1

Innovation Through New Technologies

Hans-Jrg Bullinger, Joachim Warschat

Technology Development as a Driver of Innovation

For enterprises today, innovations are the best form of protection against competitors (BULLINGER 2006). The reason is obvious. Innovations make for higher prices and larger market shares because they satisfy customer requirements better than existing products or services, deliver enhanced product quality, or enable the product development time to be accelerated (GNTHER & FISCHER 2000, FISCHER 2000 (Fig. 1.1)) time which can in turn be reinvested. A mere cost reduction, on the other hand, only permits the price range to be lowered.
Innovation

Customer needs

Quality

Time

Costs

Upward price range (by maximizing customer utility value)

Downward price range

Fig. 1.1: Increasing profitability through innovations

Innovation is largely driven by new technologies, especially overarching technologies that produce a wealth of different applications in a wide range of sectors, such as information technology or nanotechnology.

C.M. Schlick (ed.), Industrial Engineering and Ergonomics, DOI 10.1007/978-3-642-01293-8_1, Springer-Verlag Berlin Heidelberg 2009

4
Technology addition Technology integration

Bullinger & Warschat

Technology substitution

Source: KUKA Systems GmbH

Source: Fraunhof er LBF

Source: Fotolia.com

Example: Welding robot

Example: Adaptive steering

Example: White light LEDs

Fig. 1.2: Three types of technology development

We distinguish between three types of technology development as relates to their effect in new products (Fig. 1.2). Additive technology development combines two or more technologies to create a new product. The combination of a robot with a welding gun, for example, enables automated production of car bodies. The challenge faced by the company, in this case the robot manufacturer, is that of combining robot technology with welding technology. The problem can usually be solved with the aid of suppliers. Should more major interface problems occur, it may also be necessary to enlist the help of partners in research and development. The integration of several technologies, which in our example involves integrating mechatronics (mechanics, electronics, software), optoelectronics (optics and electronics), nanoelectronics and biomimetics to produce adaptronics, opens the way for completely new functions such as a self-adjusting steering mechanism or adaptive undercarriage characteristics. The interdependency of these partial technologies is considerably more diverse and intensive than in the case of additive technology development, meaning that integrative technology development calls for a greater degree of interdisciplinary cooperation and presupposes the participation of several research and development partners and suppliers. Both types of development, integrative even more so than additive, require that the company be capable of successfully developing new products in an open innovation system. Because product functionality becomes more complex in both cases, process complexity and ultimately also system complexity in terms of cross-company cooperation likewise increase. More than anything else, the rapid acquisition of new skills and expertise entails difficulties and thus becomes a barrier to innovation. What we understand by innovation, therefore, is more than simply inventing and developing a new technology or a new product. That is only the first step, the invention. Not until it is successfully marketed does an invention become an innovation.

Innovation through New Technologies

The risks involved in both types of technology development are thus to be seen in the expansion of know-how and the mastering of complexity. Usually, though, existing knowledge does not lose its value. In our examples, the partial technologies or part products such as robots, welding guns, mechatronics, optics etc. can still be successfully marketed. This is not true of the third type, technology substitution, in which a technology or a product based on that technology say the electric light bulb is replaced by something new, in this case the LED. Existing knowledge is thereby rendered partially or completely obsolete, so that the company finds itself facing a serious threat (TUSHMAN & ANDERSON 1986). A particular problem arises if, despite recognizing the threat, the company fails to realign its strategy rapidly enough due to the inherent inertia of the system, the processes and so on. This is known as path-dependence (SCHREYGG et al. 2003), or you might say success is blind. Obviously, there are no clear dividing lines between the various types of technology development. It is conceivable that, after several spurts of development, an additive development such as the hybrid engine may to some extent transmute into a substitutive technology because the combustion engine plays a less important part in the technology network than hitherto. Integrative technology development, too, can start out as a simple addition and then become a complex networked development as it is expanded to include electronic components, sensors and feedback control systems. A further distinguishing mark of the impact of a new technology on innovation is its scope within a product. It is possible that (a) new parts, assemblies or modules will be created, or (b) the product architecture will be changed (HENDERSON & CLARK 1990) (Fig. 1.3). A car engine is an excellent illustration of the fact that pursuing the development of a 4-cylinder Otto engine to create a 6-cylinder engine will affect assemblies and parts, but the architecture, i.e. the fundamental structure and the basic operating principle, remains unchanged. The hybrid engine, on the other hand, is an extension of that architecture. The electric and electronic functions and the fuel cell ultimately change the architecture completely, and this affects the entire drive train.

6
Architecture is conserved Architecture is supplemented

Bullinger & Warschat

Architecture is destroyed

Source : DAIMLER

Source : DAIMLER

Source : DAIMLER

Example: Engines

Example: Hybrid propulsion

Example: Fuel cell

Fig. 1.3: Extent of innovation

Different companies are affected by technology development to differing extents, depending on their supplier status. If the architecture is conserved, there is no need to change the relationship between OEMs and suppliers. If the architecture is supplemented, a technology integration problem that requires additional partners is created, at least for the engine manufacturer. The destruction of the architecture causes a substitution problem for the engine manufacturer that leads to completely new development and supply structures. The two latter-named changes are not as radical for the OEM as for the suppliers of engines or gearbox parts and modules, as they do not destroy the functionality of the vehicle as a whole. So what part does technology development play in company innovations? We can distinguish between four types of innovation (Fig. 1.4): Incremental innovation is a step-by-step enhancement of tried-and-tested technologies and familiar customer requirements. This is the most frequently encountered type of innovation. Its advantage is that it involves little risk; its disadvantage can be termed the incremental trap. Numerous minor technical expansions lead to high product complexity, for example, caused by a large number of functions which result in high costs and/or a decline in user acceptance. Examples include complex telecommunication products or major software systems.

Innovation through New Technologies

PRINCIPLE OF TECHNOLOGICAL SOLUTION

Technologyinduced
new

Disruptive

Source: Hella KGaA Hueck & Co.

Source: Fotolia

Incremental
familiar

Needs-induced

Source: Fotolia

Source: Fotolia

familiar

new

NEEDS
Fig. 1.4: Innovation portfolio

Needs-induced innovation wins new customers for tried-and-tested technologies, e.g. by means of a new business model such as low-cost airlines. Other pertinent examples include leasing rather than buying a car, or operator models in which manufacturers do not sell machines, but instead deliver and invoice finished parts. But technologies can also be a decisive factor in needs-induced innovation. Low-cost online flight bookings, for instance, are only possible thanks to the Internet. Technology-induced innovation discovers new technical solutions for recognized needs. Examples include LED lamps in cars, or the plasma and LCD monitors that have taken the place of CRT screens for televisions and computers. In this case the new technology is substitutive and may present a threat to companies that are too deeply rooted in traditional technology. Disruptive innovation plays a particularly important role (CHRISTENSEN 2000, DANNEELS 2004, CHRISTENSEN 2006). It enables new customer needs to be satisfied with new technology, and is thus more radical than the other types of innovation. Those who address this type of innovation at an early stage can tap new markets and achieve a huge innovative leading edge. One example of disruptive innovation is digital photography, which has destroyed the existing manufacture of

Bullinger & Warschat

cameras along with the value chain of film production, film development, and print production. This is offset by the manufacture of digital cameras and of printers for printing out copies at home. In addition, cell phones have been transformed into cameras with the ability to transmit pictures directly via the Internet. It is a widespread assumption that disruptive innovations always take place at the upper end of the technological achievement scale. This assumption has been fueled by examples such as the DVD, which has a higher capacity than the video cassette. However, innovation often takes place at the lower end of the technology scale. The first PC, for example, was a great deal less powerful than the mainframe computers customary at the time, and that still holds true today. The innovation in this case is that of individualization. Just as with the different types of technology development, transitions take place from one type of innovation to another. An additive technology development, for example, may have been planned as an incremental innovation. The outcome of further research and development turns it into a technology-induced innovation, and it ultimately acquires the status of a disruptive innovation because it caters for completely new needs and taps completely new markets (Fig. 1.5).

PRINCIPLE OF TECHNOLOGICAL SOLUTION

familiar

new

familiar

new

NEEDS
Fig. 1.5: Innovation paths

Innovation through New Technologies

One such example is the MP3 standard. Originally developed for satellite-based telephony (1), this audio data compression technique opened the way for new products such as the MP3 player (2). Applying this standard on the Internet makes it possible to carry out music downloads that have a disruptive effect on the entire music sector (3). The reason is that entirely different value-add principles can and must be implemented because the original principles, e.g. the sale of CDs, are no longer adequate. If we combine technology-oriented, disruptive and needs-oriented innovation under the heading of radical innovation and contrast them with incremental innovation, while at the same time distinguishing between product innovations and organizational innovations, we can identify certain interrelationships between the type of innovation and technology development and of organizational development as shown below (Table 1.1).
Table 1.1: Incremental versus radical innovation
Innovation Radical Product Organization

Integrative technology development that New business models changes the architecture or New value chains Substitutive technology development that destroys the architecture Additive technology development that conserves the architecture Improvement of business processes

Incremental

Incremental product innovations are confined to additive technology developments that conserve the existing architecture. In the area of organization, this involves carrying out improvements to business processes. Radical innovations, in contrast, are generated by integrative or substitutive technology developments that change or destroy the existing architecture. In the area of organization, this involves creating new business models and new valueadd networks. This classification enables us to characterize typical innovation patterns in companies (Fig. 1.6).

10

Bullinger & Warschat

Product Radical

Organization Radical

Product

Organization

Incremental

Incremental

a) Me-too innovator

b) One-off innovator

Product Radical

Organization Radical

Product

Organization

Incremental

Incremental

c) Component manufacturer

d) Permanent start-up enterprise

Fig. 1.6: Typical innovation patterns of companies

Incremental me-too innovator The company is proficient in incremental product development and continuously improves its business processes in order to save costs. However, it has difficulty in crossing the line to radical innovation. It faces the risk of declining growth and low profit margins (Fig. 1.6a). One-off innovator The company gained its reputation through a radical innovation and possibly a new business model developed by a person such as its founder. However, as this is not followed up by any comparable innovation, the company rapidly reverts to incremental status and faces the same problems as the me-too enterprise (Fig. 1.6b). The innovative component manufacturer The company has very good technological capabilities and is in a position to carry out radical technology developments which it continuously improves, but it does not succeed in properly capitalizing on this capability by setting up new business models (Fig. 1.6c). The permanent start-up enterprise The enterprise constantly produces radical innovations, but it is not capable of moving beyond prototypes and initial product versions to achieve a continuous market roll-out. It is a typical candidate for takeover (Fig. 1.7d).

References

Bullinger HJ (2006) Fokus Innovation. Krfte bndeln Prozesse beschleunigen. Hanser, Mnchen. Christensen CM (2006) The Ongoing Process of Building a Theory of Disruption. Journal of Product Innovation Management 23 (1): 3955.

Innovation through New Technologies

11

Christensen, CM (2000) The Innovators Dilemma: The Revolutionary National Bestseller that Changed the Way we do Business. HarperBusiness Ed. HarperBusiness, New York. Danneels E (2004) Disruptive Technology Reconsidered: A Critique and Research Agenda. Journal of Product Innovation Management 21 (4): 246258. Fischer J (2001) Zeitwettbewerb. Grundlagen, strategische Ausrichtung und konomische Bewertung zeitbasierter Wettbewerbsstrategien. Vahlen, Mnchen. Gtze U, Backes M (2000) Management und Zeit. Physica, Heidelberg. Gnther T, Fischer J (2000) Zeitkostenrechnung. In: Gtze U, Backes M (Eds.): Management und Zeit. Physica, Heidelberg: 269296. Henderson RM, Clark KB (1990) Architectural Innovation. The Reconfiguration of Existing Product Technologies and the Failure of Established Firms. Administrative Science Quarterly 35 (1): 930. Schreygg G, Sydow J, Koch J (2003) Organisatorische Pfade - Von der Pfadabhngigkeit zur Pfadkreation. Strategische Prozesse und Pfade 13: 257294. Tushman ML, Anderson P (1986) Technological Discontinuities and Organizational Environments. Administrative Science Quarterly 31 (3): 439465.