Management of Technology

Management of Technology2012

EVOLUTION OF TECHNOLOGY

Objectives:

To be highly knowledgeable about Evolution of Technology; To have a wide understanding about technology according to the human needs; To have better understanding about the development of technologies. What is Technology?

Technologyis the making, usage, and knowledge oftools,machines, techniques,crafts, systemsor methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures. The wordtechnology comes fromGreek (technologa); from(tchn), meaning "art, skill, craft", and-

HYPERLINK "http://en.wiktionary.org/wiki/%CE%BB%CE%BF%CE%B3%CE%AF%CE%B1"(-

HYPERLINK "http://en.wiktionary.org/wiki/logia"loga), meaning "study of-"The term can either be applied generally or to specific areas: examples includeconstruction technology,medical technology, andinformation technology. Theory of Technological Evolution

Technology evolves in:

three stages:

tools, machine, automation.

two trends:

the replacement of physical labour with more efficientmentallabour, and

the resulting greater degree of control over one'snatural environment

Stages of Technological Development

The pre-technological period - prehistoric man

The pre-technological period, in which all other animal species remain today aside from some avian and primate species was a non-rational period of the earlyprehistoric man.

The first stage: the toolThe emergence of technology, made possible by the development of the rational faculty, paved the way for the first stage: the tool. A tool provides a mechanical advantage in accomplishing a physical task, and must be powered by human or animal effort.

Hunter-gatherers developed tools mainly for procuring food. Tools such as a container, spear, arrow, plow, or hammer that augments physical labor to more efficiently achieve his objective. Later animal-powered tools such as the plow and the horse, increased the productivity of food production about tenfold over the technology of the hunter-gatherers. Tools allow one to do things impossible to accomplish with one's body alone, such as seeing minute visual detail with amicroscope, manipulating heavy objects with apulleyand cart, or carrying volumes of water in a bucket.

The second technological stage was the creation of themachine The second technological stage was the creation of themachine. A machine (a powered machine to be more precise) is a tool that substitutes the element of human physical effort, and requires the operator only to control its function. Machines became widespread with the industrial revolution, thoughwindmills, a type of machine, are much older.

The third, and final stage of technological evolution is the automation The third, and final stage of technological evolution is theautomation. The automation is a machine that removes the element of human control with an automatic algorithm. Examples of machines that exhibit this characteristic aredigital watches, automatic telephone switches, pacemakers, and computer programs.

It's important to understand that the three stages outline the introduction of the fundamental types of technology, and so all three continue to be widely used today. A spear, a plow, a pen, and an optical microscope are all examples of tools

I. History of Technology

Measuring Technological Progress

Lewis H.

HYPERLINK "http://en.wikipedia.org/wiki/Lewis_H._Morgan"Morgan, Leslie

HYPERLINK "http://en.wikipedia.org/wiki/Leslie_White" White, andGerhard

HYPERLINK "http://en.wikipedia.org/wiki/Gerhard_Lenski"Lenski, declaretechnological progressto be the primary factor driving the development of human civilization. Morgan's concept of three major stages of social evolution (savagery,barbarism, andcivilization) can be divided by technological milestones, likefire, thebow, andpotteryin the savage era,domestication of animals,agriculture, andmetalworkingin the barbarian era and thealphabet andwritingin the civilization era.

Instead of specific inventions, White decided that the measure by which to judge the evolution of culture wasenergy. For White "the primary function of culture" is to "harness and control energy." White differentiates between five stages of human development: In the first, people use energy of their own muscles. In the second, they use energy ofdomesticated animals. In the third, they use the energy of plants (agricultural revolution). In the fourth, they learn to use the energy of natural resources: coal, oil, gas. In the fifth, they harnessnuclear energy. White introduced a formula P=E*T, where E is a measure of energy consumed, and T is the measure of efficiency of technical factors utilizing the energy. In his own words, "culture evolves as the amount of energy harnessed per capita per year is increased, or as the efficiency of the instrumental means of putting the energy to work is increased". Russian astronomer,Nikolai

HYPERLINK "http://en.wikipedia.org/wiki/Nikolai_Kardashev"Kardashev, extrapolated his theory creating the Kardashev

HYPERLINK "http://en.wikipedia.org/wiki/Kardashev_scale" scale, which categorizes the energy use of advanced civilizations.

Lenski takes a more modern approach and focuses oninformation. The more information and knowledge (especially allowing the shaping of natural environment) a given society has, the more advanced it is. He identifies four stages of human development, based on advances in the history

HYPERLINK "http://en.wikipedia.org/wiki/History_of_communication" of communication. In the first stage, information is passed bygenes. In the second, when humans gainsentience, they canlearnand pass information through by experience. In the third, the humans start using signs and developlogic. In the fourth, they can createsymbols, developlanguageandwriting. Advancements in the technology of communication translates into advancements in theeconomic systemandpolitical

HYPERLINK "http://en.wikipedia.org/wiki/Political_system" system,distribution of wealth,social inequalityand other spheres of social life. He also differentiates societies based on their level of technology, communication and economy:

hunters and gatherers,

simple agricultural,

advanced agricultural,

industrial,

special (such as fishing societies).

Finally, from the late 1970s sociologists and anthropologists likeAlvin Toffler(author ofFuture Shock),Daniel BellandJohn

HYPERLINK "http://en.wikipedia.org/wiki/John_Naisbitt"Naisbitthave approached the theories ofpost-industrial societies, arguing that the current era ofindustrial societyis coming to an end, andservicesand information are becoming more important thanindustryandgoods. Some of the more extreme visions of the post-industrial society, especially infiction, are strikingly similar to the visions of near and post-Singularitysocieties.

period and geography

Early technology

1. Stone Age

The early Stone

Age is described asEpipaleolithicorMesolithic. The former is generally used to describe the early Stone Age in areas with limited glacial impact. The later Stone Age, during which the rudiments of agricultural technology were developed, is called theNeolithicperiod. During this period, polishedstone toolswere made from a variety of hard rocks such asflint,jade,jadeiteandgreenstone, largely by working exposures as quarries, but later the valuable rocks were pursued by tunnelling underground, the first steps in mining technology. The polished axes were used for forest clearance and the establishment of crop farming, and were so effective as to remain in use when bronze and iron appeared.

2. Copper and Bronze Age

The Stone Age developed into theBronze Ageafter theNeolithic Revolution. The Neolithic Revolution involved radical changes in agricultural technology which includeddevelopment of agriculture, animaldomestication, and the adoption of permanent settlements. These combined factors made possible the development of metalsmelting, withcopperand laterbronze, an alloy oftinand copper, being the materials of choice, although polished stone tools continued to be used for a considerable time owing to their abundance compared with the less common metals (especially tin).

3. Iron Age

4. Ancient Civilizations

It was the growth of the ancient civilizations which produced the greatest advances in technology and engineering, advances which stimulated other societies to adopt new ways of living and governance.

TheEgyptiansinvented and used many simple machines, such as therampto aid construction processes. TheIndus Valley Civilization, situated in a resource-rich area, is notable for its early application of city planning and sanitation technologies. Ancient India was also at the forefront of seafaring technologya panel found atMohenjodaro, depicts a sailing craft. Indian construction and architecture, called 'Vaastu

HYPERLINK "http://en.wikipedia.org/wiki/Vaastu_Shastra"

HYPERLINK "http://en.wikipedia.org/wiki/Vaastu_Shastra"Shastra', suggests a thorough understanding of materials engineering, hydrology, and sanitation.

The Chinese were responsible for numerous technologydiscoveries and developments. Major technological contributions from China include earlyseismologicaldetectors, matches,

paper,cast iron, the ironplough, the multi-tubeseed drill, thesuspension bridge, the parachute, natural gasas fuel, themagnetic compass, theraised-relief map, thepropeller, thecrossbow, theSouth Pointing Chariot, andgun powder.

GreekandHellenisticengineersinvented many technologies and improved upon pre-existing technologies. Particularly theHellenistic periodsaw a sharp rise in technological inventiveness, fostered by a climate of openness to new idea, royal patronage the blossom of a mechanistic philosophy and the establishment of theLibrary of Alexandriaand its close association with the adjacentmuseion. In contrast to the typically anonymous inventor of earlier ages, ingenious minds such asArchimedes,Philo of Byzantium,Heron,Ctesibius and

Archytasnow remained known by name to posterity.

Ancient Greek innovations were particularly pronounced in mechanical technology, including the ground-breaking invention of thewatermillwhich constituted the first human-devised motive force not to rely on muscle labour (besides the sail). Apart from their pioneer use of waterpower, Greek inventors were also the first to experiment with wind power (seeHeron's windwheel) and even created the earliest steam engine (theaeolipile), opening up entirely new possibilities in harnessing natural forces whose full potential came only to be exploited in theindustrial revolution. Of particular importance for the operation of mechanical devices became the newly devised right-angledgearand thescrew.

An illustration of theaeolipile, the earliest steam-powered device

Ancient agriculture, as in any period prior to the modern age the primary mode of production and subsistence, and its irrigation methods were considerably advanced by the invention and widespread application of a number of previously unknown water-lifting devices, such as the verticalwater-wheel, the compartmented wheel, the waterturbine,Archimedes screw, the bucket-chain and pot-garland, theforce pump, thesuction pump, the double-actionpiston pumpand quite possibly thechain pump.

The compartmented water-wheel, here its overshot version,

was invented in Hellenistic times

In music,water organ, invented by Ctesibius and subsequently improved, constituted the earliest instance of akeyboard instrument. In time-keeping, the introduction of the inflowclepsydraand its mechanization by the dial and pointer, the application of afeedback systemand theescapementmechanism far superseded the earlier outflow clepsydra.

The famousAntikythera

HYPERLINK "http://en.wikipedia.org/wiki/Antikythera_mechanism" mechanism, a kind of analogous computer working with adifferential gear, and theastrolabeshow great refinement in the astronomical science.

Greek engineers were also the first to deviseautomatonsuch asvending machines, suspended ink pots, automaticwashstandsand doors, primarily as toys, which however featured many new useful mechanisms such as thecamandgimbals.

In other fields, ancient Greek inventions include thecatapultand thegastraphetescrossbow in warfare, hollow bronze-casting in metallurgy, thedioptrafor surveying, in infrastructure thelighthouse,central heating, thetunnel excavated from both ends by scientific calculations, theship

HYPERLINK "http://en.wikipedia.org/wiki/Diolkos"

HYPERLINK "http://en.wikipedia.org/wiki/Diolkos"trackway, thedry dockand plumbing. In horizontal vertical and transport great progress resulted from the invention of thecrane, thewinch, thewheelbarrowand theodometer.

Further newly created techniques and items werespiral staircases, thechain drive,sliding calipersandshowers.

TheRomansdeveloped an intensive and sophisticated agriculture, expanded upon existing iron working technology, createdlawsproviding for individual ownership, advanced stone masonry technology, advancedroad-building(exceeded only in the 19th century), military engineering, civil engineering, spinning and weaving and several different machines like theGallic reaperthat helped to increase productivity in many sectors of the Roman economy. Roman engineers were the first to build monumental arches,amphitheatres,aqueducts,public baths,true arch bridges reservoirsanddams, vaults and domes on a very large scale across their Empire. Notable Roman inventions include thebook (Codex),glass blowingandconcrete. Because Rome was located on a volcanic peninsula, with sand which contained suitable crystalline grains, theconcretewhich the Romans formulated was especially durable. Some of their buildings have lasted 2000 years, to the present day.

metallurgy or wheel technology, they developed complex writing and astrological systems, and created sculptural works in stone and flint. Like the Inca, the Maya also had command of fairly advanced agricultural and construction technology. Throughout this time period much of this construction, was made only by women, as men of the Maya civilization believed that females were responsible for the creation of new things. The main contribution of theAztecrule was a system of communications between the conquered cities. InMesoamerica, without draft animals for transport (nor, as a result, wheeled vehicles), the roads were designed for travel on foot, just like the Inca and Mayan civilizations.

Medieval and Modern Technologies1. European TechnologyEuropean technology in theMiddle Agesmay be best described as a symbiosis oftraditio et innovatio. While medieval technology has been long depicted as a step backwards in the evolution of Western technology, sometimes willfully so by modern authors intent on denouncing the church as antagonistic to scientific progress (see e.g.Myth of the Flat Earth), a generation of medievalists around the American historian of scienceLynn Whitestressed from the 1940s onwards the innovative character of many medieval techniques. Genuine medieval contributions include for examplemechanical

HYPERLINK "http://en.wikipedia.org/wiki/Mechanical_clock" clocks,spectaclesand verticalwindmills. Medieval ingenuity was also displayed in the invention of seemingly inconspicuous items like thewatermarkor thefunctional button. In navigation, the foundation to the subsequentage of explorationwas laid by the introduction of pintle-and-gudgeonrudders,lateen sails, thedry compassthe horseshoe and theastrolabe.

Significant advances were also made in military technology with the development ofplate

HYPERLINK "http://en.wikipedia.org/wiki/Plate_armour"armour, steelcrossbows,counterweight

HYPERLINK "http://en.wikipedia.org/wiki/Trebuchet"trebuchetsandcannon. Perhaps best known are the Middle Ages for their architectural heritage: While the invention of therib vaultandpointed

HYPERLINK "http://en.wikipedia.org/wiki/Arch"archgave rise to the high risingGothic style, the ubiquitous medieval fortifications gave the era the almost proverbial title of the 'age of castles'.2. Chinese Technology

Inexpensive paper: a revolution in the diffusion of knowledgePaper making, a 2nd century Chinese technology, was carried to the Middle East when a group of Chinese paper makers were captured in the 8th century. Paper making technology was spread to Mediterranean by the Muslim conquests. A paper mill was established in Sicily in the 12th century. Thespinning wheelincreased the productivity of thread making by a factor of greater than 10. Lynn White credited the spinning wheel with increasing the supply of rags, which led to cheap paper, which was a factor in the development of printing.

Renaissance Technology

The era is marked by such profound technical advancements likelinear perceptivity,patent law,double shell domesorBastion fortresses. Note books of the Renaissance artist-engineers such asTaccolaandLeonardo

HYPERLINK "http://en.wikipedia.org/wiki/Leonardo_da_Vinci"da

HYPERLINK "http://en.wikipedia.org/wiki/Leonardo_da_Vinci" Vincigive a deep insight into the mechanical technology then known and applied. Architects and engineers were inspired by the structures ofAncient Rome, and men likeBrunelleschicreated the large dome ofFlorence Cathedralas a result. He was awarded one of the firstpatentsever issued in order to protect an ingeniouscranehe designed to raise the large masonry stones to the top of the structure. Military technology developed rapidly with the widespread use of thecross-bowand ever more powerfulartillery, as the city-states of Italy were usually in conflict with one another. Powerful families like theMediciwere strong patrons of the arts and sciences.Renaissance sciencespawned theScientific Revolution; science and technology began a cycle of mutual advancement. 1. Age of ExplorationThe sailing ship (Nau orCarrack) enabled theAge of Explorationwith theEuropean colonization of the Americas, epitomized byFrancis Bacon'sNew Atlantis. Pioneers likeVasco de Gama,Cabral,MagellanandChristopher Columbusexplored the world in search of new trade routes for their goods and contacts with Africa, India and China which shortened the journey compared with traditional routes overland. They also re-discovered theAmericaswhile doing so. They produced new maps and charts which enabled following mariners to explore further with greater confidence. Navigation was generally difficult however owing to the problem of longitude and the absence of accuratechronometers. European powers rediscovered the idea of thecivil code, lost since the time of the Ancient Greeks.

2. Industrial RevolutionThe BritishIndustrial Revolutionis characterized by developments in the areas of textilemanufacturing,mining, metallurgyandtransportdriven by the development of thesteam engine. Above all else, the revolution was driven by cheap energy in the form ofcoal, produced in ever-increasing amounts from the abundant resources ofBritain. Coal converted tocokegave theblast furnaceandcast ironin much larger amounts than before, and a range of structures could be created, such asThe

HYPERLINK "http://en.wikipedia.org/wiki/The_Iron_Bridge" Iron Bridge. Cheap coal meant that industry was no longer constrained by water resources driving the mills, although it continued as a valuable source of power. The steam engine helped drain the mines, so more coal reserves could be accessed, and the output of coal increased. The development of the high-pressure steam engine made locomotives possible, and a transport revolution followed.3. 19th CenturyThe 19th century saw astonishing developments in transportation, construction, and communication technologies originating in Europe, especially inBritain. TheSteam

HYPERLINK "http://en.wikipedia.org/wiki/Steam_Engine"Enginewhich had existed since the early 18th century, was practically applied to bothsteamboatandrailwaytransportation. The first purpose built railway line opened between Manchester and Liverpool in 1830, theRocket locomotiveofRobert Stephensonbeing one of the first working locomotives used on the line.Telegraphyalso developed into a practical technology in the 19th century to help run the railways safely.

Other technologies were explored for the first time, including theincandescent light bulb. The invention of the incandescent light bulb had a profound effect on the workplace because factories could now have second and third shift workers. Manufacture of ships' pulleyblocksby all-metal machines at thePortsmouth block millsinstigated the age ofmass

HYPERLINK "http://en.wikipedia.org/wiki/Mass_production"production.Machine

HYPERLINK "http://en.wikipedia.org/wiki/Machine_tools" toolsused by engineers to manufacture parts began in the first decade of the century, notably byRichard RobertsandJoseph Whitworth. The development ofinterchangeable

HYPERLINK "http://en.wikipedia.org/wiki/Interchangeable_parts" partsthrough what is now called theAmerican system of manufacturingwhich began in the firearms industry at the U.S Federal arsenals in the early 19th century and became widely used by the end of the century.

Steamshipswere eventually completely iron-clad, and played a role in the opening of Japan and China to trade with the West. TheSecond Industrial Revolutionat the end of the 19th century saw rapid development of chemical, electrical, petroleum, and steel technologies connected with highly structured technology research.

The period from last third of the 19th century until WW1 is sometimes referred to as theSecond Industrial Revolution.

20th century technology developed rapidly. Communication technology, transportation technology, broad teaching and implementation ofscientific method, and increased research spending all contributed to the advancement of modern science and technology. Due to the scientific gains directly tied to military research and development, technologies including electronic computingmight have developed as rapidly as they did in part due to war.Radio,radar, and earlysound recording were key technologies which paved the way for the telephone,faxmachine, andmagnetic storageof data. Energy and engine technology improvements were also

The USNational Academy of Engineering, by expert vote, established the following ranking of the most important technological developments of the 20th century:

1. Electrification

2. Automobile

3. Airplane

4. Water supply and Distribution

5. Electronics

6. Radio and Television

7. Mechanized agriculture

8. Computers

9. Telephone

10. Air Conditioning and Refrigeration

11. Highways

12. Spacecraft

13. Internet

14. Imaging

15. Household appliances

16. Health Technologies

17. Petroleum and Petrochemical Technologies

18. Laser and Fiber Optics

19. Nuclear technologies

20. Materials science

Absent from the above list is the systematic method ofmass productionwhich contributed to almost all of the above technologies.

4. 21th centuryIn the early 21st century, the main technology being developed is electronics. Broadband Internet accessbecame commonplace in developed countries, as did connecting home computers with music libraries and mobile phones. Biotechnologyis a relatively new field that holds yet unknown possibilities.

Research is ongoing intoquantum computers,nanotechnology,bioengineering,nuclear fusion(seeITERandDEMO),advanced materials(e.g., graphene), thescramjet(along withrail gunsand high-energy beams for military uses),superconductivity, thememristor, and green technologies such asalternative fuels(e.g.,fuel cells, plugin hybrid cars) and more efficientLEDsandsolar cells.

The understanding ofparticle physicsis also expected to expand through particle accelerator projects, such as theLarge

HYPERLINK "http://en.wikipedia.org/wiki/Large_Hadron_Collider"Hadron

HYPERLINK "http://en.wikipedia.org/wiki/Large_Hadron_Collider" Collider the largest science project in the world[4]and neutrino detectors such as theANTARES.Theoretical physicscurrently investigatesquantum gravityproposals such asM-theory,superstring theory, andloop quantum gravity.

Spacecraft designs are also being developed, i.a. under theProject Constellation(seeOrionandAres V).[dated info]TheJames Webb Space Telescopewill try to identify early galaxies as well as the exact location of the Solar System within our galaxy, using theinfraredspectrum. The finishedInternational Space Stationwill provide an intermediate platform for space missions and zero gravity experiments. Despite challenges and criticism,NASAandESAplan amanned mission to Marsin the 2030s.

II. History of Computers

The Beginning

In 1936, it was in this year that the first "computer" was developed. It was created by Konrad Zuse and dubbed the Z1 Computer

In 1942, business saw profit and opportunity in computers.

Next ten years, the introduction of the transistor, a vital part of the inner workings of the computer, the ENIAC 1 computer.

In 1953, The age of computers was forever altered by the introduction of International Business Machines, or IBM, into the computing industry. The first contribution was the IBM 701 EDPM Computer.

A Programming Language Evolves

A year later, FORTRAN was written so that more people could begin to program computers easily.

The year 1955, creation of the first computers for use in banks. The MICR, or Magnetic Ink Character Recognition, coupled with the actual computer, the ERMA, was a breakthrough for the banking industry.

During 1958, the creation of the integrated circuit, also known as the chip, is one of the base requirements for modern computer systems.

Gaming, Mice, & the Internet

In 1962, creation of the first computer game, which was created by Steve Russel and MIT, which was dubbed Spacewar.

In 1964, the mouse, was created by Douglass Engelbart. It obtained its name from the "tail" leading out of the device.

In 1969. ARPA net was the original Internet, which provided the foundation for the Internet that we know today.

It wasn't until 1970 that Intel entered the scene with the first dynamic RAM chip, which resulted in an explosion of computer science innovation.

In 1958, on the heels of the RAM chip, the first microprocessor was developed, which was also designed by Intel.

A year later, the floppy disk was created, gaining its name from the flexibility of the storage unit.

In 1973, the first networking card was created, allowing data transfer between connected computers.

Household PC's Emerge

The next three years, it develops systems for the average consumer. The Scelbi, Mark-8 Altair, IBM 5100, Apple I and II, TRS-80, and the Commodore Pet

In 1978, major breakthroughs, the release of the VisiCalc Spreadsheet program.

1979, WordStar, the first word processing program, was released to the public for sale.

In 1981,

The IBM Home computer quickly helped revolutionize the consumer market,

The mega-giant Microsoft enter the scene with the MS-DOS operating system.

The Competition Begins: Apple vs. Microsoft

In 1983, a vital change, Apple Lisa computer the first with a graphical user interface, or a GUI.

Conclusion:

Technology involves manipulation of the environment to meet human needs such as food, shelter, communication, and health. The development of various technologies within the last 10,000 years of human history has been affected by and has affected the environment, human societies, and science. Rachel Badanowski,

Southfield HS, Southfield, MI

References: Brush, S. G. (1988).The History of Modern Science: A Guide to the Second Scientific Revolution 1800-1950. Ames: Iowa State University Press.

Bunch, Bryan and Hellemans, Alexander, (1993)The Timetables of Technology,New York, Simon and Schuster.

Derry, Thomas Kingston and Williams, Trevor I., (1993)A Short History of Technology: From the Earliest Times to A.D. 1900. New York: Dover Publications.

Greenwood, Jeremy (1997)The Third Industrial Revolution: Technology, Productivity and Income InequalityAEI Press. http://EzineArticles.com/?expert=Rebecca_Blain

MANAGING TECHNOLOGICAL TRANSITIONS

Technological change(TC) is a term that is used to describe the overall process ofinvention,innovationanddiffusionoftechnologyorprocesses. The term is synonymous with technological development, technological achievement, and technological progress. In essence TC is the invention of a technology (or a process), the continuous process of improving a technology (in which it often becomes cheaper) and its diffusion throughout industry or society. In short, technological change is based on both better and more technology.

InventionThe creation of something new, or a "breakthrough" technology. For example, apersonal computerInnovationRogers proposes that there are five main attributes of innovative technologies which influence acceptance. These are relative advantage, compatibility, complexity, trialability, and observability.Relative advantagemay be economic or non-economic, and is the degree to which an innovation is seen as superior to prior innovations fulfilling the same needs. It is positively related to acceptance (i.e., the higher the relative advantage, the higher the adoption level, and vice versa).Compatibilityis the degree to which an innovation appears consistent with existing values, past experiences, habits and needs to the potential adopter; a low level of compatibility will slow acceptance.Complexity is the degree to which an innovation appears difficult to understand and use; the more complex an innovation, the slower its acceptance.Trialabilityis the perceived degree to which an innovation may be tried on a limited basis, and is positively related to acceptance. Trialability can accelerate acceptance because small-scale testing reduces risk. Observabilityis the perceived degree to which results of innovating are visible to others and is positively related to acceptance.

DiffusionThe spread of a technology through a society or industry. Thediffusionof a technology generally follows anS-shaped curveas early versions of technology are rather unsuccessful, followed by a period of successful innovation with high levels of adoption, and finally a dropping off in adoption as a technology reaches its maximum potential in a market.

Understanding Technology Risk

Technological changes are responsible for both the creation and destruction of industries. In the face of sweeping changes in technology, some industries die while others are born. Quite clearly, a firms competitiveness is significantly influenced by its ability to understand and embrace new product or process technologies. Introducing technological change is risky because it brings with it a high degree of uncertainty. Understanding the nature of this uncertainty, especially the obstacles to the acceptance of the new technology, is a tricky issue. Between technical feasibility and commercial viability is a period of suspense.

The Growing Pace of Innovation

Earlier, innovation cycles were quite long. This was the case with water power, textiles and iron in the late 18th century; steam, rail and steel in the mid-19th century; and electricity, chemicals and the internal-combustion engine at the turn of the 20th century. Another innovation cycle led by oil, electronics, aviation and mass production, is now drawing to a close. Current indications are that a fifth industrial revolution based on semiconductors, fibre optics, genetics and software is not only well under way, but even approaching maturity. Quite clearly, innovation cycles have shortened, from 50-60 years to around 30-40 years. Unless organizations can foster a culture in which new ideas are encouraged and commercialized rapidly, they may find themselves being overtaken by faster innovators.

Commercializing New Technologies

Successful technology management is all about bringing a new concept to the market in the most efficient way. To commercialize an idea successfully, a number of different stages2 must be completed, each more difficult than its predecessor. Not only must each of these stages be completed successfully, but adequate resources mobilized to facilitate transition from one stage to the next.

Imagining: Developing the initial insight about the market opportunity for a particular technical development.

Incubating: Nurturing the technology sufficiently to gauge whether it can be commercialized.

Demonstrating: Building prototypes and getting feedback from potential investors and customers.

Promoting: Persuading the market to adopt the innovation.

Sustaining: Ensuring that the product or process has as long a life as possible in the market.

The first three stages obviously cannot be managed like an ordinary business with tight controls. So they have to be fostered and nurtured in an environment which is culturally quite different from normal corporate settings.

Conclusion

When it comes to successful innovation, technology by itself is not the crucial factor. Technology must be considered together with market conditions and human factors. Companies have to be on the look-out for emerging market segments. They must also understand why there is resistance to the acceptance of new ideas. For established companies, existing product lines are important because they provide the cash flows so vital for financing the development of future products. At the same time, they cannot resist new initiatives. Indeed, the challenge for management is to find the right balance between incremental improvements and new and unproven technologies.

Incremental improvements on an ongoing basis demand equal emphasis on product and process design, which should be closely integrated. Regularly measuring product and process performance and tapping all the potential opportunities for improvement are important. Companies should look for cost reduction through better use of materials, energy and labor, reduction in number of products, and product and process simplification. At the same time, they must develop the core capabilities which will become critical in the future. This means they should be prepared to shift their strategic and competitive postures from time to time by regenerating and renewing their businesses.

While it is difficult to anticipate technological discontinuities, efforts must nevertheless be made to scan the environment. Firms often make the mistake of looking in the wrong places. They need to look more carefully at obscure, and unconventional sources of competition. Moreover, companies must strike the right balance between focus and diversification when developing technologies. If a company is highly focussed on a few competencies, it runs the danger of becoming vulnerable to a radical innovation based on a different set of competencies. On the other hand, if the firm tries to develop too broad a set of competencies, it may be spreading its resources too thin. In other words, technology risk management is a tightrope walk. And the chances of falling off the rope are high for most players. The ones who dont fall off ultimately emerge as the winners.REFERENCES:

http://en.wikipedia.org/wiki/Technological_change#Invention

Managing Technological Change A strategic Partnership Approach by Carol Joyce Haddad, Sage Publication, Inc. 2002

Shawn Tully and Tricia Welsh, The modular corporation, Fortune, February 8, 1993, pp.106-111.

http://

HYPERLINK "http://www.urenio.org/tools/en/Product_Life_Cycle_Management.pdf" www.urenio.org/tools/en/Product_Life_Cycle_Management.pdf

Managing Technological Innovations, A V Vedpuriswar, Nagendra Chowdhary and A S K Ghori

STANDARD AND NETWORK EXTERNALITIES

STANDARDS

Introduction

The purpose of this paper is to contribute towards a theory of telecommunications and information standardization, by organizing available information in a consistent framework. It updates the work that was originally presented last year [1]. The framework for the activities in the area of technical standards is elaborated by focusing on questions related to strategy and to tactics. The strategic questions are: 1) Why seek a standard? 2) What are the interfaces to be standardized? 3) When to standardize? The tactical questions are: 1) Which is the appropriate standards development organization? 2) How will consensus be reached? 3) Where will the standard be used?

Background

Multimedia communication merges telecommunications and information technologies. As a consequence, it brings together conflicting design philosophies and engineering practices without any explicit mechanism to solve the contradictions and to ensure end-to-end compatibility.

Stand-alone terminals (e.g., video recorders) and computing equipment operate more or less independently. As a result, terminal and early computer manufacturers attempted to dominate markets with unique products. When stand-alone terminals are interconnected, communications networks can be viewed as pipes that transport bits of information transparently, with all the intelligence needed for processing residing in the end-user terminal or computer. Many designers of end-user equipment (modems, personal computers, work stations, browsers, word processors, etc.) subscribe to that opinion. Because of short product life cycles, intense rivalry among suppliers and the constant threat of substitutes, they avoid standardization as much as possible and when forced, their aim is to provide the lowest common denominator.

The term "network externalities" describes the value of connecting various endpoints. In a communications network the value of the externalities increases with the number of users (up to a point). For the transport interactive and delay sensitive information such as speech, the telecommunications network should have enough intelligence to adapt its internal state to the demands of the active end-users. These needs are expressed in terms of availability, reliability, quality of service, etc. The deployment of such intelligence requires long-term planning to ensure the integration of compatible systems. Therefore, communications service providers, while seeking standards, attempt to differentiate their service via pricing, quality, coverage, or range of service options. Clearly, participants in the standardization of information technologies tend to fall into two large categories: standards creators and standards seekers. Standards creators believe that they can or should create their own unique product or service, while standards seekers like to assemble as many stakeholders as possible, including potential users. Both groups represent competing paradigms in a battle that cannot be resolved by proofs, the proponents of each competing paradigm "practice their trades in different worlds." [4]

Reasons for Standardization

In a technologically mature field, where competition is basically on price, there may be no real incentive to reveal technical information. In this case, a commercial organization "will accept and use standards only if it believes that it cannot expand the market directly and that standards can." [2] Standardization may also be a competitive strategy for new entrants to oppose the dominant firms [3]. In contrast, in an emerging field, the risks may be so high that firms have to share their knowledge selectively to stimulate the market and/or discover unanticipated applications. Standardization may also help legitimize a new technology and allows the organization owning or mastering the new technology to have a central position [5].

The commercial decision not to standardize has two implications. First, the organization may be seeking a unique, possibly controllable, market. Second, the product may be ephemeral. These two conditions are clearly present in the case of computer games. Conversely, a decision to standardize suggests the desire to address markets with some long-term commonality. For example, the global market of smart cards in electronic commerce requires a series of standards for the operating systems, commands and interfaces, etc., that would encourage the development of necessary applications.

Figure 1 shows the position of the standard in the product cycle. Accordingly, standards can be anticipatory, participatory, or responsive. Obviously, depending on their position, the types of details to be included will vary.

Anticipatory standards are those standards that must be created before widespread acceptance of devices or services. Examples of anticipatory standards are: V.32 modem, X.25 packet interface, ISDN, TCP/IP, the H.323 Recommendation of Internet telephony or the Secure Electronic Transactions (SET) protocol for bank card payments. The studies that precede the adoption of an anticipatory standard should, ideally, involve all interested parties. In this way, the standardization activities provide a more formal way for sharing innovations among firms. The danger of anticipatory standards is that the specifications could be premature and encumbered by unnecessary or irrelevant details. The resultant standards could be ignored, such as OSI management protocols, or force a whole industry into a dead-end, such as the case of Group 4 facsimile. Therefore, the best anticipatory standards have very well defined objectives and offer a minimum set of features to stimulate the market.

Participatory standards proceed in lock-step with implementations that test the specifications before adopting them. This incidental benefit can be an important factor in spurring innovation; for example, the development of G.728 CCITT/ITU-T 16 kbit/s speech coding algorithm led to a major breakthrough in voice coding [6]. Some of the participatory standards are the speech and voiceband coding algorithms of ITU Recommendations G.726, G.727, G.728 and G.729, and the various Internet applications above the TCP layer may be considered participatory standards (e.g., MBONE, MMUSIC, etc.). Several specifications by industry groups to achieve compatibility such as the Frame Relay Forum and the ATM Forum may be considered as participatory standards. However, before the Internet, a widespread interactive standards development environment did not exist.

Responsive standards occur to codify a product or service that has been sold with some success. When a stand-alone product is well entrenched (e.g., Microsoft Windows), there may be no incentive to standardize. In the telecommunications field, however, a manufacturer, even with a large market share, may want to formalize their product or service to benefit from network externalities. Thus, responsive standards offer a systematic way of distilling scientific information and available data into useful technical constructs. They expedite the consolidation of knowledge and provide avenues for sharing technical know-how. Some examples of responsive standards are: V.42 (which is based on Microcom MNP protocol), AT&T RJ telephone jacks, IBM's SDLC protocol of link layers, DataBeam's data conferencing protocol that led to Recommendation T.120 and Java. In such a case, precursor products or services have already provided sufficient evidence that the technology or market interest justifies the work on such standards. A recent example is what happened with proprietary 56 kbit/s modems that stimulated the development of the V.90 modem Recommendation from the ITU.

Alternatively, a formal standards committee may wish to standardize a technology that it is widely used (e.g., modem AT command sets, UNIX operating system, programming languages, etc.) and allow its reference in future work.

Responsive standards mean however, that the initial manufacturer will have to contribute to the standards development, in addition to developing a product. They may have to release technical information earlier than anticipated or modify future product plans. In addition, product differentiation will have to shift to areas not covered by the standard and requires more agility to response quickly to market needs. Should the choice of supporting a responsive standard be made, the initial manufacturer has to: 1) Achieve the maximum market penetration before supporting a responsive standard., 2) enhance the product beyond the standardized levels of functionality, or 3) differentiate the product based on quality, customer support, or services.

One way to deny a competitor an advantage is to delay the issuance of a responsive standard. This may be possible when numerous interest groups are involved and there is no way to achieve consensus. However, delaying a standard often results in incompatible approaches and may fragment the market, such as what happened with color television.

Interfaces to be Standardized

Figure 1 A layered architecture for technical standards.

Layer 1: Reference Standards. - Reference standards provide measures to describe general entities in terms of reference units. They include unit standards that define measurable physical qualities, e.g., ohm, volt, watt, dBm, etc. Examples in the information and telecommunications field include the ASCII character set, the Open System Interconnect (OSI) model, the E.163 numbering plan for international telephone service, Internet addresses, the ITU-T (International Telecommunications Union Telecommunications Standardization Sector) software tools library, etc.

Layer 2: Similarity Standards. Similarity standards define aspects that have to be identical on both sides of the communicating link, such as the nominal values, the low-level technical specifications and the allowed variations (if any) among implementations of the standard. This is the case for speech and video coding algorithms, computer operating systems, as well as for functions that terminate a layer in the OSI model.

Layer 3: Compatibility Standards. Protocol standards today often consist of a core portion and many options. They define common functions that the transmitter and the receiver pairs must have to ensure successful communication, but both sides do not have to be identical. Examples can be found in frame relay and ATM specifications. The multiplicity of options has spurred the creation of compatibility standards that go by as interfaces, templates, user agreements or implementation agreements. Compatibility standards can be verified if implementations are available for testing before the standard is approved. This was the case for mail protocols such as SMTP, Post Office Protocol 3 (POP3) and Multipurpose Internet Messaging Extensions (MIME). Compatibility itself has multiple dimensions, and maintaining compatibility as standards evolve requires the ability to accommodate extensions not yet defined.

Layer 4: Flexibility Standards. - Flexibility standards define how multiple protocols could be run over a single platform. They provide the framework to specify areas left for the future or that are manufacturer specific options. While extension bits can be found within many specifications, e.g., LAPD in ITU-T Recommendation Q.921 or LAPF in Recommendation Q.922, the programmable processors may stimulate the development of independent flexibility.

For network access, proper flexibility means the support of changes in the physical node (e.g., switching from Ethernet to another interface), backward compatibility, or different types of access (wireline or wireless). At the network end-points, flexibility means the possibility of using different terminals. For example, a hypothetical smart card may be read by readers with contact and with contact-less readers, and may contain several applications (bank card, electronic purse, wallet, etc.).

Tactical considerations

Contribution towards a standard implies a policy of knowledge management, i.e., that of generating, keeping, and/or releasing information. Without such a discipline, organized and consistent participation in the standardization process may be difficult or inefficient.

The explosion in information technology and the need for interconnection have encouraged the proliferation of Standards Development Organizations (SDOs). Information technology now deals with the preparation, collection, transport, retrieval, storage, access, presentation and transformation of signals in many forms. These forms include speech, audio and video signals, graphics, texts, still images, video as well as data. The end-users of the information systems can be people, machines or a combination of both. The number of permutations is exceedingly large, and each specific organization is addressing only a part of the whole spectrum of possibilities. A further complication is the proliferation of consortia and fora that, in their view, they are not "standard-setting" organizations, although they produce compatibility standards to ensure that all components of the whole communication system works together end-to-end.

The applicability of a standard can be assessed in terms of market, industry or geography. This item has implications on the details of the standards as well as how to go about standardization. Traditionally, standards have been adopted by governmental authorities that enforced them over a defined geographic area. Increasingly, standards are adopted voluntarily and regional standards organizations are expanding their influence. For example, ETSI (European Telecommunications Standard Institute), which is a European standards organization has taken the lead role in defining the interface of IP-based telephony with the existing telephone networks.

Selection of the standards organization to present to depends on the following factors:

1. The working methods and procedures of a SDO may make it more suitable for one type of interface standard than another. For example, compatibility standards can be developed faster than similarity standards, or flexibility standards do not require the consensus need to achieve a reference standard. In general, formal SDOs have more rigorous rules to ensure a fair and unbiased process, while industry groups have less open procedures

2. The structure, composition and decision making process of a SDO can be matched to the standardization process within the product cycle. Anticipatory standards involve mostly architects, participatory standards depend on developers while response standards require users input. It is important to choose the SDO whose decision-making process reflects the appropriate inputs for each category of standards.

3. Whether the standards are local, regional or international. In the area of electronic commerce standards such as as Electronic Data Interchange (EDI), parts of the standards will be local or regional and others will be international.

4. The parties that are involved. The constituency for standardization could also include "system integrators," whose business objective is to offer their customers, and on a world-wide basis, a seamless suite of end-to-end information services. While individual consultants have participated in various standards organizations, the increased contribution of system integrators in the standardization process may enhance the possibility for reaching a faster consensus because their interests usually lie in between standards seekers and standards creators.

Summary

Standards are the only realistic means of maintaining compatibility in an increasingly complex multi-media environment. Success in standardization requires an understanding the general environment in which they take place. Hopefully, the proposed framework will stimulate discussions on how to refine this above model to produce more applicable guides for future standardization activities.

NETWORK EXTERNALITIES

INTRODUCTION

To explain what network externalities is, in an understandable manner, I will use an example. Imagine if you were the only person having an email address and using emails as a form of communication, this network would not worth anything as the product as no one else uses this product. The more users there are using the product, the more valuable the medium becomes. If you are not able to write email to anyone else then what use/value does the email have to you. In concrete terms, network externalities exist when the value of a product to any user is greater the larger is the number of other users of the same product.

Writing in 1950, Harvey Leibenstein analyzed the bandwagon effect, by which he meant the extent to which the demand for a commodity is increased due to the fact that others are also consuming the same commodity. It represents the desire of people to purchase a commodity in order to get into the swim of things; in order to conform with the people they wish to be associated with; in order to be fashionable or stylish; or, in order to appear to be one of the boys.

TYPES OF NETWORK EXTERNALITIES

There are two types of Network Externalities, namely, Direct and Indirect. Direct network externalities exist when an increase in the size of a network increases the number of others with whom one can communicate directly. Direct network externalities involve the value aspect of things like telephone systems, computing platforms, and especially the Internet and e-Commerce.

On the other hand, Indirect Network Externalities exist when an increase in the size of a network expands the range of complementary products available to the members of the network. Additionally, indirect externalities involve related items like devices (telephones, fax machines, or software applications) becoming cheaper and more accessible as the number of overall users increases. This may also extend to things like service or parts.

Many industries exhibit network externalities. Some examples are :

Telephone Network (direct): value of that any user places on subscribing depends on the number of others with whom he can communicate

ATM machines (indirect): the larger the network the greater is the number of machines at which an ATM card can be used, hence greater is the value of the network to any user

Diesel powered cars (indirect): having more widely available fuel and service facilities the larger the number of other drivers of such cars

In each case the value of the good derives entirely from its ability to link many people possessing the same good. As a result, the marginal benefit of the good to any one individual depends on the number of other individuals who use it.

BENEFITS OF NETWORK EXTERNALITY

Network externalities are the effect that one user of a good or service has on the value of that product to other people. Positive network externalities exist if the benefits are an increasing function of the number of other users (a lot of people use that product/service). Negative network externalities exist if the benefits are a decreasing function of the number of other users. Considering firstly the positive externality, the classic example is the phone market. The more people own phones, the more valuable the phone is to each owner. That phenomenon generates a positive effect because a user may purchase their phone without intending to create value for other users, but does so in any case.

Lets consider Apple as an example: it derives most of its revenues from the network externalities created from its iTunes platform. The iPhone mainly and the iPod drive the companys revenues, according to the main principle that everyone will have compelling reasons to use an iPhone because the network externality will make that device the product someone uses simply because it is the one everyone else uses.

There are two important concepts that can rise as a consequence of positive network effects: the bandwagon effect and the tipping effect. The first one is an observed social behavior in which people tend to go along with what others do or think without considering their actions. The likelihood of a bandwagon effect is greatly increased as more and more people adopt an idea or behavior; this has led to the pejorative description herd effect in reference to this interesting behavioral phenomenon. The bandwagon effect can be seen at almost all levels of human interaction, and being aware of its influence on you can help you make calculated decisions which are based on your beliefs and values rather than the temptation to go along with a group. Tipping, indeed, is a situation more related to a competitive scenario. It occurs when two companies are trying to sell quite the same product and a small initial advantage for one of two competing goods proves self-reinforcing, even with the possibility to drive the other out of the market. In other words, it appears when positive feedback causes consumers to swing to one of the two competing products; when a good that has a substantial but not dominant market share may stay in that range for an extended period, then, quite suddenly, and often for no obvious reason, the market tips either for or against it, and the good either become dominant or fades away. A typical example of this phenomenon is the case of Betamax Vs VHS: Sony's Betamax video standard was introduced in 1975, followed a year later by JVC's VHS. For around a decade the two standards battled for dominance, with VHS eventually emerging as the winner. The victory was not due to any technical superiority, it was just a consequence of the tipping effect.

On the other side, negative network externalities can also occur, where more users make a product less valuable (network congestion)6. Congestion occurs due to overuse. The applicable analogy is still related to a telephone network. While the number of users is below the congestion point, each additional user adds additional value to every other customer. However, at some point the addition of an extra user exceeds the capacity of the existing system. After this point, each additional user decreases the value obtained by every other user. In practical terms, each additional user increases the total system load, leading to busy signals, the inability to get a dial tone, and poor customer support.

Improvements in the technology of goods subject to network externalities may at first lead to only gradual increases in the size of the network, but when that network reaches a certain size, a critical mass, it suddenly explode. At that point, in fact, the value obtained from the product or service is 3 Mac to PCs PC to iPhones... greater than or equal to the price paid for the product or service. As the value of the good is determined by the user base, this implies that after a certain number of people have subscribed to the service or purchased the good, additional people will subscribe to the service or purchase the good due to the positive 'utility/price' ratio. Beyond the critical mass, the increasing number of subscribers generally cannot continue indefinitely. After this point, in fact, most networks become either congested or saturated, stopping future uptake. Positive feedback is obvious, more people means more interaction (Wikipedia itself, for instance, depends on positive network effects).

Negative network effects result from both resource limits and provider complacency (The absence of viable competitors in a successful network can cause a provider to restrict resources, consider fee increases, or otherwise create an environment contrary to the users' benefit). What is obvious is that both success and failure are self-reinforcing, which represents a way to pat yourself on the back for progress towards the goal or standard you have established. Self-reinforcement is an invaluable link between the response & the outcome. The more often that a person can pick out a target behavior & consistently give him or herself reinforcement for that behavior, the more likely it will occur in the future.

THE IMPACT OF NETWORK EFFECTS ON TECHNOLOGY

If a technology that is dependent on network effect starts to lose market share to a challenger with a disruptive innovation, the network effects will possibly be beneficiary to the challenger, who perhaps have been successful in differentiating itself. In addition, the technology life cycle will accelerate the tipping point, meaning going from the maturity stage to the decline stage quickly. Hence, how do technology companies use network effects as a competitive advantage?

LOCK-IN

One method for creating a network effect is vendor lock-in, also known as proprietary lock-in or customer lock-in. Lock-in can be caused by network effects, and network effects generate increasing returns that are associated with lock-in. This method is well known in the telecommunications industry, where telecom operators enthusiastically SIM lock the mobile phones that are sold with their subscription which makes the phones only able to use the specific telecom operators own SIM cards. This method can help in ensuring the technology life cycle for a period of time.

WHAT TYPES OF NETWORK EFFECTS EXIST TODAY?

Today, there two kinds of values when discussing network effects: Inherent, when people gain value from the use of the product. A known example is Apple who is using both the iPod Touch and the iPhone together with their Apps store, enabling the user to take advantage of the products full capability.

The other value is Network, which can be both direct and indirect. One gains value from the product when other or more people use the same product. When it is a direct network value you get an immediate result from more peoples use of the product, and when it is an indirect network value, it is a secondary result that the user gain. For example, when many users adopt the same standards, the complementary products become cheaper.

On the other hand, network effect can both be positive and negative.

Positive network effect is basically defined as the more people the more interaction is achieved. Wikis depend mostly on positive network effect. They usually only have value if there is many users who share knowledge.

A well known example of positive network effects today is Apples iPhone along with their Apps store, where the Apps store has created an added value to the iPhone. According to Micael Arrington, an entrepreneur and founder/co-editor of the online blog TechCrunch, Apple has an opportunity in increasing the value of the iPhone even more through the Apps store. The suggestion was that Apple should consider ways to have users interact with each other in order to build network value in order for Apple to have a long term success with the iPhone. Arrington also argues that ignoring this opportunity will open the doors for other competitors.

One opportunity in increasing the positive network even more is through the development of game applications with a multiplayer game mode that enables iPhone owners to interact with each other across the world. A decade ago, Apple claimed its computers were better than PCs. However, PCs became omnipresent, meaning that there were more applications available everywhere. As a result, Apples share of the computer market fell. So, why did the assumed inferior product win? Apple was at the time promoting negative network effects, meaning that their computer was limited to only a few applications that was at that time only developed by Apple, resulting in Microsoft gaining the competitive advantage of having many applications to offer.

Ironically, the negative network effects, that killed the Apple computer, made Apple able to redeem itself through the iPhone and the Apps store and at the same time beat Microsoft at its own game.

COMPETITION AND NETWORK EXTERNALITIES

Companies, who are dealers of Information goods, are completely aware of the significance of Network Externalities. But, the question remains as how does this concept shape their ideas. Building a strong Sales Network is often the answer to products which are believed to account for strong Network Externalities. This could even be at the expense of short-term profits. The theory is often seen to be relevant for the information industry which tends to gather profits.

In order to understand this effect, lets look at an example subject to a critical mass effect, such as that of NetBooks. At the beginning, only Asus and MSI was the suppler of the product, which was largely to in their interest to get the industry to critical mass-to get explosion of sales that will occur when many people feel that they should have NetBooks as so many other have it. But, the question always remain on how the companies got the industry to critical mass. Asus and MSI provided the NetBooks at a cheaper price-may be even at a loss in the start-in order to increase the size of the network. So we often see companies introducing new high-technology products at a price we below production cost.

Similar logic could be applied in markets in subjects to Tipping. As companies wants to do it all it can to induce the market to tip towards their product, it has the audacity to introduce the product at a cheaper rate until the market has diverted towards its favor. Of course, firms offering rival products have the same incentive, so the early stages of competition in information goods often involve rival firms offering their products for very littlein some cases nothing. The most famous case may be the browser wars of the 1990s. A browser is software used to access the Internet; the two main competitorsNetscape Navigator and Microsoft Internet Explorerwere both available for free.

In the reality, of course, we cannot be quite sure whether a new product will ever achieve critical mass or whether it is possible to tip the market toward a product by offering it cheaply. The result is that there are many cases of attempts to launch products that seem foolish in retrospect: goods sold cheaply, with lots of money lost, that never take off.

CONCLUSION

Forecasting the future, market analysis and strategy are the most important aspects of a product launch but, often, strategist forget to think about the Network Externalities. It remains as the hidden force which contributes towards success of the product. A major reason how products like the Windows OS, NetBooks and the iPhone App Store sustained the hard times and made place for itself.

REFERENCES:

Baskin, E., Krechmer, K. and Sherif, M. H. (1998) "The Six Dimensions of Standards: Contribution Towards a Theory of Standardization," pp. 53-62 in Management of Technology, Sustainable Development and Eco-Efficiency, Selected Papers for the 7th IAMOT Conference, L. A. Lefebvre, R. M. Mason and T. Khalil, edts. Elsevier, 1998.

Mangematin, V. and Callon, M. (1991) Technological competition,: strategies of the firm and the choice of the first users: The case of road guidance technologies, Colloquium on the Management of Technology: Implications for Enterprise Management and Public Policy, Paris, France, May 27-28.

http://www.worthpublishers.com/krugmanwellsnew/pdf/chapter22.pdf

PROFITING FROM INNOVATION

Learning Objectives

Explain why innovating firms often fail to obtain significant economic returns from an innovation, while customers, imitators and other industry participants benefit

Discuss the fundamental building blocks of profiting from innovation

Explain the implications of profitability and channel strategies

Introduction

It is quite common for innovators those firms which are first to commercialize a new product or process in the market to lament the fact that competitors/imitators have profited more from the innovation than the firm first to commercialize it.

Who benefits from an innovation?

Possible Outcomes from Innovation

Table presents a simplified taxonomy of the possible outcomes from innovation. Quadrant 1 represents positive outcomes for the innovator. A first-to-market advantage is translated into a sustained competitive advantage which either creates a new earnings stream or enhances an existing one. Quadrant 4 and its corollary quadrant 2 show an example of innovators that fail and imitators/followers that won the industry.

Definition of Terms Appropriability - environmental factors that govern an innovators ability to capture profits generated by an innovation

Codified Vs. Tacit knowledge - The ability to formally communicate knowledge

Paradigmatic stage - when the dominant design has not be formalized (technologies and arch. are fluid)

Dominant Design - The standard form, technology, and architecture

Complementary Assets - Non technology assets that are needed to make a product successful

Profiting from innovation: Basic building blocks

There are three (3) fundamentals building blocks:

Appropriability regime

Complementary assets, and

Dominant design paradigm

1. Regime of Appropriability

A regime of appropriability refers to the environmental factors, excluding firm and market structure, that govern an innovators ability to capture the profits generated by an innovation.

The most important dimensions of such a regime are the nature of the technology, and the efficacy of legal mechanisms of protection.Appropriability regime: Key dimensions

Legal Instruments

Patents

Copyrights

Trade secrets

Nature of Technology Product

Process

Tacit Knowledge

Codified Knowledge

Patents

It has long been known that patents do not work in practice as they do in theory.

Many patents can be invented around at modest costs. They are especially ineffective at protecting process innovations.

Often patents provide little protection because the legal requirements for upholding their validity or for proving their infringement are high.

Trade Secrets

In some industries, particularly where the innovation is embedded in processes, trade secrets are a viable alternative to patents.

Trade secret protection is possible, however, only if a firm can put its product before the public and still keep the underlying technology secret.

Usually only chemical formulas and industrial-commercial processes (e.g., cosmetics and recipes) can be protected as trade secrets after theyre out.

Codified and Tacit Knowledge

The degree to which knowledge is tacit or codified also affects ease of imitation.

Codified knowledge is easier to transmit and receive, and is more exposed to industrial espionage and the like.

Tacit knowledge by definition is difficult to articulate, and so transfer is hard unless those who possess the know how in question can demonstrate it to others.Tight or Weak?

The property rights environment within which a firm operates can thus be classified according to the nature of the technology and the efficacy of the legal system to assign and protect intellectual property.

Appropriability regime can either be:

Tight - technology is relatively easy to protect.

Weak- technology is almost impossible to protect.

2. Dominant Design Paradigm

The emergence of a dominant paradigm signals scientific maturity and the acceptance of agreed upon standards by which what has been referred to as normal scientific research can proceed.

These standards remain in force unless or until the paradigm is overturned.

Once DDP emerges, competition shifts to price and AWAY from design.

Future innovation focuses on process innovation and/or details of DPP.

If imitation is easy, followers can enter market, modify innovators design yet rely on fundamental designs of innovator to establish themselves as dominant design!It is commonly recognized that there are two stages in the evolutionary development of a given branch of a science:

1. the pre-paradigmatic stage when there is no single generally accepted conceptual treatment of the phenomenon in a field of study, and

2. the paradigmatic stage which begins when a body of theory appears to have passed the canons of scientific acceptability.

3. Complementary AssetsComplementary Assets are non-technology assets that are needed to make a product successful.

Everything else required to bring a product to market.

Marketing, manufacturing, support, distribution channels, suppliers, learning, and name

In almost all cases, the successful commercialization of an innovation requires that the know-how in question be utilized in conjunction with other capabilities or assets.

Complementary Assets Needed to Commercialize an Innovation

Complementary assets: Generic, specialized and Co-specialized

Generic: general purpose assets not tailored to the innovation. e.g. plant & equipment for athletic shoes.

Specialized: assets with one-way dependence between innovation and the asset e.g. specialized repair facilities for rotary engine of automobiles

Co-specialized: assets with two-way dependence between innovation and the asset. e.g. filling stations for hydrogen fuel cell vehicles.

Implications for Profitability

These two concepts can now be related in a way which will shed light on the imitation process, and the distribution of profits between innovator and follower.

1. Tight Appropriability Regimes2. Weak Appropriability Regimes1. Tight Appropriability Regimes

Strong legal protections &/or trade secrets are hard to access

Innovator can and will translate innovation into superior returns

Innovator has time to access needed complementary assets

Innovator may license innovation to gain generic assets

OR, innovator can commit money to acquiring specialized or co-specialized CAs, AND

Innovator has time to refine product concept before DDP.

2. Weak Appropriability Regimes

1st question: Paradigmatic or Pre-paradigmatic phase?

If pre: innovator must be very careful to let the basic design float until it is clear which design will become industry standard.

Innovators must be linked to market ASAP so that user needs can influence design.

Paradigmatic stage: As leading design emerges, volumes increase economics of scale opportunities.

Firms ramp up for mass production by acquiring specialized tooling & distribution.

Prices become less important -access to complementary assets CRITICAL.

Since core technology is easy to imitate, COMMERCIAL SUCCESS DEPENDS ON TERMS OF ACCESS TO CAs.

Monopoly holders of CAs could capture ALL profits from innovation.

Channel Strategies: Contractual Mode

CONTRACTUAL MODE

Innovator signs contract (e.g. license) with independent suppliers, manufacturers, distributors.

Pros: Less investment = less risk.

Less investment = less need for cash

Gain credibility/reputation of partner

Learn from partner

Cons: Convince potential partners to invest in irreversibilities : Innovator may have to offer to carry some/most of risk.

Risk that partner doesnt perform as planned

Risk that partner copies & runs with design ie. innovator CREATED competitor

Channel Strategies: Integration Mode

Integration involves ownership

Innovator could buy capacity in CAs BEFORE announcing innovation OR

Innovator could buy capacity in CAs AFTER announcing innovation.

However, if appropriability regime is WEAK, getting control of CAs fast is CRITICAL bottlenecks/tight supply e.g. manufacturing capacity, distribution)

In this case, innovator must PRIORITIZE CAs: If a CA is critical, try to own.

BUT: money constraint (minority share)

Watch competitors (they might build or buy more quickly/cheaply)

Integration vs. contract strategies: An analytic summary

The table makes it apparent that even when firms pursue the optimal strategy, other industry participants may take the jackpot. This possibility is unlikely when the intellectual property in question is tightly protected. The only serious threat to the innovator is where a specialized complementary asset is completely locked up, a possibility recognized in cell 4.

With weak intellectual property protection, however, it is quite clear that the innovator will often loose out to imitators and/or asset holders, even when the innovator is pursuing the appropriate strategy (cell 6). Clearly, incorrect strategies can compound problems. Clearly, incorrect strategies can compound problems:

For instance:

if innovators integrate when they should contract, a heavy commitment of resources will be incurred for little if any strategic benefit, thereby exposing the innovator to even greater losses than would otherwise be the case.

On the other hand, if an innovator tries to contract for the supply of a critical capability when it should build the capability itself, it may well find it has natured an imitator better able to serve the market than the innovator itself.

Summary Points

In a weak appropriability regimes especially where required manufacturing assets are specialized to the innovation, participation in manufacturing is NECESSARY if innovator wants to appropriate rents from innovation.

If an innovators manufacturing costs are HIGHER than those of its imitators, innovator may lose most of the profits to the imitators.

As the technology gap closes (dominant design emerges), basis of competition shifts to co-specialized assets.

Take note that

Innovation produces information (i.e., reduces uncertainties about outcomes)

You cant sell information on the open market without legal protection because information can be copied at no cost

You can increase appropriability through legal protections but it is not perfect in information because some always leaks out

References:

Summary & Discussion of Profiting From Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy By David J. Teece (1987) Presentation to InventVermont monthly meeting Feb. 10/05 Robert Letovsky, Ph.D.

Appropriability and Profiting from innovation, IPPD 4/13/00

www.wikipedia.com

www.google.com

NEW TECHNOLOGIES: CHOOSING THE RIGHT BUSINESS MODEL

Objectives:

To define a business model.

To identify the role of a business model.

To identify business model options.

Introduction

Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures.

A business model describes the rationale of how an organization creates, delivers, and captures value (economic, social, or other forms of value). The process of business model construction is part of business strategy.

In theory and practice the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies. Hence, it gives a complete picture of an organization from a high-level perspective.

Whenever a business is established, it either explicitly or implicitly employs a particular business model that describes the architecture of the value creation, delivery, and capture mechanisms employed by the business enterprise. The essence of a business model is that it defines the manner by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit: it thus reflects managements hypothesis about what customers want, how they want it, and how an enterprise can organize to best meet those needs, get paid for doing so, and make a profit.

Business models are used to describe and classify businesses (especially in an entrepreneurial setting), but they are also used by managers inside companies to explore possibilities for future development. Also, well known business models operate as recipes for creative managers. Business models are also referred to in some instances within the context of accounting for purposes of public reporting.

Business Modeling is an important tool to both capture, design, innovate and transform the business. However, in order to transform ones organization and align them to ones business model, a business model should not be seen separately, but in connection with:

The main business goals of the organization, e.g. strategic business objectives, critical success factors and key performance indicators, which a holistic business model approach should include.

The main business Issues/pain points and thereby organizational weakness, which a holistic business model approach should include for they represent the threat to the companys business model.

A clear cause and effect linkages between the competencies, desired outcomes and performance measurements e.g. scorecards.

An emphasis on business model management and thereby a continuous improvement and governance approach to the business model.

The business maturity level, in order to develop the organization representation of core differentiated and core competitive competencies [linked to strategy], which is a basis for building a business model as they the represent some of the most important sources of uniqueness. These are the things that a company can do uniquely well, and that no-one else can copy quickly enough to affect competition.

Linkages among competences and competency development.

The possible value creation and realization of the organization.

The information flow, and thereby information need for effective and efficient decision making.

Such a holistic approach would help clarify both intent and sources of synergy and disconnect between business model, strategy, scorecards, information, innovation, processes and IT systems. This includes architectural alignment as well as business transformation and value and performance views. Such dialogues allow Executives to use the business model with their business alignment.

The Business Model

To extract value from innovation, a start-up (or any firm for that matter) needs an appropriate business model. Business models convert technology to economic value.

For some start-ups, familiar business models cannot be applied, so a new model must be devised. Not only is the business model important, in some cases the innovation rests not in the product or service but in business model itself. In their paper, The Role of the Business Modeling Capturing Value from Innovation, Henry Chesbrough and Richard Rosenbloom present a basic framework describing the elements of a business model.

Given the complexities of products, markets, and the environment in which the firm operates, very few individuals, if any, fully understand the organizations task in their entirety. The technical experts know their domain and the business experts know theirs. The business model serves to connect these two domains as shown below.

A business model draws on a multitude of business subjects, including economics, entrpreneurship, finance, marketing, and strategy.The business model itself is an important determinant of the profits to be made from an innovation. A mediocre innovation with a great business model may be more profitable than great innovation with mediocre business model.

In their research, Chesbrough and Resenbloom searched literature from both the academic and the business press and identified some common themes. They list the following six components of the business model.

1. Value proposition a description the customer problem, the product that addresses the problem, and the value of the product from the customers perspective.

2. Market segment the group of customers to target recognizing that different market segments have different needs. Sometimes the potential of an innovation is unlocked only when a different market segment is targeted.3. Value Chain Structure the firms position and activities in the value chain and how the firm will capture part of the value that it creates in the chain.4. Revenue generation and margins how revenue is generated (sales, leasing, subscription, support, etc.), the cost structure, and target profit margins.5. Position in value network identification of competitors, complementors, and any network effects that can be utilized to deliver more value to the customer.6. Competitive strategy how the company will attempt to develop a sustainable competitive advantage, for example, by means of cost, differentiation, or niche strategy.Business Model vs. Strategy

Chesbrough and Rosenbloom contrast the concept of the business model to that of strategy, identifying the following differences:

1. Creating value vs. capturing value the business model focus is on value creation. While the business model also addresses how that value will be captured by the firm, strategy goes further by focusing on building a sustainable competitive advantage.2. Business value vs. shareholder value the business model is architecture for converting innovation to economic value for the business. However, the business model but nonetheless impact shareholder value.3. Assumed knowledge levels the business model assumes limited environmental knowledge, whereas strategy depends on a more complex analysis that requires more certainty in knowledge of the environmentThanks to technology, there are more business models to choose from than ever before. Today you can start a business part-time or full-time, at home, online or in a brick-and-mortar commercial location!

The key is to choose a business model that fits your Life Plan.

As we always say, plan your life, then plan your business...

Some of the most successful and happy people we know are entrepreneurs who created a business thats in perfect synchronicity with what they want out of life. If you do what you love, youll work harder, better and more happily.

Elements of your Life Plan:

Your Current Status

Think carefully and honestly about where you are now in your life. Consider work, recreation, relationships, finances and anything else thats important to you. And then jot down some simple, succinct bullet points in each of these categories:

Quality rating of your life on a scale of 1 through 100, with 100 being the best possible life

Realities of your life, including responsibilities, funds available to start a business, expenses

Things that make you happy

Things that make you unhappy

Your Ideal Life

This is a snapshot of your ideal life, in a very brief, bulleted list. And remember, the skys the limit, so dont be afraid of being bold or maybe even a little grandiose. Factor in things like family time, hobbies, charity work, early retirement anything that gets you really excited.

Your Loves: What You Really Like Doing

Think about the types of things that you love to do, whether at work, at home, or at your local soup kitchen. List these things out briefly. And don't worry if some themes are starting to repeat in each section,

that just means you have some really focused ideas about what you want in life!

Your Skills & Capabilities: What You Do Well

List the abilities, experience and strengths you can build on to attain that ideal life.

Bear in mind that your skills need not be strictly from your professional life list skills developed in your personal life as well. It may be a combination of skills that leads you to a startup thats best suited to