Travelling

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- In fluid phase, products/technology are introduced to the market but they are not well developed (focus on product innovation)

- * Companies which fail to follow the standard set from fluid phase start to exit the market → Dominant Design (When customers and industry accept the given technology as a standard)

- In transition phase, innovator cares less about how the product looks like but more about process of production (focus on process innovation)

- In specific phase, innovator is more towards incremental innovation and cost reduction (focus on cost reduction)

- At the end of the pattern, there can be searches for new innovation or radical shocks

- Reasons for not establishment of a dominant design:

- - Another disruptive innovation;

- - Several producers patent their own technology and refuse to license to others;

- - No market, no fulfill the demand.

- Dominant design:

- - End of the fluid phase;

- - Necessary both the technology standard and the market acceptance (not always best technology);

- - Reduce perceived purchasing risk and ease of use;

- - Enable companies to focus on process innovation;

- - Reduce complexity for company;

- Development of complementary assets.

- Critiques & comments about Utterback & Abernathy Model:

- - Concept of “Dominant design” applicable only ex post

- - More than one Dominant Design

- *few dominant design: e.g. windows/linux, diesel/gasoline

- * some sectors are based on heterogeneity: e.g. art and cusine

- - Applicable to modern (flexible) manufacturing greater flexibility = higher # dominant design

- - Industries of applicability

- * no barriers to market entry

- * not too fast moving industries

- * mainly product innovation → process is developed and remain inside the industry

- - Radical innovation

CAVEAT: the emergence of a Dominant Design is a frequently observed pattern, but not a law of nature → depends on industry e.g. network industry

- What do we learn?

- 1. Companies fighting in the standard war need to be aware of new technologies evolving during the war, such as online streaming during the standard war in video format between Toshiba’s HD-DVD & Sony’s Blu-ray.

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- Why Blu-ray failed?

- 1. Consumers fail to understand the benefits of Blu-ray as it is difficult to tell the difference between Blue-ray & HD-DVD’s picture quality.

- 2. Blu-ray disks were too expensive to purchase compared to HD-DVD disks

- 3. Meanwhile, online streaming evolved to allow free enjoyment of movies and cheap or even free download of movies.

- Standard war → costs:

- - Delay adoption by the customer;

- - Lack of development of complementary products;

- - Costs of development of compatible products with both standards + complexity;

- - Cost of the war itself;

- Risks of change of the market or industry (new products).

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- Why radical innovations often come from entrants?

- 1. Advantages of newness

- 2. Advantages of smallness

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Liabilities of Newness / Advantages for Established

Advantages of Newness / Liabilities for Established

- New firms lack reputation & experience

- It takes time, creates inefficiencies & conflicts to assign roles and tasks

- Have to establish exchange relationships with various actors

- New firms have to rely on interactions among strangers → more difficult to obtain informal information exchange compared to established old firms

- No path-dependence → more willing to pursue completely new approach & create business from scratch

- Less inertia with more flexible company structure & more open and flexible corporate culture

Liabilities of Smallness / Advantages for bigness

Advantages of Smallness / Liabilities for bigness

- Limited resources (financial, HR)

- Low variety of skills and potential lack of critical skills due to low budget to hire expertise / technicians

- No buffer to survive time of crisis → When small firms fail, they do not have the resources for bailout

- Disadvantage on job market for recruitment due to lack of reputation

- Low market power

- Little organizational slack available for innovation, training

- More flexible processes

- More easily to identify company structure as it is clearly laid out

- Shorter ways for direct communication

- Fast decision-making due to flatter structure/less hierarchy

- Higher job satisfaction in small firms

Radical

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