wk 4 models of innovation

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wk 4 models of innovation

  1. 1. Victorious Secret present:
  2. 2. EBIN504: Workshop 4Dominant Designs and Beyond1. Dominant Design1. From New Technology to Mass Market
  3. 3. 1. Dominant Design  What is a dominant design?  What forces lead some designs to become the standard for a category of product?  What are the difficulties associated with the process?  What uncertainties do manufacturers face?  How are consumers affected while the standard is emerging?  How do firms compete once a dominant design is established?  How do dominant designs shift through time?  What factors might disrupt the status quo in an established sector?  How might this affect established firms?
  4. 4. 1.1 What is Dominant Design?“A dominant design in a product class is, by definition, the one that wins the allegiance of the marketplace, the one that competitors and innovators must adhere to if they hope to command significantmarket following. The dominant design usually takes the form of a new product (or set of features)synthesised from individual technological innovations introduced independently in prior productvariants.” (Utterback, 1996) + simple LUCK Image 1: The Dominant Design is not determined from a technical standpoint, but by society.
  5. 5.  Dominant designs emerge after the ‘ferment’ phase that follows a major innovation.  It can occur at the level of an entire product (Henderson and Clark 1990), or at the component level (Abernathy and Utterback, 1978).  It represents a moment of relative stability before change begins again, at first incrementally (Anderson and Tushman, 1990), and later through major or radical revision which, after another period of ferment, results in a new dominant design. Several mechanisms may lead to the emergence of a dominant Era of Ferment Era of Incremental design. • Design Competition Change • Substitution • Elaboration of  It constitutes the best compromise Dominant Design for addressing a predominant share of market demand and as such is TIME widely imitated across the sector (Christensen et al 1998)  As a consequence of economies of scale that favor standardization (Klepper 1997)  As a consequence of networkTechnological Dominant Design #1 Technological effectsDiscontinuity Discontinuity#1 #2
  6. 6. Dominant designs have been documented indiverse product categories, including VCRs, nuclearreactors, automatically controlled machine tools,and watches (Utterback 1994).
  7. 7. Technical systems below „line of visibility“ converge to “cheapest”design
  8. 8. Dominant Design is also the 8th stage in the technology life-cycle. The next few videos showcase the technology life-cycle in more detail and we found them quite interesting.Stage Video URL1. Origin of Idea http://www.youtube.com/watch?v=YAH4OkFKnoE&feature=relmfu2. Proposal of Concept http://www.youtube.com/watch?v=zf34TZYRhRA&feature=relmfu3. Verification of Concept http://www.youtube.com/watch?v=DT09EiG6Ihs&feature=relmfu4. Laboratory Demonstration http://www.youtube.com/watch?v=I_TvwobmzAk&feature=relmfu5. Field Trials http://www.youtube.com/watch?v=VI90HtLF9MI&feature=relmfu6. Commercial/Operational Intro http://www.youtube.com/watch?v=7aKw7bxkI14&feature=relmfu7. Era of Ferment http://www.youtube.com/watch?v=ulHewPH5YDE&feature=relmfu8. Dominant Design http://www.youtube.com/watch?v=MkBUMwQX-V4&feature=relmfu9. Era of Incremental Improvement http://www.youtube.com/watch?v=bc4w6LR_xsA&feature=plcp10. Substitution http://www.youtube.com/watch?v=TWi7knlR0G8&feature=plcp
  9. 9. 1.2 What forces lead some designs to become the standardfor a category of product?
  10. 10. 1.3 What are the difficulties associated with the process?At rare and irregular intervals in every industry, innovations appear that"command a decisive cost or quality advantage and that strike not at themargins of the profits and the outputs of the existing firms, but at theirfoundations and their very lives" (Schumpeter,1942)“Extraordinary innovations overthrow the paradigm” (Kuhn, 1962).• Once a design becomes an industry standard, it is difficult to dislodge.• Until an industry converges on a standard, no design achieves much cumulative production volume.• Dominant design leads to crowding out of firms
  11. 11. Dominant Design creates safety and allows big investments without big risks. (Nelson and Winter, 1982) – maintain that designers of a technology have at every given point in time beliefs about what is technically feasible or worth trying further performance improvements may be either blocked or will yield diminishing returns (=>need fundamentally different design approaches) (Dosi, 1982) focus on a specific course of design can make people blind to other options pressure on firms to receive adequate returns on their investment managers and designers pursue pathways that promise to bring about marketable applications
  12. 12. 1.4 What uncertainties do manufacturers face? CONFUSION abounds in basic concepts and fundamental ideas LITTLE CLARITY on technological change and its impact on organisational outcomes (Nelson, 1995) Prior to emergence of DD After standard emerges• Battle between variants • further technological progress is driven by inherent technological and economic forces• Driven by social and political forces • a more consolidated community of practitioners (Hounshell, 1995) The emergence of any DD foretells a period of chaotic change (market and organizational) as it completely changes the playing field
  13. 13. 1.5 How are consumers affected while the standard is emerging?The early phase of dominant design is a learning process, as a result, designers or producers willfocus on how to deliver new technology to consumers until they understand what core featuresthe technology have and how to use it (Markides & Geroski, 2004). Markides and Geroski alsoconsidered that the learning process is consistent with the learning curve, which implies thatconsumers’ cognition about the new product or services will be mature as time goes by. Consumer perception is a crucial principle that can link new technology and consumer more effectively. When a new product or service forms a trend, most of consumers will debate about what new product or services should or could do, and also will compare with their own expectation. As for innovators and early adopters, they are enthusiastic to share their own ideas and experiences with other potential consumers, which will speed up the learning process. Meanwhile, the sets of standard can reduce consumers’ uncertainty related to the dominant designs, so that the majority of consumers will consider them as products that they should purchase (Raji,Gary & Arvind, 2006). Learning Curve Eventually, consumers already gain, to some extent, knowledge, purchasing as well as user experiences, which enables producers to lock in consumers and reduce competition from potential competitors and other alternative products or services (Markides & Geroski, 2004).
  14. 14. 1.6 How do firms compete once a dominant design is established?At the beginning, leading firms in the market go downthe learning curves swiftly, they seek scale economiesto reduce product cost and create large cost strengthto defend their leading position. Meanwhile, these “First-mover advantages are almost permanentpioneers over the learning process brand their competitive advantages that early movers canproducts and services and build up relationships with realize and use to protect themselves against theconsumers. The reputation leads these firms to win competitive threats of later-moving, imitativemore competition. (Markides & Geroski, 2004). entrants.” (Markides & Geroski, 2004, p54) Interestingly, most successful firms are colonizers, they accurately find “inherent possibilities” in the new technology, theconsumer perception and enter the industry at the right time (Markides & Geroski, 2004).Besides, Tushman and Anderson (1986) considered that when a new product category forms, important for a firm is the rate ofproduct variation, which aid in its competition for dominance.The competition of same design changes from rival design to rival variants.In order to differentiate the core products form same platform, firms tend to seek market segments that they extend the productfamily and more limit the variety of products and the scope of market than the early phrase of dominant design (Markides &Geroski, 2004). Products have more distinguishable features and functions with other similar products, which, based on same price,consumers are much easier to compare and decide their preference of a product (Markides & Geroski, 2004).! But Markides and Geroski also pointed out that sometimes an emerging dominant design, depending its strength, shift from aniche market to a mass market, which makes it more attractive to new and potential consumers.
  15. 15. 1.7. How do dominant designs shift through time?When the firms enter into original variants of the products,the dominant designs will emerge after a series of experimentationand investments from companies. At first, it might produce competition then the product innovation shifts to improving the production process for the dominant design. The results causes the increasing of process innovation, but the products innovation decrease. After that, it becomes harder that participating in other new variants of the products and the exit of process innovation also decline. Finally, the process leads to a shakeout.
  16. 16. 1.8. What factors might disrupt the status quo in an established sector?The new innovation is the main reason to speed up changes in the currentlysituation towards many companies, such as new skill, new product or processinnovation. However, the strong organizations embrace challenges andultimately thrive. A dominate design is standardization with a dramaticbreakthrough that would threaten the status quo for companies. Whendominate design happens, it will trigger the companies change to deal with thisopportunity or threaten.The emergence of a dominate design is a vital step to create a new marketand it also bring out the consolidation into the market. These leadingcompanies will survive, while the rest of companies might be eliminated(Constantinos and Paul,2005).EXAMPLEFlash Memory Industry; there are various type of flash memory cards andonly suitable for different 3C product. However, if a sort of flash memorytechnology will be invested and it smaller and cheaper than existed ones, itmight replace other flash memory cards and become standardization soon.
  17. 17. 1.9. How might this affect established firms?The firm with dominant design will become main trend in the market; even if it is a newcompany, because more and more customers tend to buy products from it. People always have amyth that the company which produced the product they want to buy firstly is the best one, sothey might choose this brand certainly. According to this, dominant design will form centralizedmarket share highly.On the other hand, dominant design causes other companies which still use old-fashionedtechnologies fail, the appearance of dominant design declined the number of company in thisindustry, and the rest of firm not only usually attend this area earlier, but also has quite largesize. In addition to the appearance of a dominant design, it is impossible to consolidate markets.Dominant design could give the standard in the special area; it means most of companies needto change their dimension to fit for the standard.. EXAMPLE Flash Memory Industry; Flash memory is a good alternative storage device and it can be used in a wide range of portable electronic devices such as digital cameras and mp3 players. Several companies produce various types of memory cards all with different dimensions and the different products are not interchangeable. As we can see from finger1, in 2007, there is no any market share in SmartMedia(SM) card because this product is out of date in many aspects such as access- speed, weight and size. Follow by the development in SD Card which created in 2000, it has got booming in flash memory market recently so that there is a trend that many 3C Manufacturer will produce product which follow by this standardization in order to be compatible with others.
  18. 18. EXAMPLE (continued)
  19. 19. 2. From New Technology to Mass Market:  Why does the technically most efficient product not always emerge as the market standard?  Give some examples of when this has happened – begin with those given in the chapter are there others you are aware of?  What do you see as the key reasons why the VHS dominated the VCR market? Are there any parallel battles going on currently –give examples you are familiar with.  What impact do consumers have on the emergence of dominant design?  How do companies link core products and complementary products/services and why is this important? Give some examples explaining how they have affected the competitive performance of companies.
  20. 20. 2.1 Why does the technically most efficient product not always emerge as the market standard?  Just like innovation isn’t just about inventions, dominant designs are not always about superior features.Sometimes it is a satisfying design interms of technical possibilities that ispropelled by the accommodation ofcommercial interests between suppliers,users, and competitors (Anderson et al1990; Basalla 1988), for example IBM andIntel’s decision to share know-how forblade servers may be an attempt tohasten the emergence of a dominantdesign, or VHS being cheaper to make ledto more companies adopting it, despiteBetamax’s superior design.The chart shows things that need tohappen in order for a dominant design to It is interesting to note that some of the stages involved the publicemerge (in this example, with regards to relations and marketing of the product. As well as researchinggenetically modified foods). what the end user values and what they will be willing to adopt. People didn’t want to retrain how to type, which is one reason why the Dvorak keyboard failed, despite its superior design.
  21. 21. 2.2 Give some examples of when this has happened –begin with those given in the chapter are there others you areaware of?Example ImageThe Colour Fax – Faxes are still widely used today thanks to the fact that many documents stillrequire a signature. The colour fax machine however never really took off, despite being superior toit’s black and white counterpart. The first one was available in 1946, the main problem was that alot of people already had a black and white one, so it was a non-starter. Even if a consumer boughtone, it would only work if whoever they sent or received faxes from also had one.Videophones – Although they are popular now thanks to smart phones and the internet, whenthey were introduced into the commercial market back in the 1950’s they were a flop. At the time,a lot of companies thought it would become the dominant design and create a revolution in face toface interaction. However even when the phones became affordable, they found that the usersrarely looked into the camera. Nobody wanted to worry about how they looked each time thephone rang.The Segway - The product was very clever and it functioned fairly well, the company had a lot offunding and the amount of mass media coverage was astounding, so what went wrong? It’sexpectations (partly due to the media coverage) were blown way out of proportion, a piece oftechnology that people thought would rival in significance the internet or the PC. It was a cleverpiece of technology, but not a solution. How do you park it? Charge it? Do you drive it on thepavement or road? The infrastructure available did not support the product. There was nocompelling target market, as there wasn’t any real need for it. It was an invention rather than aninnovation, the inventors patented the product and kept it in the dark so much that they weresurprised at the public calling it “dorky”.
  22. 22. 2.3 What do you see as the key reasons why the VHS dominatedthe VCR market? Are there any parallel battles going on currently?–give examples you are familiar with. Sonys Betamax video standard was first commercialized in 1975, followed a year later by second mover JVC with their VHS. Amazingly it took around 10 years of battling before VHS stood as the winner. Interestingly VHS’s dominance is not attributed to technology as Betamax had arguably the technical superiority of the two, but rather to a combination of other factors Firstly, Sonys owner, Akio Morita, stated that they had difficulty and disputes with regards to the licencing of the product, which slowed the growth ofRecommended YouTube Betamax and allowed VHS to gain a foothold in the market.Video: VHS machines, were much cheaper to manufacture and so would look a lotBetamax vs VHS emergence more lucrative for companies deciding which format to back. From theof dominant design consumers perspective the most immediate difference at the time was the difference in recording length. Typical Betmax tapes would record for around 60 minutes, not enough to record an entire movie. VHS however could recordhttp://www.youtube.com/wa up to 3-hours, perfect for movies or a television series. Sony later offeredtch?v=FYQt0xi9PRM solutions but it was too little, too late. Some people argue that pornography was also a deciding factor. Sony did not allow this kind of content on their Betamax whilst it was readily available on VHS (Argawel et al, 2002)
  23. 23. A new fight is on the horizon between the west coast tech giants Appleand Amazon, regarding e-publishing between Apple’s iBooks andAmazon’s Kindle. It could be said that the real battle that is taking placeis their underlying formats: EPUB 3 and KF8. EPUB has surfaced as the unofficial but widely accepted open format among publishers. Apple cleverly chose EPUB as it’s format for iBooks, and the format is used in countless other e-readers and devices (e.g. Nook).Amazon, on the other hand, has gone solo with their KF8 (Kindle Format 8). Itreplaces .azw, essentially the .mobi format with added DRM. Amazon’s KF8 is muchmore versatile than EPUB. Currently it is only available on the Kindle Fire, but Amazonhas plans to port it back to their e-ink Kindles and to the Windows version of their e-reader.Apple is the underdog in this fight with their iBooks sales dwarfed by Amazons e-books, but all that could change with the release of Apples new hardware this week.
  24. 24. 2.4 What impact do consumers have on the emergence ofdominant design?Dominant designs are the innovations of thought and imagination to modify the design ofthe product or service which may or may not succeed in market. There is a great impacton consumers on emergence of Dominant design, as the name itself point towardspositive improvement to be dominating.The Dominant design not only shows an improvement in its physical design but also thetechnology behind its use is modernized.Viz. the black/white television set in early 50s – 60s were very bulky and the picturequality was bad are compare to the slim and sleek LED television with High definitionpicture quality This creative change in design and technology provoke consumers to buy product. Further, not only the dominant design play important role but technology also the technological change in product where consumer is experiencing new features, easy to use, compactness and its competency which had a greater impact on the consumer buying behaviour towards new product and adapt its design. Commenting on the other product dominant designs like QWERTY keyboard, petrol, Pen, Bulb, Telephone etc. are great designs of its kind which have changed the lifestyle of the consumer drastically.
  25. 25. 2.5 How do companies link core products and complementary products/services and why is this important? Give some examples explaining how they have affected the competitive performance of companies.Core Product Complementary ProductThe product which is underlying consumer benefit(s) The product which is closely related to the coreoffered by some of the actual and augmented product, people are encouraged to buy thecomponents combined together. There are desires and complementary product with the core product. Complementary goods are the opposite of substitutes:want we expect from the product we purchase Demand for a good will fall if the price of a substituteExample:- What are benefits of the Perfume? I guess is reducedWomen don’t need the spesicif color of perfume orthe shape of the bottle of perfume but the smell of theperfume is much more important which make themfeel more attractive and confident.Some of the complementary and core goods: Car and Petrol, Fan and Electricity, Pen and Ink, Fish and chips.
  26. 26. There is a direct as well as an indirect link between core and complementaryproducts. Most companies sell both types of products, but some of them do not sellthe complementary products.EXAMPLE: Kellogg’s do not sell their complementary product i.e. milk, Car companies do not sell petrol where as “Camel” sell pen and ink undersame brand. It’s not always that the company sells its complementary than its core product, it do affect the competitive market. The rise in price of Oil and Petrol affects the Automobile industries. The demand of the core product declines due to rise in prices of complementary product.
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