The Rough Guide to Technology and Innovation Management

Stefano Brusoni Professor of Technology and Innovation Management

Table of contents

A long and distinguished history, in a few words.

Science push vs. demand pull innovation

Open vs. closed innovation

Exploration vs. exploitation (gone mad!?)

Technology and Innovation Management, I

Technology and innovation management is the field of scientific enquiry focused on the analysis of how a socio-technical system of interconnected elements changes over time, whether by emergence or through design, and how such changes can be leveraged to generate value in a sustainable way.

Technology and Innovation Management, I

Technology and innovation management is the field of scientific enquiry focused on the analysis of how a socio-technical system of interconnected elements changes over time, whether by emergence or through design, and how such changes can be leveraged to generate value in a sustainable way.

Technology and Innovation Management, I

Technology and innovation management is the field of scientific enquiry focused on the analysis of how a socio-technical system of interconnected elements changes over time, whether by emergence or through design, and how such changes can be leveraged to generate value in a sustainable way.

Technology and Innovation Management, I

Technology and innovation management is the field of scientific enquiry focused on the analysis of how a socio-technical system of interconnected elements changes over time, whether by emergence or through design, and how such changes can be leveraged to generate value in a sustainable way.

Technology and Innovation Management, I

Technology and innovation management is the field of scientific enquiry focused on the analysis of how a socio-technical system of interconnected elements changes over time, whether by emergence or through design, and how such changes can be leveraged to generate value in a sustainable way.

Technology and Innovation Management, II

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The study of stress points in complex systems What systems?

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Human organizations, designed and managed to achieve relatively well specified goals through cooperative and coordinated work
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Large and small Public and private Profit and non-profit

What stress points?

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Science push vs. demand pull Open vs. closed Exploitation vs. exploration

So what?

VS.

TIM A bit of history

T. A. Edison

TIM A bit of history

F. W. Taylor

There are three causes for [slow work], which may be briefly summarized as:

First. The fallacy, which has from time immemorial been almost universal among workmen, that a material increase in the output of each man or each machine in the trade would result in the end in throwing a large number of men out of work.

Second. The defective systems of management which are in common use, and which make it necessary for each workman to soldier, or work slowly, in order that he may protect his own best interests. Third. The inefficient rule-of-thumb methods, which are still almost universal in all trades, and in practising which our workmen waste a large part of their effort.

TIM A bit of history

In order that the work may be done in accordance with scientific laws, it is necessary that there shall be a far more equal division of the responsibility between the management and the workmen than exists under any of the ordinary types of management.

TIM A bit of history

And then came Henry Ford

The Highland Park Plant in Detroit

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Development effort which led to Model T (1908-1914) Elimination of craft-made components Moving assembly line Interplay of organizational, managerial and physical innovations

Three great debates

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Science/technology push vs. demand pull

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Sources of ideas, IPRs, R&D, university-industry links, TTOs From Edison to

Open vs. closed innovation

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Firms boundaries, networks, incentives to innovate, users From Ford to

Rules vs. creativity

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Routines, formal structures, hero entrepreneurs, exploration vs exploitation, ambidexterity From Taylor to

1) The linear model of innovation

Vannevar Bush (1945) Science The endless frontier New products and processes are founded on new principles and conceptions which, in turn, are developed by research in the purest realms of science (p. 19)

TIM Science Push vs Demand Pull

Basic research is performed without thought of practical ends. It results in general knowledge and an understanding of nature and its laws. This general knowledge provides the means of answering a large number of important practical problems, though it may not give a complete specific answer to any one of them. The function of applied research is to provide such complete answers. The scientist doing basic research may not be at all interested in the practical applications of his [sic] work, yet the further progress of industrial development would eventually stagnate if basic scientific research were long neglected.
(Bush, 1945: http://www.nsf.gov/about/history/vbush1945.htm#ch3.5)
TIM Science Push vs Demand Pull

TIM Science Push vs Demand Pull

Did it work?

TIM Science Push vs Demand Pull

Souvenirs from the Moon

TIM Science Push vs Demand Pull

Source of all pictures; http://space.about.com/od/toolsequipment/ss/apollospinoffs.htm, last accessed August 27, 2009, 4.35pm

But also
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Civil application of nuclear energy followed its military development

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The Manhattan project

Both the Apollo program and the Manhattan project explain a lot of subsequent developments in microelectronics. Nixons War to Cancer + the development of biological weapons of muss destruction contributed to the molecular biology revolution
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National Cancer Act in 1971 Note that War to Cancer, overall, did not achieve its promises

TIM Science Push vs Demand Pull

Science/technology-pushed innovation
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Simple relationships
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New technologies are the application of previously acquired scientific knowledge Huge emphasis on R&D activities

It works, sometimes
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Electrical, electronics (some), chemicals, pharma

It is consistent with current emphasis on appropriability considerations

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Patents, licenses, academic entrepreneurship, Technology Transfer!!

TIM Science Push vs Demand Pull

The evidence for demand-pull

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Economic historians devoted considerable attention to the sources of innovation Schmookler, 1960s
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Pioneering work on US data in sectors such as railroads, petroleum refining, construction etc

Main conclusion
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Invention and innovation are essentially economic activities, given that shifts in the allocation of resources to invention and innovation reflect shifts in market demands (enter the social scientists) Demand as incentive and demand as knowledge

TIM Science Push vs Demand Pull

Demand as incentive to innovate

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Invention takes talent, hard work and money

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Invention is an economic activity Incentives to invent are positively affected by prospective rewards (i.e. expected profitability)

It is easier to undertake an innovative project when it is riding a rising trend and in the earlier phases of this trend Prospective rewards are ultimately determined by the volume of sales, i.e. the expected demand or, stated differently, the size of market

TIM Science Push vs Demand Pull

Additional evidence
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Marquis and Meyers (1969): survey of innovators to discover that 75% of ideas come from would-be customers Freeman 1974 (the SAPPHO Project): importance of attention to users needs in distinguishing successful from unsuccessful products Von Hippel (mid 1970s) on the role of users in developing innovation .

TIM Science Push vs Demand Pull

Demand as knowledge, I
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Innovation is an inherently uncertain process

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Useful knowledge about market needs reduces uncertainty

Knowledge about customers needs increases the probability of introducing a successful innovation, the expected profits and, ultimately, the incentive to innovate Demand is the main source of new ideas and technology lags behind

TIM Science Push vs Demand Pull

Demand as knowledge, II
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Users actually change the technology to solve their problems

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Medical devices Surf boards Open source software Robotics Etc etc.

Very popular nowadays, also referred to as:

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Crowdsourcing Virtual customer environment Participatory design Professional amateurism Open innovation model

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von Hippel, Eric (2005), Democratizing Innovation, MIT Press Georg von Kroghs work http://www.smi.ethz.ch/
TIM Science Push vs Demand Pull

Open issues
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Very important questions focus on:

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The role of IPRs in academic research The role of TTOs and, more generally, the management of technology transfer Academic entrepreneurship

Can users deliver radical innovations? Or is it simply about incremental innovation?

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The engagement of customers through Internet-based technologies The emergence of platforms for innovation

2) Open vs. closed innovation

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The case of Free/Open software

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A specific development model based upon the collective work of a distributed community of independent programmers who agree to share the source code through a General Purpose License.
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Viral close

Open source approaches differ from the proprietary model of software licensing by allowing other individuals and organizations to view, modify and redistribute the source code. The Cathedral and the Bazaar
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Raymond 1999

TIM Open vs. closed innovation

TIM Open vs. closed innovation

Source: Wikipedia, http://it.wikipedia.org/wiki/Unix,

Four problems with F/OSS

1.

Open source software should be prone to the freerider problem;

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how can open source software projects encourage the active participation of talented developers who are not directly rewarded for their efforts?

2.

Why do profitmotivated firms collaborate in open source projects?

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E.g. IBM!

3.

How have loosely coordinated networks of "hackers" been able to manage complex development projects?
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Against forking!

4.

What is the impact of this specific institutional arrangement on the rate of technological innovation?
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Does it matter, in the end?

TIM Open vs. closed innovation

Another case of collective innovation

Lessons from Cornwall

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No consolidated understanding of the working of the artefact (e.g. steam engine) Reputation mechanisms which provide incentives to disclose technical information
}Job market issues }P roblem 1)

}Average aggregate performance }C reate sufficiently large installed }P roblem 1) and 2)

Disclosure does not prevent appropriation

base

TIM Open vs. closed innovation

Coordination in F/OSS and collective invention

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Given enough eyeballs, every bug is shallow

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Attributed to Raymond

Debugging vs. kernel-level modifications

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Modularity

TIM Open vs. closed innovation

Coordination in F/OSS and collective invention

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Two different and hierarchically ordered ladders in GNU/Linux

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The kernel space (the quasi integrated cathedral) The user space (the modular bazaaar)

Delegation to few trusted lieutenants to check proposed patches to kernel

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Few and trusted!

Vast majority of F/OSS projects are stillborn.

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Very strong reputation effects

TIM Open vs. closed innovation

Four answers about F/OSS

1.

Open source software should be prone to the freerider problem; how can open source software projects encourage the active participation of talented developers who are not directly rewarded for their efforts?

Reputation effects

2.

Why do profitmotivated firms collaborate in open source projects?

Installed base; average aggregate productivity argument

3.

How have loosely coordinated networks of "hackers" been able to manage complex development projects?

Kernel and modularity

4.

What is the impact of this specific institutional arrangement on the rate of technological innovation?

Positive

TIM Open vs. closed innovation

Open issues
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Business model innovation

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How do people make money out of this? Bundling of products and services

Can you really see it in practice, outside of the software sector?

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Steve Jobs, certainly not an open innovator Product architectures as strategic levers for selectively open and close

Corporate entrepreneurship
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Established organizations intentionally generate large numbers of spin outs. Why?

Can it be open before being closed?

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A traditional life cycle argument? The role of pioneers and technological leaders

TIM Open vs. closed innovation

3) Rules and creativity

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A long tradition, going straight back to Taylor

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What role do rules play in explaining innovation and change? Do they kill creativity or foster change? Is it about key individuals? Or is it about great committees?

A new breed of micro-level studies

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Exploitation and exploration Ambidexterity

TIM Rules and creativity

Exploration and exploitation

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Exploitation
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Refinement, production, efficiency, implementation Variation, risk taking, experimentation, play, flexibility

Exploration Adaptive systems which emphasize exploitation are likely to get stuck in sub-optimal equilibria.
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The failure of established organizations

Adaptive systems which emphasize exploration are likely to be unable to gain the benefits of their innovative endeavours
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XEROX PARC!

TIM Rules and creativity

Exploration and exploitation

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Returns from exploration are uncertain, more remote in time, and organizationally distant from the locus of action and adaptation
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E.g. the R&D lab!!

Returns from exploitation are reliably linked to the time and place in which they take place.
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E.g. the manufacturing unit

How to switch from one to the other?

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And bring Edison back in the analysis

TIM Rules and creativity

T. A. Edison reinterpreted
Behavior at organizational level

exploitative

explorative

Source: Laureiro et al JNPE 2010

T. A. Edison reinterpreted
Behavior at individual level

exploitative

explorative

Source: Laureiro et al JNPE 2010

T. A. Edison reinterpreted

Attention focus

narrow

broad

Source: Laureiro et al JNPE 2010

T. A. Edison reinterpreted
Behavior at organizational level Behavior at individual level Attention mode

LC mode
phasic tonic

Source: Laureiro et al JNPE 2010

Why does it matter? Exploitation and Exploration

Learning, reward perception, Attention control regions, perseveration planning, idea generation, switching.

Source: Laureiro et al 2012

Why does it matter? Entrepreneurs vs. Managers

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Entrepreneurs do NOT explore more } What matters is how they explore Entrepreneurs routinize their exploration more than managers } They develop simple rules to select their next move! Routinization and performance are significantly correlated } Nelson and Winter proved right! Entrepreneurs performance is significantly better } Higher cumulative payoff

Source: Laureiro et al 2012

Cognitive control, routinization and performance

Entrepreneurs correlations ~ 0.313 to 0544***

Cognitive control regions

Bilateral FrontoPolar Cortex Bilateral parietal cortex Intraparietal sulcus Locus coeruleus (LC)

Routinization Routinization

Entrepreneurs corr. -0.623***

CCCs

Entrepreneurs corr. ~ 0.505 to 0.671***

Decision-making Exploration-exploitation Performance performance

TIM Rules and creativity

Open issues
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Neuroscientific techniques are widely available, but they are built on specific theories and methodological assumptions
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Small sample research, repetitive tasks

Much can be said also with more traditional techniques

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Interviews, case studies, surveys etc.

The fact that we can, does not imply we should

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Ethical issues

And anyway, how do we go from Edison to Menlo Park really?

TIM Rules and creativity

Conclusions

A long and distinguished history, in a few words.

Science push vs. demand pull innovation

Open vs. closed innovation

Exploration vs. exploitation (gone mad!?)

Thanks! sbrusoni@ethz.ch