Management of Technology
Management of Technology2012
EVOLUTION OF TECHNOLOGY
Objectives:
To be highly knowledgeable about Evolution of Technology; To
have a wide understanding about technology according to the human
needs; To have better understanding about the development of
technologies. What is Technology?
Technologyis the making, usage, and knowledge oftools,machines,
techniques,crafts, systemsor methods of organization in order to
solve a problem or perform a specific function. It can also refer
to the collection of such tools, machinery, and procedures. The
wordtechnology comes fromGreek (technologa); from(tchn), meaning
"art, skill, craft", and-
HYPERLINK
"http://en.wiktionary.org/wiki/%CE%BB%CE%BF%CE%B3%CE%AF%CE%B1"(-
HYPERLINK "http://en.wiktionary.org/wiki/logia"loga), meaning
"study of-"The term can either be applied generally or to specific
areas: examples includeconstruction technology,medical technology,
andinformation technology. Theory of Technological Evolution
Technology evolves in:
three stages:
tools, machine, automation.
two trends:
the replacement of physical labour with more
efficientmentallabour, and
the resulting greater degree of control over one'snatural
environment
Stages of Technological Development
The pre-technological period - prehistoric man
The pre-technological period, in which all other animal species
remain today aside from some avian and primate species was a
non-rational period of the earlyprehistoric man.
The first stage: the toolThe emergence of technology, made
possible by the development of the rational faculty, paved the way
for the first stage: the tool. A tool provides a mechanical
advantage in accomplishing a physical task, and must be powered by
human or animal effort.
Hunter-gatherers developed tools mainly for procuring food.
Tools such as a container, spear, arrow, plow, or hammer that
augments physical labor to more efficiently achieve his objective.
Later animal-powered tools such as the plow and the horse,
increased the productivity of food production about tenfold over
the technology of the hunter-gatherers. Tools allow one to do
things impossible to accomplish with one's body alone, such as
seeing minute visual detail with amicroscope, manipulating heavy
objects with apulleyand cart, or carrying volumes of water in a
bucket.
The second technological stage was the creation of themachine
The second technological stage was the creation of themachine. A
machine (a powered machine to be more precise) is a tool that
substitutes the element of human physical effort, and requires the
operator only to control its function. Machines became widespread
with the industrial revolution, thoughwindmills, a type of machine,
are much older.
The third, and final stage of technological evolution is the
automation The third, and final stage of technological evolution is
theautomation. The automation is a machine that removes the element
of human control with an automatic algorithm. Examples of machines
that exhibit this characteristic aredigital watches, automatic
telephone switches, pacemakers, and computer programs.
It's important to understand that the three stages outline the
introduction of the fundamental types of technology, and so all
three continue to be widely used today. A spear, a plow, a pen, and
an optical microscope are all examples of tools
I. History of Technology
Measuring Technological Progress
Lewis H.
HYPERLINK "http://en.wikipedia.org/wiki/Lewis_H._Morgan"Morgan,
Leslie
HYPERLINK "http://en.wikipedia.org/wiki/Leslie_White" White,
andGerhard
HYPERLINK "http://en.wikipedia.org/wiki/Gerhard_Lenski"Lenski,
declaretechnological progressto be the primary factor driving the
development of human civilization. Morgan's concept of three major
stages of social evolution (savagery,barbarism, andcivilization)
can be divided by technological milestones, likefire, thebow,
andpotteryin the savage era,domestication of animals,agriculture,
andmetalworkingin the barbarian era and thealphabet andwritingin
the civilization era.
Instead of specific inventions, White decided that the measure
by which to judge the evolution of culture wasenergy. For White
"the primary function of culture" is to "harness and control
energy." White differentiates between five stages of human
development: In the first, people use energy of their own muscles.
In the second, they use energy ofdomesticated animals. In the
third, they use the energy of plants (agricultural revolution). In
the fourth, they learn to use the energy of natural resources:
coal, oil, gas. In the fifth, they harnessnuclear energy. White
introduced a formula P=E*T, where E is a measure of energy
consumed, and T is the measure of efficiency of technical factors
utilizing the energy. In his own words, "culture evolves as the
amount of energy harnessed per capita per year is increased, or as
the efficiency of the instrumental means of putting the energy to
work is increased". Russian astronomer,Nikolai
HYPERLINK
"http://en.wikipedia.org/wiki/Nikolai_Kardashev"Kardashev,
extrapolated his theory creating the Kardashev
HYPERLINK "http://en.wikipedia.org/wiki/Kardashev_scale" scale,
which categorizes the energy use of advanced civilizations.
Lenski takes a more modern approach and focuses oninformation.
The more information and knowledge (especially allowing the shaping
of natural environment) a given society has, the more advanced it
is. He identifies four stages of human development, based on
advances in the history
HYPERLINK
"http://en.wikipedia.org/wiki/History_of_communication" of
communication. In the first stage, information is passed bygenes.
In the second, when humans gainsentience, they canlearnand pass
information through by experience. In the third, the humans start
using signs and developlogic. In the fourth, they can
createsymbols, developlanguageandwriting. Advancements in the
technology of communication translates into advancements in
theeconomic systemandpolitical
HYPERLINK "http://en.wikipedia.org/wiki/Political_system"
system,distribution of wealth,social inequalityand other spheres of
social life. He also differentiates societies based on their level
of technology, communication and economy:
hunters and gatherers,
simple agricultural,
advanced agricultural,
industrial,
special (such as fishing societies).
Finally, from the late 1970s sociologists and anthropologists
likeAlvin Toffler(author ofFuture Shock),Daniel BellandJohn
HYPERLINK
"http://en.wikipedia.org/wiki/John_Naisbitt"Naisbitthave approached
the theories ofpost-industrial societies, arguing that the current
era ofindustrial societyis coming to an end, andservicesand
information are becoming more important thanindustryandgoods. Some
of the more extreme visions of the post-industrial society,
especially infiction, are strikingly similar to the visions of near
and post-Singularitysocieties.
period and geography
Early technology
1. Stone Age
The early Stone
Age is described asEpipaleolithicorMesolithic. The former is
generally used to describe the early Stone Age in areas with
limited glacial impact. The later Stone Age, during which the
rudiments of agricultural technology were developed, is called
theNeolithicperiod. During this period, polishedstone toolswere
made from a variety of hard rocks such
asflint,jade,jadeiteandgreenstone, largely by working exposures as
quarries, but later the valuable rocks were pursued by tunnelling
underground, the first steps in mining technology. The polished
axes were used for forest clearance and the establishment of crop
farming, and were so effective as to remain in use when bronze and
iron appeared.
2. Copper and Bronze Age
The Stone Age developed into theBronze Ageafter theNeolithic
Revolution. The Neolithic Revolution involved radical changes in
agricultural technology which includeddevelopment of agriculture,
animaldomestication, and the adoption of permanent settlements.
These combined factors made possible the development of
metalsmelting, withcopperand laterbronze, an alloy oftinand copper,
being the materials of choice, although polished stone tools
continued to be used for a considerable time owing to their
abundance compared with the less common metals (especially
tin).
3. Iron Age
4. Ancient Civilizations
It was the growth of the ancient civilizations which produced
the greatest advances in technology and engineering, advances which
stimulated other societies to adopt new ways of living and
governance.
TheEgyptiansinvented and used many simple machines, such as
therampto aid construction processes. TheIndus Valley Civilization,
situated in a resource-rich area, is notable for its early
application of city planning and sanitation technologies. Ancient
India was also at the forefront of seafaring technologya panel
found atMohenjodaro, depicts a sailing craft. Indian construction
and architecture, called 'Vaastu
HYPERLINK "http://en.wikipedia.org/wiki/Vaastu_Shastra"
HYPERLINK "http://en.wikipedia.org/wiki/Vaastu_Shastra"Shastra',
suggests a thorough understanding of materials engineering,
hydrology, and sanitation.
The Chinese were responsible for numerous technologydiscoveries
and developments. Major technological contributions from China
include earlyseismologicaldetectors, matches,
paper,cast iron, the ironplough, the multi-tubeseed drill,
thesuspension bridge, the parachute, natural gasas fuel,
themagnetic compass, theraised-relief map, thepropeller,
thecrossbow, theSouth Pointing Chariot, andgun powder.
GreekandHellenisticengineersinvented many technologies and
improved upon pre-existing technologies. Particularly
theHellenistic periodsaw a sharp rise in technological
inventiveness, fostered by a climate of openness to new idea, royal
patronage the blossom of a mechanistic philosophy and the
establishment of theLibrary of Alexandriaand its close association
with the adjacentmuseion. In contrast to the typically anonymous
inventor of earlier ages, ingenious minds such asArchimedes,Philo
of Byzantium,Heron,Ctesibius and
Archytasnow remained known by name to posterity.
Ancient Greek innovations were particularly pronounced in
mechanical technology, including the ground-breaking invention of
thewatermillwhich constituted the first human-devised motive force
not to rely on muscle labour (besides the sail). Apart from their
pioneer use of waterpower, Greek inventors were also the first to
experiment with wind power (seeHeron's windwheel) and even created
the earliest steam engine (theaeolipile), opening up entirely new
possibilities in harnessing natural forces whose full potential
came only to be exploited in theindustrial revolution. Of
particular importance for the operation of mechanical devices
became the newly devised right-angledgearand thescrew.
An illustration of theaeolipile, the earliest steam-powered
device
Ancient agriculture, as in any period prior to the modern age
the primary mode of production and subsistence, and its irrigation
methods were considerably advanced by the invention and widespread
application of a number of previously unknown water-lifting
devices, such as the verticalwater-wheel, the compartmented wheel,
the waterturbine,Archimedes screw, the bucket-chain and
pot-garland, theforce pump, thesuction pump, the
double-actionpiston pumpand quite possibly thechain pump.
The compartmented water-wheel, here its overshot version,
was invented in Hellenistic times
In music,water organ, invented by Ctesibius and subsequently
improved, constituted the earliest instance of akeyboard
instrument. In time-keeping, the introduction of the
inflowclepsydraand its mechanization by the dial and pointer, the
application of afeedback systemand theescapementmechanism far
superseded the earlier outflow clepsydra.
The famousAntikythera
HYPERLINK "http://en.wikipedia.org/wiki/Antikythera_mechanism"
mechanism, a kind of analogous computer working with adifferential
gear, and theastrolabeshow great refinement in the astronomical
science.
Greek engineers were also the first to deviseautomatonsuch
asvending machines, suspended ink pots, automaticwashstandsand
doors, primarily as toys, which however featured many new useful
mechanisms such as thecamandgimbals.
In other fields, ancient Greek inventions include thecatapultand
thegastraphetescrossbow in warfare, hollow bronze-casting in
metallurgy, thedioptrafor surveying, in infrastructure
thelighthouse,central heating, thetunnel excavated from both ends
by scientific calculations, theship
HYPERLINK "http://en.wikipedia.org/wiki/Diolkos"
HYPERLINK "http://en.wikipedia.org/wiki/Diolkos"trackway, thedry
dockand plumbing. In horizontal vertical and transport great
progress resulted from the invention of thecrane, thewinch,
thewheelbarrowand theodometer.
Further newly created techniques and items werespiral
staircases, thechain drive,sliding calipersandshowers.
TheRomansdeveloped an intensive and sophisticated agriculture,
expanded upon existing iron working technology,
createdlawsproviding for individual ownership, advanced stone
masonry technology, advancedroad-building(exceeded only in the 19th
century), military engineering, civil engineering, spinning and
weaving and several different machines like theGallic reaperthat
helped to increase productivity in many sectors of the Roman
economy. Roman engineers were the first to build monumental
arches,amphitheatres,aqueducts,public baths,true arch bridges
reservoirsanddams, vaults and domes on a very large scale across
their Empire. Notable Roman inventions include thebook
(Codex),glass blowingandconcrete. Because Rome was located on a
volcanic peninsula, with sand which contained suitable crystalline
grains, theconcretewhich the Romans formulated was especially
durable. Some of their buildings have lasted 2000 years, to the
present day.
metallurgy or wheel technology, they developed complex writing
and astrological systems, and created sculptural works in stone and
flint. Like the Inca, the Maya also had command of fairly advanced
agricultural and construction technology. Throughout this time
period much of this construction, was made only by women, as men of
the Maya civilization believed that females were responsible for
the creation of new things. The main contribution of theAztecrule
was a system of communications between the conquered cities.
InMesoamerica, without draft animals for transport (nor, as a
result, wheeled vehicles), the roads were designed for travel on
foot, just like the Inca and Mayan civilizations.
Medieval and Modern Technologies1. European TechnologyEuropean
technology in theMiddle Agesmay be best described as a symbiosis
oftraditio et innovatio. While medieval technology has been long
depicted as a step backwards in the evolution of Western
technology, sometimes willfully so by modern authors intent on
denouncing the church as antagonistic to scientific progress (see
e.g.Myth of the Flat Earth), a generation of medievalists around
the American historian of scienceLynn Whitestressed from the 1940s
onwards the innovative character of many medieval techniques.
Genuine medieval contributions include for examplemechanical
HYPERLINK "http://en.wikipedia.org/wiki/Mechanical_clock"
clocks,spectaclesand verticalwindmills. Medieval ingenuity was also
displayed in the invention of seemingly inconspicuous items like
thewatermarkor thefunctional button. In navigation, the foundation
to the subsequentage of explorationwas laid by the introduction of
pintle-and-gudgeonrudders,lateen sails, thedry compassthe horseshoe
and theastrolabe.
Significant advances were also made in military technology with
the development ofplate
HYPERLINK "http://en.wikipedia.org/wiki/Plate_armour"armour,
steelcrossbows,counterweight
HYPERLINK
"http://en.wikipedia.org/wiki/Trebuchet"trebuchetsandcannon.
Perhaps best known are the Middle Ages for their architectural
heritage: While the invention of therib vaultandpointed
HYPERLINK "http://en.wikipedia.org/wiki/Arch"archgave rise to
the high risingGothic style, the ubiquitous medieval fortifications
gave the era the almost proverbial title of the 'age of castles'.2.
Chinese Technology
Inexpensive paper: a revolution in the diffusion of
knowledgePaper making, a 2nd century Chinese technology, was
carried to the Middle East when a group of Chinese paper makers
were captured in the 8th century. Paper making technology was
spread to Mediterranean by the Muslim conquests. A paper mill was
established in Sicily in the 12th century. Thespinning
wheelincreased the productivity of thread making by a factor of
greater than 10. Lynn White credited the spinning wheel with
increasing the supply of rags, which led to cheap paper, which was
a factor in the development of printing.
Renaissance Technology
The era is marked by such profound technical advancements
likelinear perceptivity,patent law,double shell domesorBastion
fortresses. Note books of the Renaissance artist-engineers such
asTaccolaandLeonardo
HYPERLINK "http://en.wikipedia.org/wiki/Leonardo_da_Vinci"da
HYPERLINK "http://en.wikipedia.org/wiki/Leonardo_da_Vinci"
Vincigive a deep insight into the mechanical technology then known
and applied. Architects and engineers were inspired by the
structures ofAncient Rome, and men likeBrunelleschicreated the
large dome ofFlorence Cathedralas a result. He was awarded one of
the firstpatentsever issued in order to protect an ingeniouscranehe
designed to raise the large masonry stones to the top of the
structure. Military technology developed rapidly with the
widespread use of thecross-bowand ever more powerfulartillery, as
the city-states of Italy were usually in conflict with one another.
Powerful families like theMediciwere strong patrons of the arts and
sciences.Renaissance sciencespawned theScientific Revolution;
science and technology began a cycle of mutual advancement. 1. Age
of ExplorationThe sailing ship (Nau orCarrack) enabled theAge of
Explorationwith theEuropean colonization of the Americas,
epitomized byFrancis Bacon'sNew Atlantis. Pioneers likeVasco de
Gama,Cabral,MagellanandChristopher Columbusexplored the world in
search of new trade routes for their goods and contacts with
Africa, India and China which shortened the journey compared with
traditional routes overland. They also re-discovered
theAmericaswhile doing so. They produced new maps and charts which
enabled following mariners to explore further with greater
confidence. Navigation was generally difficult however owing to the
problem of longitude and the absence of accuratechronometers.
European powers rediscovered the idea of thecivil code, lost since
the time of the Ancient Greeks.
2. Industrial RevolutionThe BritishIndustrial Revolutionis
characterized by developments in the areas of
textilemanufacturing,mining, metallurgyandtransportdriven by the
development of thesteam engine. Above all else, the revolution was
driven by cheap energy in the form ofcoal, produced in
ever-increasing amounts from the abundant resources ofBritain. Coal
converted tocokegave theblast furnaceandcast ironin much larger
amounts than before, and a range of structures could be created,
such asThe
HYPERLINK "http://en.wikipedia.org/wiki/The_Iron_Bridge" Iron
Bridge. Cheap coal meant that industry was no longer constrained by
water resources driving the mills, although it continued as a
valuable source of power. The steam engine helped drain the mines,
so more coal reserves could be accessed, and the output of coal
increased. The development of the high-pressure steam engine made
locomotives possible, and a transport revolution followed.3. 19th
CenturyThe 19th century saw astonishing developments in
transportation, construction, and communication technologies
originating in Europe, especially inBritain. TheSteam
HYPERLINK "http://en.wikipedia.org/wiki/Steam_Engine"Enginewhich
had existed since the early 18th century, was practically applied
to bothsteamboatandrailwaytransportation. The first purpose built
railway line opened between Manchester and Liverpool in 1830,
theRocket locomotiveofRobert Stephensonbeing one of the first
working locomotives used on the line.Telegraphyalso developed into
a practical technology in the 19th century to help run the railways
safely.
Other technologies were explored for the first time, including
theincandescent light bulb. The invention of the incandescent light
bulb had a profound effect on the workplace because factories could
now have second and third shift workers. Manufacture of ships'
pulleyblocksby all-metal machines at thePortsmouth block
millsinstigated the age ofmass
HYPERLINK
"http://en.wikipedia.org/wiki/Mass_production"production.Machine
HYPERLINK "http://en.wikipedia.org/wiki/Machine_tools" toolsused
by engineers to manufacture parts began in the first decade of the
century, notably byRichard RobertsandJoseph Whitworth. The
development ofinterchangeable
HYPERLINK "http://en.wikipedia.org/wiki/Interchangeable_parts"
partsthrough what is now called theAmerican system of
manufacturingwhich began in the firearms industry at the U.S
Federal arsenals in the early 19th century and became widely used
by the end of the century.
Steamshipswere eventually completely iron-clad, and played a
role in the opening of Japan and China to trade with the West.
TheSecond Industrial Revolutionat the end of the 19th century saw
rapid development of chemical, electrical, petroleum, and steel
technologies connected with highly structured technology
research.
The period from last third of the 19th century until WW1 is
sometimes referred to as theSecond Industrial Revolution.
20th century technology developed rapidly. Communication
technology, transportation technology, broad teaching and
implementation ofscientific method, and increased research spending
all contributed to the advancement of modern science and
technology. Due to the scientific gains directly tied to military
research and development, technologies including electronic
computingmight have developed as rapidly as they did in part due to
war.Radio,radar, and earlysound recording were key technologies
which paved the way for the telephone,faxmachine, andmagnetic
storageof data. Energy and engine technology improvements were
also
The USNational Academy of Engineering, by expert vote,
established the following ranking of the most important
technological developments of the 20th century:
1. Electrification
2. Automobile
3. Airplane
4. Water supply and Distribution
5. Electronics
6. Radio and Television
7. Mechanized agriculture
8. Computers
9. Telephone
10. Air Conditioning and Refrigeration
11. Highways
12. Spacecraft
13. Internet
14. Imaging
15. Household appliances
16. Health Technologies
17. Petroleum and Petrochemical Technologies
18. Laser and Fiber Optics
19. Nuclear technologies
20. Materials science
Absent from the above list is the systematic method ofmass
productionwhich contributed to almost all of the above
technologies.
4. 21th centuryIn the early 21st century, the main technology
being developed is electronics. Broadband Internet accessbecame
commonplace in developed countries, as did connecting home
computers with music libraries and mobile phones. Biotechnologyis a
relatively new field that holds yet unknown possibilities.
Research is ongoing intoquantum
computers,nanotechnology,bioengineering,nuclear
fusion(seeITERandDEMO),advanced materials(e.g., graphene),
thescramjet(along withrail gunsand high-energy beams for military
uses),superconductivity, thememristor, and green technologies such
asalternative fuels(e.g.,fuel cells, plugin hybrid cars) and more
efficientLEDsandsolar cells.
The understanding ofparticle physicsis also expected to expand
through particle accelerator projects, such as theLarge
HYPERLINK
"http://en.wikipedia.org/wiki/Large_Hadron_Collider"Hadron
HYPERLINK "http://en.wikipedia.org/wiki/Large_Hadron_Collider"
Collider the largest science project in the world[4]and neutrino
detectors such as theANTARES.Theoretical physicscurrently
investigatesquantum gravityproposals such asM-theory,superstring
theory, andloop quantum gravity.
Spacecraft designs are also being developed, i.a. under
theProject Constellation(seeOrionandAres V).[dated info]TheJames
Webb Space Telescopewill try to identify early galaxies as well as
the exact location of the Solar System within our galaxy, using
theinfraredspectrum. The finishedInternational Space Stationwill
provide an intermediate platform for space missions and zero
gravity experiments. Despite challenges and
criticism,NASAandESAplan amanned mission to Marsin the 2030s.
II. History of Computers
The Beginning
In 1936, it was in this year that the first "computer" was
developed. It was created by Konrad Zuse and dubbed the Z1
Computer
In 1942, business saw profit and opportunity in computers.
Next ten years, the introduction of the transistor, a vital part
of the inner workings of the computer, the ENIAC 1 computer.
In 1953, The age of computers was forever altered by the
introduction of International Business Machines, or IBM, into the
computing industry. The first contribution was the IBM 701 EDPM
Computer.
A Programming Language Evolves
A year later, FORTRAN was written so that more people could
begin to program computers easily.
The year 1955, creation of the first computers for use in banks.
The MICR, or Magnetic Ink Character Recognition, coupled with the
actual computer, the ERMA, was a breakthrough for the banking
industry.
During 1958, the creation of the integrated circuit, also known
as the chip, is one of the base requirements for modern computer
systems.
Gaming, Mice, & the Internet
In 1962, creation of the first computer game, which was created
by Steve Russel and MIT, which was dubbed Spacewar.
In 1964, the mouse, was created by Douglass Engelbart. It
obtained its name from the "tail" leading out of the device.
In 1969. ARPA net was the original Internet, which provided the
foundation for the Internet that we know today.
It wasn't until 1970 that Intel entered the scene with the first
dynamic RAM chip, which resulted in an explosion of computer
science innovation.
In 1958, on the heels of the RAM chip, the first microprocessor
was developed, which was also designed by Intel.
A year later, the floppy disk was created, gaining its name from
the flexibility of the storage unit.
In 1973, the first networking card was created, allowing data
transfer between connected computers.
Household PC's Emerge
The next three years, it develops systems for the average
consumer. The Scelbi, Mark-8 Altair, IBM 5100, Apple I and II,
TRS-80, and the Commodore Pet
In 1978, major breakthroughs, the release of the VisiCalc
Spreadsheet program.
1979, WordStar, the first word processing program, was released
to the public for sale.
In 1981,
The IBM Home computer quickly helped revolutionize the consumer
market,
The mega-giant Microsoft enter the scene with the MS-DOS
operating system.
The Competition Begins: Apple vs. Microsoft
In 1983, a vital change, Apple Lisa computer the first with a
graphical user interface, or a GUI.
Conclusion:
Technology involves manipulation of the environment to meet
human needs such as food, shelter, communication, and health. The
development of various technologies within the last 10,000 years of
human history has been affected by and has affected the
environment, human societies, and science. Rachel Badanowski,
Southfield HS, Southfield, MI
References: Brush, S. G. (1988).The History of Modern Science: A
Guide to the Second Scientific Revolution 1800-1950. Ames: Iowa
State University Press.
Bunch, Bryan and Hellemans, Alexander, (1993)The Timetables of
Technology,New York, Simon and Schuster.
Derry, Thomas Kingston and Williams, Trevor I., (1993)A Short
History of Technology: From the Earliest Times to A.D. 1900. New
York: Dover Publications.
Greenwood, Jeremy (1997)The Third Industrial Revolution:
Technology, Productivity and Income InequalityAEI Press.
http://EzineArticles.com/?expert=Rebecca_Blain
MANAGING TECHNOLOGICAL TRANSITIONS
Technological change(TC) is a term that is used to describe the
overall process
ofinvention,innovationanddiffusionoftechnologyorprocesses. The term
is synonymous with technological development, technological
achievement, and technological progress. In essence TC is the
invention of a technology (or a process), the continuous process of
improving a technology (in which it often becomes cheaper) and its
diffusion throughout industry or society. In short, technological
change is based on both better and more technology.
InventionThe creation of something new, or a "breakthrough"
technology. For example, apersonal computerInnovationRogers
proposes that there are five main attributes of innovative
technologies which influence acceptance. These are relative
advantage, compatibility, complexity, trialability, and
observability.Relative advantagemay be economic or non-economic,
and is the degree to which an innovation is seen as superior to
prior innovations fulfilling the same needs. It is positively
related to acceptance (i.e., the higher the relative advantage, the
higher the adoption level, and vice versa).Compatibilityis the
degree to which an innovation appears consistent with existing
values, past experiences, habits and needs to the potential
adopter; a low level of compatibility will slow
acceptance.Complexity is the degree to which an innovation appears
difficult to understand and use; the more complex an innovation,
the slower its acceptance.Trialabilityis the perceived degree to
which an innovation may be tried on a limited basis, and is
positively related to acceptance. Trialability can accelerate
acceptance because small-scale testing reduces risk.
Observabilityis the perceived degree to which results of innovating
are visible to others and is positively related to acceptance.
DiffusionThe spread of a technology through a society or
industry. Thediffusionof a technology generally follows anS-shaped
curveas early versions of technology are rather unsuccessful,
followed by a period of successful innovation with high levels of
adoption, and finally a dropping off in adoption as a technology
reaches its maximum potential in a market.
Understanding Technology Risk
Technological changes are responsible for both the creation and
destruction of industries. In the face of sweeping changes in
technology, some industries die while others are born. Quite
clearly, a firms competitiveness is significantly influenced by its
ability to understand and embrace new product or process
technologies. Introducing technological change is risky because it
brings with it a high degree of uncertainty. Understanding the
nature of this uncertainty, especially the obstacles to the
acceptance of the new technology, is a tricky issue. Between
technical feasibility and commercial viability is a period of
suspense.
The Growing Pace of Innovation
Earlier, innovation cycles were quite long. This was the case
with water power, textiles and iron in the late 18th century;
steam, rail and steel in the mid-19th century; and electricity,
chemicals and the internal-combustion engine at the turn of the
20th century. Another innovation cycle led by oil, electronics,
aviation and mass production, is now drawing to a close. Current
indications are that a fifth industrial revolution based on
semiconductors, fibre optics, genetics and software is not only
well under way, but even approaching maturity. Quite clearly,
innovation cycles have shortened, from 50-60 years to around 30-40
years. Unless organizations can foster a culture in which new ideas
are encouraged and commercialized rapidly, they may find themselves
being overtaken by faster innovators.
Commercializing New Technologies
Successful technology management is all about bringing a new
concept to the market in the most efficient way. To commercialize
an idea successfully, a number of different stages2 must be
completed, each more difficult than its predecessor. Not only must
each of these stages be completed successfully, but adequate
resources mobilized to facilitate transition from one stage to the
next.
Imagining: Developing the initial insight about the market
opportunity for a particular technical development.
Incubating: Nurturing the technology sufficiently to gauge
whether it can be commercialized.
Demonstrating: Building prototypes and getting feedback from
potential investors and customers.
Promoting: Persuading the market to adopt the innovation.
Sustaining: Ensuring that the product or process has as long a
life as possible in the market.
The first three stages obviously cannot be managed like an
ordinary business with tight controls. So they have to be fostered
and nurtured in an environment which is culturally quite different
from normal corporate settings.
Conclusion
When it comes to successful innovation, technology by itself is
not the crucial factor. Technology must be considered together with
market conditions and human factors. Companies have to be on the
look-out for emerging market segments. They must also understand
why there is resistance to the acceptance of new ideas. For
established companies, existing product lines are important because
they provide the cash flows so vital for financing the development
of future products. At the same time, they cannot resist new
initiatives. Indeed, the challenge for management is to find the
right balance between incremental improvements and new and unproven
technologies.
Incremental improvements on an ongoing basis demand equal
emphasis on product and process design, which should be closely
integrated. Regularly measuring product and process performance and
tapping all the potential opportunities for improvement are
important. Companies should look for cost reduction through better
use of materials, energy and labor, reduction in number of
products, and product and process simplification. At the same time,
they must develop the core capabilities which will become critical
in the future. This means they should be prepared to shift their
strategic and competitive postures from time to time by
regenerating and renewing their businesses.
While it is difficult to anticipate technological
discontinuities, efforts must nevertheless be made to scan the
environment. Firms often make the mistake of looking in the wrong
places. They need to look more carefully at obscure, and
unconventional sources of competition. Moreover, companies must
strike the right balance between focus and diversification when
developing technologies. If a company is highly focussed on a few
competencies, it runs the danger of becoming vulnerable to a
radical innovation based on a different set of competencies. On the
other hand, if the firm tries to develop too broad a set of
competencies, it may be spreading its resources too thin. In other
words, technology risk management is a tightrope walk. And the
chances of falling off the rope are high for most players. The ones
who dont fall off ultimately emerge as the winners.REFERENCES:
http://en.wikipedia.org/wiki/Technological_change#Invention
Managing Technological Change A strategic Partnership Approach
by Carol Joyce Haddad, Sage Publication, Inc. 2002
Shawn Tully and Tricia Welsh, The modular corporation, Fortune,
February 8, 1993, pp.106-111.
http://
HYPERLINK
"http://www.urenio.org/tools/en/Product_Life_Cycle_Management.pdf"
www.urenio.org/tools/en/Product_Life_Cycle_Management.pdf
Managing Technological Innovations, A V Vedpuriswar, Nagendra
Chowdhary and A S K Ghori
STANDARD AND NETWORK EXTERNALITIES
STANDARDS
Introduction
The purpose of this paper is to contribute towards a theory of
telecommunications and information standardization, by organizing
available information in a consistent framework. It updates the
work that was originally presented last year [1]. The framework for
the activities in the area of technical standards is elaborated by
focusing on questions related to strategy and to tactics. The
strategic questions are: 1) Why seek a standard? 2) What are the
interfaces to be standardized? 3) When to standardize? The tactical
questions are: 1) Which is the appropriate standards development
organization? 2) How will consensus be reached? 3) Where will the
standard be used?
Background
Multimedia communication merges telecommunications and
information technologies. As a consequence, it brings together
conflicting design philosophies and engineering practices without
any explicit mechanism to solve the contradictions and to ensure
end-to-end compatibility.
Stand-alone terminals (e.g., video recorders) and computing
equipment operate more or less independently. As a result, terminal
and early computer manufacturers attempted to dominate markets with
unique products. When stand-alone terminals are interconnected,
communications networks can be viewed as pipes that transport bits
of information transparently, with all the intelligence needed for
processing residing in the end-user terminal or computer. Many
designers of end-user equipment (modems, personal computers, work
stations, browsers, word processors, etc.) subscribe to that
opinion. Because of short product life cycles, intense rivalry
among suppliers and the constant threat of substitutes, they avoid
standardization as much as possible and when forced, their aim is
to provide the lowest common denominator.
The term "network externalities" describes the value of
connecting various endpoints. In a communications network the value
of the externalities increases with the number of users (up to a
point). For the transport interactive and delay sensitive
information such as speech, the telecommunications network should
have enough intelligence to adapt its internal state to the demands
of the active end-users. These needs are expressed in terms of
availability, reliability, quality of service, etc. The deployment
of such intelligence requires long-term planning to ensure the
integration of compatible systems. Therefore, communications
service providers, while seeking standards, attempt to
differentiate their service via pricing, quality, coverage, or
range of service options. Clearly, participants in the
standardization of information technologies tend to fall into two
large categories: standards creators and standards seekers.
Standards creators believe that they can or should create their own
unique product or service, while standards seekers like to assemble
as many stakeholders as possible, including potential users. Both
groups represent competing paradigms in a battle that cannot be
resolved by proofs, the proponents of each competing paradigm
"practice their trades in different worlds." [4]
Reasons for Standardization
In a technologically mature field, where competition is
basically on price, there may be no real incentive to reveal
technical information. In this case, a commercial organization
"will accept and use standards only if it believes that it cannot
expand the market directly and that standards can." [2]
Standardization may also be a competitive strategy for new entrants
to oppose the dominant firms [3]. In contrast, in an emerging
field, the risks may be so high that firms have to share their
knowledge selectively to stimulate the market and/or discover
unanticipated applications. Standardization may also help
legitimize a new technology and allows the organization owning or
mastering the new technology to have a central position [5].
The commercial decision not to standardize has two implications.
First, the organization may be seeking a unique, possibly
controllable, market. Second, the product may be ephemeral. These
two conditions are clearly present in the case of computer games.
Conversely, a decision to standardize suggests the desire to
address markets with some long-term commonality. For example, the
global market of smart cards in electronic commerce requires a
series of standards for the operating systems, commands and
interfaces, etc., that would encourage the development of necessary
applications.
Figure 1 shows the position of the standard in the product
cycle. Accordingly, standards can be anticipatory, participatory,
or responsive. Obviously, depending on their position, the types of
details to be included will vary.
Anticipatory standards are those standards that must be created
before widespread acceptance of devices or services. Examples of
anticipatory standards are: V.32 modem, X.25 packet interface,
ISDN, TCP/IP, the H.323 Recommendation of Internet telephony or the
Secure Electronic Transactions (SET) protocol for bank card
payments. The studies that precede the adoption of an anticipatory
standard should, ideally, involve all interested parties. In this
way, the standardization activities provide a more formal way for
sharing innovations among firms. The danger of anticipatory
standards is that the specifications could be premature and
encumbered by unnecessary or irrelevant details. The resultant
standards could be ignored, such as OSI management protocols, or
force a whole industry into a dead-end, such as the case of Group 4
facsimile. Therefore, the best anticipatory standards have very
well defined objectives and offer a minimum set of features to
stimulate the market.
Participatory standards proceed in lock-step with
implementations that test the specifications before adopting them.
This incidental benefit can be an important factor in spurring
innovation; for example, the development of G.728 CCITT/ITU-T 16
kbit/s speech coding algorithm led to a major breakthrough in voice
coding [6]. Some of the participatory standards are the speech and
voiceband coding algorithms of ITU Recommendations G.726, G.727,
G.728 and G.729, and the various Internet applications above the
TCP layer may be considered participatory standards (e.g., MBONE,
MMUSIC, etc.). Several specifications by industry groups to achieve
compatibility such as the Frame Relay Forum and the ATM Forum may
be considered as participatory standards. However, before the
Internet, a widespread interactive standards development
environment did not exist.
Responsive standards occur to codify a product or service that
has been sold with some success. When a stand-alone product is well
entrenched (e.g., Microsoft Windows), there may be no incentive to
standardize. In the telecommunications field, however, a
manufacturer, even with a large market share, may want to formalize
their product or service to benefit from network externalities.
Thus, responsive standards offer a systematic way of distilling
scientific information and available data into useful technical
constructs. They expedite the consolidation of knowledge and
provide avenues for sharing technical know-how. Some examples of
responsive standards are: V.42 (which is based on Microcom MNP
protocol), AT&T RJ telephone jacks, IBM's SDLC protocol of link
layers, DataBeam's data conferencing protocol that led to
Recommendation T.120 and Java. In such a case, precursor products
or services have already provided sufficient evidence that the
technology or market interest justifies the work on such standards.
A recent example is what happened with proprietary 56 kbit/s modems
that stimulated the development of the V.90 modem Recommendation
from the ITU.
Alternatively, a formal standards committee may wish to
standardize a technology that it is widely used (e.g., modem AT
command sets, UNIX operating system, programming languages, etc.)
and allow its reference in future work.
Responsive standards mean however, that the initial manufacturer
will have to contribute to the standards development, in addition
to developing a product. They may have to release technical
information earlier than anticipated or modify future product
plans. In addition, product differentiation will have to shift to
areas not covered by the standard and requires more agility to
response quickly to market needs. Should the choice of supporting a
responsive standard be made, the initial manufacturer has to: 1)
Achieve the maximum market penetration before supporting a
responsive standard., 2) enhance the product beyond the
standardized levels of functionality, or 3) differentiate the
product based on quality, customer support, or services.
One way to deny a competitor an advantage is to delay the
issuance of a responsive standard. This may be possible when
numerous interest groups are involved and there is no way to
achieve consensus. However, delaying a standard often results in
incompatible approaches and may fragment the market, such as what
happened with color television.
Interfaces to be Standardized
Figure 1 A layered architecture for technical standards.
Layer 1: Reference Standards. - Reference standards provide
measures to describe general entities in terms of reference units.
They include unit standards that define measurable physical
qualities, e.g., ohm, volt, watt, dBm, etc. Examples in the
information and telecommunications field include the ASCII
character set, the Open System Interconnect (OSI) model, the E.163
numbering plan for international telephone service, Internet
addresses, the ITU-T (International Telecommunications Union
Telecommunications Standardization Sector) software tools library,
etc.
Layer 2: Similarity Standards. Similarity standards define
aspects that have to be identical on both sides of the
communicating link, such as the nominal values, the low-level
technical specifications and the allowed variations (if any) among
implementations of the standard. This is the case for speech and
video coding algorithms, computer operating systems, as well as for
functions that terminate a layer in the OSI model.
Layer 3: Compatibility Standards. Protocol standards today often
consist of a core portion and many options. They define common
functions that the transmitter and the receiver pairs must have to
ensure successful communication, but both sides do not have to be
identical. Examples can be found in frame relay and ATM
specifications. The multiplicity of options has spurred the
creation of compatibility standards that go by as interfaces,
templates, user agreements or implementation agreements.
Compatibility standards can be verified if implementations are
available for testing before the standard is approved. This was the
case for mail protocols such as SMTP, Post Office Protocol 3 (POP3)
and Multipurpose Internet Messaging Extensions (MIME).
Compatibility itself has multiple dimensions, and maintaining
compatibility as standards evolve requires the ability to
accommodate extensions not yet defined.
Layer 4: Flexibility Standards. - Flexibility standards define
how multiple protocols could be run over a single platform. They
provide the framework to specify areas left for the future or that
are manufacturer specific options. While extension bits can be
found within many specifications, e.g., LAPD in ITU-T
Recommendation Q.921 or LAPF in Recommendation Q.922, the
programmable processors may stimulate the development of
independent flexibility.
For network access, proper flexibility means the support of
changes in the physical node (e.g., switching from Ethernet to
another interface), backward compatibility, or different types of
access (wireline or wireless). At the network end-points,
flexibility means the possibility of using different terminals. For
example, a hypothetical smart card may be read by readers with
contact and with contact-less readers, and may contain several
applications (bank card, electronic purse, wallet, etc.).
Tactical considerations
Contribution towards a standard implies a policy of knowledge
management, i.e., that of generating, keeping, and/or releasing
information. Without such a discipline, organized and consistent
participation in the standardization process may be difficult or
inefficient.
The explosion in information technology and the need for
interconnection have encouraged the proliferation of Standards
Development Organizations (SDOs). Information technology now deals
with the preparation, collection, transport, retrieval, storage,
access, presentation and transformation of signals in many forms.
These forms include speech, audio and video signals, graphics,
texts, still images, video as well as data. The end-users of the
information systems can be people, machines or a combination of
both. The number of permutations is exceedingly large, and each
specific organization is addressing only a part of the whole
spectrum of possibilities. A further complication is the
proliferation of consortia and fora that, in their view, they are
not "standard-setting" organizations, although they produce
compatibility standards to ensure that all components of the whole
communication system works together end-to-end.
The applicability of a standard can be assessed in terms of
market, industry or geography. This item has implications on the
details of the standards as well as how to go about
standardization. Traditionally, standards have been adopted by
governmental authorities that enforced them over a defined
geographic area. Increasingly, standards are adopted voluntarily
and regional standards organizations are expanding their influence.
For example, ETSI (European Telecommunications Standard Institute),
which is a European standards organization has taken the lead role
in defining the interface of IP-based telephony with the existing
telephone networks.
Selection of the standards organization to present to depends on
the following factors:
1. The working methods and procedures of a SDO may make it more
suitable for one type of interface standard than another. For
example, compatibility standards can be developed faster than
similarity standards, or flexibility standards do not require the
consensus need to achieve a reference standard. In general, formal
SDOs have more rigorous rules to ensure a fair and unbiased
process, while industry groups have less open procedures
2. The structure, composition and decision making process of a
SDO can be matched to the standardization process within the
product cycle. Anticipatory standards involve mostly architects,
participatory standards depend on developers while response
standards require users input. It is important to choose the SDO
whose decision-making process reflects the appropriate inputs for
each category of standards.
3. Whether the standards are local, regional or international.
In the area of electronic commerce standards such as as Electronic
Data Interchange (EDI), parts of the standards will be local or
regional and others will be international.
4. The parties that are involved. The constituency for
standardization could also include "system integrators," whose
business objective is to offer their customers, and on a world-wide
basis, a seamless suite of end-to-end information services. While
individual consultants have participated in various standards
organizations, the increased contribution of system integrators in
the standardization process may enhance the possibility for
reaching a faster consensus because their interests usually lie in
between standards seekers and standards creators.
Summary
Standards are the only realistic means of maintaining
compatibility in an increasingly complex multi-media environment.
Success in standardization requires an understanding the general
environment in which they take place. Hopefully, the proposed
framework will stimulate discussions on how to refine this above
model to produce more applicable guides for future standardization
activities.
NETWORK EXTERNALITIES
INTRODUCTION
To explain what network externalities is, in an understandable
manner, I will use an example. Imagine if you were the only person
having an email address and using emails as a form of
communication, this network would not worth anything as the product
as no one else uses this product. The more users there are using
the product, the more valuable the medium becomes. If you are not
able to write email to anyone else then what use/value does the
email have to you. In concrete terms, network externalities exist
when the value of a product to any user is greater the larger is
the number of other users of the same product.
Writing in 1950, Harvey Leibenstein analyzed the bandwagon
effect, by which he meant the extent to which the demand for a
commodity is increased due to the fact that others are also
consuming the same commodity. It represents the desire of people to
purchase a commodity in order to get into the swim of things; in
order to conform with the people they wish to be associated with;
in order to be fashionable or stylish; or, in order to appear to be
one of the boys.
TYPES OF NETWORK EXTERNALITIES
There are two types of Network Externalities, namely, Direct and
Indirect. Direct network externalities exist when an increase in
the size of a network increases the number of others with whom one
can communicate directly. Direct network externalities involve the
value aspect of things like telephone systems, computing platforms,
and especially the Internet and e-Commerce.
On the other hand, Indirect Network Externalities exist when an
increase in the size of a network expands the range of
complementary products available to the members of the network.
Additionally, indirect externalities involve related items like
devices (telephones, fax machines, or software applications)
becoming cheaper and more accessible as the number of overall users
increases. This may also extend to things like service or
parts.
Many industries exhibit network externalities. Some examples are
:
Telephone Network (direct): value of that any user places on
subscribing depends on the number of others with whom he can
communicate
ATM machines (indirect): the larger the network the greater is
the number of machines at which an ATM card can be used, hence
greater is the value of the network to any user
Diesel powered cars (indirect): having more widely available
fuel and service facilities the larger the number of other drivers
of such cars
In each case the value of the good derives entirely from its
ability to link many people possessing the same good. As a result,
the marginal benefit of the good to any one individual depends on
the number of other individuals who use it.
BENEFITS OF NETWORK EXTERNALITY
Network externalities are the effect that one user of a good or
service has on the value of that product to other people. Positive
network externalities exist if the benefits are an increasing
function of the number of other users (a lot of people use that
product/service). Negative network externalities exist if the
benefits are a decreasing function of the number of other users.
Considering firstly the positive externality, the classic example
is the phone market. The more people own phones, the more valuable
the phone is to each owner. That phenomenon generates a positive
effect because a user may purchase their phone without intending to
create value for other users, but does so in any case.
Lets consider Apple as an example: it derives most of its
revenues from the network externalities created from its iTunes
platform. The iPhone mainly and the iPod drive the companys
revenues, according to the main principle that everyone will have
compelling reasons to use an iPhone because the network externality
will make that device the product someone uses simply because it is
the one everyone else uses.
There are two important concepts that can rise as a consequence
of positive network effects: the bandwagon effect and the tipping
effect. The first one is an observed social behavior in which
people tend to go along with what others do or think without
considering their actions. The likelihood of a bandwagon effect is
greatly increased as more and more people adopt an idea or
behavior; this has led to the pejorative description herd effect in
reference to this interesting behavioral phenomenon. The bandwagon
effect can be seen at almost all levels of human interaction, and
being aware of its influence on you can help you make calculated
decisions which are based on your beliefs and values rather than
the temptation to go along with a group. Tipping, indeed, is a
situation more related to a competitive scenario. It occurs when
two companies are trying to sell quite the same product and a small
initial advantage for one of two competing goods proves
self-reinforcing, even with the possibility to drive the other out
of the market. In other words, it appears when positive feedback
causes consumers to swing to one of the two competing products;
when a good that has a substantial but not dominant market share
may stay in that range for an extended period, then, quite
suddenly, and often for no obvious reason, the market tips either
for or against it, and the good either become dominant or fades
away. A typical example of this phenomenon is the case of Betamax
Vs VHS: Sony's Betamax video standard was introduced in 1975,
followed a year later by JVC's VHS. For around a decade the two
standards battled for dominance, with VHS eventually emerging as
the winner. The victory was not due to any technical superiority,
it was just a consequence of the tipping effect.
On the other side, negative network externalities can also
occur, where more users make a product less valuable (network
congestion)6. Congestion occurs due to overuse. The applicable
analogy is still related to a telephone network. While the number
of users is below the congestion point, each additional user adds
additional value to every other customer. However, at some point
the addition of an extra user exceeds the capacity of the existing
system. After this point, each additional user decreases the value
obtained by every other user. In practical terms, each additional
user increases the total system load, leading to busy signals, the
inability to get a dial tone, and poor customer support.
Improvements in the technology of goods subject to network
externalities may at first lead to only gradual increases in the
size of the network, but when that network reaches a certain size,
a critical mass, it suddenly explode. At that point, in fact, the
value obtained from the product or service is 3 Mac to PCs PC to
iPhones... greater than or equal to the price paid for the product
or service. As the value of the good is determined by the user
base, this implies that after a certain number of people have
subscribed to the service or purchased the good, additional people
will subscribe to the service or purchase the good due to the
positive 'utility/price' ratio. Beyond the critical mass, the
increasing number of subscribers generally cannot continue
indefinitely. After this point, in fact, most networks become
either congested or saturated, stopping future uptake. Positive
feedback is obvious, more people means more interaction (Wikipedia
itself, for instance, depends on positive network effects).
Negative network effects result from both resource limits and
provider complacency (The absence of viable competitors in a
successful network can cause a provider to restrict resources,
consider fee increases, or otherwise create an environment contrary
to the users' benefit). What is obvious is that both success and
failure are self-reinforcing, which represents a way to pat
yourself on the back for progress towards the goal or standard you
have established. Self-reinforcement is an invaluable link between
the response & the outcome. The more often that a person can
pick out a target behavior & consistently give him or herself
reinforcement for that behavior, the more likely it will occur in
the future.
THE IMPACT OF NETWORK EFFECTS ON TECHNOLOGY
If a technology that is dependent on network effect starts to
lose market share to a challenger with a disruptive innovation, the
network effects will possibly be beneficiary to the challenger, who
perhaps have been successful in differentiating itself. In
addition, the technology life cycle will accelerate the tipping
point, meaning going from the maturity stage to the decline stage
quickly. Hence, how do technology companies use network effects as
a competitive advantage?
LOCK-IN
One method for creating a network effect is vendor lock-in, also
known as proprietary lock-in or customer lock-in. Lock-in can be
caused by network effects, and network effects generate increasing
returns that are associated with lock-in. This method is well known
in the telecommunications industry, where telecom operators
enthusiastically SIM lock the mobile phones that are sold with
their subscription which makes the phones only able to use the
specific telecom operators own SIM cards. This method can help in
ensuring the technology life cycle for a period of time.
WHAT TYPES OF NETWORK EFFECTS EXIST TODAY?
Today, there two kinds of values when discussing network
effects: Inherent, when people gain value from the use of the
product. A known example is Apple who is using both the iPod Touch
and the iPhone together with their Apps store, enabling the user to
take advantage of the products full capability.
The other value is Network, which can be both direct and
indirect. One gains value from the product when other or more
people use the same product. When it is a direct network value you
get an immediate result from more peoples use of the product, and
when it is an indirect network value, it is a secondary result that
the user gain. For example, when many users adopt the same
standards, the complementary products become cheaper.
On the other hand, network effect can both be positive and
negative.
Positive network effect is basically defined as the more people
the more interaction is achieved. Wikis depend mostly on positive
network effect. They usually only have value if there is many users
who share knowledge.
A well known example of positive network effects today is Apples
iPhone along with their Apps store, where the Apps store has
created an added value to the iPhone. According to Micael
Arrington, an entrepreneur and founder/co-editor of the online blog
TechCrunch, Apple has an opportunity in increasing the value of the
iPhone even more through the Apps store. The suggestion was that
Apple should consider ways to have users interact with each other
in order to build network value in order for Apple to have a long
term success with the iPhone. Arrington also argues that ignoring
this opportunity will open the doors for other competitors.
One opportunity in increasing the positive network even more is
through the development of game applications with a multiplayer
game mode that enables iPhone owners to interact with each other
across the world. A decade ago, Apple claimed its computers were
better than PCs. However, PCs became omnipresent, meaning that
there were more applications available everywhere. As a result,
Apples share of the computer market fell. So, why did the assumed
inferior product win? Apple was at the time promoting negative
network effects, meaning that their computer was limited to only a
few applications that was at that time only developed by Apple,
resulting in Microsoft gaining the competitive advantage of having
many applications to offer.
Ironically, the negative network effects, that killed the Apple
computer, made Apple able to redeem itself through the iPhone and
the Apps store and at the same time beat Microsoft at its own
game.
COMPETITION AND NETWORK EXTERNALITIES
Companies, who are dealers of Information goods, are completely
aware of the significance of Network Externalities. But, the
question remains as how does this concept shape their ideas.
Building a strong Sales Network is often the answer to products
which are believed to account for strong Network Externalities.
This could even be at the expense of short-term profits. The theory
is often seen to be relevant for the information industry which
tends to gather profits.
In order to understand this effect, lets look at an example
subject to a critical mass effect, such as that of NetBooks. At the
beginning, only Asus and MSI was the suppler of the product, which
was largely to in their interest to get the industry to critical
mass-to get explosion of sales that will occur when many people
feel that they should have NetBooks as so many other have it. But,
the question always remain on how the companies got the industry to
critical mass. Asus and MSI provided the NetBooks at a cheaper
price-may be even at a loss in the start-in order to increase the
size of the network. So we often see companies introducing new
high-technology products at a price we below production cost.
Similar logic could be applied in markets in subjects to
Tipping. As companies wants to do it all it can to induce the
market to tip towards their product, it has the audacity to
introduce the product at a cheaper rate until the market has
diverted towards its favor. Of course, firms offering rival
products have the same incentive, so the early stages of
competition in information goods often involve rival firms offering
their products for very littlein some cases nothing. The most
famous case may be the browser wars of the 1990s. A browser is
software used to access the Internet; the two main
competitorsNetscape Navigator and Microsoft Internet Explorerwere
both available for free.
In the reality, of course, we cannot be quite sure whether a new
product will ever achieve critical mass or whether it is possible
to tip the market toward a product by offering it cheaply. The
result is that there are many cases of attempts to launch products
that seem foolish in retrospect: goods sold cheaply, with lots of
money lost, that never take off.
CONCLUSION
Forecasting the future, market analysis and strategy are the
most important aspects of a product launch but, often, strategist
forget to think about the Network Externalities. It remains as the
hidden force which contributes towards success of the product. A
major reason how products like the Windows OS, NetBooks and the
iPhone App Store sustained the hard times and made place for
itself.
REFERENCES:
Baskin, E., Krechmer, K. and Sherif, M. H. (1998) "The Six
Dimensions of Standards: Contribution Towards a Theory of
Standardization," pp. 53-62 in Management of Technology,
Sustainable Development and Eco-Efficiency, Selected Papers for the
7th IAMOT Conference, L. A. Lefebvre, R. M. Mason and T. Khalil,
edts. Elsevier, 1998.
Mangematin, V. and Callon, M. (1991) Technological competition,:
strategies of the firm and the choice of the first users: The case
of road guidance technologies, Colloquium on the Management of
Technology: Implications for Enterprise Management and Public
Policy, Paris, France, May 27-28.
http://www.worthpublishers.com/krugmanwellsnew/pdf/chapter22.pdf
PROFITING FROM INNOVATION
Learning Objectives
Explain why innovating firms often fail to obtain significant
economic returns from an innovation, while customers, imitators and
other industry participants benefit
Discuss the fundamental building blocks of profiting from
innovation
Explain the implications of profitability and channel
strategies
Introduction
It is quite common for innovators those firms which are first to
commercialize a new product or process in the market to lament the
fact that competitors/imitators have profited more from the
innovation than the firm first to commercialize it.
Who benefits from an innovation?
Possible Outcomes from Innovation
Table presents a simplified taxonomy of the possible outcomes
from innovation. Quadrant 1 represents positive outcomes for the
innovator. A first-to-market advantage is translated into a
sustained competitive advantage which either creates a new earnings
stream or enhances an existing one. Quadrant 4 and its corollary
quadrant 2 show an example of innovators that fail and
imitators/followers that won the industry.
Definition of Terms Appropriability - environmental factors that
govern an innovators ability to capture profits generated by an
innovation
Codified Vs. Tacit knowledge - The ability to formally
communicate knowledge
Paradigmatic stage - when the dominant design has not be
formalized (technologies and arch. are fluid)
Dominant Design - The standard form, technology, and
architecture
Complementary Assets - Non technology assets that are needed to
make a product successful
Profiting from innovation: Basic building blocks
There are three (3) fundamentals building blocks:
Appropriability regime
Complementary assets, and
Dominant design paradigm
1. Regime of Appropriability
A regime of appropriability refers to the environmental factors,
excluding firm and market structure, that govern an innovators
ability to capture the profits generated by an innovation.
The most important dimensions of such a regime are the nature of
the technology, and the efficacy of legal mechanisms of
protection.Appropriability regime: Key dimensions
Legal Instruments
Patents
Copyrights
Trade secrets
Nature of Technology Product
Process
Tacit Knowledge
Codified Knowledge
Patents
It has long been known that patents do not work in practice as
they do in theory.
Many patents can be invented around at modest costs. They are
especially ineffective at protecting process innovations.
Often patents provide little protection because the legal
requirements for upholding their validity or for proving their
infringement are high.
Trade Secrets
In some industries, particularly where the innovation is
embedded in processes, trade secrets are a viable alternative to
patents.
Trade secret protection is possible, however, only if a firm can
put its product before the public and still keep the underlying
technology secret.
Usually only chemical formulas and industrial-commercial
processes (e.g., cosmetics and recipes) can be protected as trade
secrets after theyre out.
Codified and Tacit Knowledge
The degree to which knowledge is tacit or codified also affects
ease of imitation.
Codified knowledge is easier to transmit and receive, and is
more exposed to industrial espionage and the like.
Tacit knowledge by definition is difficult to articulate, and so
transfer is hard unless those who possess the know how in question
can demonstrate it to others.Tight or Weak?
The property rights environment within which a firm operates can
thus be classified according to the nature of the technology and
the efficacy of the legal system to assign and protect intellectual
property.
Appropriability regime can either be:
Tight - technology is relatively easy to protect.
Weak- technology is almost impossible to protect.
2. Dominant Design Paradigm
The emergence of a dominant paradigm signals scientific maturity
and the acceptance of agreed upon standards by which what has been
referred to as normal scientific research can proceed.
These standards remain in force unless or until the paradigm is
overturned.
Once DDP emerges, competition shifts to price and AWAY from
design.
Future innovation focuses on process innovation and/or details
of DPP.
If imitation is easy, followers can enter market, modify
innovators design yet rely on fundamental designs of innovator to
establish themselves as dominant design!It is commonly recognized
that there are two stages in the evolutionary development of a
given branch of a science:
1. the pre-paradigmatic stage when there is no single generally
accepted conceptual treatment of the phenomenon in a field of
study, and
2. the paradigmatic stage which begins when a body of theory
appears to have passed the canons of scientific acceptability.
3. Complementary AssetsComplementary Assets are non-technology
assets that are needed to make a product successful.
Everything else required to bring a product to market.
Marketing, manufacturing, support, distribution channels,
suppliers, learning, and name
In almost all cases, the successful commercialization of an
innovation requires that the know-how in question be utilized in
conjunction with other capabilities or assets.
Complementary Assets Needed to Commercialize an Innovation
Complementary assets: Generic, specialized and
Co-specialized
Generic: general purpose assets not tailored to the innovation.
e.g. plant & equipment for athletic shoes.
Specialized: assets with one-way dependence between innovation
and the asset e.g. specialized repair facilities for rotary engine
of automobiles
Co-specialized: assets with two-way dependence between
innovation and the asset. e.g. filling stations for hydrogen fuel
cell vehicles.
Implications for Profitability
These two concepts can now be related in a way which will shed
light on the imitation process, and the distribution of profits
between innovator and follower.
1. Tight Appropriability Regimes2. Weak Appropriability
Regimes1. Tight Appropriability Regimes
Strong legal protections &/or trade secrets are hard to
access
Innovator can and will translate innovation into superior
returns
Innovator has time to access needed complementary assets
Innovator may license innovation to gain generic assets
OR, innovator can commit money to acquiring specialized or
co-specialized CAs, AND
Innovator has time to refine product concept before DDP.
2. Weak Appropriability Regimes
1st question: Paradigmatic or Pre-paradigmatic phase?
If pre: innovator must be very careful to let the basic design
float until it is clear which design will become industry
standard.
Innovators must be linked to market ASAP so that user needs can
influence design.
Paradigmatic stage: As leading design emerges, volumes increase
economics of scale opportunities.
Firms ramp up for mass production by acquiring specialized
tooling & distribution.
Prices become less important -access to complementary assets
CRITICAL.
Since core technology is easy to imitate, COMMERCIAL SUCCESS
DEPENDS ON TERMS OF ACCESS TO CAs.
Monopoly holders of CAs could capture ALL profits from
innovation.
Channel Strategies: Contractual Mode
CONTRACTUAL MODE
Innovator signs contract (e.g. license) with independent
suppliers, manufacturers, distributors.
Pros: Less investment = less risk.
Less investment = less need for cash
Gain credibility/reputation of partner
Learn from partner
Cons: Convince potential partners to invest in irreversibilities
: Innovator may have to offer to carry some/most of risk.
Risk that partner doesnt perform as planned
Risk that partner copies & runs with design ie. innovator
CREATED competitor
Channel Strategies: Integration Mode
Integration involves ownership
Innovator could buy capacity in CAs BEFORE announcing innovation
OR
Innovator could buy capacity in CAs AFTER announcing
innovation.
However, if appropriability regime is WEAK, getting control of
CAs fast is CRITICAL bottlenecks/tight supply e.g. manufacturing
capacity, distribution)
In this case, innovator must PRIORITIZE CAs: If a CA is
critical, try to own.
BUT: money constraint (minority share)
Watch competitors (they might build or buy more
quickly/cheaply)
Integration vs. contract strategies: An analytic summary
The table makes it apparent that even when firms pursue the
optimal strategy, other industry participants may take the jackpot.
This possibility is unlikely when the intellectual property in
question is tightly protected. The only serious threat to the
innovator is where a specialized complementary asset is completely
locked up, a possibility recognized in cell 4.
With weak intellectual property protection, however, it is quite
clear that the innovator will often loose out to imitators and/or
asset holders, even when the innovator is pursuing the appropriate
strategy (cell 6). Clearly, incorrect strategies can compound
problems. Clearly, incorrect strategies can compound problems:
For instance:
if innovators integrate when they should contract, a heavy
commitment of resources will be incurred for little if any
strategic benefit, thereby exposing the innovator to even greater
losses than would otherwise be the case.
On the other hand, if an innovator tries to contract for the
supply of a critical capability when it should build the capability
itself, it may well find it has natured an imitator better able to
serve the market than the innovator itself.
Summary Points
In a weak appropriability regimes especially where required
manufacturing assets are specialized to the innovation,
participation in manufacturing is NECESSARY if innovator wants to
appropriate rents from innovation.
If an innovators manufacturing costs are HIGHER than those of
its imitators, innovator may lose most of the profits to the
imitators.
As the technology gap closes (dominant design emerges), basis of
competition shifts to co-specialized assets.
Take note that
Innovation produces information (i.e., reduces uncertainties
about outcomes)
You cant sell information on the open market without legal
protection because information can be copied at no cost
You can increase appropriability through legal protections but
it is not perfect in information because some always leaks out
References:
Summary & Discussion of Profiting From Technological
Innovation: Implications for Integration, Collaboration, Licensing
and Public Policy By David J. Teece (1987) Presentation to
InventVermont monthly meeting Feb. 10/05 Robert Letovsky, Ph.D.
Appropriability and Profiting from innovation, IPPD 4/13/00
www.wikipedia.com
www.google.com
NEW TECHNOLOGIES: CHOOSING THE RIGHT BUSINESS MODEL
Objectives:
To define a business model.
To identify the role of a business model.
To identify business model options.
Introduction
Technology is the making, usage, and knowledge of tools,
machines, techniques, crafts, systems or methods of organization in
order to solve a problem or perform a specific function. It can
also refer to the collection of such tools, machinery, and
procedures.
A business model describes the rationale of how an organization
creates, delivers, and captures value (economic, social, or other
forms of value). The process of business model construction is part
of business strategy.
In theory and practice the term business model is used for a
broad range of informal and formal descriptions to represent core
aspects of a business, including purpose, offerings, strategies,
infrastructure, organizational structures, trading practices, and
operational processes and policies. Hence, it gives a complete
picture of an organization from a high-level perspective.
Whenever a business is established, it either explicitly or
implicitly employs a particular business model that describes the
architecture of the value creation, delivery, and capture
mechanisms employed by the business enterprise. The essence of a
business model is that it defines the manner by which the business
enterprise delivers value to customers, entices customers to pay
for value, and converts those payments to profit: it thus reflects
managements hypothesis about what customers want, how they want it,
and how an enterprise can organize to best meet those needs, get
paid for doing so, and make a profit.
Business models are used to describe and classify businesses
(especially in an entrepreneurial setting), but they are also used
by managers inside companies to explore possibilities for future
development. Also, well known business models operate as recipes
for creative managers. Business models are also referred to in some
instances within the context of accounting for purposes of public
reporting.
Business Modeling is an important tool to both capture, design,
innovate and transform the business. However, in order to transform
ones organization and align them to ones business model, a business
model should not be seen separately, but in connection with:
The main business goals of the organization, e.g. strategic
business objectives, critical success factors and key performance
indicators, which a holistic business model approach should
include.
The main business Issues/pain points and thereby organizational
weakness, which a holistic business model approach should include
for they represent the threat to the companys business model.
A clear cause and effect linkages between the competencies,
desired outcomes and performance measurements e.g. scorecards.
An emphasis on business model management and thereby a
continuous improvement and governance approach to the business
model.
The business maturity level, in order to develop the
organization representation of core differentiated and core
competitive competencies [linked to strategy], which is a basis for
building a business model as they the represent some of the most
important sources of uniqueness. These are the things that a
company can do uniquely well, and that no-one else can copy quickly
enough to affect competition.
Linkages among competences and competency development.
The possible value creation and realization of the
organization.
The information flow, and thereby information need for effective
and efficient decision making.
Such a holistic approach would help clarify both intent and
sources of synergy and disconnect between business model, strategy,
scorecards, information, innovation, processes and IT systems. This
includes architectural alignment as well as business transformation
and value and performance views. Such dialogues allow Executives to
use the business model with their business alignment.
The Business Model
To extract value from innovation, a start-up (or any firm for
that matter) needs an appropriate business model. Business models
convert technology to economic value.
For some start-ups, familiar business models cannot be applied,
so a new model must be devised. Not only is the business model
important, in some cases the innovation rests not in the product or
service but in business model itself. In their paper, The Role of
the Business Modeling Capturing Value from Innovation, Henry
Chesbrough and Richard Rosenbloom present a basic framework
describing the elements of a business model.
Given the complexities of products, markets, and the environment
in which the firm operates, very few individuals, if any, fully
understand the organizations task in their entirety. The technical
experts know their domain and the business experts know theirs. The
business model serves to connect these two domains as shown
below.
A business model draws on a multitude of business subjects,
including economics, entrpreneurship, finance, marketing, and
strategy.The business model itself is an important determinant of
the profits to be made from an innovation. A mediocre innovation
with a great business model may be more profitable than great
innovation with mediocre business model.
In their research, Chesbrough and Resenbloom searched literature
from both the academic and the business press and identified some
common themes. They list the following six components of the
business model.
1. Value proposition a description the customer problem, the
product that addresses the problem, and the value of the product
from the customers perspective.
2. Market segment the group of customers to target recognizing
that different market segments have different needs. Sometimes the
potential of an innovation is unlocked only when a different market
segment is targeted.3. Value Chain Structure the firms position and
activities in the value chain and how the firm will capture part of
the value that it creates in the chain.4. Revenue generation and
margins how revenue is generated (sales, leasing, subscription,
support, etc.), the cost structure, and target profit margins.5.
Position in value network identification of competitors,
complementors, and any network effects that can be utilized to
deliver more value to the customer.6. Competitive strategy how the
company will attempt to develop a sustainable competitive
advantage, for example, by means of cost, differentiation, or niche
strategy.Business Model vs. Strategy
Chesbrough and Rosenbloom contrast the concept of the business
model to that of strategy, identifying the following
differences:
1. Creating value vs. capturing value the business model focus
is on value creation. While the business model also addresses how
that value will be captured by the firm, strategy goes further by
focusing on building a sustainable competitive advantage.2.
Business value vs. shareholder value the business model is
architecture for converting innovation to economic value for the
business. However, the business model but nonetheless impact
shareholder value.3. Assumed knowledge levels the business model
assumes limited environmental knowledge, whereas strategy depends
on a more complex analysis that requires more certainty in
knowledge of the environmentThanks to technology, there are more
business models to choose from than ever before. Today you can
start a business part-time or full-time, at home, online or in a
brick-and-mortar commercial location!
The key is to choose a business model that fits your Life
Plan.
As we always say, plan your life, then plan your business...
Some of the most successful and happy people we know are
entrepreneurs who created a business thats in perfect synchronicity
with what they want out of life. If you do what you love, youll
work harder, better and more happily.
Elements of your Life Plan:
Your Current Status
Think carefully and honestly about where you are now in your
life. Consider work, recreation, relationships, finances and
anything else thats important to you. And then jot down some
simple, succinct bullet points in each of these categories:
Quality rating of your life on a scale of 1 through 100, with
100 being the best possible life
Realities of your life, including responsibilities, funds
available to start a business, expenses
Things that make you happy
Things that make you unhappy
Your Ideal Life
This is a snapshot of your ideal life, in a very brief, bulleted
list. And remember, the skys the limit, so dont be afraid of being
bold or maybe even a little grandiose. Factor in things like family
time, hobbies, charity work, early retirement anything that gets
you really excited.
Your Loves: What You Really Like Doing
Think about the types of things that you love to do, whether at
work, at home, or at your local soup kitchen. List these things out
briefly. And don't worry if some themes are starting to repeat in
each section,
that just means you have some really focused ideas about what
you want in life!
Your Skills & Capabilities: What You Do Well
List the abilities, experience and strengths you can build on to
attain that ideal life.
Bear in mind that your skills need not be strictly from your
professional life list skills developed in your personal life as
well. It may be a combination of skills that leads you to a startup
thats best suited to