This document provides an overview of a session on basic innovation concepts and the history of innovation theory. It discusses early thinkers like Schumpeter who viewed entrepreneurs as the drivers of innovation through "creative destruction". It also outlines models of technology cycles and dominant design. Later sections describe the rise of dedicated R&D departments in the 1950s and innovation diffusion research in the 1960s which examined how new ideas spread through social systems over time. The document is intended to give context on the major themes and theorists that have shaped the field of innovation management.

1. Session 2: Basic Innovation Concepts
Prof. Dr. Bernhard Katzy
2012
www.CeTIM.org
Prof. Dr. Bernhard R. Katzy

2. Innovation Management
Innovation
System
Organization of Innovation
innovation Governance
Innovation
Transformation
and
entrepreneurship
Basic innovation concepts Introduction to innovation
Innovation Theory …
Dominant theory, Main issues
and developments of innovation
research
www.CeTIM.org Prof. Dr. Bernhard Katzy 14/02/12 1

3. Session 2 – An Overview
Agenda
● Mini-Test
● A brief history of thinking about innovation
● Summary and assignments
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4. Session 2 – Reading Engagement
Mini-Test
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5. A brief history of thinking about innovation
1930ies: Entrepreneurs innovate the economy
CREATIVE DESTRUCTION OF SCHUMPETER'S ENTREPRENEUR
• Schumpeter‟s definition on innovation:
A process of creative destruction
Driven by:
- New markets or products
- New equipment
- New methods of organization or management
- New methods of communication
• Schumpeter‟s business (technology) cycle
A circular flow which, excluding any innovations and innovative
activities, leads to a stationary state. The entrepreneur disturbs
this equilibrium and this is the cause of economic
development, which proceeds in cyclic fashions along several
time scales.
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6. A brief history of thinking about innovation
1930ies: Entrepreneurs innovate the economy
THE S MODEL OF TECHNOLOGY CYCLE
Maturity of
Technology
T
2
Substitution
T
1
Time
Initiation Take-off Maturity
[Source: Foster,1986]
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7. A brief history of thinking about innovation
1930ies: Entrepreneurs innovate the economy
THE ABERNATHY MODEL OF DOMINANT DESIGN
Rate of
Innovation
Dominant
Design
Process
Innovation
Product
Innovation
Fluid Transitional Specific Time
Pattern Pattern Pattern
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8. A brief history of thinking about innovation
1930ies: Entrepreneurs innovate the economy
CASE
Telecommunication or Media?
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9. A brief history of thinking about innovation
1930ies: Entrepreneurs innovate the economy
CASE OF DIGITAL TELEVISION
Incremental innovation? Or radical?
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10. A brief history of thinking about innovation
1930ies: Entrepreneurs innovate the economy
ARCHITECTURAL INNOVATION
[Source: Henderson, Clark]
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11. A brief history of thinking about innovation
1930ies: Entrepreneurs innovate the economy
CREATIVE DESTRUCTION OF SCHUMPETER ‘S ENTREPRENEUR
Definition on entrepreneurs (innovators):
Individuals whose function is to carry new combination out
• The entrepreneur is the head of a firm and its employees
• The entrepreneur is never the risk bearer. Risk taking is in no
case an element of the entrepreneurial function, but may risk his
reputation
• First of all, there is the dream and the will to found a private
kingdom, usually, though not necessarily, also a dynasty;
• Then there is the will to conquer: the impulse to fight, to prove
oneself superior to others, to succeed for the sake, not of the
fruits of success, but of success itself;
• Finally , there is the joy of creating, of getting things done, or
simply of exercising one’s energy and ingenuity.
Source :Schumpeter < the theory of economic development>
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12. A Brief history of thinking about innovation:
1950ies – Innovation through R&D Departments
SCHUMPETER 2
• Why this called Schumpeter 2 ?
• The traditional paradigm for managing R&D
Bureaucracy in innovation departments dominant
• Elements for innovation through R&D laboratories
paradigm
• Main actors of R&D department
• R&D laboratories : Philips since about 1914, the Bell Labs
in 1925…
• Capital resources: funding from organization, or public
subsidies
• Human resources: scientist, researchers……
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13. A Brief history of thinking about innovation:
1950ies – Innovation through R&D Departments
EARLY CASES OF R&D LABS
Bell Labs has been at the forefront of technology since 1925. Here
are ten Bell Labs innovations that changed the world :
The Transistor Cellular Telephone Laser
Technology
Solar Cells, Communications Satellites, Touch-Tone Telephone,
Data Networking, Digital Transmission and Switching, Unix
Operating System and C Language, Digital Signal Processor
(DSP)……
Source :http://www.alcatel-lucent.com/wps/portal/BellLabs
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14. A Brief history of thinking about innovation:
1960ies: Innovation adoption of new ideas by society
INNOVATION AS DIFFUSION OVER TIME
• Diffusion is the process by which an innovation is
communicated through certain channels over time among the
members of a social system.
• The decisions are not authoritative or collective, each member
of the social member of the social system faces his/her own
innovation-decision that follows a 5-step process:
-Knowledge
-Persuasion
-Decision
-Implementation
-Confirmation
For most members of a social system, the innovation-
decision depends heavily on the innovation-decisions of
the other members of the system
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15. A Brief history of thinking about innovation:
1960ies: Innovation adoption of new ideas by society
INNOVATION AS DIFFUSION OVER TIME
The Bell-shape Curve and S-shape Curve
The scholars divide this bell-shape curve to characterize five
categories of system member innovativeness. These groups are:
Innovator, Early adopters, Early majority, Late majority, and
Laggards.
Source: Rogers <Diffusion of innovations>
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16. A Brief history of thinking about innovation:
1960ies: Innovation adoption of new ideas by society
S – SHAPE CURVE AND BCG MATRIX
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17. A Brief history of thinking about innovation:
1960ies: Innovation adoption of new ideas by society
S – CURVE DOES NOT ALWAYS GO SMOOTH
Moore's CHASM
H3 H2 H1
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18. A Brief history of thinking about innovation:
1970ies: Innovation as a business strategy
INNOVATION AS A STRATEGIC MEANS TO DIFFERENTIATE
IN MATURE MARKETS
National strategy
- The relation ship between innovation and economic growth
- Mainly concerns supporting small and medium sized enterprises in
how to adopt innovations.
- Policies and institutes such as TNO institute in Holland channelling
more inventions through the process from basic to applied research
and into production in firms.
Innovation and organizational strategy
- Viewing technology as a functional capability implies the need to
develop a technology strategy, analogous to financial and human
resource strategies
- A set of interrelated decisions encompassing, among
others, technology choice, level of technology competence, level of
funding for technology development, timing of technology introduction
in new products/ services, and organization for technology application
and development (e.g., Maidique and Patch, 1978)
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19. A Brief history of thinking about innovation:
1980ies: Innovation as a profession and competence
INNOVATION AS A DISCIPLINE - DRUCKER
Innovation
is an effect in economy
Innovation and society Innovators
is work
Principles must build
on their strength
The practice (discipline) of innovation:
„90% of Innovation is Transpiration‟
1 Analysis for 5
opportunities
2 Do‟s Gain
Go out, 4 leadership
3
look and listen Start small
conception & perception Be effective,
simple
and focused
[Drucker, 1996]
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20. A Brief history of thinking about innovation
1990ies: Innovation through collaboration in networks
INNOVATION THROUGH STRATEGIC COOPERATION IN
INNOVATION SYSTEMS
- Stresses that the flow of technology and information among
people, enterprises and institutions is key to an innovative
process. It contains the interaction between the actors who are
needed in order to turn an idea into a process, product or service
on the market.
- Innovation systems have been categorized into national
innovation system, local innovation system, regional
innovation systems and sectoral innovation systems
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21. A Brief history of thinking about innovation
1990ies: Innovation through collaboration in network
INNOVATION SYSTEM
Sectoral
Innovation
Regional
System
Cluster
Industry and
Company Research
Research
Centre
Entities
Publi
c VPC VPC
Instit
ution
University
National
Innovation
System
Living Lab LL client
community
Social
New
Comm product/
Territory unity service
Social Co-
Settings LL Collaborative creation
Infrastructure
Innovation system
[Katzy and Crownston 2008; Schuh, Katzy, Eisen 1997]
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22. A Brief history of thinking about innovation:
2000: “open” Innovation in cooperation with the user
INNOVATION THROUGH OPEN INNOVATION
Research licensing Development
Other firms’
Market
New Market
Spin-off
Internal
Technology Base Current Market
External
Technology Base Technology
insourcing
Labor mobility/ Venture Capital/ Numerous Start-ups/ research
conducted at Universities/……
[Source: Henry Chesbrough 2003]
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23. A Brief history of thinking about innovation:
2000: “open” Innovation in cooperation with the user
COMPARISON BETWEEN OPEN INNOVATION
AND CLOSED INNOVATION
Closed innovation Principles Open innovation Principles
The smart people in our field work for us Not all the smart people work for us
We need to work with smart people inside To profit from R&D
and outside our company
we must discover it, develop it and ship it External R&D can create significant value,
ourselves internal R&D is needed to claim some
portion of that value
If we discover it ourselves, we will get it to We don't have to originate the research to
market first profit from it
The company that gets an innovation to Building a better business model is better
market first will win than getting to market first
If we create the most and the best ideas in If we make the best use of internal and
the industry, we will win external ideas, we will win
We should control our innovation process, We should profit from others' use of our
so that our competitors don't profit from our innovation project, and we should buy
ideas others' IP whenever it advances our own
business model
Henry Chesbrough <Open Innovation>
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24. A Brief history of thinking about innovation:
2000: Innovation through Organization routines
INNOVATION THROUGH ORGANIZATION ROUTINES
A congruence model of diagnosing organizational behaviour
Transformation Process
Informal
Organization
Context Output
Formal Organization
Environment Task Group
Strategy Organization
Resources History Arrangements Individual
Individual
Feedback
Tushman and Nadler < a congruence model for organization problem solving>
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25. Summary and assignments
Summary
- Perspectives from the different sides to study innovation
phenomenon
- Different perspectives are complementary to each other
- No clear boundary between different research orientation
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26. Readings for next sessions 3: Transformation and
Entrepreneurship and session 4:Organization of Innovation
S4: S3:
Transformation and Entrepreneurship Organization of Innovation
•Article 22: Dynamic capabilities and
strategic management
•Article 18: Understanding power in
•Article 36: Creating new ventures from organizations
Bell labs Technologies
•Article 20: The ambidextrous
organization: managing
Selective reading (available on the evolutionary and revolutionary
blackboard) change
<Capturing value from technological
innovation: integration, strategic partnering,
and licensing decisions> by David Teece 1988
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