4. Perez

Innovation vs invention

• innovation is the commercial introduction of a new product or a new combination

• invention belongs to the realm of science and technology. Inventions are thought up by people from a technical point of view.

 

Inventing something can be of little use, but combining inventions can lead to innovation!

• Technologically possible ≠ economically profitable ≠ socially acceptable. It is with profit in mind that entrepreneurs and managers are constantly turning inventions into innovations – turning technical possibilities and discoveries into economic realities.

• inventions and innovations do not happen separately, but interact with what people want, desire, and accept. Innovation is a process, which we are a part of.

Radical innovations vs incremental innovations

• Radical innovation = major innovations with a central role

  • E.g., electric freezer, washing machine

  • E.g., smarthpone

 

• Incremental innovation = numerous minor enhancements and process improvements

  • E.g., electric knife, increased camera quality for smartphone, streaming music, free wifi texting, …

  • Fundamentally different technology than it started out at the radical innovation, but is hasn’t happened overnight (process of incremental innovations)

Schumpeterian clusters

Technologies interconnect and tend to appear in the neighborhood of other innovations. Innovation is a collective process that increasingly involves other agents of change: suppliers, distributers, consumers, … These clusters are the result of techno-economic and social interactions between producers and users within complex dynamic networks.

Innovation is a process demanding complementary innovations, upstream and downstream (clusters of industries) and facilitating similar ones, including competing alternatives.

Example: television

Upstream → something that happens before TV

• Manufacturing of broadcasting equipment

• Specialized supplier industries

 Downstream → something that happens after TV

• Ideas for TV-series, advertising, music, film, …

Technological revolutions

A technological revolution can be defined as a set of interrelated radical breakthroughs, forming a major constellation of interdependent technologies.

= a cluster of clusters or a system of systems

Five successive technological revolutions

1. Industrial Revolution (1771)

2. Age of steam and railways (1829)

3. Age of steel, electricity, and heavy engineering (1875)

4. Age of oil, automobile and mass production (1908)

5. Age of information and telecommunications (1971)

two basic criteria for a revolution

1) A strong interconnectedness and interdepence of the participating systems in their technologies and markets

2) A capacity to transform profoundly the rest of the economy and eventually society

→ The capacity to transform other industries and activities results from the influence of its associated techno-economic paradigm.

the structure of technological revolutions

Each revolution includes a significant number of interrelated new products and production technologies, giving rise to important new industries.

 Among them there tends to be a core all-pervasive low-cost input, often a source of energy, sometimes a crucial material, plus one or more new infrastructures.

Techno-economic paradigm

TEP = set of the most successful and profitable practices in terms of choice of inputs, methods and technologies and in terms of organizational structures, business models and strategies.

• The emerging heuristic routines and approaches are gradually internalized by engineers and managers, investors and bankers, and advertising people, entrepreneurs and consumers. Old ideas are unlearned, new ones become normal. A shared logic or ‘new common sense’ is accepted both for investment decisions and consumer choice.

No matter how important and dynamic a set of new technologies may be, it only merits the term revolution if it has the power to bring about a transformation across the board. It is the techno-economic paradigm (TEP), evolving as the new technologies diffuse, that multiplies their impact across the economy and eventually also modifies the socio-institutional structures.

• The established technologies and the prevailing paradigm are made obsolete and transformed by the new ones → changes in the economy are disturbing for the social status-quo! Often accompanied by the explosive growth of new wealth with strong polarising trends in the income distribution.