Product & Process Innovations - Tech S-Curve

PRODUCT AND PROCESS INNOVATIONS AND THE TECHNOLOGY S-CURVE Product and Process Innovations William Abernathy and James Utterback observed that in newtechnology industries, early innovations focus on improving product performance and safety. Later, innovations shift to enhancing the production process - making the product cheaper and better quality. The rate of product innovations peaks around the time a product design standard emerges. Thereafter it declines, and process innovations rise, as manufacturers can now standardize production. After key technologies mature, the market eventually saturates at a level that continues unless the key technologies become obsolete through substitution. Then the old technology's market declines to zero or a niche. Soon, obvious ideas are exhausted. Progress gets harder, starting linear growth. Eventually, the rate slows as limits approach - technological, economic (diminishing R&D returns), or social (undesirable by-products). Then a new technology emerges and gets adopted, not facing the old technology's limits. Firms gain from changing technologies. Technological Leadership Seeking technological leadership means being first with innovations supporting strategy. Followership is consciously not being first, actively choosing to not innovate earliest. Leadership or followership support either cost leadership or differentiation. The choice depends on:  Sustainability competitors  First mover advantages like reputation, preemption, switching costs, learning curve, scarce input access  First mover disadvantages like pioneering costs, demand uncertainty, investment specificity, ease of imitation Technology S-Curve New technologies see S-shaped progress - initial exponential growth, slowing to linear, and tapering off toward a limit. At first, inventions have poor performance, are inconvenient, dangerous, and costly. But opportunities for improvement emerge as inventors/engineers address limitations. Exponential performance growth occurs as ideas flush in. Sustained preventing innovation. of lead over leadership requires duplication and rapid Role of Technology Technological change drives competition and industry evolution, creates industries, equalizes rivals, and propels some firms to prominence. Many great firms technological changes. exploited Innovation is key for sustainable competitive edge. Firms generally must use the latest technology for more features, performance, quality or lower costs. Sometimes invention is also needed. Innovations can be based on inventions or discoveries, but must be commercially exploited. The relationship between technology and competition is often misunderstood. Technology itself is not important - its effect on competitive advantage and industry structure matters. High technology does not guarantee profitability - many hi-tech industries are less profitable than some "low-tech" industries due to structure. Technology pervades the value chain, so there are no "low-tech" industries. Assuming industry maturity risks strategic disaster. Many innovations involve no scientific breakthroughs. Mundane innovations in "low-tech" firms can confer strategic advantage. Technology alters rivalry by affecting cost position, differentiation, supplier power, buyer power, entry barriers - all competitive forces. Widespread technology defines industry structure. Diffused technology can improve or erode entire industry profitability. For sustainable advantage, technological change should:  Improve cost/differentiation with sustainable lead  Shift cost/uniqueness drivers in the firm's favor  Translate first mover efforts into first mover advantages  Enhance industry structure Conversely, technology destroys advantage if competitors easily duplicate it or it skews cost/uniqueness against the firm.