Innovation evolution and revolution

The third characteristic of a high-tech product is its innovative quality. It should bring a (usually) radical change to a market where one new product will drive away others.

One of the main reasons why firms bring innovation and new products to the market is out of necessity, that is, they need to remain competitive. One leading German electronics manufacturer drew about 70% of its revenues in the late 1970s from products that were better than those of its competitors. Five years later, that share had fallen to 35%;10 years later, the company did not have a single superior product and was losing market share. More generally, in a survey of 102 electronics firms worldwide made by the consulting firm McKinsey, innovation provided the majority of growth for the top third of the companies, in terms of profitability and increase in sales. Innovative products and processes also appear to be critical in achieving cost competitiveness; according to this McKinsey survey, innovation contributes approximately two-thirds of all unit cost reduction. In other words, high-tech firms must innovate or capitulate.

It is no secret that technologies undergo periods of evolution and revolution [24]. They emerge then grow before maturing and die. Every need is satisfied by a technology that has a "life cycle," characterized by introduction, growth, maturity, and decline. The need to communicate led to primitive arts, writing, printing, typewriters, and recently computers (which also meet the need to count). The need to know about space led ancient cultures to build temple-planetariums, then astronomic telescopes, and currently satellites and other space rockets.

Every technology gives rise to products that then progress through their own life cycles with the same phases (introduction, growth, maturity, and decline). The product life cycle is the mirror image of the changing needs that the product satisfies, and reflects customer diffusion of the innovation curve. At its introduction, a product attracts people who like innovations. Then, as the product grows in popularity, a larger majority is interested in the product. Sales increase until a late majority adopts the product. Then the level of sales stabilizes, while decline is accelerated by the arrival of a new technology (see Figure 1.6).

In the consumer goods area, televisions in the 1940s, calculators in the 1960s, and microwave ovens in the 1980s introduced a breakthrough in consumption, banishing the radio, multiplication tables, and traditional ovens, which are now almost forgotten.

For industrial products, the case of electronics is characteristic: In the 1950s the input medium for information processing was first performed by vacuum tubes. These vacuum tubes were soon replaced by transistors in the 1960s. Striving toward miniaturization, manufacturers of electronics introduced integrated circuits, before they were replaced by microprocessor technology in the beginning of the 1980s. In each case, an innovative technological development chased its predecessor. Today it seems that microprocessor technology has arrived at certain limits (such as the balancing speed of gate arrays or the internal clock frequency of processors) related to its input medium, silicon. However, it won't be impossible to go beyond these limits in the future with new technology like supraconducting materials at ambient temperatures (see Figure 1.7). Similarly, in the pharmaceutical business, biotechnologies are replacing more traditional technologies to make new drugs.

As a matter of fact, any kind of technology will experience either sustaining innovations or disruptive innovations. Sustaining innovations can be defined as innovations that improve the performance of established

Performance

Performance

Time/ investment

Figure 1.6 The concept of a life cycle for products and technology.

Time/ investment

Figure 1.6 The concept of a life cycle for products and technology.

Sales

Transistors circuits

Transistors circuits

1950

1960

1970

1980

1990

2000 Time

Figure 1.7 Technology succeeding technology.

products and services in ways that mainstream customers in major markets have valued. Examples include continual development of faster microprocessors, flatter monitor screens for computers, or higher-resolution medical scanning devices, and SMS (Short Message Service) for cellular phones. Disruptive innovations offer a different, original and often untested solution to a larger category of needs [25]. They offer better performance than traditional solutions and provide to customers more convenient and/or cost-effective value and benefits. They can be "leading edge" technology or just creative ways to use existing technologies. For instance, examples of disruptive innovations include low-cost microprocessors (located in cars, washing machines and other appliances), on-line marketplaces, or DVDs.

Major or breakthrough innovations—like electricity, transistors, or machine tools in the past, and computers, networks, and robots, nowadays—are becoming diffuse throughout the economy. They often provide the basis for the emergence of new industries that create major new markets. Once computers were introduced and accepted, it made sense to expand their power, offer new application software, and connect them. Once they were connected, on-line services and electronic commerce naturally made their way into the economy and consumers' behavior.

Disruptive innovations create new markets and as we will see later on take root on the weakest segments of large companies that are already in the markets. While incumbents tend to stick with sustaining innovations for their traditional customers, challenging companies will take on competitors with disruptive innovations. Consequently, a key challenge for a high tech firm is how to structure the development activities before the full potential of one technology and of its market appeal is established.

For instance, within the next 5 years some very promising technologies could open new markets for high-tech firms [26]:

► IBM, Sun, Hewlett-Packard, and Microsoft push for autonomic computing: Enabling a computer system to diagnose and optimize its own performance and allocate its own computer and storage resources automatically should increase efficiency and boost an already mammoth market for information technology services [27].

► Giants in electronics such as Motorola, Xerox, and Lucent are collaborating with chemical powerhouses E. I. DuPont de Nemours, Dow Chemical, and Bayer AG to delop Organic Electronics. In portable electronics and flat-panel displays, plastic organic light-emitting diode (OLED) displays could replace liquid-crystal displays (LCD).

► Better search mechanisms and personal agents (dubbed as "Semantic Web") could automatically perform searches through the billions of pages on the Web and provide better and more effective results than today's searches [28]. Semantic Web research is led by the members of the World Wide Web Consortium.

► Light emitting diode (LED) is a light source applying the different energy conversion process, so-called electron-hole recombination luminescence, rather than conventional light sources, such as incandescent or fluorescent lamps. LED provides many benefits, such as a longer life span, measured in years not hours, vivid sunlight-visible colours and low power requirements. Introduced on the market in 1997, it could grab a significant share of the $12 billion-a-year market for sources of white light. The founder and leader, Nichia Corp., of Japan, is taking on Lumileds Lighting LLC, a joint venture of Philips Lighting and Agilent Technologies;GELcore, a joint venture of General Electric and Emcore Corp.;and Tokyo's Toshiba Corp., partnered with Toyoda Gosei C.

► Nanotechnology is about building things up by manipulating one atom at a time—first achieved in 1989 by physicists at IBM's Almaden Research Center, in San Jose, California. They used a microscopic probe to move with painstaking precision a series of xenon atoms on a nickel surface to form a Lilliputian version of the IBM logo. This one-off experience was performed at around -270°C;today scientists can do this at room temperature and industrial labs are transforming nano-dreaming into real technology. Nanotechnol-ogy was first used to create nanomachines—nanotech robots and motorized tools so small they can manipulate individual cells and molecules. These devices have many different applications, such as precision engineering, as well as electronics; electromechanical systems, as well as mainstream biomedical applications in areas as diverse as gene therapy, drug delivery and novel drug discovery techniques.

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