Technology Change and the Emergence of Entrepreneurial Opportunities

• 1. A/Prof Jeffrey Funk Division of Engineering and Technology Management National University of Singapore For more information, see Exponential Change: What drives it? What does it tell us about the future.? http://www.amazon.com/Exponential-Change-drives-about-future-ebook/dp/B00HPSAYEM/ref=sr_1_1?s=digital- text&ie=UTF8&qid=1391564750&sr=1-1&keywords=exponential+change

2. Basic Course Objectives When do new technologies become economically feasible? How can we find these technologies? either as an entrepreneur employee of a large company Finding these technologies requires us to understand those technologies that are experiencing rapid rates of improvement These technologies are more likely to become economically feasible for a growing number of applications than are technologies with slower rates of improvement This module helps you find these technologies Analyze them and present your findings in an end-of year presentation 3. Change Provides Opportunities It provides opportunities for new products and services It also provides opportunities for new firms New entrants Incumbents with low shares Types of changes Technology Political and regulatory rules Social and demographic factors Industry structure 4. Looking at this Change in More Detail Technology Magnitude of change is important (e.g., changes in the concepts or architectures that form basis of technology) General changes (Integrated Circuits, magnetic storage, Internet) provide more opportunities than do changes in special technologies Political and regulatory rules Licenses Environmental and safety rules Social and demographic factors Changes in customer taste Increased incomes Demographic changes such as more women in the workforce or longer life spans Industry structure Vertical disintegration Lower capital intensity 5. Example of How Changes Led to Entrepreneurial Opportunities in Personal Computers Opportunity (Personal Computers in 1970s, including software and components) Social: more income and more knowledge workers at home or in small businesses Economic: greater need for processing information Industry structure: more vertical disintegration in computer industry Technology: falling cost and rising performance of integrated circuits (ICs) and magnetic storage 6. Many Types of Entrepreneurial Opportunities Emerged for Personal Computers Manufactures of Personal computers Integrated circuits (ICs) Hard disks Compact disks (CDs) Displays Other sub-assemblies Design houses for integrated circuits (ICs) Software suppliers Contract manufacturers for PCs and sub-assemblies Changes in higher level systems such as retail, logistics, finance, manufacturing, insurance, and health care 7. For Change, MT5009 Focuses on Technological Change Technological change makes new things technically and economically feasible (and often leads to higher incomes) Most venture capital is in industries with lots of technological change Other types of change are important, but receive less emphasis in this module There are patterns of technological change that enable us to understand when new technologies might become economically feasible 8. Number of U.S. Firms Receiving Venture Capital Funding Source: Dow Jones Venture Capital Industry Report Industry Group Industry Segment 2000 2005 Healthcare Biopharmaceuticals 338 244 Services 53 43 Medical devices 228 195 Medical Information Systems 210 54 Total 829 537 Information Technology Broadcasting and Cable 17 6 Other Communications & Networking 808 181 Electronics & Computer Hardware 157 106 Information Services 627 116 Semiconductors 254 141 Software 1790 690 Total 3653 1276 Other 1834 426 Grand Total 6316 2239 9. All Industries in 2010 26.45 Billion USD Aerospace and defense 97 Agriculture and forestry 34 Biopharmaceuticals 3,246 Business support services (mostly Internet) 2,516 Communications and networking 1,027 Construction and civil engineering 141 Consumer information services 4,552 Electronics and computer hardware 1,282 Financial institutions and services 631 Food and beverage 100 Healthcare services (mostly Internet) 1,144 Household and office goods 71 Machinery and industrial goods 188 More Recent Data from Dow Jones 10. All Industries Billions of USD Materials and chemicals 413 Media and content 343 Medical devices and equipment 2,249 Medical software and information services 478 Non-renewable energy 296 Personal goods 47 Renewable energy 2,118 Retailers 182 Semiconductors 764 Software 3,762 Travel and leisure 133 Utilities 141 Vehicles and parts 460 Wholesale trade and shipping 0 11. Returning to Change, Which Technologies are Becoming Economically Feasible? To understand this questions, we must understand rates of improvement Which technologies have rapid rates of improvement and what drives these improvements? What drives the emergence of and improvements in technologies, e.g., improvements in cost and performance? For economically feasible, we can also use the term value proposition When does a new technology provide a superior value proposition to some set (or an increasing number) of users? And thus begin diffusing? 12. New Technologies Diffuse. Because they offer a superior value proposition to some set of users (when compared to existing technologies) Benefits from the value proposition include superior performance in one or more dimensions superior features lower price When might improvements in cost or performance enable a new technology to offer a superior value proposition and thus begin diffusing? Talking about the diffusion of new technologies is really talking about the future 13. What is the Future of Cities? 14. Maybe not the so distant future for cities? 15. How About Transportation in Cities? Will these vehicles be auto- nomous vehicles and will they be moving at 100 km per hour? 16. Maybe the Farms will be in the Cities What About Transport of Vegetables, Fruits, and other Food? 17. How will we get information in cities of future? 18. Or Maybe Our Cities will be Someplace Else? 19. What is the Future of Offices? 20. How big will these displays be? And how will we interact with these displays? 21. Will We Use Our Hands i.e., Gesture Interface? Or something else? 22. How About Our Homes? What will they be Like? 23. What About the Future of Energy? The Future of Energy? 24. What About the Future of the Environment? 25. Or the Future of Humans? 26. We Could Look at Many Such Pictures of the Future..but Obviously there are many technologies that might shape our future And their numbers are rapidly increasing.. Which ones will become a reality and which ones will fade away? Will these technologies lead to better lives for us, our families, our grandchildren? Will you personally benefit from them? As users? As suppliers? As entrepreneurs? 27. Which Technologies will become a Reality and which ones will Fade Away? This is obviously difficult to predict Depends on rates of improvements user preferences interactions between multiple technologies or what I call an interaction between systems and components Improvements in components enable us to design new and better systems All of the previous pictures were of systems We focus on rates of improvement in specific technologies 28. Faster Rates of Improvements Increase the chances that a new technology or systems composed of that technology will become economically feasible For example, Moores Law enabled emergence of many new systems Calculators, digital watches Personal computers, laptops, tablets, PDAs Video games, digital cameras, MP3 Players E-book readers, digital TV, smart phones What new systems will Moores Law or other technologies enable in the future? This question was implicit in many of the pictures shown earlier 29. A Key Question? Which Technologies are Experiencing Rapid Rates of Improvement? What do you think? 30. What do you think? Improvements in which of the following technologies will have the largest impact on reducing the usage of fossil fuels in the next 10 years? Batteries? Wind turbines? ICs, lasers, other electronic components, computers? Superconductivity? 31. Rates of Improvements Batteries about 5% per year Wind Turbines about 2% per year ICs, computers, lasers, electronic components between 30 and 40% per year Superconductors between 30 and 50% a year Slow rates of improvements suggest that improvements in batteries and wind turbines will have smaller effect than will other technologies 32. Importance of Fast Rates of Improvement is Often Underestimated 1% per year: 70 years for doubling 5% per year: 14 years for doubling 15% per 10% per year: 7 years for doubling 20% per year: 3.5 years for doubling 30% per year: 2.3 years for doubling Technologies with rapid rates of improvement can have a large impact on our world and how we design cities, homes, offices, health care and energy generation and distribution 33. What About Mobile Phones? (1) In early 1980s, one study concluded there would be about 1 million mobile phones in use by 2000 Some would say we under estimated the need for mobile phones I say we under estimated the impact of Moores Law on the cost of mobile phones 34. What About Mobile Phones? (2) In early 2000s, many believed that location services were a huge market Until recently no one used these services Until recently some would say we overestimated the need for such services I say we over estimated the impact of Moores Law on the cost of such services for short term under estimated the impact for long term 35. Another Reason Fast Rates of Improvements are Underestimated Cognitive biases Nobel Laureate Daniel Kahneman 36. Cognitive Biases Nobel Laureate Daniel Kahneman People assess relative importance of issues, including new technologies by ease of retrieving from memory largely determined by extent of coverage in media E.g., media talks about solar, wind, battery-powered vehicles, bio-fuels and thus many think they have rapid rates of improvement - but only some are Second, judgments and decisions are guided directly by feelings of liking and disliking One person invested in Ford because he liked their products but was Ford stock undervalued? Many people like some technologies and dislike others without considering rates of improvement Source: Daniel Kahneman, Thinking Fast and Slow, 2011 37. Isnt there a more deliberate and logical way? Understanding rates of improvement can help firms, universities, and governments better understand when new technologies might become economically feasible Technologies must have some level of performance and price for specific applications before they begin to diffuse Technologies that experience faster rates of improvement are more likely to become economically feasible. They are also more likely to have an impact on how we design higher-level systems This has implications for R&D policy and solving global problems such as urban congestion, sustainability But which technologies are currently experiencing rapid rates of improvement and why? 38. Technology Dimensions of measure Time Period Rate Per Year Integrated Circuits Number of transistors per chip 1971-2011 38% Power ICs Current Density 1993-2012 16.1% Camera chips Pixels per dollar 1983-2013 48.7% Light sensitivity 1986-2008 18% MEMS Number of Electrodes per Eye 2002-2013 45.6% Drops per second for printer 1985-2009 61% Organic Transistors Mobility 1994-2007 101% Computers Instructions per unit time 1979-2009 35.9% Instructions per time and dollar 1979-2009 52.2% Technologies Experiencing Rapid Rates of Improvements (Information Transformation) 39. Technology Dimensions of measure Time Period Rate Per Year Carbon Nanotube Transistors 1/Purity (% metallic) 1999-2011 32.1% Density (per micrometer) 2006-2011 357% Superconducting Josephson Junctions 1/Clock period 1990-2010 20.3% 1/Bit energy 1990-2010 19.8% Qubit Lifetimes 1999-2012 142% Bits per Qubit lifetime 2005-2013 137% Photonics Number of Optical Channels 1983-2011 39.0% Computers Instructions per unit time 1979-2009 35.9% Instructions per time and dollar 1979-2009 52.2% Quantum Computers Number of Qubits 2002-2012 107% Technologies Experiencing Rapid Rates of Improvements (Information Transformation - Continued) 40. Sub-Technology Dimensions of measure Time Period Rate/ Year Magnetic Storage Recording density (disks) 1991-2011 55.7% Recording density (tape) 1993-2011 32.1% Cost per bit 1956-2007 32.7% Flash Memory Storage Capacity 2001-2013 47% Resistive RAM 2006-2013 272% Ferro-electric RAM 2001-2009 37% Phase Change RAM 2004-2012 63% Magneto RAM 2002-2011 58% Technologies Experiencing Rapid Rates of Improvements (Information Storage) 41. Technology Domain Sub-Technology Dimensions of measure Time Period Rate/ Year Information Transmission Last Mile Wireline Bits per second 1982-2010 48.7% Wireless, 100 m Bits per second 1996-2013 79.1% Wireless, 10 m 1995-2010 58.4% Wireless, 1 meter (USB) 1996-2008 77.8% Materials Transformation Carbon Nanotubes 1/Minimum Theoretical Energy for Production 1999-2008 86.3% Biological Trans- formation DNA Sequencing per unit cost 2001-2013 146% Synthesizing per cost 2002-2010 84.3% Cellulosic Ethanol Output per cost 2001-2012 13.9% Technologies Experiencing Rapid Rates of Improvements 42. Technologies Experiencing Rapid Rates of Improvements Technology Domain Sub- Technology Dimensions of measure Time Period Rate Per Year Energy Trans- formation Light Emitting Diodes (LEDs) Luminosity per Watt 1965-2008 31% Lumens per Dollar 2000-2010 40.5% Organic LEDs Luminosity per Watt 1987-2005 29% GaAs Lasers Power/length-bar 1987-2007 30% LCDs Square meters/dollar 2001-2011 11.0% Quantum Dot Displays External Efficiency 1994-2009 79.0% Solar Cells Peak Watt Per Dollar 2004-2013 21.0% Photo-sensors (Camera chips) Pixels per dollar 1983-2013 48.7% Light sensitivity 1986-2008 18% Energy Transmission Super- conductors Current-length/dollar 2004-2010 115% Current x length-BSSCO 1987-2008 32.5% Current x length-YBCO 2002-2011 53.3% 43. I probably missed some.. Can you find other ones in your group presentations? Or can you combine these technologies or these and other technologies into new systems Dont just copy what others say, combine technologies into new and novel systems This is your opportunity to think about the future and do so in a more rigorous way than is done by the media Technologies with rapid rates of improvement will have a large impact on the world partly depending on how they are combined in novel and interesting ways 44. Understanding why these Technologies Experience Rapid Improvements is also Important Cumulative production is not the main story! Costs fall as cumulative production grows in learning or experience curve as automated manufacturing equipment is introduced and organized into flow lines Implications: stimulating demand will lead to cost reductions. This is one reason why many governments subsidize the introduction of clean energy more than they subsidize R&D spending Clayton Christensens theory of disruptive innovation also implies that increases in demand will lead to reductions in cost and improvements in performance 45. Christensens theory of disruptive innovation also implies that performance improvements automatically emerge once a low-end innovation has been found 46. A Very Different Story can be Told Rapid improvements in areal recording density enabled smaller disk drives to emerge and enabled increases in the capacity of these disk drives Similar story can be told with Moores Law and emergence of smaller and better computers Conclusion: find technologies with rapid rates of improvement and you will find disruptive technologies 47. My story: Cumulative Production is Overrated! As described throughout this semester, it is not the primary driver of improvements, even the primary indirect driver of improvements Many technologies experience improvements with little or no commercial production! These improvements are implemented in laboratories by scientists and engineers who are motivated by publications, patents, and awards And sometimes by commercializing these technologies We will talk about the drivers of these improvements in detail in Session 2 48. Technology Commercial Production Dimensions of measure Time Period Improvement Rate Per Year Organic LEDs 2001 Luminosity per Watt 1987-2005 29% Organic Solar Cells 2010 Efficiency 2001-2013 11.5% Organic Transistors 2007 Mobility 1994-2007 101% Perovskite Cells 2013 Efficiency 2009-2013 >10% Quantum Dot Displays 2013 External Efficiency 1994-2009 79.0% Quantum Dot Solar Cells 2013 Efficiency 2010-2013 42.0% Resistive RAM 2013 Storage Capacity 2006-2013 272% Ferroelectric RAM 2005 2001-2009 37.8% Magnetoresistant RAM 2004 2002-2011 57.8% Phase Change RAM 2006 2004-2012 63.1% Carbon Nanotubes for Transistors 2011 1/Purity 1999-2011 32.1% Density 2006-2011 357% High Temperature Superconductor Wire (YBCO and BSSCO) 2006 Current-length per cost 2004-2010 115% Current x length-BSSCO 1987-2008 32.5% Current x length-YBCO 2002-2011 53.3% Superconducting Josephson Junctions 2011 1/Clock period 1990-2010 20.3% 1/Bit energy 1990-2010 19.8% Qubit Lifetimes 1999-2012 142% Bits/Qubit lifetime 2005-2013 137% Quantum Computers 2011 Number of Qubits 2002-2012 107% Technologies with Rapid Rates of Improvement with little, no Production 49. Technology Start of Commercial Production Recent Sales Data ($ Millions) Sources of Sales Data Organic LEDs 2001 300 in year 2012 (Display Search 2013) Organic Transistors 2007 530 (printed electronics) in Year 2010) (Markets and Markets, 2011) Organic Solar Cells 2010 4.6 in Year 2012 (IDTE, 2012) Quantum Dot Solar Cells 2013 Zero until 2013 (Investorshub, 2013) Quantum Dot Displays 2013 Zero until 2013 (Research & Markets, 2013) Resistive RAM 2013 200 (Yole, 2013) Ferroelectric RAM 2005 Magneto-resistant RAM 2004 Phase Change RAM 2006 Single Walled Carbon Nanotubes for Transistors 2011