, the technology trajectory begins at
a point where it provides performance close to that
demanded by the mass market, but over tim
increases faster than the expectations of the market as the firm targets the high-end marke
the price of the technology rises, the mass m
may feel it is overpaying for technological feait does not value. In Figure 3.9, the low-end mis not being served; it either pays far more for nology that it does not need, or it goes withou
this market that Andy Grove, former CEO of refers to as segment zero.
For Intel, segment zero was the market forend personal computers (those less than $1,
While segment zero may seem unattractive in tof margins, if it is neglected, it can become
breeding ground for companies that provide loend versions of the technology. As Grove n
“The overlooked, underserved, and seemunprofitable end of the market can provide f
ground for massive competitive change.”31
As the firms serving low-end markets with
pler technologies ride up their own traject(which are also steeper than the slope of the trtories of customer expectations), they can event
reach a performance level that meets the demof the mass market, while offering a much l
price than the premium technology (see FigureAt this point, the firms offering the premium
nology may suddenly find they are losing the bu
Theory in Action Technology Trajectories and “Segment Ze
High-end market
Mass market
Low-end market
TechnologyTrajectory
Performance
Time
FIGURE 3.8Trajectories of Technology Improvement and
Customer Requirements
conti
High-end ma
Mass market
Low-end ma
High-endtechnology
Performance
Time
Low-endtechnology
FIGURE 3.9Low-End Technology’s Trajectory Intersects Mas
abandoned its ferrite-oxide-based disk drives and moved to developing thin-film tech-nology, which had greater potential for increasing density. Hitachi and Fujitsu contin-ued to ride the ferrite-oxide s-curve, ultimately achieving densities that were eighttimes greater than the density that IBM had perceived to be a limit.
Finally, whether switching to a new technology will benefit a firm depends on a num- ber of factors, including (a) the advantages offered by the new technology, (b) the new
technology’s fit with the firm’s current abilities (and thus the amount of effort that would be required to switch, and the time it would take to develop new competencies), (c) thenew technology’s fit with the firm’s position in complementary resources (e.g., a firmmay lack key complementary resources, or may earn a significant portion of its rev-enues from selling products compatible with the incumbent technology), and (d ) theexpected rate of diffusion of the new technology. Thus, a firm that follows an s-curvemodel too closely could end up switching technologies earlier or later than it should.
TECHNOLOGY CYCLES
The s-curve model above suggests that technological change is cyclical: Each news-curve ushers in an initial period of turbulence, followed by rapid improvement, thendiminishing returns, and ultimately is displaced by a new technological discontinu-ity.33 The emergence of a new technological discontinuity can overturn the existingcompetitive structure of an industry, creating new leaders and new losers. Schumpeter called this process creative destruction, and argued that it was the key driver of
progress in a capitalist society.34
56
their sales revenue to industry contenders that donot look so low-end anymore. For example, by 1998,
the combination of rising microprocessor power anddecreasing prices enabled personal computerspriced under $1,000 to capture 20 percent of the
market. Intel now pays very close attention to seg-ment zero.
Grove describes how this same scenario alsoplayed out in the textbook publishing industry. In
the early 1980s, a relatively small portion of instruc-tors used course packets created at a copy center
such as Kinko’s. The course packets were rathershabby. The copy quality of articles was often not
good, and the course packets had no page numbers,no indexing system, and dull paper or card-stock
covers. The instructors typically used them becausethey wanted more control over the content andsequencing of material—and they wanted it badly
enough to sacrifice the advantages of a profession-
ally produced textbook. However, by the late 1990s,course packets produced by copy centers hadbecome significantly more sophisticated. Digital
printing and copying technologies enabled copycenters to produce high-quality course packets with
crisp print, numbered pages, glossy covers, andoften even tables of contents and indexes. As these
copying options proliferated (as did copyright clear-inghouses that facilitate the transfer of copyright
privileges), many instructors began to move awayfrom textbooks, assembling their own course pack-
ets from articles, book chapters, cases, and their owncourse notes.
In response, publishing companies began target-ing the market that had been publishing’s segmentzero by designing their own customized textbook
systems. One of the most widely used of these sys-tems in the late 1990s was McGraw-Hill’s Primis.
Primis allows instructors to assemble their own text-book from a database of book chapters, articles,
cases, and other materials.32
The materials are
entered into a database and coded so that aninstructor may choose materials and decide on their
order, and a table of contents and indexing system iselectronically generated. Books can be printed andshipped to bookstores within 5 to 10 days.
Several studies have tried to identify and characterize the stages of the technocycle in order to better understand why some technologies succeed and others and whether established firms or new firms are more likely to be successful in inducing or adopting a new technology.35 One technology evolution model that ro
prominence was proposed by Utterback and Abernathy. They observed that a tnology passed through distinct phases. In the first phase (what they termed the f
phase), there was considerable uncertainty about both the technology and its maProducts or services based on the technology might be crude, unreliable, or exsive, but might suit the needs of some market niches. In this phase, firms experimwith different form factors or product features to assess the market respoEventually, however, producers and customers begin to arrive at some conseabout the desired product attributes, and a dominant design emerges.
36The d
inant design establishes a stable architecture for the technology and enables firmfocus their efforts on process innovations that make production of the design meffective and efficient or on incremental innovations to improve components wthe architecture. Utterback and Abernathy termed this phase the specific p
because innovations in products, materials, and manufacturing processes are all
cific to the dominant design. For example, in the United States the vast majorienergy production is based on the use of fossil fuels (e.g., oil, coal), and the methof producing energy based on these fuels are well established. On the other htechnologies that produce energy based on renewable resources (e.g., solar, whydrogen) are still in the fluid phase. Organizations such as Royal Dutch/SGeneral Electric, and Ballard Power are experimenting with various forms of
photocell technologies, wind-turbine technologies, and hydrogen fuel cells in efto find methods of using renewable resources that meet the capacity and cost reqments of serving large populations.
Building on the Utterback and Abernathy model, Anderson and Tushman stuthe history of the U.S. minicomputer, cement, and glass industries through sev
cycles of technological change. Like Utterback and Abernathy, Anderson and Tushfound that each technological discontinuity inaugurated a period of turbulenceuncertainty (which they termed the era of ferment ) (see Figure 3.10). The new tnology might offer breakthrough capabilities, but there is little agreement about the major subsystems of the technology should be or how they should be configtogether. Thus, while the new technology displaces the old (Anderson and Tushrefer to this as substitution), there is considerable design competition as firms exment with different forms of the technology. Just as in the Utterback and Abernmodel, Anderson and Tushman found that a dominant design always arose to cmand the majority of the market share unless the next discontinuity arrived too and disrupted the cycle, or several producers patented their own proprietary techn
gies and refused to license to each other. Anderson and Tushman also found thadominant design was never in the same form as the original discontinuity, but italso never on the leading edge of the technology. Instead of maximizing performon any individual dimension of the technology, the dominant design tended to butogether a combination of features that best fulfilled the demands of the majoritthe market.
58 Part One Industry Dynamics of Technological Innovation
FIGURE 3.10The
Technology
Cycle
Era of Incremental ChangeElaboration of Dominant Design
Era of FermentDesign CompetitionSubstitution
Dominant DesignSelected
TechnologicalDiscontinuity
In the words of Anderson and Tushman, the rise of a dominant design signals the
transition from the era of ferment to the era of incremental change.37
In this era, firmsfocus on efficiency and market penetration. Firms may attempt to achieve greater mar-ket segmentation by offering different models and price points. They may also attemptto lower production costs by simplifying the design or improving the production
process. This period of accumulating small improvements may account for the bulk of the technological progress in an industry, and it continues until the next technologicaldiscontinuity.
Understanding the knowledge that f irms develop during different eras lends insightinto why successful firms often resist the transition to a new technology, even if it pro-vides significant advantages. During the era of incremental change, many firms ceaseto invest in learning about alternative design architectures and instead invest in refin-
ing their competencies related to the dominant architecture. Most competitionrevolves around improving components rather than altering the architecture; thus,companies focus their efforts on developing component knowledge and knowledgerelated to the dominant architecture. As firms’ routines and capabilities become moreand more wedded to the dominant architecture, the firms become less able to identifyand respond to a major architectural innovation. For example, the firm might establishdivisions based on the primary components of the architecture and structure the com-munication channels between divisions on the basis of how those components inter-act. In the firm’s effort to absorb and process the vast amount of information availableto it, it is likely to establish filters that enable it to identify the information most cru-cial to its understanding of the existing technology design.
38As the firm’s expertise,
structure, communication channels, and filters all become oriented around maximiz-ing its ability to compete in the existing dominant design, they become barriers to thefirm’s recognizing and reacting to a new technology architecture.
While many industries appear to conform to this model in which a dominant designemerges, there are exceptions. In some industries, heterogeneity of products and pro-duction processes are a primary determinant of value, and thus a dominant design isundesirable.39 For example, art and cuisine may be examples of industries in whichthere is more pressure to do things differently than to settle upon a standard.
1. Different dimensions have been used to distinguish types of innovation. Somthe most widely used dimensions include product versus process innovation, ical versus incremental innovation, competence-enhancing versus competedestroying innovation, and architectural versus component innovation.
2. A graph of technology performance over cumulative effort invested often exh
an s-shape curve. This suggests that performance improvement in a new techogy is initially difficult and costly, but, as the fundamental principles of the tnology are worked out, it then begins to accelerate as the technology beco
better understood, and finally diminishing returns set in as the technoapproaches its inherent limits.
3. A graph of a technology’s market adoption over time also typically exhibits shape curve. Initially the technology may seem uncertain and there may be gcosts or risks for potential adopters. Gradually, the technology becomes moretain (and its costs may be driven down), enabling the technology to be adoptelarger market segments. Eventually the technology’s diffusion slows as it reamarket saturation or is displaced by a newer technology.
4. The rate at which a technology improves over time is often faster than the rawhich customer requirements increase over time. This means technologiesinitially met the demands of the mass market may eventually exceed the needthe market. Furthermore, technologies that initially served only low-end tomers (segment zero) may eventually meet the needs of the mass market and ture the market share that originally went to the higher-performing technolog
5. Technological change often follows a cyclical pattern. First, a technologicalcontinuity causes a period of turbulence and uncertainty and producers and sumers explore the different possibilities enabled by the new technology
producers and customers begin to converge on a consensus of the desired tec
logical configuration, a dominant design emerges. The dominant design prova stable benchmark for the industry, enabling producers to turn their attentioincreasing production efficiency and incremental product improvements. cycle begins again with the next technological discontinuity.
6. The first design based on the initial technological discontinuity rarely becothe dominant design. There is usually a period in which firms produce a vaof competing designs of the technology before one design emerges as domin
7. The dominant design rarely embodies the most advanced technological feaavailable at the time of its emergence. It is instead the bundle of features thatmeets the requirements of the majority of producers and customers.
Discussion
Questions1. What are some reasons that established firms might resist adopting a
technology?
2. Are well-established firms or new entrants more likely to (a) develop and/oadopt new technologies? Why?
3. Think of an example of an innovation you have studied at work or school. How wyou characterize it on the dimensions described at the beginning of the chapter?
60 Part One Industry Dynamics of Technological Innovation
Suggested
Further
Reading
Classics
Anderson, P., and M. L. Tushman, “Technological discontinuities and dominantdesigns,” Administrative Science Quarterly 35 (1990), pp. 604–33.
Bijker, W. E., T. P. Hughes, and T. J. Pinch, The Social Construction of Technological Systems (Cambridge, MA: MIT Press, 1987).
Dosi, G., “Technological paradigms and technological trajectories,” Research Policy11 (1982), pp. 147–60.
Henderson, R., and K. Clark, “Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms,” AdministrativeScience Quarterly 35 (1990). pp. 9–30.
Utterback, J. M., and W. J. Abernathy, “A dynamic model of process and productinnovations,” Omega 3 (1975), pp. 639–56.
Recent Work
Baldwin, C. Y., and K. B. Clark, Design Rules: The Power of Modularity (Cambridge,MA: MIT Press, 2000).
Christensen, C. M., The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fai. (Boston: Harvard Business School Publishing, 1997).
Rogers, E., Diffusion of Innovations, 5th ed. (New York: Simon & Schuster Publishing,2003).
Sood, A., and G. J. Tellis, “Technological evolution and radical innovation,” Journal of Marketing 69, no. 3 (2005), pp. 152–268.
Endnotes 1. Adapted from D. Davis, T. Davis, S. Moodie, and M. A. Schilling, “Honda Motor Co. and
Hybrid Electric Vehicles,” New York University teaching case, 2006.
2. J. Johnson, “Production of cleaner-burning hybrids on the rise for all,” Waste News 11, no. 19(2006), p. 12.
3. Hybridcars.com (www.hybridcars.com/history), accessed September 26, 2004.
4. K Nice, Howthingswork.com, “How Hybrid Cars Work” (http://auto.howstuffworks.com/
hybrid-car.htm), accessed September 26, 2004.
5. Ibid.
6. Ibid.
4. What are some reasons that both technology improvement and technology diffu-sion exhibit s-shape curves?
5. Why do technologies often improve faster than customer requirements? What arethe advantages and disadvantages to a firm of developing a technology beyond thecurrent state of market needs?
6. In what industries would you expect to see particularly short technology cycles?In what industries would you expect to see particularly long technology cycles?What factors might influence the length of technology cycles in an industry?
