INTRODUCTION
The notion that innovation is essentially about the
commercialisation of ideas and inventions suggests that it is relatively
straightforward and simple. Far from it, not only is the step from invention to
commercially successful innovation often a large one that takes much effort and
time, innovations can and do vary enormously. In addition the term ‘innovation’
is widely used, probably because it frequently has very
positive associations, and is often applied to things
that really have little to do with
innovation, certainly in the sense of technological
innovation. The purpose of this 38
chapter is to try
and produce some sort of order from the apparent chaos and confusion
surrounding innovation.
MAKING SENSE OF INNOVATION
If innovation comes in a variety of shapes and sizes
and is used by different people to mean different things then making coherent
sense of the subject is not an easy task. Grouping innovations into categories
can help. Essentially by putting innovations in groups it should make it easier
to make sense of innovation as a whole simply because one can then take each
group in turn and subject it to detailed scrutiny. If it is easier to make
sense of a small group than large one then we should be on the way to making
sense of innovation.
Two kinds of categorization are attempted. The first centres
on different forms of innovation. Form in the sense in which the term is used
here applies to the use or application of the innovation. Three applications
are considered: product, service and process innovations.
The second categorization is based on the degree of
novelty associated with the innovation. It implies that there are different
degrees of novelty associated with innovation. As a result, one sometimes finds
that things described as innovations actually involve little or no novelty.
Take the case of a new wrapper for a chocolate bar. For the people marketing
the product, the new wrapper may well appear to be a
significant innovation, hence justifying the use of
words like innovation and
innovative in promotional campaigns. But the reality
is that if the same type of 39
wrapper
is already in use on other similar products there really is very little
innovation. On the other hand one can have innovations such as television,
developed by John Logie Baird, which not only transformed the nature of leisure
time, created a new creative industry and provided employment for thousands,
but also went on to transform a whole host of other aspects of our society
including politics, advertising, the provision of information and sport.
Recognising different degrees of novelty, this categorization considers four
types: radical, architectural, modular and incremental.
FORMS OF INNOVATION
This
categorization is based on the idea of applications or uses for innovation. By
this we mean areas or fields where innovations are used. It is possible to
differentiate three principal applications for innovation: products, services
and processes.
Product Innovation
Product innovations loom large in the public
imagination. Products, especially consumer products are probably the most
obvious innovation application. The Dyson bagless vacuum cleaner is an example
of a product innovation. James Dyson developed what he terms ‘dual cyclone’
technology (Dyson, 1997) and used it to create a new more efficient vacuum
cleaner. As a vacuum cleaner it is a consumer product and what makes it an
innovation, i.e. what is ‘innovative’ about it, is that it functions in a quite
different way from a conventional vacuum cleaner. It is still a
vacuum cleaner and it does what vacuum cleaners have
always done, it extracts dust
and other items of household debris from carpets and
upholstery. But the innovation 40
lies in
the way in which it functions. Instead of employing a fan to suck dust into a
bag, it dispenses with the bag and uses Dyson’s patented ‘dual cyclone’
technology to extract dust and place it in a clear plastic container. It is a
nice example of a product innovation because it is an everyday household
product where you can actually see the innovation at work, a fact that James
Dyson, an experienced industrial designer and entrepreneur, no doubt had in
mind when he designed his first bagless vacuum cleaner, the Dyson 001.
From a commercial perspective the attraction of
product innovations is that the novelty of a new product will persuade
consumers to make a purchase. It is no surprise that ‘new product development’
is one of the four business strategies put forward by Ansoff for the future
development of a business. Of course product innovations don’t have to be
consumer products, they can just as easily be industrial products such as
machinery and equipment.
Service Innovations
Often overlooked but equally important are service
innovations, that take the form of new service applications. One reason why
service innovations don’t attract as much attention as product innovations is
that they are often less spectacular and less eye- catching. This probably has
something to do with the fact that where innovation is concerned, the public
imagination has always tended to identify with inventions, rather than
innovation as such. Because of their high novelty value, inventions are usually
products.
Service
innovations typically take the form of a new way of providing a service, often
with a novel and very different business model.
Occasionally they even take the form of an entirely new service. The
creation of the ‘Direct Line’ telephone insurance business is a good example of
the first type of service innovation. For years the insurance business had been
transacted via high street outlets, door-to-door, by post or through
intermediaries known as insurance brokers. Peter Wood, the creator of the
Direct Line telephone insurance business, realised that with appropriate on
line computer services, it would be possible to cut out these expensive and
unproductive ways of dealing with the public and deal direct with the customer
via the telephone. Developments in computing and telecommunications in recent
years have given rise to a whole raft of service innovations very similar to
Direct line where new technologies are used both to provide customers with a
better service and to enable service providers to improve their productivity by
providing it more cheaply.
MINI-CASE: SOUTH WEST AIRLINES
Founded in the late 1960s by Herb Kellner,
it was South West Airlines that started the
‘no frills’ revolution in air travel.
In Europe in the last 10 years air travel
has been transformed by the introduction of low cost services offered by ‘no
frills’ carriers. The innovation which these carriers introduced has been the
provision of easily accessible scheduled short haul services at fares very much
lower than those offered by conventional scheduled airlines. The result has
been an enormous increase in both numbers travelling by air and the range of
destinations served.
Yet this was not a European innovation. The
pioneer of low cost ‘no frills’ air transport was South West Airlines based in
Texas. Under its charismatic founder, Herb Kellner, South West Airlines had to
fight legal battles with local competitors for the first four years of
existence just to be allowed to fly. Competitors argued there simply wasn’t
enough business to warrant another airline in the region. When it did finally
get airborne it was faced with a price war with Braniff and other airlines as
they tried to drive it out of business.
Based at Love Field in downtown Dallas South
West Airlines was able to survive by offering customers a very different
package from conventional airlines. The package included low fares (usually 60%
below conventional airlines), high frequencies, excellent on-time departure
rates and direct sales (i.e. no travel agents). What was not being offered was
meals, pre-assigned seats, different classes of seating and connecting flights.
This was achieved by means of: a single aircraft type (then and now the Boeing
737), smaller low cost airports, rapid turnarounds (typically 15-20 minutes),
high load factors, and point-to-point services (Procter, 1994).
The ‘no frills’ service package diverted
some traffic away from existing carriers but more significantly it generated a lot of new business, especially
leisure and business passengers who could be persuaded to fly rather than
drive. As Herb Kellner (Dogannis, 2001: p128) put it,
‘we are not competing with airlines, we’re
competing with ground transportation.’
De-regulation of airline services in the US
in 1978 meant that South West Airlines was well placed to expand in Texas with
this innovation in airline service.
Traffic growth proved well above average. South West was able to expand by
adding more capacity to its fleet, but instead of adding routes as airlines
normally did Kellner’s strategy was to
increase flight frequency on existing routes.
It worked. Today South West Airlines is
the fifth biggest carrier in the US, and is the most consistently profitable
airline in the country. Yet it has stuck
to its innovative business model. Not only that, but the model has been copied with great
success in Europe, first by Ryannair (Dogannis, 2001) and then by a host of
other airlines including EasyJet and BMI Baby to create a low cost revolution
in air travel across the continent.
Source: Procter (1994)
Sometimes one gets innovations that take the form of
completely new services. Ebay, the internet auction, and Lastminute.com the
clearing house for late bookings on anything from holidays to gifts, would
probably come under this heading. So too would Federal Express the brainchild
of Frederick W. Smith. Operating in an established industry: parcel delivery,
Smith pioneered the idea of overnight delivery using a hub and spoke system
(Nayak and Ketteringham, 1993). During the day trucks collect parcels and bring
them to an airport where they are sorted and then flown overnight to a hub near
their destination ready for delivery the next day.
Process Innovations
If service innovations come second behind product
innovations, then process innovations almost certainly come a poor third. And
yet process innovations often have an even bigger impact on society than either
product or service innovations. The
early nineteenth century Luddite movement in and around Nottingham(Chapman,
2002), where stocking knitters who worked on machines
in the home, took to rioting and breaking the new more efficient machines
located in factories, because they feared that the new machines would destroy
their livelihoods, is testimony to the power of process innovations.
Although
generally less well known than product innovations, examples of process
innovations, including ones that have had a dramatic impact on society as a
whole, abound.
The humble photocopier, developed by Chester Carlson,
may not sound like a spectacular innovation, and yet it had a big impact on the
way in which administrative systems in offices are organised. One has only to
look at what happens in an office when the photocopier breaks down to see how
reliant we are upon it.
Much less well known, but just as significant in terms
of its impact on society, is the
Float Glass process developed by Alistair Pilkington, in which
plate glass is
manufactured by drawing glass out across a bed of
molten tin (Quinn, 1991). Prior to
the introduction of this process innovation, plate
glass used for shop windows and
office windows was expensive and of poor quality
largely because the only way of 45
getting
a flat surface was to grind it and polish it. The Float Glass process at a stroke eliminated the need for time
consuming grinding and polishing it, leading to a dramatic fall in costs.
Architects and property developers could now afford to specify large sheets of
plate glass when constructing new buildings, where in the past they would have
been prevented because of the cost. The result can be seen in the public
buildings constructed in the last thirty years, where everything from office
blocks and hotels to airports and shopping malls now employ large expanses of
glass.
Table 2.1: Craft v. Mass Production at
Ford 1913-1914
Assembly
time Craft Production,
1913, (minutes)
|
Mass Production,
1914, (minutes)
|
Reduction in
effort
|
Axle 150 26.5
83%
Components into vehicle 750
93 88% Source: Womack, Jones and
Roos (1990)
Nor is it only process innovations that affect
working practices and the physical infrastructure of towns and cities. Process
innovations often have a big impact on the economics of production. As table
2.1 shows, Henry Ford’s introduction of the moving assembly line at his new
Highland Park plant in Detroit in 1913 resulted in a
dramatic reduction in manufacturing effort. Improved
productivity on this scale,
enabled him to dramatically reduce the price of his
Model T car. The price of a Ford
Model T
which in 1908 was $850, fell to $600 in 1913 and $360 by 1916 (Freeman and
Louçã, 2001: p275). As Ford reduced his prices, demand took off and the car,
which had hitherto been an ostentatious toy only available to a small wealthy
elite, was opened to a broad cross-section of society.
Today a similar revolution in production is taking
place, but this time the revolution is occurring not on the factory floor but
in the office. Business-to-business (B2B) E- commerce is dramatically reducing
the need for paperwork and those who process paper, namely administrators. It
is no surprise that all sorts of business organisations from airlines to
insurance companies offer a discount for buying online. Buying online means
less paper and money spent processing paper. One has only to look at the size
of the discounts offered to get an idea of the efficiency gains that firms can
make.
TYPES OF INNOVATION
It has long been noted that one can differentiate
innovations in terms of the degree of novelty associated with them. Some
innovations employ a high degree of novelty, while others involve little more
than ‘cosmetic’ changes to an existing design. This distinction between big
change and small changes innovations has led some to group innovations as
either radical or incremental (Freeman, 1982). However differentiating innovations
using just two classes in this way is rather limited and does not bring out the
subtle but important differences between innovations. In particular it fails to
show where the novelty often lies. To cater for this Henderson and Clark (1990)
use a more sophisticated analysis. Their analysis incorporates both radical and
incremental innovation but within a more wide-ranging analysis that is both
robust and meaningful. Henderson and Clark’s (1990) analytical framework
provides a typology that allows us to analyse more modest innovations and at
the same time predict their impact in terms of both competition and the
marketplace. Although this typology focuses primarily on product innovations it
can equally be applied to service and process innovations.
At the heart of
Henderson and Clark’s analytical framework is the recognition that products are
actually systems. As systems they are made up of components that fit together
in a particular way in order to carry out a given function.
Example
Pen
= knib + ink storage + stem +
cover + ink
System
= interaction of components
Henderson and
Clark (1990) point out that to make a product normally requires two distinct
types of knowledge:
• Component knowledge
i.e. knowledge of each of the components that performs
a well defined function within a broader system that makes up the product. This
knowledge forms part of the ‘core design concepts’ (Henderson and Clark, 1990) embedded
in the compoents.
• System knowledge
i.e. knowledge about the way the components are
integrated and linked together. This is knowledge about how the system works
and how the various components are configured and work together. Henderson and
Clark (1990) refer to this as architectural knowledge.
MINI-CASE: AUTOMATIC WASHING MACHINE
The modern automatic washing machine has
been subjected to a variety of types of
innovation. The washing machine is a
system for washing for clothes. The components comprise: motor, pump, drum,
programmer, chassis, door and body. These components are linked together into
an overall system. Component knowledge is the knowledge that relates to each of
the components. System knowledge on the other hand is about the way in which
the components interact. The interaction is determined by the way in which the
system is configured. Responsible for the design and development of the system,
washing machine manufacturers frequently buy-in component knowledge by buying
components and then assembling them into a finished product.
Washing machines have been affected by
both incremental and architectural innovation. Changes in the spin speed are an
example of incremental innovation. The spin speed determines how dry the
clothes will be when they come out of the machine. 20 years ago the fastest
machines spun at up to about 1,000rpm. Gradually spin speeds have risen and
today the fastest machines spin at 1,600rpm. Although these advances have
resulted in improved performance, the system has remained unchanged. However
there have been architectural innovations in the washing machine field. In the
1960s most washing machines were ‘twin tubs’, where the washer and the spinner
were completely separate and placed alongside each other with access via the
top of the machine. Clothes had to be manually moved from the washer into the
spinner. The automatic washing machine with the washer and spinner
combined in a single drum, allowing all the
operations to be completed in a single cycle, was an architectural innovation.
Similarly when Dyson launched its Contrarotator™ washing machine in November 2000 this was
another architectural innovation. This has not just one drum, as on a
conventional machine, but two that rotate in opposite directions. This change
in the configuration of the system gives an entirely different washing system.
Henderson and Clark (1990) use the distinction between
component and system knowledge to differentiate four categories or types of
innovation. They use a two dimensional matrix. On one axis are component
changes on the other are linkage (i.e. system) changes:
Figure 2.1: Typology of Innovations
In this analysis Incremental and Radical
innovation are polarised as being at opposite extremes. However the analysis
introduces two intermediate stages between these two extremes: Modular
innovation and Architectural innovation:
Table 2.3: Changes associated with Types
of Innovation
Innovation Components System
Incremental
Improved No change Modular New No change
Architectural
Improved New configuration/architecture
Radical New New
configuration/architecture
Incremental Innovation
Incremental innovation refines and improves an
existing design, through improvements in the components. However it is
important to stress these are improvements not changes, the components are not
radically altered. Christensen (1997) defines incremental innovation in terms
of:
‘a change that builds on a firm’s
expertise in component technology within an established architecture.’
In the
case of the washing machine example used earlier, incremental innovation would
be case of offering a machine with a
more powerful motor to give faster spin speeds.
Incremental
innovations are the commonest. Gradual improvements in knowledge and materials
lead to most products and services being enhanced over time. However
these enhancements typically take the form of
refinements in components rather than changes in the system. Thus a new model
of an existing and established product
(perhaps described as a ‘mark 2’ version) is likely to leave the
architecture of the system unchanged and instead involve refinements to
particular components. With the system and the linkages between components
unchanged and the design of the components reinforced (through refinements and
performance improvements) this places such innovations in the top left hand
quadrant of figure 2.1, where they are designated incremental innovations.
Radical Innovation
Radical innovation is about much more than
improvements to existing designs. A radical innovation calls for a whole new
design, ideally using new components configured (i.e. integrated into the
design) in a new way. In Henderson and
Clark’s (1990) terms,
‘Radical innovation establishes a new
dominant design, and hence a new set of core design concepts embodied in
components that are linked together in a new architecture.’
Radical
innovations are comparatively rare. Rothwell and Gardner (1989) estimated that
at the most about 10 per cent of innovations are radical. Radical innovation is
often associated with the introduction of a new technology. In some cases this
will be a transforming technology, perhaps even one associated with the
transforming effect of a Kondratiev long wave.
Table 2.4: Radical Innovations
Radical Innovation Technology
Impact on Society
Telephone
|
Telecommunications New means of mass communication
|
| Jet
Airliner |
|
Jet power Growth of mass travel, foreign holidays
|
|
| Television
|
|
Television New leisure activity, entertainment
|
services e.g. banking
In terms of
Henderson and Clark’s framework radical innovation is located in the bottom
right hand quadrant, at the opposite extreme from incremental innovation, as
it involves both new components and a new design with a new architecture that
links the components together in a different way.
MINI-CASE: NEVER ASK PERMISSION TO
INNOVATE
In 1956, a small American company
invented a device called the ‘Hush-a-Phone’. It was a plastic cup designed to
be attached to the microphone end of a telephone
handset in order to facilitate telephone conversations in
noisy environments - rather like cupping your hand over the phone.
When Hush-a-Phone appeared on the market,
AT&T – then the monopolistic supplier of telephone services to the US
public – objected, on the grounds that it was a crime to attach to the phone
system any device not expressly approved by AT&T. Hush-a- Phone had not
been thus approved. The Federal Communications Commission agreed with AT&T.
The fact that the device in no way ‘connected’ with the network was neither
here nor there. Hush-a-Phone was history.
A few years later, when Paul Baran
proposed the packet-switching technology which eventually under-pinned the
internet, AT&T first derided and then blocked its development. One of
AT&T’s executives eventually said to Baran: ‘First, it can’t possibly work,
and if it did, damned if we are going to allow the creation of a competitor to
ourselves.’
Note the verb ‘allow’. In a single word it
explains why we should never permit the established order to be gatekeepers of
innovation.
This is not widely understood by
legislatures or governments, and it is particularly not understood by our own
dear DTI (aka the Department of Torpor and Indolence), which thinks that the
way to encourage innovation is to get all the established players in an
industry together and exhort them to do it.
Innovation comes in two forms. The first is
incremental – the process of making regular improvements to existing products
and services. This is a cosy, familiar business which is easily accommodated by
the established industrial order and by its regulatory bodies. It is what
governments and corporations have in mind when they declare they are in favour
of innovation.
The second kind of innovation is the
disruptive variety – defined as developments that upset, supersede or transform
established business models, user expectations and government frameworks and
create hitherto unimagined possibilities. In other words, change that upsets
powerful apple-carts.
This is the kind of innovation that the
established order really fears – and often tries hard to squash. And yet, if
our societies and economies are to remain vibrant, it is the only kind of
innovation that matters. We are thus faced with a dilemma: on the one hand, we
need disruptive innovation; on the other, the established order will never make
it happen. So what do we do?
This is the central policy issue
confronting every modern government. Yet the answer
? as a striking new pamphlet by Demos argues ?
is staring us in the face it involves learning from the history of the
internet. The
reason it spurred such an explosion of
disruptive change is that it was an innovation commons – an uncontrolled
space
equally available to all. A whole raft of
powerful technologies – for example, the world wide web, streaming audio, video
conferencing, internet telephony, instant messaging, peer-to-peer networking,
interactive gaming, online auctions, chat – came into being because their
inventors had unfettered access to the network. They didn’t
have to ask the permission of AT&T or BT or the DTI to
implement their ideas. If the invention was good enough, then it could, and
did, conquer the world.
The lesson for the UK – and particularly
Ofcom, the new omnipotent communications regulator – is that the preservation
of a commons is vital if real innovation is to be nurtured here. This means,
for example, that when analogue TV is switched off, some of the liberated
spectrum should be retained as an unlicensed commons so that people can
experiment and innovate with it.
Like all great ideas, it’s simple. The
only question is whether it’s simple enough for the DTI to get it.
Source: Naughton (2002)
Modular Innovation
Modular innovation uses the architecture and
configuration associated with the existing
system of an established product., but employs new components with different
design concepts. In terms of Henderson and Clark’s framework, modular
innovation is in the top right quadrant.
MINI-CASE: CLOCKWORK RADIO
An example of this type of innovation
would be the clockwork radio, developed by Trevor Baylis. Radios have been
around for a very long time. They operate on the basis of electrical energy,
normally provided via either an external power supply or
batteries. The clockwork radio is an
innovation that employs a different form of power supply, one that utilises a
spring-based clockwork mechanism. The other components of the radio, such as
the speakers, tuner, amplifier, receiver etc remain unchanged. As a radio, the clockwork radio operates in
the same way as other radios. It employs the same kind of architecture in which
the various components that make up the system are configured and linked
together in the normal way. However being clockwork it does not require an
external power sources and this is a very valuable feature in those parts of
the world which don’t benefit from regular uninterrupted power supplies.
Source: Baylis (1997)
As with incremental innovation, modular innovation
doesn’t involve a whole new design. However modular innovation does involve new
or at least significantly different components. In the case of the clockwork
radio it is the power source that is new. The radio operates in much the same way
as any other radio.
The use of new
or different components is the key feature of modular innovation, especially if
the new components embrace a new technology. New technology can
transform the way in which one or more components
within the overall system
operate, but the system and its
configuration/architecture remains unchanged.
Clearly the
impact of modular innovation is usually less dramatic than is the case with radical
innovation. The clockwork radio illustrates this well. People still listen to
the
radio in the way they always have. But the fact that
it doesn’t need an external power
source means that new groups often living in
relatively poor countries without access 58
to a
stable and reliable supply of electricity living can get the benefit of radio.
Clockwork radio has also opened up new markets in affluent countries, for
example hikers who want a radio to keep in touch with the outside world.
Clockwork radio has also provided an important ‘demonstration’ effect as it has
led to other products, such as torches, being fitted with this ingenious and
environmentally friendly source of power.
Architectural Innovation
With
architectural innovation, the components and associated design concepts remain
unchanged but the configuration of the system changes as new linkages are
instituted. As Henderson and Clark (1990, p12) point out,
‘the essence of an architectural
innovation is the reconfiguration of an established system to link together
existing components in a new way.’
This is not to
say that there won’t be some changes to components. Manufacturers may well take
the opportunity to refine and improve some components, but essentially the
changes will be minor leaving the components to function as they have in the
past but within a new re-designed and re-configured system.
MINI-CASE: SONY WALKMAN
The Sony Walkman provides a good example
of architectural innovation. The Walkman when it first came out was a highly
innovative new product, but it involved
little or no new technology. All the main
components that went into the Walkman were tried and tested having been used on
a variety if other products. Portable audio tape recorders that could both play
and record music had been on the market for many years. Designers at Sony,
started with an existing small audio cassette tape recorder, the Pressman
(Henry and Walker, 1991), a small lightweight tape recorder designed for press
reporters. They proceeded to remove the
recording circuitry and the speakers, and added a small stereo amplifier. A set
of lightweight headphones completed the package. Because there were no speakers
the new machine needed much less power. The absence of speakers meant it could
be made much smaller while the fact that it needed much less power meant it
could use only small batteries making it very much lighter. Thus a very different kind of system with a
very different kind of architecture began to emerge. And so the Walkman was
borne. It was new type of audio product. It was a personal stereo, that enable
its young, mobile users to listen to music whenever and wherever they wanted,
and without being harassed by older generations concerned about noise.
Source: Sanderson and Uzmeri (1995)
The Walkman was a huge commercial success, selling 1.5
million units in just two years (Sanderson and Uzumeri, 1995) . However the
significance of the Walkman is not just that it sold well. It illustrates the
power that is sometimes associated with architectural innovations. As well as
securing Sony’s future as a consumer electronics manufacturer, it had much
wider impact on society. It was soon copied by other manufacturers, but more
significantly it changed the behaviour of consumers. Young people found they
could combine a healthy lifestyle while continuing to listen to
music so that the
Walkman may be said to have helped promote a whole range of activities like the
jogging, walking and the use of the gym.
THE VALUE OF AN INNOVATION TYPOLOGY
None of the types of innovation outlined using this
framework is entirely watertight. Inevitably there is overlap and there will be
many occasions when it is a matter of judgement as to which category an
innovation should be placed in. However, this is not really an issue. What
matters is the general value that comes from attempting a categorisation of
innovations. Categorization, and in particular this form of categorization,
helps to show that innovations are not homogeneous. Innovations vary.
Consequently any analysis of innovation needs a degree of sophistication that
can isolate exactly where the nature of the innovation lies. In the process
this should enable the more discerning analysts to cast a more critical eye
upon some of the wilder claims surrounding objects that are described using
that much over-used
adjective: ‘innovative’.
Categorizing innovations in this way can also help to
show that the influence of technology and technological change can vary
considerably. Technology works in a variety of ways. However its impact will
differ enormously when applied to whole systems or when, for comparison, it is
applied to individual components. Hence this form of categorization has a
predictive power, such that those who use it can much more effectively evaluate
the potential impact of a particular innovation.
Distinguishing
four different types of innovation can also help to explain why the responses
of firms to the introduction of new technologies will often vary. The analysis
means that perhaps we should not be surprised that some firms don’t respond
positively to some new technologies. If the technology affects components we
can expect a rapid take-up of a new technology, because it is likely to
reinforce the competitive position of incumbent manufacturers. On the other
hand if the technology leads to system changes and the introduction of new
architectures then the incumbents are less likely to be happy about the changes
as their position will be eroded. In Schumpeter’s words we are likely to see
‘creative destruction’ at work.
This typology can also help in understanding the
evolutionary process associated with technological change. When a new
technology appears it frequently leads to a proliferation of competing system
designs each with a different architecture. One could see exactly this
happening when the first cars were developed – there was a multiplicity of
competing architectures, and again when the first video recorders appeared. But
through a process of ‘shakeout’ eventually a common system architecture or
‘dominant design’ evolved and was adopted by all manufacturers. This kind of
evolutionary process is in fact very common and it has big implications for
would be innovators and entrepreneurs who need to recognise that if they enter
the industry during the early years there is likely to be a period of shakeout
eventually. Even more important they need to recognise that the dominant design
that does eventually emerge is not always technically superior to its rivals.
The Qwerty keyboard is evidence that sometimes technically inferior designs
emerge as the dominant design.
CASE
STUDY: THE GUTS OF THE NEW MACHINE
(This is an abridged version of an a
article from The New York Times, 30th
November
2003)
Two years ago this month, Apple Computer
released a small, sleek-looking device it called the iPod. A digital music
player, it weighed just 6.5 ounces and held about 1,000 songs. There were small
MP3 players around at the time, and there were players that could hold a lot of
music. But if the crucial equation is ''largest number of songs'' divided by
''smallest physical space,'' the iPod seemed untouchable. And yet the initial
reaction was mixed: the thing cost $400, so much more than existing digital players
that it prompted one online skeptic to suggest that the name might be an
acronym for ''Idiots Price Our Devices.''
Since then, however, about 1.4 million
iPods have been sold. For the months of July and August, the iPod claimed the
No. 1 spot in the MP3 player market both in terms of unit share (31 percent)
and revenue share (56 percent), by Apple's reckoning. It is now Apple's
highest-volume product. Whether the iPod achieves truly mass scale -- like,
say, the cassette-tape Walkman, which sold an astonishing 186 million units in
its first 20 years of existence -- it certainly qualifies as a hit and as a
genuine breakthrough.
So you can say that the iPod is
innovative, but it's harder to nail down whether the key is what's inside it,
the external appearance or even the way these work together. One approach is to
peel your way through the thing, layer by layer.
The Aura
Before you even get to the surface of the
iPod, you encounter what could be called its aura. The commercial version of an
aura is a brand, and while Apple may be a niche player in the computer market,
the fanatical brand loyalty of its customers is legendary. Leander Kahney has
even written a book about it , “The Cult of Mac”. As he points out, that base
has supported the company with a faith in its will to innovate -- even during
stretches when it hasn't. Apple is also a giant in the world of industrial design.
The candy-colored look of the iMac has been so widely copied that it's now a
visual cliché.
But the iPod is making an even bigger
impression. Bruce Claxton, who is the current president of the Industrial
Designers Society of America and a senior designer at Motorola, calls the
device emblematic of a shift toward products that are ''an antidote to the
hyper lifestyle,'' which might be symbolized by hand-held devices that bristle with
buttons and controls that seem to promise a million functions if you only had
time to figure them all out. ''People are seeking out products that are not
just simple to use but a joy to use.'' Moby, the recording artist, has been a
high-profile iPod booster since the product's debut. ''The kind of insidious
revolutionary quality of the iPod,'' he says, ''is that it's so elegant and
logical, it becomes part of your life so quickly that you can't remember what
it was like beforehand.''
The idea of innovation, particularly
technological innovation, has a kind of aura around it, too. Imagine the lone
genius, sheltered from the storm of short-term commercial demands in a research
lab somewhere, whose tinkering produces a sudden and momentous breakthrough. Or
maybe we think innovation begins with an epiphany, a sudden vision of the
future. Either way, we think of that one thing, the
lightning bolt that jolted all the other
pieces into place. The Walkman came about because a Sony executive wanted a
high-quality but small stereo tape player to listen to on long flights. A small
recorder was modified, with the recording pieces removed and stereo circuitry
added. That was February 1979, and within six months the product was on the
market.
The iPod's history is comparatively free
of lightning-bolt moments. Apple was not ahead of the curve in recognizing the
power of music in digital form. Various portable digital music players were
already on the market before the iPod was even an idea. The company had, back
in the 1990's, invented a technology called FireWire, which is basically a tool
for moving data between digital devices -- in large quantities, very quickly.
Apple licensed this technology to various Japanese consumer electronics
companies (which used it in digital camcorders and players) and eventually
started adding FireWire ports to iMacs and creating video editing software. This
led to programs called iMovie, then iPhoto and then a conceptual view of the
home computer as a ''digital hub'' that would complement a range of devices.
Finally, in January 2001, iTunes was added to the mix.
And although the next step sounds prosaic
-- we make software that lets you organize the music on your computer, so maybe
we should make one of those things that lets you take it with you -- it was
also something new. There were companies that made jukebox software, and
companies that made portable players, but nobody made both. What this meant is
not that the iPod could do more, but that it would do less. This is what led to
what Jonathan Ive, Apple's vice president of industrial design, calls the
iPod's ''overt simplicity.'' And this, perversely, is the most exciting thing
about it.
The Surface
The surface of the iPod, white on front and stainless steel behind, is
perfectly seamless. It's close to impenetrable. You hook it up to a computer
with iTunes, and whatever music you have collected there flows (incredibly
fast, thanks to that FireWire cable) into the iPod -- again, seamless. Once
it's in there, the surface of the
iPod is not likely to cause problems for
the user, because there's almost nothing on it.
Just that wheel, one button in the center,
and four beneath the device's LCD screen.
''Steve (Jobs) made some very interesting
observations very early on about how this was about navigating content,'' Ive
says. ''It was about being very focused and not trying to do too much with the
device -- which would have been its complication and, therefore, its demise.
The enabling features aren't obvious and evident, because the key was getting
rid of stuff.''
Later he said: ''What's interesting is
that out of that simplicity, and almost that unashamed sense of simplicity, and
expressing it, came a very different product. But difference wasn't the goal.
It's actually very easy to create a different thing. What was exciting is
starting to realize that its difference was really a consequence of this quest
to make it a very simple thing.''
Only Apple could have developed the iPod.
Like the device itself, Apple appears seamless: it has the hardware engineers,
the software engineers, the industrial designers, all under one roof and
working together. ''As technology becomes more complex, Apple's core strength
of knowing how to make very sophisticated technology comprehensible to mere
mortals is in even greater demand.'' This is why, (Jobs) said, the barrage of
devices made by everyone from Philips to Samsung to Dell that are imitating and
will imitate the iPod do not make him nervous. ''The Dells of the world
don't spend money'' on design innovation, he said. ''They
don't think about these things.''
As he described it, the iPod did not begin
with a specific technological breakthrough, but with a sense, in early 2001,
that Apple could give this market something better than any rival could. So the
starting point wasn't a chip or a design; the starting point was the question,
What's the user experience? ''Correct,'' Jobs said. ''And the pieces come
together. If you start to work on something, and the time is right, pieces come
in from the periphery. It just comes together.''
The Guts
What, then, are the pieces? What are the
technical innards of the seamless iPod? What's underneath the surface? A lot of
people were interested in knowing what was inside the iPod when it made its
debut. One of them was David Carey, who for the past three years has run a
business in Austin, Tex., called Portelligent, which tears apart electronic
devices and does what might be called guts checks. He tore up his first iPod in
early 2002.
Inside was a neat stack of core
components. First, the power source: a slim, squarish rechargeable battery made
by Sony. Atop that was the hard disk -- the thing that holds all the music
files. At the time, small hard disks were mostly used in laptops, or as
removable data-storage cards for laptops. So-called 2.5-inch hard disks, which
are protected by a casing that actually measures about 2 3/4 inches by 4 inches,
were fairly commonplace, but Toshiba had come up with an even smaller one. With
a protective cover measuring just over 2 inches by 3 inches, 0.2 inches thick
and
weighing less than two ounces, its 1.8-inch disk could hold
five gigabytes of data -- or, in practical terms, about a thousand songs. This
is what Apple used.
On top of this hard disk was the circuit
board. This included components to turn a digitally encoded music file into a
conventional audio file, the chip that enables the device to use FireWire both
as a pipe for digital data and battery charging and the central processing unit
that acts as the sort of taskmaster for the various components. Also here was
the ball-bearing construction underlying the scroll wheel.
Exactly how all the pieces came together
-- there were parts from at least a half- dozen companies in the original iPod
-- is not something Apple talks about. But one clue can be found in the device
itself. Under the Settings menu is a selection called Legal, and there you find
not just Apple's copyright but also a note that ''portions'' of the device are
copyrighted by something called PortalPlayer Inc. That taskmaster central
processing unit is a PortalPlayer chip.
Most early MP3 players did not use hard
disks because they were physically too large. Rather, they used another type of
storage technology (referred to as a ''flash'' chip) that took up little space but
held less data -- that is, fewer songs. PortalPlayer's setup includes both a
hard disk and a smaller memory chip, which is actually the thing that's active
when you're listening to music; songs are cleverly parceled into this from the
hard disk in small groups, a scheme that keeps the energy-hog hard disk from
wearing down the battery.
Apple won't comment on any of this, and
the nondisclosure agreements it has in place with its suppliers and
collaborators are described as unusually restrictive. Presumably this is
because the company prefers the image of a product that sprang
forth whole from the corporate godhead --
which was certainly the impression the iPod created when it seemed to appear
out of nowhere two years ago. But the point here is not to undercut Apple's
role: the iPod came together in somewhere between six and nine months, from
concept to market, and its coherence as a product given the time frame and the
number of variables is astonishing. Jobs and company are still correct when
they point to that coherence as key to the iPod's appeal; and the reality of
technical innovation today is that assembling the right specialists is critical
to speed, and speed is critical to success.
Still, in the world of technology
products, guts have traditionally mattered quite a bit; the PC boom viewed from
one angle was nothing but an endless series of announcements about bits and
megahertz and RAM. That 1.8-inch hard disk, and the amount of data storage it
offered in such a small space, isn't the only key to the iPod, but it's a big
deal. Apple apparently cornered the market for the Toshiba disks for a while.
But now there is, inevitably, an alternative. Hitachi now makes a disk that
size, and it has at least one major buyer: Dell.
The System
My visit to Cupertino happened to coincide
with the publication of a pessimistic installment of The Wall Street Journal's
Heard on the Street column pointing out that Apple's famous online music store
generates little profit. About a week later Jobs played host to one of the
''launch'' events for which the company is notorious, announcing the
availability of iTunes and access to the company's music store for Windows
users. The announcement included a deal with AOL and a huge promotion with
Pepsi. The message was obvious: Apple is aiming squarely at the mainstream.
This sounded like a sea change. But while you
can run iTunes on Windows and hook it up to an iPod, that iPod does not play
songs in the formats used by any other seller of digital music, like Napster or
Rhapsody. Nor will music bought through Apple's store play on any rival device.
This means Apple is, again, competing against a huge number of players across
multiple business segments, who by and large will support one another's
products and services. In light of this, says one of those competitors, Rob
Glaser, founder and C.E.O. of RealNetworks, ''It's absolutely clear now why
five years from now, Apple will have 3 to 5 percent of the player
market.''
Jobs, of course, has heard the predictions
and has no patience for any of it. Various contenders have come at the iPod for
two years, and none have measured up. Nothing has come close to Apple's
interface. Even the look-alike products are frauds. ''They're all putting their
dumb controls in the shape of a circle, to fool the consumer into thinking it's
a wheel like ours,'' he says. ''We've sort of set the vernacular. They're
trying to copy the vernacular without understanding it.'' (The one company that
did plan a wheel-driven product, Samsung, changed course after Apple reportedly
threatened to sue.) ''We don't underestimate people,'' Jobs said later in the
interview. ''We really did believe that people would want something this good,
that they'd see the value in it.
The Core
What I had been hoping to do was catch a
glimpse of what's there when you pull back all those layers -- when you
penetrate the aura, strip off the surface, clear away the guts. What's under
there is innovation, but where does it come from? I had given up on getting an
answer to this question when I made a jokey observation that before long
somebody would probably start making white headphones so that people
carrying knockoffs and tape players could fool the world
into thinking they had trendy iPods.
Jobs shook his head. ''But then you meet
the girl, and she says, 'Let me see what's on your iPod.' You pull out a tape
player, and she walks away.''
Source: Walker, R. (2003) The Guts of the
New Machine, New York Times, 30th
November, 2003, p68.
Questions
1.
What is novel about the iPod?
2.
What type of innovation would you class
the Sony Walkman as and why?
3.
What type of innovation would you class
the iPod as and why?
4.
What does the author man by ‘lightening
–bolt’ moments?
5.
If ‘the iPod did not begin with a specific
technological breakthrough ‘ as Steve
Jobs maintains, how can it still be
classed as an innovation?
6.
What is licencing and why did Apple choose
to licence its Firewire
technology?
7.
Why, according to the author, does
innovation especially technological
innovation, have an ‘aura’ around it? Give
an example of another product with an aura.
8.
What do you think Steve Jobs means when he
says that the iPod is about
‘navigating content’?
9.
Why does Steve Jobs believe that imitators
of the iPod like Dell, do not pose a
threat?
10.
By the end of 2004, total sales of iPods
had reached 10 million. What
does this
imply about the prediction of Rob Glaser
of RealNetworks for the iPod’s
market share?
QUESTIONS FOR DISCUSSION
1.
What
is the value of being able to categorize innovations?
2.
Why may large established firms be wary of
radical (disruptive) innovations?
3.
Why do product innovations tend to attract
more public attention than service
or process
innovations?
4.
Why
do process innovations some times have wide-ranging consequences for
society?
5.
Identify
two process innovations which have had a big impact on society.
6.
Differentiate between component knowledge
and system knowledge.
7.
Choose an example of an everyday household
object (e.g. an electric kettle)
and identify some of the incremental innovations that
have taken place.
8.
Why are only a small proportion of
innovations typically radical?
9.
Why is the Sony Walkman an example of
architectural innovation?
10.
What type of innovation is Apple’s iPod?
ASSIGNMENTS
1.
Using
any household object of your choice (e.g. vacuum cleaner, hairdryer
etc) identify
and analyse the following:
a.
System
function
b.
Components
c.
System linkages
d.
Incremental innovation
Outline what you consider to be the
rationale behind ONE recent incremental innovation.
2.
Identify a product that has been the
subject to modular innovation. Analyse
where the innovation has occurred and the impact this
has had on the product. Explain why you think this is a case of modular
innovation, noting how the system architecture has remained unchanged.
3.
What is a system? Take an example of a
system and analyse it using a diagram
to show the components and the linkages between them.
Indicate where there
have been examples of a.) incremental innovation b.)
architectural innovation.
4.
What is meant by radical innovation? Take
an example of radical innovation
and analyse the impact it has had on society. Take
care to differentiate
between the different groups within society that have
been affected.
5.
What is meant by the term ‘creative
destruction’. Explain, using appropriate
examples, the link between creative destruction and
radical innovation.
RESOURCES
The paper by Henderson and Clark( 1990) that appeared
in Administrative Science Quarterly , provides an excellent starting point for
classifying and categorizing innovations. It draws on earlier work to provide a
fourfold typology.
Two of the categories, radical and incremental
innovation have substantial literatures of their own. Incremental innovation is
covered by works such as Nelson and Winter (1982), Ettlie, Bridge and O’Keefe
(1984) and Tushman and Anderson (1986). Radical innovation on the other hand
overlaps with other aspects of innovation such as technological discontinuities
and crops up in sources as diverse as Schumpeter (1942), Rothwell (1986) and
Christensen (1997).
When it comes to the product, process and service
categorization of innovation one finds that product innovations are
comparatively well served , but service and process innovations have attracted
much less attention. The main reason for this is that product innovation falls
within the remit of histories of invention while service and process
innovations do not. Among the many excellent histories of invention that give
valuable insights into the events surrounding the development process
associated with product innovations are studies by Van Dulken (2002) and Nayak
and Ketteringham (1993) which provide short outlines of many well-known product
innovations. In addition there are a number of other texts with a strong
American focus including Basalla (1988), Hughes (1989) and Petroski (1992).
Basalla (1988) is particularly interesting because its focus is on the
evolution of technology and the links between different innovations.
Service
innovations are much more poorly served, largely because technology is often less
in evidence and because there is no tangible object. While it focuses mainly on
product innovations, the study by Nayak and Ketteringham (1993) is one of the
few to cover some well-known examples of service innovations including Federal
Express and Club Mediterranée. Similar studies that include examples of service
innovations are Davis (1987) and Henry and Walker (1991).
Process innovations are often the hardest to research.
They are often well known but acquiring detailed data about them can be
difficult. Industry studies, that is to say studies of how an industry has
developed over time can provide valuable, detailed insights. Examples include
Womack et al.’s (1990) study of the motor industry, Chapman’s (2002) study of
the knitting and hosiery branches of the industry, and Dogannis’ (2001) study
of the airline industry. The first of these is the product of a huge study of
the motor industry undertaken in the late 1980s. It provides a lot of detail
about mass production – one of the most significant process innovations, as
well as later developments such as lean manufacturing. A more specialised study
that focuses on the regional rather than the international level is Chapman’s
(2002) study of knitting and textiles. It builds on earlier work stretching
back to the 1960s and shows how process innovations transformed the textile
industry. Dogannis has written a number of studies of the airline industry.
Dogannis (2001) covers a number of process innovations associated with
aircraft. Another important study of the same industry is Hanlon (1999) who
provides insights into a number of process innovations including computer
reservation systems and hub-and-spoke operations.
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