Suh Num Pyo (KAIST) - Theory Of Innovation

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Suh Num Pyo (KAIST) - Theory Of Innovation

  1. 1. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication Theory of Innovation Nam P Suh President Korea Advanced Institute of Science and Technology Daejeon, Korea Abstract Three laws of innovation are advanced as the necessary conditions for innovation. The first law states that for innovation to occur, all the required steps of an innovation continuum must be present. The second law states that an innovation hub can be nucleated if the initial size of the nucleate is larger than the critical size and if the activation energy barrier for nucleation can be overcome. Once the innovation hub is nucleated, heterogeneous nucleation of innovation can occur around the innovation hub. The third law states that for innovation to occur, the nucleation rate of innovation must be faster than the rate at which innovative talent and ideas can diffuse away from the region. These three laws of innovation are analogous to the laws that govern natural systems. Based on this theory, government policies for economic growth based on innovation can be formulated. Two case studies are presented. Keywords: theory of innovation, innovation continuum, innovation kinetics, diffusion of innovative ideas, laws of innovation 1
  2. 2. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication Introduction The purpose of this paper is to propose a theory for innovation which can provide a basis for designing policy and formulating strategies by governments and industries. This theory may also provide a pedagogical framework for teaching and learning about innovation. The theory consists of three laws of innovation which are evaluated within the context of an innovation continuum. Two case studies are presented to support the proposed theory: the MuCell technology that originated from MIT and the Mobile Harbor that originated from KAIST. Motivation Innovation: The Engine for Economic Growth Innovation has been the economic growth engine for the world (Rosenberg, 2004; Welfens, et al, 2008). New products, processes, services and systems that advance or revolutionize various aspects of society are some of the most desirable means of spurring economic growth. Therefore, many nations focus on innovation to fuel their economies. In order to achieve this goal, governments support research at universities and enact legislations that encourage private sector R&D investment. The goal is to create new or reinvigorate existing industries by converting research results or inventions into commercially viable and/or socially useful products. However, innovation is often difficult to understand and predict. 2
  3. 3. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication Past Track Record: Why are there regional differences? The rates of innovation differ a great deal among nations and even between regions within a nation. For example, the roughly $2 billion dollar per year R&D investment made in biotechnology by the U.S. government in the Boston area has resulted in about 300 biotechnology and 150 medical device technology firms (Nelsen, 2005). The top 10 of these firms had a combined market capitalization of about $90 billion in 2005. However, comparable R&D investments made in many other countries have not produced similar results. Within the United States, there are also differences in terms of their ability to nurture new industries based on innovation (OTA, 1984). It is known that the Silicon Valley in California and the greater Boston area of Massachusetts have been successful in creating new industries. Many other areas of the U.S. – despite serious attempts – have not been able to replicate the successes of these regions. What differentiates these innovation hubs from the regions that have had limited success? And, what lessons can we learn that will help us create new, successful innovation hubs elsewhere in the world? R&D and Innovation Because of the current economic crisis, governments worldwide are searching for an economic engine that can generate jobs and stimulate the economy. Korea is no exception. The New Growth Engine Task Force1 just completed the task of identifying promising fields that could increase the GDP per capita by a factor of two in five to ten years. As a 1 Task Force created by the Ministry of Knowledge Economy consisted of 360 experts chaired by the author. 3
  4. 4. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication result of this effort, 22 promising technological fields have been identified. Some of these will require innovation. The past R&D investment by Korean government has had limited success in creating innovative technologies. Korea’s economic growth has been primarily from their successful investment in established industries, e.g., shipbuilding, automobiles, steelmaking, consumer electronics, and semiconductor manufacturing rather than through new innovations. The limited success the Korean government has had in fostering major innovations may be attributed to the lack of the innovation continuum in Korea. Innovation It is generally agreed that innovation refers to the process of converting research results, ideas, inventions or scientific discoveries into commercially successful products, processes, services or systems. Many different models, principles, and theories have been proposed for innovation (Drucker, 1985; Utterback, 1996; Schotchmer, 2006). (a) Innovation Process One of the major impediments in the innovation process is the belief that invention cannot be systematic and be based on scientific principles. However, the innovation process does not have to be ad hoc. Invention can be made to satisfy a chosen set of functional requirements (FRs) in a systematic way. Axiomatic design theory (Suh, 1990, 2001; Lee and Suh, 2006; Sohlenius, 2008) has provided a scientific basis for obtaining design solutions and creating inventions that satisfy a given set of goals (FRs). This theoretical framework has been used to innovate a large number of patented products, software, processes, and systems, including organizations and hospitals. At 4
  5. 5. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication KAIST, it is a required freshman subject and the students do wonderful original work, some of which have been presented at international conferences. Invention forms first three levels of the innovation continuum. (b) Innovation Continuum Continuum of essential steps The following steps are part of a general innovation process. The sequence of individual tasks can vary depending on the situation. 1. Identify the need for a new product or process or service or system 2. Perform basic and/or background research 3. Create, test, select and revise ideas via funneling 4. Demonstrate the feasibility of the idea 5. Test the commercial viability of the idea 6. Find an “angel” who will be willing to invest in #4 and #5 7. Raise venture capital or find a large company that is willing to take over the idea and develop it 8. Create or identify a venture company that can manufacture and sell the product 9. Hire talented people for all functions that the company must perform, including R&D, manufacturing, marketing, sales, purchase, and administration 10. Raise a large amount of capital through a public offering 11. Sell the venture company 5
  6. 6. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication These steps form an innovation continuum from the inception of an idea to its completion as one or more commercial products. When some of these steps are missing, the probability of success for innovation decreases significantly. Once the need for innovation is clearly identified, there must be infrastructure to support the innovation including: a strong foundation for basic research and technological invention; a financial community that is willing to supply the risk capital; and an industry with the necessary expertise to develop and manufacture the invention and the know-how for commercialization. Commercialization requires infrastructure of its own, including: legal expertise, financing, manufacturing, public relations, and human resources. For innovations that involve advanced technology, strong and leading research universities are needed not only for ideas and scientific expertise but also to teach and train talented people who can man companies that are developing innovative products. Money is also clearly central to any innovation, since the capital required for innovation is the lifeline of a new venture. In Boston and in the Silicon Valley in particular, there are venture capitalists or people who can bring in capital from other financial centers. Funneling of Ideas There is one additional requirement related to the innovation continuum: the innovation continuum must be funnel shaped. The innovation process must begin with a large number of ideas. As the innovation process proceeds from basic research to commercialization, only a subset of the most promising ideas will be selected in each subsequent step. Eventually only the most innovative idea will remain. Therefore, the 6
  7. 7. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication number of research projects being worked on must always be much larger than the number of development projects, and so forth. Quality of the Steps (or Elements) of an Innovation Continuum When some steps in the innovation continuum are missing, the process of innovation is interrupted, and innovation may never be realized. However, even in the presence of all the steps of the innovation continuum, the quality of each step may affect the outcome. Therefore, the downstream selection of promising ideas and solutions from the preceding step must be done well. There are several things to consider when ideas and solutions are selected. In most innovations, more than one FR must be satisfied. It is important that selected ideas or methods maintain the independence of the FRs. (The independence axiom of axiomatic design theory states that the attempt to satisfy one FR should not affect other FRs). The design should also be robust (as per the information axiom) (Suh, 1990, 2001). Importance of having a complete Innovation Continuum The reason that the Daeduk Science Park of Korea and Kansas City of the United States have not become innovation hubs can be attributed to the fact that they have missing steps or elements in forming the innovation continuum. The Daeduk Science Park has a concentration of research institutes with some 10,000 Ph.D.s, but it lacks venture capitalists and the risk-takers who are willing to convert research results into innovations. Kansas City does not have the research infrastructure. 7
  8. 8. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication When John T. Parsons (Ross, 1978; Reintjes, 1991) invented the numerically Controlled (NC) machine tools, he did not have the engineering capability to develop the idea. Therefore, in 1949, the U.S. Air Force gave a contract to MIT to develop the NC machine tool. After commercial NC machine tools were developed, the government tried to encourage defense contractors to use them, but the adoption rate was low because of the high machine cost. Finally, the U.S. Air Force purchased the machines for their contractors to use. As the use of computers in manufacturing has become ubiquitous, the NC machines have become common production machines in industry. It took the Air Force to complete the innovation continuum for NC machine tools. Based on the foregoing observations on innovation, the first law of innovation may be stated as follows: The First Law of Innovation: For innovation to occur, there cannot be any missing steps or links in the innovation continuum. (c) Innovation as a Nucleation Phenomenon In addition to the innovation continuum, we also have to consider the question of how innovation hubs, such as the one in Silicon Valley, are nucleated. The creation of innovation centres is similar to the physical nucleation of rain droplets or voids in microcellular plastics (Colton and Suh, 1984). There are two kinds of nucleation: homogeneous nucleation and heterogeneous nucleation. When rain droplets form by condensation of water vapor in the absence of any existing particle, it is called homogeneous nucleation. When there are particles, such as a previously nucleated water particle or an impurity particle in the water vapor, the condensation forms around the 8
  9. 9. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication existing particle. Such a nucleation is called heterogeneous nucleation. Heterogeneous nucleation requires less energy, since the new surface generated is smaller. Therefore, heterogeneous nucleation occurs much more readily than homogeneous nucleation. For homogeneous nucleation to occur, the nucleated entity (e.g., a water droplet formed from water vapor) must be larger than a critical size to be stable. Otherwise, the droplet will go back to its original state, i.e., water vapor. Once a nucleate formed is larger than the critical size, it grows because the vapor condenses more easily by heterogeneous nucleation on existing particles rather than nucleating a new droplet, which is energetically more favored. This process makes the nucleate that formed earlier grow larger than the one formed later. The water droplet example demonstrates that not all regions of the United States can become Silicon Valley or Boston. It is easier to nucleate an innovative idea in an existing hub by heterogeneous nucleation rather than homogeneously nucleating a new innovation hub. Innovation will occur where the “free energy” change required for nucleation is the least. Unless there are political or economic barriers enacted to prevent the free flow of innovative ideas and capital for new ventures, innovative ideas will go to places where they will encounter the least resistance. Outstanding researchers tend to migrate to institutions where an innovative culture already exists. The migration of ideas towards innovation hubs is supported by the statistics that come from Stanford University (Byer, 2006). About 50% of the revenue of Silicon Valley companies is from Stanford spin-off companies. But, of more than 1,000 companies that were spun-out from Stanford University, only one out of 20 companies 9
  10. 10. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication used the technologies that came out of Stanford either directly or indirectly. This indicates that many ideas came to the Silicon Valley from other parts of the world2. To prevent a new aspiring innovator in Kansas from going to an existing innovation hub (e.g., Boston), there must be a means of preventing the diffusion of the innovator to the existing site. This can be done by creating a barrier that will prevent the diffusion of innovative ideas and the migration of venture capital to regions that have a track record of success in nurturing innovation. Alternatively, the pace of creating a stable innovation hub in the region without one must be greatly increased. Thus, the nucleation rate of innovation in Kansas must be faster than the rate of diffusion of the innovative idea to Boston, in order for innovation to occur in Kansas. The rate of nucleation of innovation at a given region may be expressed as: dI ⎛ −ΔG ⎞ = Io f I exp⎜ ⎟ (1) dt ⎝ bH ⎠ where I is occurrence of innovation, t is time, the product Io f 3 is a constant, ΔG is the activation energy required for innovation, and the product bH is a constant that represents the overall energy level of innovation activities. This rate equation is similar to thermally activated rate equations (Colton and Suh, 1984). The exponential function represents the probability of creating something innovative given the activation energy barrier represented by ΔG , and the overall energy-level of innovation activity represented by the product bH. Equation (1) shows that if a government is interested in increasing the rate of innovation, they have to make Io and H as large as possible, and ΔG as small as possible. 2 The fraction of the ideas generated elsewhere in Silicon Valley but not at Stanford is unknown. 3 The exact nature of the constant I o f needs more research. 10
  11. 11. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication ΔG for homogeneous nucleation is larger than that of heterogeneous nucleation, indicating that the creation of new innovation hubs is inherently more difficult than a heterogeneous nucleation on an existing site. Heterogeneous sites have the infrastructure that can support the new innovator. ΔG at equilibrium is a function of the net energy we have to supply to create an innovation hub and the force that will tend to break up the hub4. As a result, there is a critical size of the innovation hub, below which the nucleated innovation hub is not stable and may break up. Once the size of the innovation hub exceeds the critical size, it will be stable and grow. Clearly the Silicon Valley and Boston have exceeded this critical size. The second law of innovation may thus be stated as follows: The Second Law of Innovation: An Innovation hub will be nucleated if the initial nucleate size exceeds the critical size needed for stability and if the activation energy barrier for nucleation can be overcome. (d) Diffusion of Innovative Ideas and Human Resource Once an innovation hub is nucleated, it will tend to grow as new innovative ideas diffuse to the stable center of innovation that has already nucleated. This is because the infrastructure that already exists will make it easier for the heterogeneous nucleation of new innovation to occur at an existing site. That is, the diffusion rate of the innovative ideas from the location where it was conceived to an existing innovation center may be expressed as: 4 This conclusion is a result of invoking an analogy between the nucleation of innovation hub and the nucleation of natural systems. 11
  12. 12. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication dD ⎛ −ΔGD ⎞ = Do f D exp⎜ ⎟ (2) dt ⎝ hTD ⎠ where D is the diffusion of innovative ideas (or people), t is time, the product Do f D is a constant5, the product hTD is a constant that represents the energy-level of the activity of ideas for diffusion, and ΔGD is the activation energy barrier that must be overcome for diffusion. The exponential function represents the probability that diffusion can occur given the energy-level for the diffusion of innovative ideas and the activation energy barrier6. If the transfer of innovative ideas, venture capital, or people is by convection rather than by diffusion, then it will be the dominating mechanism and Equation (2) is not applicable. Transfer by convection, rather than by diffusion, is a distinctly possible mechanism in some cases. Convection will be much faster but many aspiring innovators may not have the personal connections (i.e. social and professional network) that will provide access to the convective medium. The nucleation rate of innovation given by Equation (1) and the diffusion rate given by Equation (2) will be two competing factors that will determine where the next innovation will occur. Whether or not an innovative idea will move to an existing innovation hub or create a new one will be determined by the ratio: dI dt =α dD dt (3) 5 The exact nature of the product Do fD needs further research. 6 The exact nature of the product hTD needs for further modeling. 12
  13. 13. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication When α is greater than 1, the innovation will stay locally. When it is less than 1, it will migrate to an existing innovation hub. It is estimated that in the United States, most regions will find it difficult to prevent the migration of people with ideas to already existing innovation centres, because regional differences in culture, custom, language, and people within the U.S. are rather minimal. When governments try to establish policies to promote innovation for their country or for specific local regions, they should consider Equations (1) and (2). They may institute means of tying down local innovators to their regions or build large disincentives for them to move away. However, these kinds of rigid policies, which arguably kill the human spirit, may squash innovation. On the other hand, governments that are interested in attracting innovations from around the world to their countries must establish strong infrastructures for innovation, à la Boston, and make it as easy as possible for people with innovative ideas to immigrate to their countries. The third law of innovation may be stated as follows: The third law of innovation: For innovation hubs to nucleate, the nucleation rate of innovation in a region must be greater than the rate at which innovative ideas, people and financial resource can move away from the region. (e) Policy Implications Diffusion Barriers that Support Nucleation Leading nations that already have the infrastructure for innovation in place, have an open door immigration policy, and offer attractive incentives will entice talented people away from other countries, effectively facilitating the diffusion of ideas and people away from these areas. This diffusion will prevent the nucleation of innovation hubs in the less 13
  14. 14. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication developed nations, as per the third innovation law. Thus, it will be extremely difficult to displace the United States as a haven for innovation, or Boston and the Silicon Valley as innovation hubs within the United States. Diffusion barriers – to both people and venture funds – are required to limit the growth of an existing nucleate, as well as to nurture a region that is trying to become a new innovation centre. A barrier to diffusion is to convince the unique human resource that is responsible for the new invention or scientific discovery to stay at their current location by helping them financially and politically to launch the commercialization effort. Another barrier is to invest in the special infrastructure required to implement the innovation but that is not available in the existing innovation hub. Another kind of barrier is for the local government to invest significant funds to bring more researchers and companies to the region to nucleate a new innovation hub. It may take many innovations to create a stable new innovation hub. Economic barrier against nucleation An innovation that holds great promise in displacing or replacing existing technologies must be justified based on its potential return on investment (ROI). The payback on the investment made to implement the innovation must be relatively quick and high. While this cannot always be predicted accurately, the case must be made as accurately as possible for an innovation to come to fruition. Even when the payback cycle is one year, there can be opposition to adopting an innovation. This may be the reason why General Motors is suffering today. It has not introduced innovations during the last few decades, not because of their lack of new technologies, but because of their own mental barriers created by short-term finance- 14
  15. 15. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication dominated thinking that they have adopted. That type of thinking can become a major barrier for innovation. (f) Risk Takers Innovation entails both benefits and risks. Unless the participants in the innovation continuum believe that the benefits far outweigh the risks, innovation will not occur. To be successful, each step of this innovation continuum needs risk-takers who commit their reputation and/or financial resources to achieve the ultimate goals of the innovation. When there are no risk takers for any one of the steps of the innovation continuum, the probability of having a successful innovation will be reduced. The risk taker for basic research is often a government agency. For initial conversion of scientific and technological ideas into commercially viable products, the risk-taker may be inventor’s relatives and/or friends -- or an angel, a venture capitalist or a large company. Significant venture capital may be needed to launch a large-scale commercialization of the innovation, which may be supplied by a group of venture capitalists or by a group of individual investors with deep pockets. Once a company is formed for the new product, it needs people who can run the company, who also take risks, since their careers and financial futures are tied to its success. In addition to technical staff, the company will need experts in marketing, sales, administration, purchasing, human resources, legal and manufacturing, all of whom become risk takers, albeit to different degrees depending upon their roles. Stock options have been used as one of the instruments to compensate for the risks to individuals. 15
  16. 16. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication (g) Need for Periodic Re-initialization of Innovated Systems Innovations may not be stable forever and will eventually fail or be replaced. Even what appeared to be a perfect product at the time of innovation may deteriorate over time and have a finite life. Such a failure occurs when the chosen DPs change over a long period of time. Also when there are many FRs to be satisfied over an extended period of time, they may become coupled with each other as the system deteriorates, eventually leading to the system failure. These are the characteristics of systems with time-dependent combinatorial complexity (Suh, 2006). To prevent such a failure, the innovation should undergo periodic re-initialization. Thus, if a system with time-dependent combinatorial complexity can be made into a system with time-dependent periodic complexity, it becomes stable and long lasting. This issue has been addressed as part of a complexity theory (Suh, 2006). Government Policy Implications The role of policy makers is fourfold in creating and promoting innovation: identifying the missing links in the innovation continuum; establishing policies that can help fill or repair these links; lowering the activation energy required for nucleation of the innovation hub; and increasing the overall level of innovative activities. Each country must enact government policies that address their specific barriers to innovation as they affect their entire nation or specific regions. No country will have the same set of missing links or high activation barriers for nucleation of innovation centres. While the policies will differ, the activation energy for nucleation can be lowered by governments through the following means: 1. Identify missing links in the innovation continuum 16
  17. 17. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication 2. Create policies and/or means of creating links for the missing links 3. Strengthen research universities 4. Legislate regulatory policies that promote innovation 5. Enact policies that give special tax credits for investment in venture firms and venture capitalists 6. Create public venture capital if private venture capital is not available 7. Promote creative culture through proper education 8. Provide loans to small venture firms at favorable terms 9. Create cooperatives for purchasing to reduce the cost of materials procured 10. Provide financial incentives to the risk takers. Innovation Continuum in the Republic of Korea In Korea, while there are many activities and policies that promote innovation, there also exist several missing or weak links along the innovation continuum, which have prevented the development of a true innovation hub in Korea, à la the Silicon Valley of California. Korea is a geographically small but highly populated country. There are two cities that have the potential to become an innovation hub: Seoul and Daejeon. Seoul is the capital city of Korea with nearly 50% of South Koreans living in the greater metropolitan area. It is the centre of commerce, politics, education, and finance and thus has more infrastructure in place for an innovation hub. Daejeon has a less mature infrastructure for innovation and a smaller financial community. However, it possesses a high 17
  18. 18. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication concentration of scientific and technical human resources, national research laboratories, and research universities. Korea has many universities. A few are outstanding research universities. The funding for research is competitive but perhaps more readily available than in the United States, especially for professors in better-known universities. However, the research culture in Korea is not conducive to innovation. It tends to reward average performers, because so much weight is given to the number of publications in so-called SCI (science citation index) journals. To nurture innovation, funding agencies should change their policy of assessing research accomplishment in meaningful qualitative, not just quantitative, ways. One of the most important missing links of the innovation continuum in Korea is a strong venture capital community. The venture community that was created in the 1990’s failed so miserably that the funding for new ventures has shriveled away since then. Reviving the venture capital community will require the active encouragement of the Korean government. This will take courage given today’s dire economic climate in which the government is less willing to take an active role to generate venture capital for innovation. Korea is also missing a large domestic market that will yield a major return on investment (ROI) for a successful innovation. Therefore, the success rate of venture firms, once they are created, must be considerably higher in Korea than in the United States to justify their investment in new ventures. There are many ways to overcome this missing link. One way is to reduce tax rates to investors in venture capital funds. Another way is 18
  19. 19. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication to help small venture capital firms acquire access to the venture capital community outside of Korea. Innovation in the United States In the United States, many regions outside Boston and the Silicon Valley face similar problems as Korea. In some ways, the challenge of creating an innovation hub in the state of Kansas is far greater than the one Korea faces, for two reasons. It is a lot easier for talented people in Kansas to migrate to California or Boston rather than take risks in Kansas, than it is for Koreans to leave their country for another where they would have to overcome language and culture differences. Just like in physical nucleation processes that proceed in the direction of decreasing free energy, so will the innovation process. In Kansas, venture firms can be only created through a homogeneous nucleation process; Kansas thus has a much higher activation energy barrier for nucleation than Boston. In addition, thermodynamics would favor diffusion of money and talents away from Kansas toward Boston. Case Studies Two case studies, one from MIT (USA) and the other from KAIST (Korea), are presented to illustrate the role of the three laws of Innovation: continuity in the innovation continuum, nucleation of innovation hubs, and the nucleation rate versus the diffusion rate. These two case studies will illustrate the details of the innovation process and the effectiveness of R&D investment in nurturing innovation. Case Study I: Innovation of Microcellular Plastics (MuCell) 19
  20. 20. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication This case study demonstrates the success that can occur when the three laws of innovation are satisfied (also in Branscomb and Auerswald, 2001). What is MuCell? MuCell is a trade name for microcellular plastics that was developed at MIT. It is a plastic that has a large number of tiny bubbles in the material matrix. (There are about 109 bubbles per cm3. The diameters of the bubbles range from a few microns to about 30 microns). The large volume occupied by bubbles reduces the use of plastic and the tiny bubbles provide improved resistance to fracture. These bubbles can be created in almost any plastic by using a thermodynamic instability phenomenon (Martini-Vedensky, et al, 1984). How did it come about? Problem definition In 1973, the MIT-Industry Polymer Processing Program was established at MIT in order to promote a close research collaboration between MIT and industry, strengthen industrial support for MIT research, and create a new academic program of polymer processing. This program was the first cooperative program between MIT and a consortium of industrial firms. This was accomplished at a time when the idea of collaborating with industry was not popular at MIT. Fortunately for the MIT-Industry Polymer Processing Program, in the early 1970’s, the National Science Foundation (NSF) established the NSF Experimental R&D Incentives Program to see how U.S. universities could strengthen the competitiveness of U.S. industries (Gray, 2004; Suh and Kramer, 1982). MIT received initial funding of about a half million dollars over 5 years to explore different means of promoting innovation at universities to enhance U.S. industrial competitiveness. Of the number of 20
  21. 21. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication different experimental R&D programs funded by NSF, the MIT program was the only one that succeeded. This model has been replicated by NSF at over 100 other universities (Gray, 2004). The Polymer Processing Program decided to accept up to 14 companies from various industries. Each paid between $20,000 and $150,000 a year, depending on the size of polymer-related business. Industrial members had to make a minimum commitment of two years, renewing their membership annually after the first year. This collaboration strengthened over time, with some of the companies staying in the MIT Program for more than a decade -- a testament to the program’s ability to create many patented new innovative processes and products. Once a year, usually near the anniversary date of their membership in the MIT Program, each member company was asked to suggest suitable research projects for the following year. In the early 1980’s, one of the member companies, Eastman Kodak, requested that MIT develop a means of reducing plastics consumption without changing the shape of their products and decreasing the toughness of the molded parts. In response to this request, MIT designed microcellular plastics where the bubble voids would reduce the materials consumption, while the tiny bubble size would guarantee fracture toughness (Suh, 1990, 2001). When Eastman Kodak accepted this idea, MIT began to explore it, asking a graduate student, Jane Martini, who just finished a physics program at Bryn Mawr College to work on the project. Innovation process for MuCell After experimenting with several ideas, MIT created a batch process for microcellular plastics using thermodynamic instability of plastic/gas solutions (Martini-Vedensky, et al, 21
  22. 22. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication 1984). However, the process was so slow that it was not economical for industrial production. MIT stopped working on the project in 1984, when the author left MIT to accept a presidential appointment at NSF in Washington. After seeing the microcellular plastics created by the MIT batch process, Eastman Kodak tried to mass-produce the product. However, since they tried a mass production technique before the scientific basis of the mass production technology was fully developed, their initial trial did not succeed. They abandoned this project. Two Kodak engineers, who had great faith in the potential of the innovation, decided to leave the company to start a new company focused on the manufacture microcellular plastics. However, their company did not succeed either because they did not have the fundamental understanding of the underlying science. While bold, their commercialization effort failed because the first step in the innovation continuum – basic scientific understanding and technology -- was missing. When the author returned to MIT after four years at NSF, a Japanese company, Furukawa Electrical, suggested that MIT develop a continuous process for microcellular plastics. Several Ph.D. students developed the process, using axiomatic design, for mass production of microcellular plastics, ultimately creating a small machine to demonstrate the basic concept of mass production7. After this technology was developed (Park, et al, 2000)8, MIT tried unsuccessfully to convince many large companies to license the technology. There were simply no risk 7 There are many product and process patents, but only one is listed in the Reference. MIT owns many basic patents and Trexel owns many application patents. 8 Several masters and doctoral theses were written on this topic at MIT. 22
  23. 23. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication takers within big companies who were willing to adopt this unproven new process. As a result, MIT gave an exclusive license to Trexel, Inc., a small company that the author established, and asked Mr. Alex d’Arbeloff, founder of Teradyne, Inc. to serve as Chairman of the Board of Directors. Because of his belief in the power of the technology, Mr. d’Abeloff invested his own money and brought in a number of private investors. Without the leadership and investment of Mr. d’Abeloff, Trexel would not exist today. It took a few years to establish a viable commercial business for microcellular plastics by Trexel. MIT only demonstrated the feasibility of a mass production technique, but it was Trexel that did the extensive development work to create the commercial process. Trexel hired about 50 engineers and managers to work on the process and also develop special machines for injection molding and extrusion. Trexel did active marketing and selling of the MuCell process throughout the U.S., Europe and Asia. Part of the attraction of the MuCell process is that the innovation reached beyond its initial goals, which was to reduce the consumption of plastics. Injection-molded MuCell parts are dimensionally more accurate than solid plastic parts because of the reduced residual stress in the molded part. In addition, the cycle time of injection molding is reduced by 50 percent, because the plastic can be processed at a lower temperature. When automobile companies replace their plastic parts with microcellular plastics, they can reduce the weight of their cars by about 35 lbs. each, which ultimately improves fuel efficiency and reduces CO2 emissions. The overall savings that can be accrued by automobile companies can be hundreds of millions of dollars. Microcellular plastics are good for the bottom line and the environment (Bernstein, 2009). 23
  24. 24. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication Today, Trexel is primarily a licensing company, but supplies special auxiliary equipment to the end user to be used with conventional injection molding and extrusion machines. Their licensees are large, well known companies. Current status and future prospect Leading automotive companies and office equipment manufacturers, as well as many others, use MuCell technology. There are also many other products under development based on the MuCell technology. The pace of adoption of this innovation has been slower than expected because tier one suppliers of automotive parts do not have financial incentives to use it and because the automobile companies buy parts from a large number of vendors. Concluding Remarks MuCell is successful because it had the benefit of having all the steps of the innovation continuum in place, including strong patents that cover any plastic with tiny bubbles. It had industrial sponsors with clear needs, outstanding researchers at a major research university, a significant funding source, investors, manufacturing expertise, marketing capability, and a professional management team. If it lacked any one of these steps needed for innovation, it might have been more difficult to complete the innovation. It is also reasonable to conclude that the heterogeneous nucleation of the microcellular plastics technology was possible because it was done at MIT and in Boston, the innovation hub of the United States. Case Study II: Mobile Harbor 24
  25. 25. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication “Mobile harbor,” is a project initiated by KAIST and now a part of the New Economic Growth Engine project of the Ministry of Knowledge Economy of Korea. It is an automated, robotized, floating harbor that will go out to a variety of ships to unload and load their cargo. It will be able to deliver the cargo to small and large ports with and without major port facilities (Suh, 2008). KAIST will collaborate with the third largest shipbuilding company and a national research laboratory in Korea to build and test the mobile harbor, with research funding support from the government. The company will actually build the mobile harbor using their own funds. The ultimate customers of the mobile harbor may be governments that operate harbors and the shipbuilding companies that will construct and sell the mobile harbors. Motivation Six unrelated events and/or facts explain the motivation for the “mobile harbor” project. While it has not been fully implemented, it has great promise as an important innovation that satisfies the three laws of innovation. 1. In Singapore, over 100 ships wait outside the harbor for their turn to unload and load their cargo. Some ships have to wait for days, although the daily charge for these large ships is about $200,000. Because of their limited access to the pier, more ships may be built than necessary. When the author witnessed this scene, he asked: “Why should ships come into the harbor? Why shouldn’t the harbor go out to the ships?” 2. Korea is the largest shipbuilding nation in the world. Seven of the country’s largest shipbuilding companies own almost half of the world’s shipbuilding business. However, it is unlikely that Korea can double the size of its shipbuilding industry 25
  26. 26. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication since it already has about 50 percent of the world’s market. What should Korea do to sustain its leadership in shipbuilding and double its GDP per capita? 3. Given Korea’s dominance in shipbuilding, KAIST has decided to create a new Department of Ocean Systems to prepare its students as engineers in this industry. While teaching shipbuilding is straightforward, KAIST as a research university educates its graduate students through their involvement in research. Thus the challenge for KAIST is identifying cutting-edge research topics in the field of ocean systems. 4. Understanding that the real customer need is not the ship, but the transportation of goods across oceans, KAIST has decided that it will conduct research in solving the rate limiting process in ocean transportation, which includes access to piers in harbors. The mobile harbor project would provide rich educational and research opportunities to KAIST students. 5. Economic and societal justification for the mobile harbor is formidable. For example, the Yellow Sea between China and Korea is very shallow. Near land, the water depth is less than 15 meters deep. However, large container ships require 20 meters of water depth to float and move. Therefore, the sea near the harbor area has to be dug deep, which is very expensive and may impact the environment. 6. The mobile harbor is equivalent to taxis that take the passengers who arrive in Boeing 747 at the JFK airport to various destinations in New York City. The mobile harbor does not require deep waters and extensive and expensive facilities. It will have rail tracks on it for freight cars for quick removal when the mobile harbor docks. Also the mobile harbor can go to small ports, since it does not require special 26
  27. 27. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication facilities for loading and unloading. It is best suited for the shore of the Yellow Sea between China and Korea, where about 16% of the world’s population live within 100 miles from the shore. Mobile harbor will reduce the need to use land transportation systems to move cargo from a few major harbors to remote places. Role of government Governments in many countries are potential customers for these mobile harbors, since they build and operate them. In the case of the Korean government, it also serves as one of funding sources for research and development. Role of KAIST as a Research Organization Several professors and graduate students at KAIST are designing the mobile harbor based upon the basic research they conduct on various design and operational aspects. They are collaborating with a national research institute for ocean systems, Korea Institute for Machinery and Metals that has a towing tank and other facilities for ocean systems. Role of the Private Sector A large shipbuilding company has agreed to build the first mobile harbor using their own funds. By analyzing the feasibility and effectiveness of mobile harbors in accelerating the unloading and loading process, the shipbuilding company will market this product if the prototype satisfies all the FRs of a mobile harbor and if they can find customers for it. By doing so, the company will find new business opportunities to grow. While still in its beginning stages, it appears that all the steps of the innovation continuum for a mobile harbor are in place. Since Korea already is the largest hub for shipbuilding, the mobile harbor will undergo a heterogeneous nucleation. 27
  28. 28. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication Conclusions To realize innovation, we must consider three important laws of innovation related to: (1) the existence of all the steps (or elements) of the Innovation Continuum for a product, (2) the kinetics of nucleation of innovation hubs, and (3) the relative rates between nucleation and diffusion of the idea, people, and financial resources. A university’s role in promoting innovation is providing new ideas for innovation through basic research and technology innovation. In many regions and many nations, the research infrastructure in terms of basic research at universities is so weak that they cannot begin the innovation process. Most countries cannot make all its universities to be research universities. They must concentrate their investment in a limited number of universities so as to make them the world-class research universities. Government policy for innovation and economic growth through technology must be based on the consideration of the innovation continuum and the kinetics of the nucleation of innovation hubs. It must be sure that the innovation continuum exists and must deal with its missing links. Government should also have policies and resources for nucleation of innovation hubs by lowering the activation energy barrier for nucleation. Since each step of the innovation continuum is different, appropriate measures must be found such as support of basic research, tax incentives for venture capital, assistance for global marketing, etc. It should also have a policy of easy diffusion of ideas and people to its region from other regions of the country or from other nations. At the same time, government should deploy policies that will discourage innovators from leaving the region by providing them with resources and opportunities for innovation. Although there 28
  29. 29. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication are many fiscal measures that can be taken by government, it must provide a living environment for high quality of life, including strong educational infrastructure and health care. Today, the United States best satisfies the three laws of innovation. Rapid changes within the global economy provide other countries with opportunities to embrace innovation. The country that actively creates strong innovation hubs and implements policies that welcome innovators will become the leading nation in innovation and most likely one of the more prosperous and powerful nations of the 21st Century. Acknowledgement The author is grateful to Grace Suh and Professor Kate Thompson for editorial help. 29
  30. 30. Theory of Innovation, by Nam Pyo Suh, 2009;copyright © 2009 N. P. Suh, submitted for publication References Bernstein, D. (2009), Trexel report, Woburn, MA Branscomb, L. M. and P. E. Auerswald (2001), Taking Technical Risks: How Innovators, Managers, and Investors Manage Risk in High-Tech Innovations, MIT Press, Cambridge, MA Byer, R. L. (2006), “The Generality of Silicon Valley Model and Role of University and the Region”, Talk presented at Tohoku University and the Federation of Tohoku Economic Organizations, January 16, 2006 Colton, J.S. and N.P. Suh (1984), "Nucleation of Microcellular Foam: Theory and Practice," Polymer Engineering and Science, Vol. 27, No. 7, pp. 500-503. Drucker, P. F. (1985), Innovation and Entrepreneurship, Harper and Row, New York Gray, D. O. (2004), “Plenary Session I: I/UCRC Program - 30 Years of Partnerships: Past Successes: An overview of the history, core principles and accomplishments of the NSF I/UCRC Program”, Presentation at NSF I/UCRC 2004 Annual Meeting and 30th Anniversary Celebration, January 7-9, 2004 30
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