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8/9/2019 201 Aug 09 Dynamics of Innovation
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DYNAMICS OFDYNAMICS OFINNOVATIONINNOVATION
byby
Roger D. Posadas, Ph.D.Roger D. Posadas, Ph.D.Professor, Technology Management CenterProfessor, Technology Management Center
University of the Philippines - DilimanUniversity of the Philippines - Diliman
August 2009August 2009
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THE UTTERBACK-ABERNATHY MODELTHE UTTERBACK-ABERNATHY MODEL
OF THEOF THE
DYNAMICS OF INNOVATION...1DYNAMICS OF INNOVATION...1
The Utterback-Abernathy model of the dynamics ofThe Utterback-Abernathy model of the dynamics of
innovation details the dynamic processes that takeinnovation details the dynamic processes that take
place within an industry and its firms during theplace within an industry and its firms during the
evolution of a tech- nology by describing the changingevolution of a tech- nology by describing the changingrates of product and process innovation.rates of product and process innovation.
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THE UTTERBACK-ABERNATHY MODELTHE UTTERBACK-ABERNATHY MODEL
OF THEOF THE
DYNAMICS OF INNOVATION...2DYNAMICS OF INNOVATION...2
The Product Innovation CurveThe Product Innovation Curve
The U-A model describes the rate of productThe U-A model describes the rate of product
innovation of a radical technology over time asinnovation of a radical technology over time asstarting from a high level (due to the high degree ofstarting from a high level (due to the high degree of
experimentation with various product designs),experimentation with various product designs),
declining to a dominant design, and slowing downdeclining to a dominant design, and slowing down
to incremental innovations based on the dominantto incremental innovations based on the dominantdesign.design.
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THE UTTERBACK-ABERNATHY MODELTHE UTTERBACK-ABERNATHY MODEL
OF THEOF THE
DYNAMICS OF INNOVATION...3DYNAMICS OF INNOVATION...3
The Process Innovation CurveThe Process Innovation Curve
The U-A model depicts the rate of process inno-The U-A model depicts the rate of process inno-
vation connected with the radical technology overvation connected with the radical technology overtime as starting from a low level (due to the initialtime as starting from a low level (due to the initial
use of crude, inefficient processes), growing to ause of crude, inefficient processes), growing to a
peak as product designs converge on a dominantpeak as product designs converge on a dominant
design, and declining to a low level.design, and declining to a low level.
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THE UTTERBACK-ABERNATHY MODELTHE UTTERBACK-ABERNATHY MODEL
Product Innovation CurveProduct Innovation Curve
Rateo
fMajorInn
ovation
Process Innovation Curve
Time
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SUMMARY OF THE CHANGES DESCRIBED BY THE U-A MODEL...1SUMMARY OF THE CHANGES DESCRIBED BY THE U-A MODEL...1
PRODUCTPRODUCT :: From high variety toFrom high variety todominant design, to incrementaldominant design, to incremental
innovation on standardizedinnovation on standardized
productsproducts
PROCESSPROCESS :: From a manufacturingFrom a manufacturing
process that relies heavily onprocess that relies heavily on
skilled labor and general purposeskilled labor and general purpose
equipment to one that makes useequipment to one that makes useof specialized equipment and low-of specialized equipment and low-
skilled laborskilled labor
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SUMMARY OF THE CHANGES DESCRIBED BY THE U-A MODEL...2SUMMARY OF THE CHANGES DESCRIBED BY THE U-A MODEL...2
ORGANIZATION :ORGANIZATION : From an entrepreneurialFrom an entrepreneurial organicorganicfirm tofirm to
a hierarchicala hierarchical mechanisticmechanisticfirm with definedfirm with defined
tasks and procedures and few rewards fortasks and procedures and few rewards for radicalradical
innovationinnovation
MARKET :MARKET : FromFrom fragmented and unstablefragmented and unstable with diversewith diverse
products and rapid feedback toproducts and rapid feedback to commodity-likecommodity-like
with largely undifferentiated productswith largely undifferentiated products
COMPETITION:COMPETITION:FromFrom many small firmsmany small firms with uniquewith unique
products to anproducts to an oligopoly of firmsoligopoly of firms with similarwith similar
productsproducts
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ORGANIZATIONAL CHANGE IN THE U-A MODELORGANIZATIONAL CHANGE IN THE U-A MODEL
The organization of a firm formed around an innovation goesThe organization of a firm formed around an innovation goes
through the following transformation:through the following transformation:
FROM
An informal, entrepreneurial
organicfirm characterized by:
frequent adjustment and
redefinition of tasks
limited hierarchy
high lateral communication
high value given to entre-
preneurial skills that can
generate a superior product
TO
A hierarchical, managerial,
mechanisticfirm characterized by:
consistent routines and rules to
minimize inefficiency
hierarchical organization
bureaucratic communication
high value given to administrative
skills that can generate steady
financial returns
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CHANGE IN MARKET CHARACTERISTICS IN THE U-A MODELCHANGE IN MARKET CHARACTERISTICS IN THE U-A MODEL
From the introduction of the radical innovation to the selection of aFrom the introduction of the radical innovation to the selection of a
dominant design, the market characteristics change as follows:dominant design, the market characteristics change as follows:
FromFrom:: A fragmented and unstable market with market sharesA fragmented and unstable market with market shares
ofof each firm varying rapidly, with a diverse range ofeach firm varying rapidly, with a diverse range of
products, and with product price influenced more byproducts, and with product price influenced more by performance,performance,
features, and functionality than by cost offeatures, and functionality than by cost of production.production.
ToTo:: A market with a few dominant firms and stable marketA market with a few dominant firms and stable market
shares and products that tend to be commodity-like andshares and products that tend to be commodity-like and
undifferentiated in terms of function and features. Incre-undifferentiated in terms of function and features. Incre- mentalmental
innovations will become more important andinnovations will become more important and price will dependprice will dependheavily on direct manufacturing costs.heavily on direct manufacturing costs.
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CHANGE IN COMPETITION IN THE U-A MODELCHANGE IN COMPETITION IN THE U-A MODEL
As the role of product innovation decreases and the rate of processAs the role of product innovation decreases and the rate of process
innovation increases, important changes occur in the competitiveinnovation increases, important changes occur in the competitive
environment:environment:
FromFrom:: A competitive environment consisting of many small firmsA competitive environment consisting of many small firms
competing with unique products, where the basis of com-competing with unique products, where the basis of com-
petition is functional product performance.petition is functional product performance.
ToTo:: An oligopoly of firms with efficient production systemsAn oligopoly of firms with efficient production systems
producing standardized or slightly differentiated productsproducing standardized or slightly differentiated products with stablewith stable
sales and market shares. A few small firmssales and market shares. A few small firms may remain in the industrymay remain in the industryto serve specialized marketto serve specialized market segments. The surviving dominant firmssegments. The surviving dominant firms
will strivewill strive towards vertical integration from raw materials totowards vertical integration from raw materials to
production to sales.production to sales.
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PHASES IN THE UTTERBACK-ABERNATHY MODELPHASES IN THE UTTERBACK-ABERNATHY MODEL
The model describes not only the changes in the rates of productThe model describes not only the changes in the rates of product
and process innovations but also the life cycle of the industry itself.and process innovations but also the life cycle of the industry itself.
Thus, the industrial life cycle is divided into three phases:Thus, the industrial life cycle is divided into three phases:
1. The Fluid Phase --1. The Fluid Phase -- TThis covers more or less the period fromhis covers more or less the period from
the launch of the radical innovation to thethe launch of the radical innovation to the Era ofEra of FermentFermentin thein the
Tushman-Rosenkopf model of technologyTushman-Rosenkopf model of technology evolution.evolution.
2. The Transitional Phase2. The Transitional Phase -- This covers the rapid growth in theThis covers the rapid growth in the
market and themarket and the selection of a dominant design.selection of a dominant design.
3. The Specific Phase --3. The Specific Phase -- This coincides more or less with theThis coincides more or less with theEra of Incremental ChangeEra of Incremental Changein the Tushman-Rosenkopfin the Tushman-Rosenkopf
model of technology evolution.model of technology evolution.
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PHASES IN THE DYNAMICS OF INNOVATIONPHASES IN THE DYNAMICS OF INNOVATION
Product InnovationProduct Innovation
Rateof
MajorInnova
tion
Process Innovation
TimeFluid Phase Specific PhaseTransitional Phase
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CHARACTERISTICS OF THE THREE PHASES...1CHARACTERISTICS OF THE THREE PHASES...1
FLUIDPHASE
TRANSITIONA
L PHASE
SPECIFIC
PHASE
INNOVATI
ON
Frequent
majorproductchanges
Major
processchangesrequired byrisingdemand
Incrementa
l changesfor productwithcumulativeimproveme
nts inproductivity andquality
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CHARACTERISTICS OF THE THREE PHASES...2CHARACTERISTICS OF THE THREE PHASES...2
FLUIDPHASE
TRANSITIONA
L PHASE
SPECIFIC
PHASE
PRODUCTSDiverse
designs,oftencustomized
At least one
productdesign, stableenoughto havesignificant
productionvolume
Mostly
undifferentiated, standardproducts
PRODUCTI
ON
Flexible and
inefficient,
Becoming
more rigid,
Efficient,
capital-
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CHARACTERISTICS OF THE THREE PHASES...3CHARACTERISTICS OF THE THREE PHASES...3
FLUIDPHASE
TRANSITIONAL
PHASE SPECIFIC PHASE
R&D Focusunspecified because
of highdegree oftechnicaluncertainty
Focus onspecificproduct
features oncedominantdesignemerges
Incrementalchanges forproduct with
cumulativeimprovements inproductivity andquality
EQUIPMENTGeneral-purpose;
requiringskilled
Somesubprocesses
automated,creating
Special-purpose,mostly
automatic, withlabor focused on
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CHARACTERISTICS OF THE THREE PHASES...4CHARACTERISTICS OF THE THREE PHASES...4
FLUIDPHASE
TRANSITIONALPHASE SPECIFIC
PHASE
PLANT Small-scale,
locatednear useror sourceofinnovations
General-purpose with
specifiedsections
Large-scale,highly specific
to particularproducts
COST OFPROCESSCHANGE
Low Moderate High
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CHARACTERISTICS OF THE THREE PHASES...5CHARACTERISTICS OF THE THREE PHASES...5
FLUIDPHASE
TRANSITION
AL PHASE SPECIFICPHASE
COMPETITORS
Few, but
growing innumberswith widelyfluctuating
marketshares
Many, but
decliningin numbersafteremergence
ofdominantdesign
Few; classic
oligopolywith stablemarketshares
BASIS OF
COMPETITION
Functional
productperformanc
Product
variation;fitness to
Price
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CHARACTERISTICS OF THE THREE PHASES...6CHARACTERISTICS OF THE THREE PHASES...6
FLUIDPHASE
TRANSITIONAL PHASE SPECIFICPHASE
ORGANI-ZATIONALCONTROL
Informal andentrepreneurial
Thoughproject andtask groups
Structure,rules, andgoals
VULNERA-BILITIES OFINDUSTRYLEADERS
To imitators,andpatentchallen- ges;to success-
ful product
To moreefficient andhigher-qualityproducers
Totechnologicalinnovationsthat presentsuperior
product
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BREAKING OUT OF THE SPECIFIC PHASEBREAKING OUT OF THE SPECIFIC PHASE
Is the specific phase of production the end of history for anIs the specific phase of production the end of history for an
industry? Is there a way to break out of this highly capitalized,industry? Is there a way to break out of this highly capitalized,
highly controlled, and uninnovative mode of production?highly controlled, and uninnovative mode of production?
ANSWERANSWER::Yes, through the Japanese-pioneered strategy ofYes, through the Japanese-pioneered strategy of
mass customization which uses both flexible manu-mass customization which uses both flexible manu-
facturing and the creation of unique products fromfacturing and the creation of unique products from
standardstandard
platforms to satisfy customer requirementsplatforms to satisfy customer requirements more fully. Thismore fully. This
enabled Japanese auto companies toenabled Japanese auto companies to retain low unit-costretain low unit-cost
while producing greater variety inwhile producing greater variety in smaller runs.smaller runs.
CAVEATCAVEAT:: However, flexible manufacturing and mass customi-However, flexible manufacturing and mass customi-zation may also be a trap resulting in products withzation may also be a trap resulting in products with
little commercial potential and in unwanted productlittle commercial potential and in unwanted product
variety.variety.
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NONASSEMBLED PRODUCTS...1NONASSEMBLED PRODUCTS...1
Nonassembled productsNonassembled products are products like aluminum,are products like aluminum,
cement, flat glass, paper, fibers, petroleum, steel, etc.cement, flat glass, paper, fibers, petroleum, steel, etc.
which have no separable components. They are pro-which have no separable components. They are pro-
duced through chemical, thermal, or machining pro-duced through chemical, thermal, or machining pro-
cesses consisting of a set of sequentially interlinkedcesses consisting of a set of sequentially interlinked
steps orsteps orsubprocesses.subprocesses.
Subprocesses Linking process
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NONASSEMBLED PRODUCTS...2NONASSEMBLED PRODUCTS...2
For nonassembled products, technological progressoccurs either in process or materials. Process innova-tion either replaces or eliminates subprocesses toincrease process speed and/or efficiency.
SUBPROCESS SUBSTITUTION
SUBPROCESS ELIMINATION
EVOLUTION OF PLATE GLASSMAKING PROCESSEVOLUTION OF PLATE GLASSMAKING PROCESS
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EVOLUTION OF PLATE GLASSMAKING PROCESSEVOLUTION OF PLATE GLASSMAKING PROCESS
TECHNOLOGYTECHNOLOGY
OriginalOriginal
ProcessProcess
Step 1
Step 2
Step 3
Step 4
End
Result
float process
continuous casting
continuous annealing lehr
continuous mixing and melting tank
Mix Melt Cast AnnealGrind &Polish
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DISCONTINUOUS CHANGE IN PROCESS ARCHITECTUREDISCONTINUOUS CHANGE IN PROCESS ARCHITECTURE
The combination or elimination of steps or subprocesses in the productionThe combination or elimination of steps or subprocesses in the production
of nonassembled products results in dramatic productivity gains and lowerof nonassembled products results in dramatic productivity gains and lower
unit costs. Each new process technology represents a change in processunit costs. Each new process technology represents a change in process
archi- tecture. New process architecture represents a discontinuous advancearchi- tecture. New process architecture represents a discontinuous advance
in productivity due to:in productivity due to: (1) the entire elimination of a process step(1) the entire elimination of a process step, or, or(2) the(2) the
increased efficiency of the new process technologyincreased efficiency of the new process technology. Since each new process. Since each new process
architecture results in lower unit costs, the relationship between time, unitarchitecture results in lower unit costs, the relationship between time, unit
cost, and process architecture looks like a downward staircase with each stepcost, and process architecture looks like a downward staircase with each step
representing a change in process architecture.representing a change in process architecture.
Un
itCo
st New process
architecture introduced
Incremental processinnovation introduced
Time
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ENABLING TECHNOLOGY FOR NONASSEMBLED PRODUCTSENABLING TECHNOLOGY FOR NONASSEMBLED PRODUCTS
For nonassembled products, the equivalent of dominantFor nonassembled products, the equivalent of dominant
design is termed enabling technology. For example, the floatdesign is termed enabling technology. For example, the floatglass process is an enabling technology that appeared in aglass process is an enabling technology that appeared in a
rush and was refined incrementally in subsequent years.rush and was refined incrementally in subsequent years.
Like the emergence of a dominant design, the emergence of anLike the emergence of a dominant design, the emergence of an
enabling technologyenabling technology -- a discontinuous change in process-- a discontinuous change in processarchitecture -- is not always apparent, but it can be indicated byarchitecture -- is not always apparent, but it can be indicated by
the following obvious signs:the following obvious signs:
the change results in order-of-magnitude improvements inthe change results in order-of-magnitude improvements in
cost and quality.cost and quality.
the change results in reducing the number of process stepsthe change results in reducing the number of process steps
through the combination or elimination of steps or thethrough the combination or elimination of steps or the
transformation of batch processes to continuous processes.transformation of batch processes to continuous processes.
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PATTERN OF INNOVATION FORPATTERN OF INNOVATION FOR ASSEMBLEDASSEMBLEDPRODUCTSPRODUCTS
Product InnovationProduct Innovation
Freque
ncyof
Majo
rInnova
tion
Process Innovation
Fluid Pattern Specific PatternTransitionPattern
Dominant Design
Occurs
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PATTERN OF INNOVATION FORPATTERN OF INNOVATION FOR NONASSEMBLEDNONASSEMBLEDPRODUCTSPRODUCTS
Product InnovationProduct Innovation
Fre
que
ncyof
MajorInnova
tion
Process Innovation
Fluid Pattern Specific PatternTransition Pattern
EnablingTechnology Occurs
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COMPARISON OF THE TRANSITIONAL PHASE FORCOMPARISON OF THE TRANSITIONAL PHASE FOR
ASSEMBLED AND NON ASSEMBLED PRODUCTS...1ASSEMBLED AND NON ASSEMBLED PRODUCTS...1
ASSEMBLED NONASSEMBLED
INNOVATIONEmphasis onincremental
productimprovementand productvariation
Emphasis onprocess changes
required by risingdemand
SOURCE OFINNOVATION
Users;manufacturers
Manufacturers;equipmentmakers
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COMPARISON OF THE TRANSITIONAL PHASE FORCOMPARISON OF THE TRANSITIONAL PHASE FOR
ASSEMBLED AND NON ASSEMBLED PRODUCTS...2ASSEMBLED AND NON ASSEMBLED PRODUCTS...2
ASSEMBLED NONASSEMBLED
PRODUCTS Many featuresunique toindividual
producers
Increasinglyundifferentiated
PRODUCTION
PROCESSES
Somesubprocessesautomated,creatingislands ofautomation
Becoming morerigid, morecontinuous, morecapital-intensive
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COMPARISON OF THE TRANSITIONAL PHASE FORCOMPARISON OF THE TRANSITIONAL PHASE FOR
ASSEMBLED AND NON ASSEMBLED PRODUCTS...4ASSEMBLED AND NON ASSEMBLED PRODUCTS...4
ASSEMBLED NONASSEMBLED
COMPETITORS Many, butdeclining in
numbers afteremergence of
the dominantdesign
Increasinglyundifferentiated
VULNERABILITIES
OF INDUSTRY
LEADERS
To bothimprovedproducts
and moreefficient
To moreefficient andhigher quality
producers
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COMPARISON OF THE TRANSITIONAL PHASE FORCOMPARISON OF THE TRANSITIONAL PHASE FOR
ASSEMBLED AND NON ASSEMBLED PRODUCTS...3ASSEMBLED AND NON ASSEMBLED PRODUCTS...3
ASSEMBLED NONASSEMBLED
PLANT General purposewith specializedsections
Emphasis onprocesschangesrequired by
rising demand
COST OF
PROCESSCHANGE
Moderate Manufacturers;
equipmentmakers
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- End of Presentation -- End of Presentation -
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