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Transcript of It industry innovation
Innovation and Information Technology Industries
Higher School of Economics , Moscow 2011
www.hse.ru
Ian MilesResearch Laboratory for the Economics of Innovation, HSE
(and Manchester Institute of Innovation Research)
November 2011
Outline
• PART ONE:– IT Industries– Technological and Service Trajectories– IT innovation: new goods and services
• PART TWO:– IT, Innovation and Competition– Winners, Losers, and Alliances– Futures of IT innovation
Higher School of Economics, June 2011
Before we begin
• Not all innovations come from private industry!• Knowledge for innovation is often developed in the public
sector.
Before we begin
• Not all innovations come from private industry!• Knowledge for innovation often developed in public sector.
• Major new ways of doing things may be created in public sector institutions.
• Links to such institutions may be important for firms – spin-offs, partnerships.
What do we mean by Innovation?
Invention
Develop-ment
Commerc-ialisationDiffusion
Applic-ation
Product Innovation: Making new things (goods), doing new things (services)Process Innovation: doing or making things in new ways
All stages require development and application of knowledge and skills
Realisation of an idea in a product or process that is adopted by users.
PART ONE
Schumpeter, Freeman, OECD Oslo Manual
What do we mean by IT (aka ICT)?
• New Information Technology• Mechanical and Analogue ways of storing,
communicating, processing information have been existence since beginning of history
• Many specific innovations in C19th, including electricity-based ones: telephone, telegraph
as well as mechanical and chemical ones (phonogram, photogram)
• C20th: electronics – valves and transistors• Microelectronics (and optronics etc.)
PART ONE
VLSI 1968
Transistor 1950s
New IT triggers innovation
Invention
Develop-ment
Commerc-ialisationDiffusion
Applic-ation
Technological Opportunities “Swarming of Innovations”
search for
Market Opportunities
Problems and Needs may trigger search for solutions- Technology possibilities may trigger search for problems
Cornucopia (Pandora’s Box?)
SERVICES(bits)
COMMUNICATION INFORMATION
Inf
GOODS/ PHYSICAL PRODUCTS (atoms)
What do we mean by the IT Industry (aka ICT Industry)?
The Harvard Map
Communication Services
Information Services
Information and Communication
Equipment
Information Products
McLaughlin, JF andAntonoff, AL, 1986, Mapping the information Business. Harvard University Program on InformationResources Policy, Cambridge, MA
IT Industry (aka ICT Industry)The Houghton Framework
Communication Services
Information Services
Communication Equipment
Information Equipment
SERVICES (bits)
CONDUIT, CONTENT, FORM
SUBSTANCE
GOODS/ PHYSICAL PRODUCTS (atoms)
PRESTInstitute of Innovation Research
Post, courier
Legal, accounting
Paper, filing cabinets Business forms
Magazines, books
BASIC TELEPHONY
CALL TELEPHONY SERVICES
BCS & TRANSMISSION
LEASED LINE & PSDN
SERVICES
LINE. TRANSMISSION & BROADCASTING
EQUIPMENT
SWITCH, LAN, WAN, DATA EQUIPMENT
TERMINAL & PERIPHERAL EQUIPMENT
COMPUTER EQUIPMENT
SYSTEMS SOFTWARE
NETWORK SOFTWARE
NETWORKED CONTENT
PACKAGED SOFTWARE
NETWORKS & SERVICES
HIGHER LEVEL NETWORK SERVICES
PROFESSIONAL SERVICES
COMPUTER, COMMS &
SOFTWARE SERVICES
Software
Physical Components
Network Infrastructures
(Information) Services
Information and Communication
Goods
Digital Content Products
RELATIONSHIPS
TANGIBLE
INTANGIBLE
THINGS
IT Industry Sectors and Products
Software
Physical Components
Network Infrastructures
(Information) Services
Information and Communication
Goods
Digital Content Products
IT Industry Sectors and Products
So the IT industry is very diverse
• Goods and Services, Components and Systems• Communication, Data Processing, Content Production• Digitalisation Convergence• Different skills, cultures, markets Collision • C&C = Computers & Communications; = Convergence & Collision
Mergers and Acquisitions – vertical integration, economies..
Some viewed as successes;Some disasters;General impacts on innovation?
Software
Physical Components
Network Infrastructures
(Information) Services
Information and Communication
Goods
Digital Content Products
RELATIONSHIPS
TANGIBLE
INTANGIBLE
THINGS
Lets Look at the various IT Industry Sectors and Products
• PROCESSING: Microelectronic Chips – VLSI – the core revolutionary technology?...
• CAPTURE: Sensors- semiconductors, mechatronics, chematronics, etc...
• STORAGE: magnetic memory, electronic memory, optical memory....
• DISPLAY: CRTs, LEDs, LCDs, etc. (plus audio etc.)...
• COMMUNICATION: wires, optical fibres, radio signals....
ComponentsPhysical Components
Components: underpinning trajectories
Gordon Moore (Intel) noted in 1965 that this ratio was doubling every 18 months
Nu
mb
er
of tr
ansi
stor
s on
a c
hip
People now suggest a doubling every 2 years
1971 1981 1991 2001 2011
From Wikipedia, for more and debate see http://www.kurzweilai.net/articles/
Impact on Processing PowerManchester Institute of Innovation Research
1960 1970 1980 1990
Millions ofInstructions per second
(MIPS)
100
10
1.0
0.1
.01
MainframeMinicompr PCEmbedded
From a Scientific American article
Rapid Improvement of Other Components
Problem Areas?
• Batteries/power sources.• Vulnerability to EMP/solar flares/etc.• Dependence on rare earth elements.• Fabrication plants also become increasingly
costly.
• Underpin problems in many applications of these components
All sorts of information are being digitised,
both from old information and media industries, and across economy.
Implications
• Increases in amount of data that can be handled, in speed at which it can be handled
• Continuing change in underpinning components means continual reinvention of products and creation of new products
• ...performing new services, and performing services in new ways (speed, quality, mobility, customisability)
• IT involves a revolutionary new “heartland” technology, with applications across the economy
Physical Components Physical Goods
Examples
• Computers• Digital phones• PDAs, smartphones, tablets, etc.• Audiovisual equipment – digital TVs, PVRs, Music
players; consumer electronics (incl. Synthesisers, cameras....); office and educational equipment (projectors, smartboards...)
• Products using new IT: “informatised” household appliances and industrial equipment, new devices in medicine (scanners), utilities (metering), logistics, and automated manufacturing ....
Physical Goods
Mark Weiser’s ViewManchester Institute of Innovation Research
source: http://www.ubiq.com/hypertext/weiser/UbiHome.html
Sal
es/Y
ear
Envelope curve (systems of all types)
MAINFRAME: one computer serves many people
PC: one -----
computer per
person
UBIQUITY: many
computers per person
Physical Goods
Remore Local Mobile Pervasive
Some Trajectories
• Smaller, more powerful• Networked• User Interfaces – “anthropotropic” (Levinson)• Converged devices (though also specialisation)
• Beginning to see: wearable (implantable?)• Speech and gesture recognition ((companionable?)• Many new plastic-based displays and devices;
nanotechnology possibilities• New applications – health, security, home systems…
Physical Goods
Infrastructure
• Digitisation• Gilder’s Law - bandwidth triples every 12 months;
Rabiner’s Law -the optical capacity on a single mode fibre doubles every 10 months. [Metcalf’s Law - the value of a computer network increases at a rate of the square of the number of connections.]
• Extension of optical fibre, improved capabilities• Development of successive generations of mobile
phone and wireless networks• Satellite systems
Networks & Infrastructure
Infrastructure Trajectories
• Increased scope for connectivity, with wider and higher-quality coverage
• Cross-network interoperability of devices
• Addressing security and reliability issues
Software
Physical Components
Network Infrastructures
(Information) Services
Information and Communication
Goods
Digital Content Products
RELATIONSHIPS
TANGIBLE
INTANGIBLE
THINGS
Continuing with IT Industry Sectors and Products
Software
• Instructs physical equipment concerning actions (on/off switches)
• Operating Systems, Applications Development Software, Applications Software
• Embedded in hardware, installed via storage media or download, accessed remotely (e.g. Cloud computing)
• A huge industry (emerged from “unbundling”), but most small firms are simply customising applications for end-users
Software
Software Trajectories
• Production methods like Software Engineering & SOA to confront “software crisis”.
• User-friendly interfaces for producing as well as using software
• Open source and FLOSS production and access to software
• Efforts to reduce ”bloatware” (impact of mobiles)
Software
Services
• Computer Services – remote data processing, cloud computing
• Communication Services – virtual networks, social networks, one-to-one and many-to-many services
• Transactional Services – ecommerce, reservations and booking
Information/ Communication
Services
Services Trajectories
• Location-based (mobile) services• Natural language processing• Semantic Web (Web 3.0)• Context-aware services• Agents
Information/ Communication
Services
Content
• Digital(ised) Content Production, “Packaging”, Delivery• Traditional Media – were 1-to-many (digital converts-
sometimes very latecomers) – Text and Graphics (print media) – Audio (recording industry, radio)– Video (TV, Film)
• Information Services (databases, business news (digital converts and natives)
• New Media (Born digital, digital natives)– Also Multimedia, videogames, websites...
Digital Content
Content Trajectories
• User produced content (Web 2.0)• Shared experiences• “Free” content • Content via narrowcast, P2P, social networks• “Realism” – 3D, VR, • Real-time access• Online storage
Digital Content
Innovation in Context
• Markets, Competition and Innovation
PART TWO
Successful Innovation
• Diffusion and Adoption of a Product– Product life cycle and innovation
• Disruptive Innovation– Often Digital natives versus (would-be) digital
converts or digital deniers– Sometimes battle between digital platforms– Can incumbents maintain/regain position?
Diffusion of innovation
Typical Model of
uptake of an innovation: percentage
of market adopting
Network effects: more people using compatible systems makes it easier to learn, easier to communicate, share
• Examples: adoption of PCs, mobile phones
Diffusion of innovation
Abernathy/ Utterback Model of
Product Life Cycle
Teece: stabilisation
of design paradigm
• Examples: design of PCs, mobile phones
Design flux
Dominant Design(s)
New models? Product differentiation?
Competition over functionality
Competition over efficiency
Competition over service/
extras
Increasing user-friendliness, less need for skill, economies of scale
Two ideas from David Teece
http://www2.haas.berkeley.edu/faculty/teece_david.aspx
• Stabilisation of design paradigms
• Complementary assets– Innovations are rarely
unique; first-comers often do not succeed in creating substantial markets; life is tough
Design Paradigm
• Innovation begins when an idea is commercialised: we can offer this new/better service
• But just what form does this take?• Often other firms will be trying to offer similar
services – or if not, and if your idea is a good one, they soon will.
• Competition at the outset is often about what design will prevail.
• This may come to be seen as the “natural” solution – e.g. car or PC keyboard layout.
So who wins?
• Not necessarily the person with the technically best design!
• Not necessarily the cheapest!• Who can mobilise Complementary Assets –
– Brands, marketing, distribution channels– Supply chain connections (e.g. hardware, content
providers)– Intellectual property,
intellectual assets– Links to users, etc.
Successful Innovation - 2
• Diffusion and Adoption of a Product– Product life cycle and innovation
• Disruptive Innovation– Often Digital natives versus (would-be) digital
converts or digital deniers– Sometimes battle between digital platforms– Can incumbents maintain/regain position?
Examples of disruptive IT Innovation
• Semiconductors displace valves, LCDs displace CRTS
• Telecomms networks displace postal service• Microelectronic watches, cameras, CD players,
etc. displace traditional designs• Music/film downloads challenge recording
and film industries, crisis in newspapers (and now books – already encyclopedia etc.?)
• Travel agents , dating agencies etc.
Comp-onents
Infrast-ructure
Goods
Content
Services
It can be hard for incumbents to stay in the game
• When there is a new business model, then adaptability is key – often very problematic
• When there is new technology, then will usually need to acquire, or form alliances
• Some successes with mergers• Many problems• Drives move to more Open Innovation
(alliances, collaborations, etc.)
Often mergers fail
Industries, Products,
Components
Technologies, Cultures,
Organisation
Convergence
Digital convergence: blurring boundaries (but multiple platforms)
Wars over standards, platforms
Finally...
• IT may be used in the innovation process itself• New tools for innovation:
– Simulation, visualisation, CAD– Virtual laboratories, networking and division of
labour• Support for open innovation:
– Collaboration software– Online crowdsourcing
Conclusions
• IT continues to be the source of many promising innovations
• Even if rapid hardware evolution slows, much scope for new services and content
• Continuing disruption and opportunities for new entrants and niches
• Expect moves up and across sectoral categories by firms from emerging economies
• Requires putting together right skills and knowledge – of markets and cultures as well as technology and technique
20, Myasnitskaya str., Moscow, Russia, 101000Tel.: +7 (495) 621-2873, Fax: +7 (495) 625-0367
www.hse.ru
Higher School of Economics, June 2011
Digital Populations
• Digital Natives• Digital Converts• Digital Deniers• Digital Excluded