Technology and innovation - gimmenotes
Technology and innovationMNE3703TOPIC 1Study unit 1What is innovation?Invention: Discovering something new.Innovation: Changing what has been invented and applying it commercially.Most innovations have a degree of novelty.Innovation is about the commercial exploitation of ideas and innovationsEmbrace both technological and creative dimensionInnovation is a subset of inventionDegree of innovationSee page 7:Two axes, namely:Newness to company (NC)Newness to market (NM)NC High, NM High – Completely new productNC High, NM Low – New Product LineNC Low, NM High – Product RepositioningNC Low, NM Low – Cost ReductionNM Low, NC Moderate – Improvements to existing productsNM Moderate, NC Moderate – Line ExtensionInnovation: ProcessInvention: Mew idea, new discoveries, new breakthrough. Invention phase most commonly associated with innovation. Turn ideas into workable inventionsCommercialization: Find way to unlock ‘latent value’ in order to generate real value. Increasingly describe as “business models”. Diffusion is the stage where innovation is adopted and used by consumers. Diffusion describes the way innovation catches on and become popular. Three routes to innovationIndividual (heroic)Corporate (Closed)OpenCommercialization: business modelsDefinition: enabling device, tool that allow inventor to profit from their idea. Two important functions:Value CreationIdentity the users and then articulate the value propositionValue CaptureCapture the value by means of many mechanismGeneric Business ModelsThree to convert technology potential into economic value are:Incorporate the technology in the current businessLicense the technology to a third partyLaunch the new venture to exploit the technology in new business arenasDiffusionFollow S curve. Study unit 2Make sense of innovationThree principle application for innovation, namely:Product - TangibleProcess - Procured product and deliver service by utilizing processes. New equipment or new methods.Service – IntangibleProduct and service innovation benefit the consumers and process innovation the manufacturers.Forms of InnovationProduct InnovationTangibleHelp to solve everyday problemsProduct innovation, high noveltyService InnovationOften overlookedComputer technology has a dramatic impact on service.Process InnovationsPublic, process innovation least important, but have biggest impact on our livesE-mail, assembly lineInnovation in the manufacturing processTypes of innovationDegree of noveltyInnovativeness of innovationBig change – RadicalNew technologies, Major Scientific advances, major breakthroughsSmall change, incrementalChange to product attributesProduct, Process and Service are systemsMake product, service or process require two types of distinct knowledge:Component knowledgeKnowledge of each component that perform a well-defined functionPart of core design conceptSystem KnowledgeWay the components are integratedHow the system works and how the various components are configured and work ponents/core componentReinforcedComponents/core componentOverturnedSystem/linkage – UnchangedIncrementalModularSystem/linkage – ChangedArchitecturalRadicalRadical InnovationNon-linear and discontinuous, involving step changeWhole new designNew dominant designRareAsk new set of questionsDisruptive technologyMore far-reaching consequencesIncremental InnovationChange build on firms expertise in component technologyMost commonTechnology improve rather than replaceLinear-process of continues changeFavor existing playersModular InnovationUse exiting architectureNew or significantly different componentsArchitectural innovationConfiguration of the system changeComponents may be refined or improved.Value of innovation topologyInnovation not homogenousTechnology follows an evolutionary processThere will be a shakeoutServices themselves not like productStudy unit 3Technology changeThe nature of technologyTechnology change one of the main drivers of innovationTechnology is defined as the application of scienceTechnology: human activity devoted to the production of technics – or technic-related intellectual productsTechnology expand the realm of human possibilityScience: human activity related to production of theory-related knowledge of material phenomena whose rot function is to attain and understanding of natureScience is about understanding whilst technology is about how to make thingsTechnology to succeed, must be able to apply science, not understandTechnology and science have an dependencyChanges in technology lead to changes in innovation. Technologies became the catalyst between science and innovationTechnology embedded in artifacts, people and organizationsNew products/services leads to new patterns of consumption and behaviorSignificant change in the economic and social facets of human existenceLong wave cycle and the technology changeTechnology change differs over various periods of timeTechnology change in cyclesFirst change rapidly when new until stability is reachedTechnology are constantly changingRadical change in the beginning of the cycle.Technology life cycle do not follow business life cycleNicolai Kondratiev describe the idea of the long-life cycleBusiness cycle between 5 – 10 yearsTechnology life cycle much longer than business life cycleExamples:Cotton, iron and waterRailways, steam power and steamshipsElectricity, chemicals and steelCars, electronics, oil and aerospaceComputers, telecommunications and the internetLong life cycle may extend to over 50 yearsLong-wave cycle, predicable courseRecovery phase: Discoveries are developed into new opportunity for investment, growth and employmentProsperity Phase: Broader market is reach thru diffusionRecession phase: Technology advancement is limited to owning to pricing competitionDepression phase: Pricing and competition comes head to head, decline in profitabilityCycle is like a circle. Little boy is unhappy and want candy. He gets candy and is getting better (Recover), he start to enjoy the candy and run’s around (Prosperity), the candy is getting less and he eats slower (Recession), almost no more candy (Depression)Internet: Our very own long wave cycle.Changing behavior patters at home, at work and in everyday livesImplication of the long-wave cycleTechnological change cycleDifferent effects at different timesProduct innovation happens early in the cycle, give way to process innovation as technology diffuses.Reinforces notion of different types of innovationEarly cycle, radical innovation, later, incremental changesTechnology change go hand-in-hand with intuitional change:Education and trainingIndustrial relationsCorporate structuresSystems of managementCapital marketsThe legal framework5’th long wave accompanied by further institutional change:Network structures for organizationsAlliance and joint venturesOutsourcingHighlights the impact of transformation technology and cost.Technology paradigmsDistinguish differences in the pattern of technology change is embodie3d in notion of the technology paradigm.Technology paradigm:General are or field of technologyTechnology paradigm based on selected set of principles. These principles confine the innovation process in terms of:Field of inquireProblem to be solvedProcedures usedGeneric tasks to which it is appliedProperties it exploitsMaterials technology it usesNew paradigm emerges, represent a major discontinuityDisruptive technology vs. technological paradigmTechnological paradigms vs. technological trajectoriesThe procedures and the nature of “technologies” are suggested to be broadly similar to those which characterize “science”. In particular, there appear to be “technological paradigms” (or research programmes) performing a similar role to “scientific paradigms” (or research programmes). The model tries to account for both continuous changes and discontinuities in technological innovation. Continuous changes are often related to progress along a technological trajectory defined by a technological paradigm, while discontinuities are associated with the emergence of a new paradigm. One-directional explanations of the innovative process, and in particular those assuming “the market” as the prime mover, are inadequate to explain the emergence of new technological paradigms. The origin of the latter stems from the interplay between scientific advances, economic factors, institutional variables, and unsolved difficulties on established technological paths. The model tries to establish a sufficiently general framework which accounts for all these factors and to define the process of selection of new technological paradigms among a greater set of notionally possible ones.The history of a technology is contextual to the history of the industrial structures associated with that technology. The emergence of a new paradigm is often related to new “schumpeterian” companies, while its establishment often shows also a process of oligopolistic IC 2What does innovation involve?Study unit 4Theories of innovationInnovation is concerned with commercialization of discoveries and inventions.Innovation features:ComplexityPopulismInterest in success/failureRange of activities, collective effort and organizational support needed for innovation.Theories of innovationTheory puts the story of innovation in context.TheoriesTechnology S-curveOver time the ability for technology to deliver improve performance will vary(The handbook on page 69 is misleading. The effort is over time (flow) where the product performance is measured at that point in time (stock)). What is depicted is that for a steady flow the advancement or product performance will vary. Initially high increases in flow yield little increase in advancements, till some breakthrough, and then the advancement rapidly expands, till a point where diminishing return sets in. Technology matureTechnology maturesHave physical limitsScale and complexityPunctuated (Occur at intervals) EquilibriumAgain the handbook is very vague. Taken from the internet:In my last post about innovation I referred to Clayton Christensen and his concepts of sustaining versus disruptive innovation. It reminded me a little bit of the concept of punctuated equilibrium in evolution. The idea is simple: suppose you have a bunch of monkeys working in an office. You have the executive monkeys who eat healthy meals and exercise at lunch time. Then you have the office drone monkeys who go outside into the rain and cold for smoke breaks and eat gyros and fries for breakfast. The executive monkeys have nice glossy coats, get the best mates and have nice condos in desirable parts of town. The drone monkeys…not so much.While the executive monkeys only evolve slowly, as various members drop dead of coronaries before being able to reproduce, the smoke break monkeys are exposed to much harsher conditions, evolve in some surprising and menacing ways, then stage a bolshevik revolution (punctuation!!) and eat the executive monkeys’ brains. They then become executive monkeys, kick the smoking habit, suppress the surviving executive monkeys into the role of office drone, and the whole thing happens all over again. Now innovation isn’t genetics, but the concepts are surprisingly similar. Sustaining innovation is gradual, while disruptive innovation enters into the market at the low end before moving up market and displacing the incumbents.So, the next time you’re tempted to scoff at your small fry competition, pause for thought. They may be evolving more quickly than you are.Radical innovation leads to incremental innovationNew technology, new skill, new knowledge, new abilitiesHighly disruptive technology bring period of stability and equilibrium to an endEvolutionary theoryWhy incumbent firms are slow to react to new technology:TraditionsSunk CostInternal Political constraintsCommitment to outmoded technologyDominant DesignThe one that wins the alliance in the marketplaceConfiguration that all or most firms eventually followPre-paradigmatic phaseFlux, fermentDominant DesignDesign standardizedPrice competitionIncremental innovationHow dominant design does arises:Consumer preferenceMarket power of dominant producerRegulationAbsorptive CapacityIntegrate both external dimension of innovation (evaluation of technology) and internal dimension (learning and knowledge)Looks at the organization’s capacity to absorb the external factors (trends and standards) and assimilate them by using its internal factors (knowledge and skill).Organization ability to transfer knowledge (internal and external) across all functions in the organization.About the organizations ability to learn and think about new ideas.Three factors are vital:Exposure to relevant knowledge. Presence of prior related knowledge.Diversity of experience. More sophisticated: Look at how organizations acquire new knowledge Many organizations fail because they can spot new trends but can’t assimilate them.How does theory help innovators?Descriptive: contribution: Proving an account for the innovative process.Analytical contribution: Why/how innovation came about and why it was successful. Looks at patterns and point out commonality.Predictive contribution: Explain why innovation has succeeded or failed. Benefits of prediction:Course of events associated with innovation can be anticipatedProblems and difficulties can be predicted in advanceScope form planning so that resources can be used more effectivelyGreater likelihood of a successful outcome to innovationStudy unit 5Sources of innovationFocus on the invention stage of the innovation process.Concerned with the Eureka momentInsight, sources of innovation:IndividualsUsersProcess needsSpill-oversCorporate undertakingIdeas can come from some form of sudden insightInsight Invention InnovationInsight is the moment of inspirationFour patterns for the basis of insight:AssociationBring together two unconnected ideasInsight in one field provide solution in anotherBring work from two different fields togetherAdaptionTaking an existing solution to a problem and adapting it so it can be used for a different purposeAnalogyA principle used in one situation is used for a different purpose in anotherDifferent from association because a new idea occur and not just transferred directly from one context to another Serendipity/changeChange, “serendipity”. Random occurrence given rise to a new insightWhat is the requirement?ChangePrior knowledgeExperienceIntelligent observerSources of innovationToo much focus on individuals is misleadingInnovation sourcesIndividualsCorporationsUsersEmployeesOutsidersSpill-oversProcess NeedsIncreasing use of open modelsIndividualsResilience of individual link to a number of factors:Growth in small-firm sectorVariety if organization devices, e.g. strategic alliance, have enabled small firms to work with large firmsInnovation is associated with the application of technology. Big firms proficient at the development of technology, small firms have more knowledge.Increase popularity of spin-off companies.Emergence of distributive technology is something to which the corporate sector often finds difficult to adapt. CorporationsAs innovation became increasingly to be more technology based it requires extensive research and developmentR&D laborites started in the chemical industryCorporate model of innovation is till primary source of innovation but R&D undertaken not the only way in which corporations can innovate.R&D is increasingly done by smaller firmsChange reflect the increasingly use of “open innovation”Corporation still innovate, just sometimes with some else’s technology.UsersUsers actively involvedCertain industry sectors users play a critical role in innovation and subsequent development“democratizing” of innovation extend to other industries:Software developmentLibrary information systemsMountain bikesOutdoor equipmentExtreme sportingWhy do users get involve:Improvement of communicationGrowth in mediaImprovement in computingGreater level of educationGrowth of open innovationUsers have been democratized (Make (something) accessible to everyone: "mass production has not democratized fashion)EmployeesMuch under-estimate source of innovationCompanies will encourage employee’s more as companies increasingly recognize the importance of innovation in providing a competitive advantage.OutsidersIn industry, “conventional wisdom”Assumptions deeply embeddedPaying close attention to customers and customer needs my actually be counter-productive for innovationOutsiders may avoid some of these pitfallsMore willing to try unorthodox ideasOutsiders have external contacts outside in the fieldAbsorptive capacity greater.Spill-overOne firm benefit from another firm’s R&DSpill-over are likely to occur in situations where it is difficult to prevent others from appropriating the benefits from an inventionSpill-over are also more likely in situations where staff move around a lotProcess NeedsSometimes the demand of a manufacturing process will act as a stimulus to innovation.Cost reduction acting as spur.Study unit 6Process of innovationFrom the internetThe steps in the innovation processInsight/Research – R&D - InventionDevelopment – R&D - InventionDesign - CommercializationMarket evaluation- CommercializationProduction engineering - CommercializationMarket/Pilot testing- CommercializationFull scale manufacturing & launch- CommercializationStep 1 & 2 – Once OffStep 3-7 – Transformation into a productInsight/researchInsight, rise to new idea or discoveryDevelopmentTurning ideas or technology into productsProduct will work and feasibility can be demonstratedDevelopment phase about prototypesModel to convey form, style and “feel of an objectModels serve to communicate the appearance of the proposed productWalking through the model long before the real thing can be used to identify: Incompatibility, clashes, lack of space, etc.Prototypes in contrast are all about function.Functional prototypeDevelopment is a slow laborious processMake one change at a timePrototypes have other uses too:Facilitate the integration of components and sub-systemsIt facilitate learningUser-test prototypes is about users and their behaviorPrototype plays a role in risk-mitigationBy the time the development process is complete, fully functioning prototypes should be in operations.By now reasonable certainty the product will workDesignDesign is required to determine the features and attributes of the final productThe following should be specified:Precise shape of the productTolerance to which it will be manufacturedMaterial to be used in manufactureProcess by which the product will be manufacturedDesign is a processMore complex program, also system-level designBoth appeal to customer and enable the firm to make moneyDesign brief – What is the requirements from the design and a number of constraintsDesigner must turn design brief into a designMarket evaluationNo inherent value in technology per sayBusiness model, value capture and value creationValue creation is articulation the value propositionDetermine the value and who the customer isTechnical staff often overvalue technical complicationValue capture on the other hand is all about making money. ‘Show me the money’A number of revenue generation possibilities:SaleLeasingSold below cost but the consumables makes the moneyThe correct revenue generation model should be selectedWithout a clear perspective on value proposition, real risk that the value of a new product/service remains unquantified.Production engineeringHow the product will be manufacturedDesign changes for optimization:Reducing the part countUsing standardized componentsUsing self-aligning partsUsing assembly operationsAs volume of production increase so does the method of manufacturingMarketing/pilot testingMarket testing, launching the product on a trial basisTesting will be about ‘Is it safe in the hand of the consumer’Full-scale manufacture and launchCommission process is to prove the systemLearning relies on tacit information and is a cumulative processModels of the innovation processTechnology pushTraditional perspective on the process of innovationResearch-led versionDriven by development in scienceLinear and sequentialModel virtually ignore the market placeBasic Science Design & Engineering Manufacturing Marketing SalesPharmaceuticalsDemand PullRole of market is centralMarket-centered type of innovationConsumer requirements is seen as driving R&DMarket need Development Manufacturing SalesMature technology/industriesCouplingPush/Pull innovation process linear‘Over the wall’ behaviorThis model include feedback loopsTwo-way trafficEach phased is linked or coupled to the market place, hence the nameIntegratedConcurrent or parallel developmentProject team integrate the various functionsTeam-based new product developmentNetworkfifth-generation of innovation processNetwork modelInternal and external resourcesAchieve through alliances, contracts and agreementsSystem integration takes on the role of innovation, managed by partnersUsed in aerospace, computing and pharmaceuticalsCompanies have looked outside the own organization for access to greater range of capabilitiesOpen innovationTechnology Push, Demand Pull, Coupling, Integrated Closed ModelsNetwork Open ModelOpen innovation takes the stage of Network model further.Open innovation firms utilize external resources in one of two possible ways:Taking internally generated ides/discoveries and using an external route to market via a third party organization. 3rd Party develops the ideas/discoveries into marketable products/services which it then markets.Sourcing ideas/discoveries themselves from external organizations with subsequent development taking place internally using the firm’s own resources/facilities.Open innovation had been matched by the decline of the cooperate form of innovation, namely closedClosed innovation challenged, why?Mobility of knowledgeMobility of capitalOrganization that takes open innovation becomes more fluid and flexible with ideasFeatures of open innovation:No one firm can hire all the best brainsNetworking in various forms can provide the means of linking to external knowledgeOther innovation strategies than first moverManagement of intellectual property is vitally importantOpen innovation have two forms: External Sources or External RoutesExternal routes: Licensing agreementNew VentureJoint VentureSpin-off companyStudy unit 7Intellectual propertyIntellectual property may therefore be seen as the product of the application of knowledge and skills.Other will want to copy to reap financial benefitCopy will deny the creator any commercial benefitActs as deterrentCreate for the inventor a system where they can benefit financiallyIntellectual property rights is monopolisticCreation: Either registered and inherentNature: Either Creative or ReputationPatentExclusive right granted for invention for product or processProtection granted for 20 yearsPatents are designed to prevent the ideas from being copiedPatent to encourage innovationApply to DTI: Must meet three criteria:Novelty of idea. Must be newInventive steps: Steps no obviousIndustrial application: Must be industrial useCant patient everything:Scientific theoriesMathematical modelsAesthetic creationOwner have legal recourseServices of patent expertsIn south Africa seek assistance of a patent attorneySouth Africa accept the Patent Co-operation Treaty (PCT)Patentable InventionsDiscoveryScientific TheoryMathematical MethodScheme, rule or methodProgram for computerPresentation of informationRegistered DesignsDesign rights is an automatic form of design protectionProtect for ten yearsDesignAbout shape and visual featureShape, form, appearance, pattern, ornamentation and configurationTwo types of design that can be registered:Aesthetic design – 15 YearsFunctional design - 10 YearsTrademarkBrand nameOnce registered no one else can use itImportant role in marketing and brandingItems that can be registered:Domain NamesLogosMusicSlogansColorsShapesTo register at the DT:Fall under group of itemsDistinctiveNon-deceptiveMust not conflictMust be registeredCIPRORenewed 10 years, last foreverCopyrightIntangible right that comes into effect through creative effortExtend to computer softwareCopyright timescales:70 years or author lifetime (music, artistic, drama)Film, TV and radio 50 yearsPublishers rights- 25 yearsPassing offCommon law version of trademarkForm of misrepresentationLicensingGives company right to produce the intellectual property rights of which belong to another companyTOPIC 3How do you manage innovation?Study unit 8Nature of StrategyStrategy, organization long term plansMap of the entire organization on how it intends to accomplish it goals and objectivesMade by top-management and impact everybody in the orgValue capture is about innovators appropriating benefits from their innovationWhy does strategy matter?Market dynamics include a degree of uncertaintyResources are on such a scale it could result in ‘bet the company’Decision involve long time scaleNature of strategyBusiness strategy (How do we compete?) Functional strategy (Which technology?) Product Strategy (How do we innovate?)Business strategy. Looks at the company as a whole and how organization achieve its long-term goalsFunctional strategy. Contributes to business strategy by customizing the business strategy for each individual functionProduct strategy: Long term development of productsTechnology strategy: Definition, development and use of technology competencies”Long term development of the core technologiesDevelopment have to address two issues:Breath of the technologies - Rangedepth of technologies - KnowledgeProduct Strategies:Long term development of product and servicesInnovation strategy part of product strategyInnovation StrategyAbout the big decisions surrounding innovationLevel of R&D, Type of innovation, Most appropriate intellectual property rights to employConcern with bigger, broader and longer-term issuesWhether to enter a marketWhen to enter the marketWhere to enter the marketExternal routes to innovationWhy ask the question, should the company enter the market with its innovation?Lack of resourcesLack of knowledgeA poor fit with the company’s strategyLack of reachTwo routes for transferring a new technology:LicensingSpin-offsLicensingLicensees will typically be an organization that have assets the owner do not have, namely:KnowledgeAccess to financeMotivationCesoroni: Case for licensing as opposed to in-house development:Complementary assets in production and marketingTransaction cost associated with acquiring the complimentary assetsCompetition in final product marketSpin-offsOne firm creates anotherPackage the technology along-side the staffParent company divest itself of the technologyCan be sold in a variety ways:Company flotationManagement buy-outSale to venture capitalSale to another companyInternal routes to innovation: Innovation strategiesIf we wants to enter the market, then there is a number of strategies:First-mover/pioneer strategy - WhenFollower/latecomer strategy - WhenSide-entrance strategy - WhereDerivative Strategy – WhereFirst-mover strategy(When)Being first to the marketBenefits:Opportunity to establish a technological lead, become more familiar, more practiced and more competentHeadstart enable firm to get further along the “learning curve”Can establish technological leadership. Can use intellectual property as a barrier to entryAbility to acquire scare resourcesAbility to build customer baseEach represent a barrier to entryOther possible benefits:Scope for building brandShaping consumer preferenceAcquisitions of patientsTwo important factors affecting the suitability of first-movers:Pace of technology changeRate at which the market is expandingFollower/latecomer strategy (When)Wait-and-see approachBenefits:Free rider effectInformation spill-overLearning effectBetter understanding of consumer demandsSide-entrance strategy (Where)Achieving market entry via a small nicheWay to gain market presenceAvoid head-to-head competitionAbility to prove new technologyLearning the new technology and enhancing itDerivative strategyApplying new technology to an existing productAlso called hybrid strategyCannot be used by new firmsCan reduce manufacturing cost and time to marketStudy unit 9Technical entrepreneursEntrepreneurshipThree perspectives:Economic perspectivePsychological perspectiveBehavioral/processual perspectiveEntrepreneurs are not inventors or managersNeed to know about management and very often have to manageEconomicsPrime movers of economic developmentEntrepreneur gives rise to some form of new combinationEntrepreneur is a disruptive influenceEntrepreneur initiate changeEntrepreneur is someone who identify and exploit opportunity for profitEntrepreneur find opportunities because knowledge is incompletePsychologicalDistinctive personality traits:Need for achievementHigh internal locus of controlWillingness to take riskNeed for autonomyIgnore influence of environment. It is focus on nature and ignores nurture.Behavioral / processualExploring business behavior and business contextTypologies:EntrepreneurQuasi-entrepreneurAdministratorCaretakerCraft-ownerPromoterProfessional managerArtisanEntrepreneur and managerNature of technical entrepreneurSynonymous with small, high-technology firms (New Technology Based Firms)Used to describe a technology based spin-offSector with significant numbers:Medical equipmentElectrical equipmentPrecision instrumentsPharmaceutical’sTechnical entrepreneur possess the following features:Founders of the company were affiliated with the source of the technology before the company was established.The company business idea is based on exploiting advance technological knowledge-development or acquired from a source of technology.The company is independentCompany is entrepreneurial. Controlled and managed by an entrepreneur or a group od entrepreneur.Occupational BackgroundTechnical entrepreneur that prevail have business backgroundFour categories of technical entrepreneur:ResearchProducerUserOpportunistResearch technical entrepreneurEmployment experience in universities or public-research laboratoriesHave modest knowledge of marketing, finance and interpersonal skilsProducer technical entrepreneurBackground is industrialInvolve in development and production of commercial productsEngineering backgroundStrong mix of both technical and managerial experienceUser technical entrepreneurHave experience in marketing., sales or product supportCredence to innovation as a demand/pull processHave a demand side perspectiveOpportunist technical entrepreneurLittle or no technical educationTowards a synthesisDifferent factors that influence new venture creation by technical entrepreneursNew venture creation factors:Antecedent (Preceding in time or order; previous or preexisting ) factorsPersonalityHigh achieverIndependentControl orientatedHome contextSpouse supportFew childrenBackgroundHighly educatedProf. parentsMiddle classParental experienceWork environmentFrustrationRedundancyExperienceIntuitional SupportParent’s helpVenture capitalGovernment aidEnvironmental factorsTechnologyDiscoveriesNew materialsNew technologyPatentsMarketsNew productsNew usesNew consumersTechnical entrepreneur’s very technical industry specific.Types of technical entrepreneursTechnical entrepreneurs focus on highly specialized, niche products and services which utilize the specialized, in-depth knowledge of technology possessed by the technical entrepreneur himself.Business build around technical expertise of the ownerFound in highly technology-fieldDegree of technology intensity can vary a great deal, so too can the nature of the market the technology seek to penetrate.Some seek new markets other instances stay in establish marketAutio differentiate 4 types of technical entrepreneurs:Application innovatorUse established technologyDiffusion of an existing generic technology into a new, much more specialized, market niches. Novelty of technology: Establish, Novelty of market: EstablishedSoftware housesMarket innovatorDevelop new markets with existing technologyTechnology genericCombining or configuring the technology in a different wayFirst AppleNovelty of technology: Establish, Novelty of market: EmergingTechnology innovatorRely on new technologyTechnology might be associated with scientific breakthroughsTechnology into new technology sold in establish marketsNovelty of technology: Scientific breakthrough , Novelty of market: EstablishThreaten incumbent firmsBiotechnology companiesParadigm innovatorsMost extreme of technical entrepreneursNew product concept based on new ideaVery disruptiveNovelty of technology: Scientific breakthrough , Novelty of market: NewThawte, internet security start-upNew venture creationTechnical entrepreneur start a business in two ways:Start-up routeSpin-off routeStart-upsNew venture established to commercialize an entrepreneur’s idea“venture” in this context means the creation of a new companyEntrepreneur acts independentlyThe idea is the property of the entrepreneur and he/she owns it.Key feature is that the entrepreneur acts independentlySpin-offsNew ventures but arise from a parent organization (university, government R&D laboratory or establish firm)Create with explicit goal of commercializing a technology developed by the parentCreated by employeesIf university the venture will license the researchParent company will play active role. May provide physical resources and also intangible resourcesParent will also take equity stakeCreated because the parent does not want to or cannot commercialize on the technologyReason for parents action for not commercializing:May not have resourcesTechnology may be applicable to markets the parent do not want to enter intoParent may not have flexibility or the environmentThe drivers of technical entrepreneursOnly last 30 years started to describe entrepreneurs who found technology-bases business as technical entrepreneursDrivers that can be accounted for the growth of technical entrepreneursDiffusion of the knowledgeMany more people studyingCase on the internetParticular technical knowledge no more confined to R&D laboratoriesStaff churnSmall high-tech high rate of staff movementStaff mobility much greaterImproved institutional supportEasier to become technical entrepreneurUniversities and coursesFinancial institutions much more willing to helpGovernment also step to the plateGrants and physical facilitiesAvailability of and access to venture capitalSpecialist financiers who invest in companies with a view to get their further growth and eventual capital gainBusiness AngelsEasier because appropriate funding to finance new technical start-up venture is availableThe rise of open innovationIncrease open innovation use by large organizationsTechnical entrepreneur can developed new technologies and new technological applications which can be used as part of the innovation process in large companiesTechnical entrepreneur specialized in particular technology and firms provide complimentary assets (marketing, distributing and product support capabilities)Nature of new technologyPreviously scale of requirements acts as barrier for entryNew technologies more mobile and flexibleEvident in internetRole ModelsThere are many role models to learn fromStudy unit 10Funding innovationThree factors that make innovation expensiveResourceScale of technology, both technology and peopleTimingTime it takes to achieve a marketable productGap between inflow and outflowUncertaintyDifficult to predict the outcome or the course of eventsFocus on external fundingInnovation cash flow gapInnovation is about exploiting ideas and inventions to turn them into commercial productsMost innovators initially will make use of personal savings (Working model and Engineering Prototype) , Supplemented by friends and familyDevelopment of production prototypes need seed capital. Turn to informal rmal investors also called business angelsVenture capitalist are approach closer to product introduction All this to bridge the cash flow gapFounder, family and friendsSmall firm, money come from founder, family and friendsSome overlap between source of funding and bootstrappingHere we will build the first models or prototypes and form part of the proof-of-conceptAbility to use friends is part a function of the innovators social capitalFinancial bootstrappingFunding by not paying for itStrap for cash they are looking for other meansImaginative strategies for getting hold of resourcesTake two forms:Using creative ways of acquiring financeMinimizing or eliminating the need for financing by security resources at little or no costUsing the founder’s social capital networkGovernment fundingKhula Enterprise Finance LimitedIDCCommercial loansQuasi-equityBridging financeShareware housingGuaranteesSuspensive salesWholesale financeExport financeImport financeSupport ProgramBankVenture capitalBusiness angelsHigh net-worth individuals“informal” investorsNot a homogenous group, differ in:Number of investments made a yearLevel of funds they have availableNet-worth of individual investorExtend of their experienceReasons to investDivide into two broad categories:Active (4 categories)EntrepreneursSelf-made, very wealthyInterested in broad range of business opportunitiesMost important criteria – personality of innovator/founderLess active in management of the ventureWealth-maximizingA contradictory bunchInvest or financial gainTake minority stakeGet involve in company managementRicher than income-seeking business angelsLess focus what they invest inBackground not entrepreneurialWealth thru inheritanceIncome-seekingInterested in smaller investmentsLooking for high rate of returnBackground, least entrepreneurialLess net-worthInvesting mainly in local sectorFor them serious businessCorporateCompanies making investmentPassive (2 categories)LatentInvested in the past but do not currently have investmentsGenerally very wealthyHighly educatedOlder than other business angelsNo investing, lack of suitable investing opportunitiesVirginWant to invest but have not done soFew involved in business-startupVenture capital firmsExistence of equity capInability for small firms to access long-term risk capitalStructured as limited partnershipsMange pools of capitalMake a gain when harvesting their investmentVenture capital firms are of declining importance as a source of funding innovation undertaken by small companiesCorporate venturingKeep in touch with specific technologyStrategic motiveOccurs in high-technology sectorsStudy unit 11Managing InnovationFunction of managementManagement consists of:PlanningDecision making activityNeed to set goalsOrganizingSpecifying and structure working relationship between individualsEnabled planned activitiesLeadingConveying a sense of purposeProviding a visionMotivating individualsControllingMonitoring and evaluationWhy does innovation have to be managed?Contextual factorsUncertaintyInnovation by its very nature involves much uncertaintyComplexityDeveloping something new will draw on a number of different expertise’sMessy/untidyIt is not smooth or straightforwardDisruptiveNovel and the new. New ways of doing somethingCreativeRequire a degree of creativityPlanningProject managementGeneral purpose planning techniqueManagement technique, 5 main stepsDetermine the goalIdentify the activities or tasks to be undertakenEstimate the duration of the activities/tasksDetermine the sequence in which the activities/tasks have to be completedDevelop a project planTwo types of plan:Gantt or bar chartNetwork diagramThink about innovation in a much broader term. This is what planning is all about.Development funnelStructured approach for getting from ideas to launch of a new product or serviceOrganizingChoice of internal structure conducive to innovationStructures effect a great many aspects of work activities, such as:Communication channelsFlows of informationWorking relationshipWorking practicesWork environmentCorporate cultureStructure must be effective to facilitate knowledge transfer: Theory of absorptive capacityWorking relationships and working practices have to be flexible and able to cope with uncertainty and unpredictabilityInnovation specific structures: corporate venturingLearning new knowledge (LNK) vs. Leveraging existing knowledge (LEK)LNK – High, LEK – High [New venture department/division, skunk worksLNK – Low, LEK – High (Direct Integration)LNK – Low, LEK – Low, Dedicated business UnitLNK – Low, LEK – Low, Independent venture unitDirect integrationPeople from all over organization drawn into a new team to develop new product/serviceQuick to setup, depended on existing cooperate culture being innovation tolerantDedicated business unitNew business unitSuitable for innovators with short development spanInnovation will be incrementalOrganization need to be sure that it will break into profit soonNew-venture departmentSkunk worksRadical innovationsCreate organization within an organizationWill always fit into the ‘control’ of mother companyIndependent venture unitSeparate entitiesSet up for express purpose of developing innovative new productsMay be wholly owned or joint ventureSeparate legal entityDegree of autonomyWill developed own sub-cultureJV will be advantages, joint resources and sharing of riskLeadingAbout setting direction or vision for others to followEmployees should feel motivated to exercise their creativityLeadership rolesProject leaderFormalFormally designatedFigureheadTake responsibility of the project and provide it with an appropriate sense of directionProject leader should be someone who does not get completely bogged down in detailAble to maintain a sense of perspectiveMix skill, communication and motivationProduct championSomeone who acts as advocate for the innovationNeed political supportMust be familiar with the organizationKnow the way around and know where the power liesMust be leader who can communicateGodfatherLeast formal roleProvision of political support to those involved in innovation by pulling stringsExercise power and influence in the organizationSupport for innovation and affording it protectionGatekeeperKnowledge is critical to innovationOrganization ability to transfer knowledgeCertain individual’s forms part of the knowledge-transfer process. They act as gatekeepersHold key to accessing knowledgeActing as repository of knowledgeKnowing who possesses knowledgeExercising skill in making connectionsActing as go-betweenNetworking skillsAct as bridge between different part of the organizationMotivational schemesFunctional is to tap the creativity of employees by motivating them to participate in innovation by coming up with ideas that can form the basis of new products/services or process enhancements.BootleggingWay to motivate individuals to make effective use of their own knowledgeUndercover activityIdeas programmesEmployee based schemes to encourage employees to come forward with new ideasResearch clubsFacilitate innovation through collaborationCorporate culturesOrganization shared values and beliefImplicit and explicitShape behavior and experience of individuals working in an organizationCorporate culture can have a profound effect on innovation via the value it place on things like challenging existing ideas and practicesStrong record of corporate culture is organizations that value and promote the following:Outward-looking orientationStrong links to external partiesFacilitating communicationOpenness to new ideasIndividuals able to experimentAcceptability of failureAccepting and tolerating failure is essentialPromotion of evaluation and reflectionDo not rush inControllingImport because innovation is all about high degree of uncertaintyClose link between planning and controlDevelopment funnel both planning and controlThe stage-gate process of innovationSeries of evaluation pointsMinimum of three possible gates in a project:Initial screeningBusiness/finance analystPre-commercialization bushiness analystEach gate three questions:Does the project continue to make economic/business senseHave the essentials steps been completedIs the project on time and budget and have the milestone been hitGO if answer to Q1-3 is HOLD if the answer to Q2 is negativeKILL if the answer to Q1 is negativeDecision made by representative of all functional disciples involvedBoth technical and commercial have to agree to go forwardConclusionInnovation must be managed instead of handling ad-hoc by providing structureBreakthroughs are comparatively rare ................
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