1. Operations Management Part V

2. The Value Equation

3. Innovation
Product vs. Process Innovation
Managing for Innovation
Theories of Innovation
Patterns of Innovation
Technological Forecasting

4. The Value Equation
Product Innovation
Process Innovation

5. Competing with Process Innovation
Value to
Customer
Competing with
Marketing
Capabilities
Competing with
Operational
Capabilities
Price
Quality
Timeliness
Flexibility
Competing with
Technological
Capabilities
Product
Enhancements
Process
Enhancements

6. Evolution of Product/Process Innovation
Product Innovation
high
Process
Innovation
Rate of
Innovation
low
early
late
Stage of Product Life-cycle

7. Managing for Innovation – Necessary Conditions
Innovative People
Motivated to challenge constraints
Socioeconomic Incentives
Potential for wealth, fame, honor
Diversity and Tolerance
Penalties for challenging status quo not excessive
Moykr, The Lever of Riches, 1990.

8. Richter Scale of Innovation
Transforming innovation
100
Substantial innovation
Difficulty of change
Newness 10
Incremental innovation 1 1 10
100
Wealth Creation
Foster and Kaplan, Creative Destruction, Currency (Doubleday), 2001

9. Barriers to Innovation
Intrinsic Barriers
Uncertainty
Fear of failure
Requires array of talents
Managerial Barriers
Emphasis on maintaining order and discipline
Risk aversion
Reward systems which discourage uncertainty
Competition for resources
Institutional Barriers
Treat to careers and status
Territorial competition
Hard work!

10. Technology in History Disorderly Breaks constraints Unexplained timing
Not an orderly process of research and development; few elements of planning or cost-benefit analysis.
Breaks constraints
Technological change involves an attack by an individual on a constraint that is taken as a given by everyone else.
Unexplained timing
Often no good reason why an invention was made at a particular time and not centuries earlier (e.g. wheelbarrow and stirrup in Medieval times).
Moykr, The Lever of Riches: Technological Creativity and
Economic Progress, Oxford University Press (NY), 1990.

11. Technical Innovation Normal vs. Revolutionary
Normal Innovation
Innovation with an accepted “paradigm”
Incremental in nature
Increasing specialization required
Kuhn, T.S., The Structure of Scientific Revolutions, 1962.

12. Technical Innovation Normal vs. Revolutionary
Revolutionary Innovation
Often a response to “intellectual crisis”
Often proceeded by competing theories and ideas
Changes the world view of a discipline
Establishes a new paradigm
Kuhn, T.S., The Structure of Scientific Revolutions, 1962.

13. Examples of Paradigms
Everything that can be invented has been invented
Charles H. Duell, Commissioner, U.S. Office of Patents, 1899.
Louis Pasteur's theory of germs is ridiculous fiction.
Pierre Pachet, Professor of Physiology at Toulouse, 1872
Airplanes are interesting toys but of no military value.
Marechal Ferdinand Foch, Professor of Strategy, Ecole Superieure de Guerre.
There is no reason anyone would want a computer in their home.
Ken Olson, president, founder of Digital Equipment Corp., 1977
640K ought to be enough for anybody.
Bill Gates, 1981
From the Internet

14. Technological Progress
Physical limit of technology
Performance
Opportunity Sweet Spot
Effort (time, funds)
Technological performance often follows an S-shaped curve
Foster, Innovation: The Attackers Advantage, Summit Books, 1986

15. Technology Forecasts Growth Forecast Maturity Forecast Early Forecast
Performance
Early Forecast
Development Forecast
Effort (time, funds)
Technological performance often follows an S-shaped curve
Foster, Innovation: The Attackers Advantage, Summit Books, 1986

16. Successive Tech Innovations
Disruptive Technology
Performance
Attacker’s Advantage
Disruptive Gap
Effort (time, funds)
Foster, Innovation: The Attackers Advantage, Summit Books, 1986

17. Five Successive Tech Revolutions
Industrial Revolution (1771)
Britain
Age of Steam and Railways (1829)
Britain, US
Age of Steel, Electricity, Engineering (1875)
US, Germany
Age of Oil, Automobile, Production (1908)
US, Germany, Europe
Age of Information and Telecom (1971)
US, Europe, Asia
Perez, Technological Revolutions and Financial Capital, 2002

18. Moore’s Law
In 1965 by Gordon Moore, co-founder of Intel, observed that the number of transistors per square inch on integrated circuits had doubled every year since the integrated circuit was invented. Moore predicted that this trend would continue for the foreseeable future. In subsequent years, the pace slowed down a bit, but data density has doubled approximately every 18 months, and this is the current definition of Moore's Law, which Moore himself has blessed. Most experts, including Moore himself, expect Moore's Law to hold for at least another two decades.

19. Take-Aways Innovation Technology
Promote necessary conditions, mitigate barriers
Paradigms are powerful barriers
We are in the middle of a tech revolution
Technology
Technological forecasting is difficult if not impossible
S-Curve analysis helpful
Beware disruptive innovation