Sources of innovation Natasha bank & Eduardo Cadorin

PowerPoint-presentation

Classics in Innovation and Entrepreneurship Linkping University, April 05, 2016

Natasha BankEduardo Cadorin

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2016-04-052Eric von Hippel The Sources of Innovation

Do you see any connections/discrepancies between Von Hippels work and the previous classic works that we have been reading in the course?Please comment on and discuss the role of empirical evidence and methodology in Von Hippels work.What are the implications of Von Hippels sources of innovation for the boundaries ofthe firm (and its related theories e.g. RBV, TCE etc.)?What is the role of informal know-how trading? What are the implications forinnovation management?What are major differences and similarities between Von Hippel s contribution on user innovation and the open innovation concept coined by Chesbrough?What implications does the notion of architectural innovation (in Hendersonand Clark s article) have for innovation management? And for inter-firm collaboration?

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The innovator:Is the individual or firm that first develops an innovation to a useful state as proven by documented, useful output.User innovation: The innovator benefits from using the innovation Manufacturer innovation: When the developer expects to benefit by selling the innovation

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2016-04-054Eric von Hippel The Sources of InnovationThe traditional producer innovation paradigmIt is the producer who as a rule initiates economic change, and consumers are educated by him if necessary (Schumpeter 1934, p.65)

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2016-04-056Eric von Hippel The Sources of InnovationInnovations can come from many different sources and different industry innovate from different sources or funnels Innovators are most often usersJoint user/manufacturer (The locus of almost the entire innovation process is centered on the user. Only commercial diffusion is carried out by the manufacturer.)Manufacturer ( tractor shovel)Suppliers ( wire termination machinary)

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2016-04-057Eric von Hippel The Sources of InnovationInnovators are most often users

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2016-04-058Eric von Hippel The Sources of InnovationSchumpeter argued those who succeed at innovating are rewarde by having temporary monopoly control over what they have created leading to enhanced position in market and temporary profits.Necessary preconditionsDifficult for innovators to adopt new functional relationships to their inovationsInnovators must have a poor ability to capture rent by licensing their innovation-related knowledge to others

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2016-04-059Eric von Hippel The Sources of InnovationRoutes of capturing rent from an innovation for the innovatorExploiting the innovation himself while preventing others from doing so ( property rights) PatentLicensing others to use his innovation-related knowledge for a feeLicencing conveys an innovators right to innovation-related nonembodied knowledge to another) trade secret legislation

The patent grant has little value to innovators in most fields

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2016-04-0510Eric von Hippel The Sources of InnovationInformal Know-how trading

Even among rivals !!Little competitive advantageNo formal agreements R > RGood for the whole industry

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The trading can happen even among rivals ! Courious !


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2016-04-0515Eric von Hippel The Sources of InnovationImplications for innovation managementHow to choose the partners?How to choose what should be shared or not?How to share the new knowledge within the firm?

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3/6/16Title/Lecturer


Henry Chesbrough is known for coining the term open innovation

is the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation

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2016-04-0518Eric von Hippel The Sources of InnovationVon Hippel vs Henry ChesbroughSimilarities:

Von Hippels ideas contributed to creation of the concept of the Open Innovation: user innovation, free revealing...

Innovation can arise outside the firm (suppliers, customers, partners, community...)

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2016-04-0519Eric von Hippel The Sources of InnovationVon Hippel vs Henry ChesbroughDifferences:

VH: the knowlegde should be shared freely! All users are benefited from innovation.HC: Business models to support investment in a project and allow it to scale over time.VH: little or no IP protection for innovation.HC: IP is a new class of assets that can deliver additional revenues. Buyer vs Seller.( free vs open )

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Henderson and ClarkArchitectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms

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2016-04-0521Eric von Hippel The Sources of InnovationHenderson and ClarkProduct development requires:Component knowledgeArchitectural knowledgeTwo new types of innovation: (p.12)Modular Innovation: changes only the core design concepts of a technology. Architectural Innovation is the reconfiguration of an established system to link together existing components in a new way.

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Component Knowledge: or knowledge about each of the core design concepts and the way in which they are implemented in a particular component

Atchitectural Knowledge: or knowledge about the ways in which the components are integrated and linked together into a coherent whole.

2016-04-0522Eric von Hippel The Sources of InnovationHenderson and Clark - Architectural Innovation

AIR FAN ROOMSImprovements in Blade or Motor DesignCompletely new design of bladePortable Fans

Air conditioners

Xerox and small copiers

RCA and portable radios

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Incremental: the core componentes can improved a little but the links among them stay unchanged; Radical: the componentes are overtuned and the links are also changed. Modular: some component is modified but the links stay the same. Architectural: some or all components are improved but the links among them are changed.

XEROX: in the mid-1970 competitors was offering copiers much smaller and reliable than xerox product. The new products required little new scientific or engineering knowledge. So, even Xerox had invented the core technologies and had enormous experience, it took 8 years to introduce a competitive product into the market, after missteps and false starts.

RCA: in the mid-1950, RCA developed a prototype of a portable transistorized radio receiver. RCA dominated the technology involved ( transistors, radio circuits, speaker...) but didn't see reason to invest in this product. On the other hand, SONY was a small company, relatively new, used this kind of radio to enter in the US market. Sony improve the product and RCA remained a follower. The curious is for many years Sony's radios were produced with technology licensed from RCA !

2016-04-0523Eric von Hippel The Sources of InnovationHenderson and Clark - Architectural InnovationIncremental:reinforce the competitive positions of established firmsbuilt on core competences and existing architecturalRadical:destroys the usefulness of their existing capabilitiesdestroys the usefulness both architectural and component knowledgeArchitectural: Much of the firm know-how is useful and needs to be applied. But some is not useful and actually handicap the firm.

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2016-04-0524Eric von Hippel The Sources of InnovationHenderson and Clark - Architectural InnovationImplications for innovation management:Difficult to recognizing what is useful or not, when acquiring and applying new knowledge;Dominant design.Architectural knowlegde: knowledge and capability are around the recurrent tasks that they perform.

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Development of both knowledge: components and architectureSingle architecture.Refinements in componentsPractices and procedures are embedded in the organization

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INCUMBENTS FIRMSUSERSSUPPLIERSNEW ENTRANTS

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2016-04-0527Eric von Hippel The Sources of InnovationINDUSTRY PIONEERSPRODUCT USERSMANUFACTORSUSERSSUPPLIERS

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Natasha Bank: [email protected]

Eduardo Cadorin: [email protected]

www.liu.se282828

Leadership & Management

Sources of innovation Natasha bank & Eduardo Cadorin