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Technological innovation is a fundamental component of progress and is the main determinant of human development, defined as “a process of broadening human possibilities, enabling individuals to enjoy a long and healthy life, to be educated and to have access to the necessary resources at a dignified standard of living”.
In addition to the basic concept of technological innovation, it is important to investigate the main categories and groups that are commonly used to distinguish the different forms that innovation takes, depending on certain characteristics.
In addition, it may be useful to focus on the concept of S curves applied to the process of technological improvement and to that of diffusion of a new technology, which allows a better understanding of the behaviour that innovation tends to assume in most cases while remaining fully aware that these are instruments that do not pretend to predict the success or path that a new technology will necessarily follow in order to assert itself on the market, but in any case, understanding that allows you to avoid making certain mistakes and to build more precise strategies at the same time, with a higher probability of success.
The Forms of Innovation
Technological innovation can take different “forms” that are classified through the use of different criteria:
The first criterion used for classifying forms of innovation is the “nature of innovation”, and this may be:
- product innovation
- process innovation
Innovation is called product innovation when the innovation process focuses on the production of new technologies that can then be integrated into a specific good or service.
Process innovation instead refers to processes that create innovation with the aim of modifying the production process of a given good or service, increasing its efficiency, and usually reducing the costs of production.
Intensity and degree of amplitude
With regard to the classification of innovation according to intensity and degree of amplitude, the innovation processes can be divided into:
- radical innovations (disruption)
- incremental innovations
Radical innovations produce, for the most part, immediate and disruptive effects. This type of innovation is most commonly found in emerging sectors and therefore characterized by innovations that have the potential to upset the market, such as in the case of the introduction of modern smartphones. As a result of this attitude and manner of “attacking” the market, radical innovations have a considerable risk of failure, however, if successful, they can lead to very substantial returns in terms of profits.
On the other hand, incremental innovations have a more gradual path, the change does not happen overnight but tends to develop over several years, thanks to the succession of “small” innovations implemented gradually. When it comes to incremental innovation, it basically refers to the improvement (or adaptation) of something that already exists. It increases the productivity and competitiveness of the enterprise by improving the efficiency of the use of all the factors of production.
Effect on competences
The effect that innovation can have on the skills possessed, both at the enterprise level and at the market level as a whole, is a very important factor in the classification of innovation processes. Based on this particular aspect we can find:
- “Competence-enhancing” innovation
- “Competence-destroying” innovation
Innovation is defined as competence-enhancing when it is based on the quantity of knowledge already existing within a company, strengthening and enriching it with new ideas and new information.
Competence-destroying innovation, on the other hand, does not derive from the past knowledge of an enterprise or entity but may render obsolete the knowledge accumulated over time both by the enterprise itself and by other entities present in the market. An example of this type of innovation can be found in the development and subsequent introduction of the electronic calculator on the market, which has rendered useless the skills accumulated up to that time on the operation and use of the slide rule, which performed the same functions but in a much less efficient way.
Finally, the last feature that we will see, used to distinguish the different forms of innovation, is the target area for which there are two types of innovation:
- architectural innovations
- modular innovations
The architectural innovations lead to the change of the entire structure that makes up a given product, are therefore little and specific innovations that lead to visible changes on the product as a whole.
On the other hand, modular innovations are characterized by a very different impact, in fact, they focus on a specific element or component of a product, concentrating the forces then on one aspect and without causing major changes to the product as a whole.
Technical and Commercial Dimensions
When developing an innovation project, it is important to consider two different dimensions in which the innovation process can have a major impact, namely the technical and commercial dimensions. Both these dimensions are essentially complementary areas and it is good that, while preserving their specificities and differences, they can collaborate and be strongly interconnected in order to provide important insights and information to each other.
The technical dimension includes the resources and skills linked to:
- design and incorporation of technology
- production systems
- supply (raw materials and suppliers)
This dimension is crucial both in terms of improving efficiency in a given innovation project and thus reducing the cost of producing a given product, as well as for the creation of new and possibly more performing products. It can, therefore, be subject to both product innovation and process innovation.
As far as the commercial dimension is concerned, it includes the resources and skills linked to:
- the relationship with customers
- the management and choice of distribution channels
- customer knowledge of the product
This part has the great advantage that being in direct contact with customers and therefore with the market, it has a far better perspective than the trends and the diffusion of a given product or technology. As part of an innovation strategy, the commercial dimension can provide the technical area with all the information it can gather about the market and the needs of its customers so that managers can decide to steer development in one direction rather than another.
The S Curve
S curves are used to describe both the technological improvement curve and the diffusion curve of new technologies. It has been noted that in both cases the trajectory followed on the one hand by technological improvement, and on the other by the spread of a new technology, follows an “S” trajectory, with the first stage of development almost flat, then a second phase of very fast increment that ends with a third area where the movement loses strength and reaches the upper limit.
The S curve of Technological Improvement
In the case of technological improvement, the S curve is represented in a graph where, on the x-axis, there is the effort, while on the y-axis there is the level of 3, which is intended as the improvement that the technology can have.
In this case, the “S” curve shows in the initial phase (first block) a slow improvement in performance, caused mainly by the fact that the basic principles of the new technology have been understood for the time being still partially and fragmented. As a result, many mistakes are still made and inventors need more time and effort to better understand how to get the most out of this new technology.
This first phase does not have a specific duration, for this reason on the x-axis time has not been indicated but a more generic concept of “effort”, in fact, this phase could last a few months as well as several years. The duration of this phase depends mainly on the commitment of the person in charge of development.
Later (second block), when the knowledge about the new technology increases, the technological improvements proceed faster and there is therefore a sudden increase in performance, albeit with little additional effort.
Finally (third block), as we get closer to the natural limit of technology, the “S” curve tends to flatten, and at this point, while dedicating effort, the improvements in terms of performance are almost insignificant.
The S curve of the Diffusion of a New Technology
As for the use of the “S” curve in order to describe the diffusion process of a new technology, the curve is inserted within a graph that indicates on the x-axis the time and on the y-axis the percentage of adopters, that is, the customers who transpose a given technology.
Also in this case the departure is slow, in fact, for a period of time the new adopters are very few because the innovation is still to an initial stage and therefore in little succeed to notice the potentialities enough to start adopting it.
These subjects are called innovators, which are fundamental to the affirmation of new technologies. They are characterized by a high purchasing power and a strong propensity to spend their money on a type of product that they are particularly interested in. Their role is so important because they act as a channel of communication between the company and the market as they have a strong ability to communicate the success of an innovation. As a result, companies that are in the process of devising a marketing strategy for a new product tend to have an eye for this group of customers as it often becomes crucial to determine the success or failure of an innovation.
Then, the second group, which is that of first adopters, is however a small group but crucial in allowing the technology to develop and spread in the market. In fact, after the first adopters, we see the entry on the market of the early majority.
This is a much larger group than the previous two, and while adopting products that are in a sense asserting themselves on the market, they still show a good propensity for innovation and strongly encourage the spread of the technology, which then gets adopted by the late majority.
As the name suggests, the late majority, which together with the groups mentioned above confirms the fact that innovation has been a great success as it has been adopted by more than 80% of the market, even by those who are generally more reluctant to change and who adapt only at a later stage or for certain obligations related to the profession or similar reasons.
Finally, the last group that then leads to almost total adoption by the market is that of laggards. This group, like the late majority, shows a certain skepticism towards innovation, but to an even greater extent than the previous group, in fact, they decide to adopt the new technology only when it is spread almost completely and completely on the market.
Limits of “S” curves
The “S” technology curves, as described in the previous sections, are useful tools that are in fact used to allow a better understanding of the phenomena of diffusion of new technologies and also of technological improvements.
They can be useful to better understand certain phenomena and to support the creation of a strategy, but nevertheless they have quite obvious limitations and for this reason, they should not be considered infallible, that they can predict the future or accurately assess the situation of an innovative product.
This is because S curves are based on estimates that management makes at a given time. In fact, there are no really reliable tools or ways of understanding the specific position of a given innovation at any given time.
In addition, another even more important reason is the fact that the world of innovation is characterized by great uncertainty, and it is therefore absolutely normal to see products that, for various reasons, lose large portions of market share as a result of the dissemination of a competing product, even before reaching the final stage of the curve.
In other cases, however, a new technological breakthrough could completely change the cards on the table and interrupt the process of developing a technology that is entering the second phase, which should be characterized by very high-performance increases over the increase in commitment, which has now become obsolete.