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Chapter 5:
Technological Invention, Innovation & Competitive Advantage
HistoryThe history of technology is the history of the invention of tools and techniques.These inventions have enabled people to create and accomplish many new things. Technological artifacts are products of a society’s economy, a force for economic growth, and a large part of everyday life. Technological innovations affect, and are affected by, a society's cultural traditions.
What is a tool?The invention of tools and techniques is evidence of a society’s ability to solve problems that were encountered in every day life.A tool is a device or a piece of equipment that typically provides a mechanical advantage in accomplishing a task or enables the accomplishment of a task not otherwise possible. The most basic tools are simple machines. When particularly intended for domestic use, a tool is often called a utensil.
Types of Tools Cutting tools, such as the knife, scissors or an axe, are
wedge-shaped implements that produce a shearing force along a narrow face.
Guiding and measuring tools include the ruler, set square, and straightedge.
Shaping tools, such as moulds, jigs, trowels, caulk, and concrete help us by making consistent and reliable shapes that fit together well and are sturdy.
Fastening tools, such as welders, rivet guns, nail guns, glue guns, and glue help us by fastening things together.
Types of tools Moving tools, move large and small things. All
these tools move items by some kind of force. for example: Concentrating force tools (like the hammer moves a
nail, or the maul moves a wedge.) These operate by applying physical compression to a surface. In the case of the screwdriver, the force is sideways and called torque.
Writing implements deliver a fluid to a surface via compression to activate the ink cartridge.
Grabbing and twisting nuts and blots with pliers, a glove, or a wrench
Inclined planes, wedges and pulleys help move large items.
Early Civilizations and toolsMany sociologists and anthropologists have created social theories dealing with social and cultural evolution. Some declare technological progress to be the primary factor driving the development of human civilization. In other words, societies advance when their technologies advance.There were three main time periods or ages when tools were the main technological development: The Stone Age, The Bronze Age and the Iron Age.
The Stone AgeThe first tool-makers! This period of time is called the Stone Age because these very early men created tools from stone. The Stone Age ran from about 2 million years ago to about 10,000 years ago.
200,000 years later…
Man learns to make FIRE!!!
They were probably a bit startled when they saw what
they had created, little knowing that the invention of
fire would change life dramatically!
DISCUSS: How do you think the ability to make fire changed life?
A collection of stone age tools:
Can you guess which tools were used for what?
The Bronze Age
The Stone Age developed into the Bronze Age after radical changes in agricultural technology which included: development of agriculture (people began to grow crops), animal domestication (people began to raise animals), and the adoption of permanent settlements (people began to
stay in one area).
During this period in the development of technology is when metals were first used regularly in the manufacture of tools and weapons.
Mining, smelting, and casting became organized efforts.
Bronze Age Tools
Can you guess which tools were used for what?
The Iron AgeThe Iron Age involved the adoption of iron smelting technology. It generally replaced bronze, and made it possible to produce tools which were stronger and cheaper to make than bronze equivalents. In many Eurasian cultures, the Iron Age was the last major step before the development of written language. Also developed during the Iron Age was a coin system.
Iron Age Tools
Can you guess which tools were used for what?
Ancient EgyptiansThe Egyptians invented and used many simple machines, such as the ramp to aid construction processes. They were among the first to extract gold by large-scale mining using fire-setting, and the first recognizable map. Egyptian paper, made from papyrus, and pottery was mass produced and exported throughout the Mediterranean basin.
IndiaIndia is notable for its early application of city planning and sanitation technologies. Cites in the Indus Valley offer some of the first examples of closed gutters, public baths, and communal granaries. India was also at the forefront of seafaring technology . Ship construction is vividly described in an ancient Indian text on Shipbuilding.Indian construction and architecture suggests an understanding of materials engineering, hydrology, and sanitation. Ancient Indian culture was also pioneering in its use of vegetable dyes, cultivating plants including indigo and cinnabar. Many of the dyes were used in art and sculpture. The use of perfumes demonstrates some knowledge of chemistry, particularly distillation and purification processes.
ChinaThe Chinese made many first-known discoveries and developments. Major technological contributions from China include early seismological detectors, matches, paper, the double-action piston pump, cast iron, the iron plough, the wheelbarrow, the suspension bridge, the parachute, natural gas as fuel, the magnetic compass, the raised-relief map, the propeller, the crossbow, and gun powder. Other Chinese discoveries and inventions include: the paddle wheel boat, block printing and movable type, phosphorescent paint, chain drive, the spinning wheel, and solid rocket fuel!
GreeceGreek engineers invented many technologies and improved upon pre-existing technologies. They were unique in their ability to combine scientific research with the development of new technologies. Heron of Alexandria invented a basic steam engine, watermill and windmill.Archimedes invented several machines. One example is the Archimedean screw.Other technologies invented by Greek scientists include the ballistae, and primitive analog computers like the Antikythera mechanism and the piston pump. Greek architects were responsible for the first true domes, and were the first to explore the Golden ratio and its relationship with geometry and architecture.Other Greek inventions include torsion catapults, pneumatic catapults, crossbows, cranes, organs, the keyboard mechanism, gears, differential gears, screws, refined parchment, showers, dry docks, diving bells, odometer and astrolabes. In architecture, Greek engineers constructed monumental lighthouses and devised the first central heating systems. The Tunnel of Eupalinos is the earliest tunnel in history which has been excavated with a scientific approach from both ends.Automata like vending machines, automatic doors and many other ingenious devices were first built by Greeks.
Creativity, Inventions and Innovation• From ancient civilizations until now, there have been many inventions,
discoveries, and development of technologies. Many different cultures have had significant impacts upon technological advances.
• In current society, when man is faced with a problem, he naturally searches for an answer. If he can not find one, he will create one using current knowledge.
• Sustained economic growth cannot be achieved through saving or investment, macroeconomic adjustment policy, preferential taxes or subsidies unless these are accompanied by the myriad large and small inventions and discoveries, required to create greater value from natural resources
- Paul Romer
Technology, Innovation, Science and Development
Technology is the systematic study of techniques for making and doing things (concerned with the fabrication and use of artifacts)
Science is the systematic attempt to understand and interpret the world (it depends upon the skills of literacy and numeracy)
Technology is as old as mankind, science developed with the development of civilization
Technological development and innovation is one of the most important factors for economic development
Long-term economic growth is the result of an increase and accumulation of technological knowledge
The contribution of raw materials, and/or labor, has steadily declined in providing that competitive edge to new products
Technology and Innovation - The Never-ending Spiral
From its beginning, Chinese civilization valued technological skill, e.g. hydraulic engineering, (survival depended on controlling the enriching but destructive floods of the Huang Ho (Yellow River)), the casting of iron, the production of porcelain,the manufacture of brass and paper, silk production, the magnetic compass or the water powered mechanical clockWestern knowledge of silk working, the magnetic compass, papermaking, and porcelain were all derived from China (it took centuries before Europeans were able to produce anything of a similar quality)
Factors and Conditions for an Innovative, Supportive and Enabling Environment
o Educationo Information and transfer of knowledgeo Government policies, including tax policy, supportive
legal and regulatory frameworko Industrial, technological and R&D infrastructureo Efficient intellectual property system o Recognition & rewards o Company climate and culture o Work force and labor environmento Entrepreneurial spirito Availability of funds and financial resources
Creativity, Inventions & Innovation
Countries & companies policies and priorities resource commitment
enhancing creativity of staff and people promoting entrepreneurial spirit increasing productivity gaining competitive advantage generating wealth and improving comfort of life
Creativity and Invention - Challenge to Stability
By nature man is torn between: Security where he seeks shelter Adventure where he takes risks
• Price for each contrasting outcome• Assessed risks
Being creative is risky - higher price, but also higher reward
Ideas without risks are useless, while risks without ideas are stupid
Creativity and Innovation - Challenge for Public Policy Makers
Facilitate rather than regulate Give companies and entrepreneurs more freedom to
experiment Guarantee a fair share of invention and innovation
benefits to inventors and creators Positive attitude towards failures and risk To encourage inventors and creators to join efforts with
entrepreneurs in developing innovative ideas
Inventions
Creating something new that did not exist before
New solutions to existing problems Result of human creativity and curiosity Successful inventions - demand driven
Inventions Few inventions
break-through - pioneering inventions new industries new business new markets
Most inventions - incremental development of technology improved quality better performance higher productivity more customer
satisfaction reduced cost
Innovation and the IP System
19th century - protection and promotion for inventors-entrepreneurs
20th century - protection of corporate interests - anonymous inventors
21th century - increased awareness will result in new empowerment of creative individuals and entrepreneurs
Innovation Process - bringing an invention to market and users Innovation is planned - does not happen by chance Requires team work and cooperation
inventors and researchers process, product and design engineers lawyers and marketing specialists financial and production managers sales, advertising and distribution specialists entrepreneurs
31
Innovation Entrepreneur - play-maker
bring together all those who make innovation a success
Success function of competitive advantages offered by innovation social and economic environment open to change
and progress general attitude towards risk, failure, science and
technology, invention and innovation
Entrepreneurs are Characterized by: Ability to think, take risks and make decisions Independent, reflect and make their dreams
to become reality Have a sense of inquiry Do not believe in inhibitions or limitation
Obstacles to InnovationConservative and hierarchical structures hostile to innovationNew ideas threaten the profits of existing products and serviceslarger organizations tend to apply the NIH factor (NIH=Not Invented Here) to get rid of uninvited innovators (= troublemakers). Often innovators do not get recognition, "but a R&D effort that fails is never forgotten"Inventors not able to present ideas in business terms; many do not even see the business benefits of their ideas
Obstacles to InnovationInnovators are seen as "irritating viruses" or “troublemakers” in the corporate environment. Companies ignore innovations when they do not fit into any of their existing business profilesThe budget allocation process is designed to support existing businesses New ideas are eroded by subtle discouragement rather than by explicit vetoes (application of organizational antibodies to neutralize the irritating viruses): withholding of funding, general nay-saying,subtle signals that it might not be 'career smart' to associate with an innovation project"
• Technology can have positive and negative impacts on individuals, society and the environment.
• Humans have the capability and responsibility to constrain or promote technological development.
• Technology, by itself, is neither good or bad, but decisions about the use of products or systems can result in desirable or undesirable consequences.
Technological Literacy Is not only what students should know and be able to do, but what all citizens in a technology driven society need to know and be able to do.Basic technological literacy is necessary to make informed decisions about technology and its impacts.Technological literacy is the ability to use, manage, assess, and understand technology.
Technological Literacy has been defined many ways, but all of them include similar characteristics:•Abilities to make decisions about technology•Possession of basic literacy skills required to solve technology problems•Ability to make wise decisions about uses of technology•Ability to apply knowledge, tools, and skills for the benefit of society•Ability to describe the basic technology systems of society.
Impacts of TechnologyThe impact of technology is viewed as the solutions to problems and the new problems created by the solutionsOptimization is the process of seeking or developing the best solution to a problemThe best solution for a problem is not likely to be found the first time. This makes it possible for future developments to improve or optimize the product.Every new technological advance or solution has some hidden and known negative effects.These negative effects or compromises are called: TRADE-OFFS.Negative aspects of a product could affect people and the environment in ways that are sometimes more harmful than the solution.When new technology is developed, decisions are made regarding the amount of risk that is acceptable in attaining a solution.Many of these risks were not considered as carefully as they should have been and we are now just starting to see their effects.
Technological ChangeThe evolution of technology has been a series of progressive improvements to products to fulfill a need or provide a convenience.In the beginning of our technological evolution, more emphasis was placed on development of a solution and less on the implications it may have on society or the environment.Early technological development, because of a smaller knowledge base and lack of communication, was very slow and sometimes took hundreds of years.As we progressed through time and developed more ideas and solutions, it became easier and faster.Increased knowledge, communication and writing, and the ability to improve current products played an important role in the change process.Ex: Computers, televisions, phones, etc.
ImplicationsThe choices we make can have long lasting positive or negative effects to our future.Even if we make good choices, the results of those choices will affect individuals, society, environment, and future technology.Internal Combustion Engine was one of the greatest inventions in history.The use in the automobile created a change in work and leisure activities.It influenced the economy, changed the way we built cities, and shortened travel time.
Unfortunately, it also had a drastic impact on our environment.PollutionAccidentsErosion Reduction in agricultural and forested land
have had dramatic impact on our environment.
As a result of increased paved areas and pollutants in the air, the average global temperature is rising in what scientists call “Global Warming.”
In recent years, advanced technology solutions have often reduced the need for human workers in various professions.Ex: Robots have replaced human workers in
the manufacturing industry. They do not get tired, injured or need breaks, and can perform jobs that are hazardous to people.
Societal Problems
Most of the current environmental problems are a result of technology created over the past 30 to 40 years. This is due mainly to the development of materials used in products that are not biodegradable or recyclable.If they are not recycled, disposal is still necessary and creates landfill and run off problems.Materials used to grow food and other agricultural products can also have damaging effects on the environment.Ex: FertilizersWhen technology is developed to help improve life, it often can disrupt the balance of nature and cause irreversible damage. Environmental problems are not only about waste products, but deal with raw materials and resources. Conservation of materials in many circumstances is not a priority when developing new technology.Ex: Trees, fossil fuels, and different types of minerals.
Environmental Problems:
Other inventions are made to solve problems.
Many inventions keep people safe.
People who create inventions are called inventors.
Inventors can live anywhere in the world and be any age!
Inventors can be anyone that wants to help the world!
People have been creating inventions for hundreds of years.
Don’t give up!
• Inventors need to plan for a long time and have to try many times before they can get their invention to work the right way.
No copy cats!
• Once an invention works, inventors will need to get a patent.
• A patent makes sure that no one can copy their idea.
• A patent means the inventor can sell their invention to make money!
Improvements!• Inventions can be changed to make them
better!
• Changing the design or plan of an invention can help the people who use them.
Refrigerator• The refrigerator was invented to help keep food
from spoiling in the heat.• Carl von Linde invented the refrigerator in 1876.• Carl von Linde was from Germany.
Airplane• Wilbur and Orville Wright spent many years building
balloons and kites before they built the first airplane. • Their invention was very special because it was the first
flying machine.
Flying Kite
The Flyer• The first flight took place on December 17, 1903
and lasted 12 seconds. • The Wright Brothers’ plane, the Flyer, was an
important invention because it marked the beginning of human flight.
The First CarHenry Ford wanted to change transportation in the world.
He designed the first car and used factories to build many cars in a short amount of time!
Many people could pay to own one of his Model T cars!
New CarsCars have gotten faster over the years.
They cost more money, but they are safer than the old Model-T cars.
Telephone• Alexander Graham Bell designed the telephone
in 1876. • He wanted a faster way to talk to others who
were not nearby.• His success allowed for all people to
communicate quickly!
Improving the telephone!• Over the years, inventors have tried to make the
telephone better.• Phones that cost less let many people own one
in their home.• Cell phones allowed people to take their phone
with them wherever they go!
Vacuum Cleaner• Many people created several designs for
the vacuum cleaner. • This invention helped clean rugs, floors,
and other dirty areas indoors.• Over time vacuums have become more
powerful and clean better.
Braille• Louis Braille was blinded as a child and
he wanted a way to read.• He invented a system of raised dots
that could be read using the fingers.• Today, this method is still used by
people who are blind.
Definition of Competitiveness
• Objective of a business is to make a profit.• Profit based on providing value to customers.
How can a business assure value to customers?
A good competitor knows:• Which products and services it offers.• Who its customers are.• Who its competitors are.
Competitive Advantage
To assure positioning for profit, a company must maintain competitive advantage. •Methods that are achievable and sustainable.•Work smarter.•Assess whether Information Systems are appropriate to gaining a competitive advantage?•Focus on three primary inputs: HR , Capital, Technology.
Global Competition
The Global Market will come to you if you don’t go to it.
•By staying in your home country, you assume a defensive position.•There are advantages and disadvantages to going global. These need to be considered carefully.
Role of the Nation• Study states that increased
competitiveness of the Nation will stimulate the economy.
• Appropriate steps to stay competitive.• Only companies can sustain and achieve
competitive advantage.• Government should serve as a catalyst
and a challenger.
Competitiveness: A Link to National Goals
HumanResources
Capital
Technology
ImprovedDomestic
Performance
More andBetter Jobs
IncreasedStandard of
Living
StrongerNational Security
DecreasedBudgetDeficit
TradePolicy
NewCompetition
Increased World Market
Competitiveness
ReducedTrade Deficit
Figure 2-1
Porter Competitive Model
Intra-Industry Rivalry
Strategic Business Unit
BargainingPower
of Buyers
Bargaining Power
of Suppliers
Substitute Products
and Services
PotentialNew Entrants
Source: Michael E. Porter. “Forces Governing Competition in Industry, Harvard Business Review, Mar.-Apr. 1979
• Used to understand and evaluate the structure of an industry’s business environment and the threats of competition to a specific company.• Was not developed for IS use.• Breaks an industry into logical parts, analyzes them and
puts them back together.• Avoids viewing the industry too narrowly.• Provides an understanding of the structure of an
industry’s business environment.• Provides an understanding of competitive threats into an
industry.
Porter Competitive Model
Rivalry Likelihood• Profit margins.• Industry growth rate and potential.• A lack of capacity to satisfy the market.• Fixed costs.• Competitor concentration and balance.• Diversity of competitors.• Existing brand identity.• Switching costs.• Exit barriers.
A Buyer Has Power If: 1. It has large, concentrated buying power that enables it to gain volume discounts and/or special terms or services.2. What it is buying is standard or undifferentiated and there are multiple alternative sources. 3. It earns low profit margins so it has great incentive to lower its purchasing costs. 4. It has a strong potential to backward integrate. 5. The product is unimportant to the quality of the buyers’ products or services.
A Supplier Has Power If: 1. There is domination of supply by a few companies.
2. Its product is unique or at least differentiated.
3. It has built up switching costs.
4. It provides benefits through geographic proximity to its customers. 5. It poses a definite threat to forward integrate into its customers’ business. 6. A long time working relationship provides unique capabilities.
DefinitionsNew Entrant:An existing company or a startup that has not previously competed with the SBU in its geographic market. It can also be an existing company that through a shift in business strategy begins to compete with the SBU.
Substitute Product or Service:An alternative to doing business with the SBU. This depends on the willingness of the buyers to substitute, the relative price/performance of the substitute and/or the level of the switching cost.
Possible Barriers to Entry• Economies of scale.• Strong, established cost advantages.• Strong, established brands.• Proprietary product differences.• Major switching costs.• Limited or restrained access to distribution.• Large capital expenditure requirements.• Government policy.• Definite strong competitor retaliation.
Substitute Threats
• Buyer propensity to substitute.
• Relative price/performance of substitutes.
• Switching costs.
Porter Competitive Model Tips1. To incorrectly define the industry can cause major problems in doing
Section I of the analysis term paper.
2. You must identify the specific market being evaluated.
3. Your analysis company is the Strategic Business Unit.
4. Identify rivals by name for majors, by category for minor rivals if needed to present the best possible profile of rivals.
5. Be sure to address the power implications of both customers and suppliers. Power buys them what?
6. Identify buyers and suppliers by categories versus companies.
7. Summarize your Porter Model analysis.
Porter Value Chain
Basic Concept:
1. Deals with core business processes.
2. Enables tracking a new idea to create a new product and/or service from origination all the way to customer satisfaction.
Generic Value Chain
INBOUNDLOGISTICS
OPERATIONS OUTBOUNDLOGISTICS
MARKETING AND SALES
SERVICE
PRIMARY ACTIVITIES
PROCUREMENT
TECHNOLOGY DEVELOPMENT
HUMAN RESOURCE MANAGEMENT
FIRM INFRASTRUCTURE
SUPP
OR
T A
CTI
VIT
IES
Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright © 1985 by Michael E. Porter.
Technologies in the Value Chain
INBOUNDLOGISTICS
OPERATIONS OUTBOUNDLOGISTICS
MARKETING AND SALES
SERVICE
PROCUREMENT
TECHNOLOGY DEVELOPMENT
HUMAN RESOURCE
MANAGEMENT
FIRM INFRASTRUCTURE
Information System TechnologyPlanning and Budgeting Technology
Office Technology
Training TechnologyMotivation Research
Information Technology
Product TechnologyComputer-Aided DesignPilot Plant Technology
•Diagnostic and Testing Technology•Communications Technology•Information Technology
•Transportation Technology•Material Handling Technology•Storage and Preservation Technology•Communication System Technology•Testing Technology•Information Technology
Information Systems TechnologyCommunication System TechnologyTransportation System Technology
Software Development ToolsInformation Systems Technology
•Basic Process Technology•Materials Technology•Machine Tools Technology•Materials Handling Technology•Packaging Technology•Testing Technology•I/nformation Tech.
•Transportation Technology•Material Handling Technology•Packaging Technology•Communications Technology•Information Technology
•Multi-Media Technology•Communication Technology•Information Technology
Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright © 1985 by Michael E. Porter., p. 167.
Entrepreneurship and Competitive Advantage
• Acquiring a competitive advantage involves – anticipating unmet and unarticulated consumer needs deep into
the future– investing development of new products– investing in capabilities to produce and distribute these products
and– be the first to do so
• Competitive advantage arises from a firm’s entrepreneurial ability to exploit market shocks and discontinuities
• New sources of competitive advantages displace established ones (Schumpeter’s creative destruction)
Creative Destruction, Growth and Monopoly
• Markets have periods of comparative quiet punctuated by shocks and discontinuities• During the period of quiet firms that posses superior products and technology earn
economic profits• Entrepreneurs who exploit the opportunities created by the shocks enjoy economic
profits during the next period of quiet• Creative destruction implies that the isolating mechanisms that protect a firm’s
competitive advantage will not be permanent• The life expectancy of a competitive advantage shrinks as technology and tastes
change rapidly• Schumpeter considered static efficiency - allocative efficiency at a point in time - to be
less important than dynamic efficiency • Society benefits much more from competition between new products, new technologies
and new forms of organization than from price competition• Schumpeter’s ideas have been used to defend monopoly• Presumably monopoly leads to greater investment in innovation and higher long term
growth.
Disruptive Technologies
• Many of the disruptive technologies have higher perceived benefits and lower costs
• Some times disruptive technologies can have lower benefits and much lower costs (example: Downloadable MP3 recordings versus higher resolution in CDs)
Sustainability and Creative Destruction
• Access to ongoing scientific expertise is essential for riding the wave of creative destruction.
• Biotech and pharmaceutical firms stay in close touch with the scientific and academic community.
• They reward scientists for generating general scientific knowledge.
Strategic Intent and Strategic Stretch
• According to Hamel and Prahalad, successful firms like CNN, SONY and Honda tend to have strategic intent - an obsession with global dominance in their industries
• For these firms, there is a gap - strategic stretch - between their strategic intent and their current resources and capabilities
Hypercompetition Strategies• Firms are said to enter a state of hypercompetition state when
competitive advantages can only be sustained for very short periods.
• According to Richard D’Aveni, several industries are in this state.
• Firms in these industries continually seek new sources of competitive advantage.
• A firm’s chief strategic goal should be to disrupt the existing sources of advantages including its own.
• A firm that relies solely on its existing source of advantages will be displaced by more innovative rivals.
• Firms may be able to create shocks on their own rather than waiting for them to occur.
Technology Competitiveness in Developing countries - Factors
Technology imports• Small number of developed countries provide most of technological
innovations. Most of the developing countries are neither innovating nor adopting. <Technology innovating economies..>
• Lacks capability to create globally competitive technologies• Lack of access to information on new technologies and innovations
Technology infrastructure• R&D institutes and testing facilities in developing countries fall short
of quality when compared to industrialized countries• Lack of collaborative research• Isolation of universities and R&D from Industry
Technology Competitiveness in Developing countries - Factors
Pace of technological change• SMEs lack the capability to constantly upgrade technologies in view
of rapidly changing technologies in developed countries• Easier in Process industries
Technology acquisition• Unit level technology absorption is low• Lack of incentive, direction and capability to update existing
technologies• Lack of ready access to capital• Relatively high transaction cost
Technology Competitiveness in Developing countries - Factors
Unit Level Interventions• Smaller firms find difficult to finance and coordinate the requisite
level of technological activity• Low participation in network of organizations and institutions
involved in diffusing information on technologies. (specially SMEs)
Availability of Skilled Manpower• Shortage of trained personnel• Lack of continuous capability development of manpower in technical
dimensions• New technologies are not adopted due to lack of skilled people thus
widening the technology gap.
