tech 4

Week 4 lecture

Innovation is a systemic phenomenon = for big innovations to happen, companies usually need to work with other groups. They can't do it alone.

This is a concept called the "triple helix," which involves three groups working together:

1. Universities (like research labs at colleges)

2. Companies (private businesses)

3. Government (provides funding and regulations)

 These three groups support each other, making it easier to develop new ideas.

Example: Robot Spot by Boston Dynamics: This robot was created by a company called Boston Dynamics, which started as a project at MIT (a university) with funding from DARPA (a government agency). example of universities, companies, and the government working together to create something new.

how innovation (creating new ideas, products, or technology) happens from two different viewpoints:

Policy Perspective (Big-picture, national level): What the government needs to do to support innovation across the country.

This is about how a government (like the Ministry of Industry) should support different types of organizations to encourage innovation.

The government would want:

Large Companies: Big companies (like Google or IBM) that have a lot of money and resources. They’re good at improving existing technologies.
Small Start-Ups: Newer, smaller companies that bring fresh, disruptive ideas and create new markets (like what Uber did with ride-sharing).
Universities: Places like research universities that develop new knowledge and train skilled workers.
Government’s Own Role: The government provides funding, policies, and can act as a big buyer of new technology (like in defense or healthcare).

Together, these groups create a strong innovation ecosystem—they all play different but complementary roles.

Role of the Government

The government helps fund research through universities and national labs.
It sets policies to create a stable economy where companies can thrive.
The government can also act as a big customer for new technology, which supports innovation. For example, U.S. defense spending helped the growth of Silicon Valley.

Example: Oxford-AstraZeneca COVID-19 Vaccine

Oxford University (university) developed the initial vaccine.
AstraZeneca (large company) helped scale it up, manufacture, and distribute it.
This shows how universities and companies need each other, with government often providing funds or regulatory support.

Summary: The government should support both large and small companies, as well as universities, to make innovation possible.

2. Managerial Perspective: What Companies Should Focus On

This is about what different types of companies should focus on for innovation, depending on their size and type.

Large Companies (like IBM, Microsoft):
- They are best at incremental innovation (small improvements to existing products).
- They’re good at investing in big projects that take time and money.
- They can handle big technological changes but don’t like changing their whole business model.
Start-Ups (newer, smaller companies):
- They’re better for disruptive innovation (creating completely new products or markets).
- They do well with new ideas that large companies might ignore initially because they don’t seem profitable right away (like Uber when it first launched).
- Start-ups are good when the initial investment is small or when they get venture capital support.

Summary: Large companies are good for improving existing products, while start-ups are better for creating completely new ideas or markets.

Sources of information come from

1. Firms

2. Unis, gov instution and other not for profit organisation

3. Individual inventors

 Companies can use various sources for innovation:

Internal sources

o Employees

o R&D

o Design offices

o Production

o IT departments: They create new ideas from within.

Users (like lead users TOP PERFORMING USERS WHO INNOVATE THE PRODUCT): They suggest improvements because they use the product a lot.
Suppliers: They may introduce new materials or processes that help improve products.
Competitors and Complementors: Observing competitors or working with other companies can also lead to new ideas.

 Each industry (like tech, healthcare, etc.) might find some sources more useful than others. This depends on the industry’s specific needs and how it operates.

Pavitt’s Taxonomy, which is a way of classifying which sources of innovation are most important for different types of industries.

- categorizes industries based on the sources of innovation they typically rely on. It helps us understand which sources are most important for each industry and the strategic focus companies in these sectors should have. Here’s how it breaks down:

Managerial Implications

· Technology and Competitive Advantage: Understanding where competitive advantage comes from in each sector (suppliers, R&D, users, etc.) helps firms decide where to focus their innovation efforts.

· Investment and Relationships: Firms should invest in relationships with the most important sources of innovation for their industry, such as:

o Building R&D capacity for science-based sectors.

o Strengthening supplier relationships in supplier-dominated sectors.

o Focusing on data and information systems in information-intensive sectors.

How Innovation Strategies Differ by Industry

This framework shows that different industries rely on different innovation sources, and they don’t all approach innovation the same way. For example:

· Automobiles (scale-intensive) focus on refining processes, incorporating best practices, and gradual integration of new technologies.

· Pharmaceuticals (science-based) focus on R&D and collaborations with the scientific community to discover breakthrough products.

· Retail (information-intensive) focus on customer data, IT systems, and ensuring integration across multiple shopping channels.

Limitations of Pavitt’s Taxonomy

· Simplified View: It may not cover all firms, as some firms belong to more than one category, especially large firms with diverse operations.

· Change Over Time: Innovation sources may shift with technological advances. For example, the car industry is increasingly science-based with developments like autonomous driving and electrification, even though traditionally it was scale-intensive.

Triple Helix: a collaborative framework involving government, academia, and industry working

together to foster innovation and economic development.

Lead users: individuals or entities within a target market who, due to their unique needs, experiences,

or early recognition of emerging trends, are at the forefront of innovation and are likely to adopt and

adapt new products or technologies ahead of the broader market.

Pavitt’s Taxonomy: a categorization of industries according to their main sources of innovation.

(You are required to know the 5 categories of industries and how they differ).

Innovation

You probably know the robot Spot

produced by Boston Dynamics, a

spin-off of MIT. Early robots by this

company were developed with

funding by DARPA. The search for a

Covid19 vaccine.

UK AI strategy

■Innovation is a systemic phenomenon – no company innovates in a vacuum

■The ‘triple helix’ of innovation: Companies, Universities, and the Government

The recent history of

autonomous vehicles in

the US

DARPA challenge 2004

(DARPA is a research

organization of the US

Defence Department),

taken up by teams in which

universities and industry

collaborated showing that it

was possible, then the idea

was picked up by industry

with renewed interest.

Perspectives on sources of Innovation

■Policy vs. Managerial perspective

■From a policy perspective (meaning, if you were the Ministry for Industry and had to design the

innovation policy of a country –or if you vote for those designing it): what kind of entities/actors do I

want to make sure are around and what should I incentivize them to do?

oLarge and established tech-intensive companies

oNew and entrepreneurial tech start-ups

oUniversities

oGovernment

■From a managerial perspective: what innovations are more suitable for my

company?

Managerial Perspective

What innovations are more suitable for large, established, tech-

intensive companies? (Think about the types of innovations we studied

in previous weeks)

Strengths and weaknesses of large, established, technology

intensive firms vs tech-based start-ups

■Large, established, technology-intensive firms

oGood at incremental innovation, competence-enhancing innovations, sustaining

innovations, innovations that require a lot of investment

oCan cope reasonably well with even a drastic technological transition as long as it does not

change business models –so they can cope with technological innovations that are

competence-destroying (new tech competencies) but also sustaining (no new

market/business model)

■Tech-base start-up do very well when

oInitial investment is low (but consider venture capital)

oThe innovation is disruptive for large companies (large companies have no interest

because it is not (yet) their market that is in play)

➢Examples: Apple with first Desktop, Amazon with birth of ecommerce, Uber with Taxi

services, Transferwise with international money transfer and banks, etc.

The policy perspective (1/3)

■Large and small companies have complementary roles.

oDifferent types of innovation

oMany very important discoveries and inventions have historically come from the R&D labs of large

companies (e.g., Xerox’s PARC and Bell Labs)

oLarge companies often act as clients for young entrepreneurial companies, or might fund them in the

early stage or acquire them if they are successful (e.g., Microsoft and IBM; DeepMind and Google)

oLarge companies often provide the nurturing ground for entrepreneurs and their innovative

companies, providing them with essential industry and managerial experience: spin-offs founded by

former employees (e.g., Intel; the automotive cluster around Detroit; Transferwise)

Oxford-Astra Zeneca Covid19 candidate vaccine

The research was the vaccine was conducted at Oxford University laboratories. The lab at Oxford University then established a

relationship with Astra Zeneca to help with licensure, manufacturing and distribution. As part of the process IRBM was contracted

to produce enough vaccine to conduct the trial. Moving from the vary small quantities produced from the lab to the quantities

necessary to run a trial in not a simple thing -‘scaling up’ is a complex and difficult process in the pharmaceutical and chemical

industries. IRBM was a research unit divested from Merck & Co that re-opened as an independent drug discovery company.

The policy perspective (2/3)

■From a policy perspective, you need both set of entities for a successful

innovation ecosystem

oDeveloping a ‘biotechnology cluster’ in countries that do not have large pharmaceutical companies is

very difficult.

oIn turn, the lack of large pharmaceutical companies and biotech start-ups weakens the research

ability of universities.

■Today’s large established firms in the tech sector (Google, IBM, Microsoft) are

incubating quantum computing machines – in a way that is strikingly like what the

Bell Labs of AT&T did with microprocessors.

■Caveat: there are indications that large firms are decreasing their investment in

blue-sky R&D (they have learnt from Xerox and Bell Labs – but this becomes a big

policy problem)

The policy perspective (3/3)

■What is the role of government?

■Usually thought of in terms of funding (basic) research via the university system

and national research centers and general economic policies (tax, employment),

etc.

■Government plays a key role as buyer of advanced technology too

oSilicon valley and US Defense spending

Olivetti 1962 – Programma101 and a

conservative public administration

Sources of innovation – the ecosystem

■Firms

■Universities, government institutions, and other not for profit organizations

■Individual inventors

Sources of innovation (firms)

■Internal sources

oEmployees

oR&D Department

oDesign offices

oProduction

oIT/Systems-Digital-analytics departments

■Users

Users as a source of innovation

LEAD USERS –TOP

PERFORMING USERS WHO

INNOVATE THE PRODUCT

Sources of innovation (firms)

■Internal sources

oEmployees

oR&D Department

oDesign offices

oProduction

oIT/Systems-Digital-analytics departments

■Users

■Suppliers

■Competitors

■Complementors

■…

Are specific sources of innovation equally important for all firms?

■Most innovative firms have very thick innovation linkages both internally (e.g., R&D with the other

operations of the firm) and externally (with customers, suppliers, universities…) – utilizing multiple

sources of innovation.

■Yet, there are significant differences across industries: Pavitt’s Taxonomy

Pavitt’s Taxonomy

Typical sectors Agriculture Automobiles Retail Pharma Instruments

Main sources of tech

innovation

Main tasks of tech

strategy

Agriculture today

Agriculture – which sources are most important?

“Our farm is large and is at the forefront of the

technological revolution that is changing the shape of

agriculture. Sowing, watering, fertilizing and harvesting

are all computer‐controlled. The seeds are improved

varieties provided by advanced biotechnology

companies, and we are even beginning to experiment

with robots for picking up tomatoes. Getting here has

been difficult, and we have spent countless hours trying

to understand what technologies are available, what

advantages and disadvantages they bring given their

current position in the market. Once the decision has

been made, implementing is never easy, and there are a

lot of improvements to be done on how the technologies

work.”

Pavitt’s Taxonomy

Supplier

dominated

Typical sectors Agriculture

Services

Traditional

manufacturing

Main sources of tech

innovation

Suppliers

Production learning

Main tasks of tech

strategy

Identify useful tech

produced elsewhere

to strengthen other

competitive

advantages

(Traditional) Automotive

(Traditional) Automotive– which sources are most important?

“Producing a new car is a very complex process that requires

the integration of inputs from a variety of sources, from

marketing to the production line – even without considering all

the improvements and innovations that come from the

suppliers of components such as control systems. Attractive

new cars are the aim of designers, while production

engineering has to devise the new and advanced production

processes that will allow a new design to be actually built and

sold, as well as providing ways to cut costs. “Continuous

improvement” techniques are in place in the production line,

and a lot of information about what is easy to manufacture

needs to be fed back to production engineering and the design

office. None of this is really revolutionary, but getting all the

minor technical improvements to work together is not easy. It

is no wonder that a lot of emphasis is put in developing and

copying best practices.”

Pavitt’s Taxonomy

Supplier

dominated

Typical sectors Agriculture

Services

Traditional

manufacturing

Main sources of tech

innovation

Suppliers

Production learning

Main tasks of tech

strategy

Identify useful tech

produced elsewhere

to strengthen other

competitive

advantages

Scale intensive

Automobiles

Bulk materials

Civil Engineering

Production

engineering

Production learning

Design offices

Specialized

suppliers

Incremental

integration of

advantages in

complex systems

Adoption of best

practices in

production and

design

Retail

Retail - which sources are most important?

“Innovating in retailing today is all about knowing your

customer and ensuring that the merchandise is available

to the customer by whichever channel they want it, in

the physical store, on‐line on the web, or through the

app. Trends are shifting very fast and it is not easy to

keep being innovative in the products and how to reach

clients. Retailers increasingly rely on data analytics and

other IT to run all of their systems –and integrating new

systems in the architecture as well as ensuring the

coordination of all the channels is no minor challenge.”

Pavitt’s Taxonomy

Supplier

dominated

Typical sectors Agriculture

Services

Traditional

manufacturing

Main sources of tech

innovation

Suppliers

Production learning

Main tasks of tech

strategy

Identify useful tech

produced elsewhere

to strengthen other

competitive

advantages

Scale intensive Automobiles

Bulk materials

Civil Engineering

Production

engineering

Production learning

Design offices

Specialized

suppliers

Incremental

integration of

advantages in

complex systems

Adoption of best

practices in

production and

design

Information

intensive

Retail

Finance

Publishing

Travel

IT and analytics

departments

Specialized

suppliers

Design and

operation of complex

process info

systems

Development of