MolaU

VCR and Refrigerator Case Study: Subject Matter and Block Initialization

2012-03-22T22:46:00.002-07:00

Infringement Analysis: Enclosed Disc Drive With Improved Air Flow

2012-03-22T22:37:00.000-07:00

Summary and Comments on “The Art of Standards Wars” Shapiro & Varian (1996)

2012-03-22T22:26:00.001-07:00

“The Art of Standards Wars” Shapiro & Varian (1996)

Summary:

Introduction: The authors discuss the prevalence of standards wars in the information age. They claim to have identified strategies that allow one to win through examining past standard wars. They discuss some of the standard wars that were of issue at their time (1996) such as Microsoft Vs. Netscape, DVD Vs. Divx, and Microsoft Vs. Real Networks.

Historical Examples: The authors discuss 3 historical standard wars to help support their winning strategy. They say that winning in a standards battle is simply looking at the past and learning from the mistakes of the loosing company, and gaining insight from the winning companies’ strategy.

North vs. South in Railroad Gauges: The authors discuss the standards war that occurred over railroad gauges. According to the authors, there were up to 7 different gauges used during the time with 5’ gauge and 4’8/12” being the two most predominant. Although there were clearly benefits to standardization, three reasons did not allow for it; Cost, Stubbornness and unwillingness to change, and Workers who made a living from the gauges being different. However, eventually the North won much because of the outcome of the Civil War.

Key Points: 1. Incompatibilities can arise almost by accident, yet persist for many years. 2. Network markets tend to tip towards the leading player, unless the other players coordinate to act quickly and decisively. 3. Seceding from the standard-setting process can leave you in a weak market position in the future. 4. A large buyer can have more influence than suppliers in tipping the balance. 5. Those left with the less popular technology will find a way to cut their losses, either by employing adapters of by writing off existing assets and joining the bandwagon.

Edison vs. Westinghouse in Electric Power: The Battle of the Systems: The authors point out that this battle did not clearly demand a standard as in the case of the railroad gauges, but a standard battle did ensue. Edison pushed his DC system which had pros and cons in comparison to Westinhouse’s AC system. This standardization battle was not only fought in the market, but in the courthouse and in the public domain; swaying public impressions about the safety of the two systems. Patents were created by Edison, and he even went as far as inventing the electric chair to pose a negative image of AC systems to the public. Eventually, even though Edison had a head start and had a reputation AC systems won. The authors point to three factors that led to the defeat of DC systems; advances in polyphase AC, rotary converter (DC to AC system integration), and Edison selling his interests to GE which produced both systems.

Key Points: 1. Consumer expectations can become self-fulfilling in standards battles. 2. Technologies can seek well-suited niches if the forces towards standardization are not overwhelming. 3. Ongoing innovation can lead to victory in a standards war. 4. First mover advantage can be overcome by a superior technology, if the performance advantage is sufficient and users are not overly entrenched. 5. Adapters can be the salvation of the losing technology and can help to ultimately defuse a standards war.

RCA vs. CBS in Color Television: The authors showcase another standards battle between RCA and CBS over color television. As the story goes, CBS was ahead of the color television game and was able to get the FCC to select their technology over RCA in 1950. However, RCA did not give up and doubled up on their efforts to improve their technology. They also continued to try and sell their black and white T.V.’s so that it would be that much harder for CBS to gain market share since their technology was not backwards compatible. In the end, CBS’s poor placement, such as not having manufacturing capability, and the Korean war which put a hold on parts used for color televisions allowed RCA the time to develop their technology and come out as the winner. However, the battle for RCA did not end their because there was not a sufficient amount of programing available at the time, and for consumers the costs to value ratio did not make sense at the time. It wasn’t until 1960, that RCA finally started to make some profits from its investments due to the procurement of “Walt Disney’s Wonderful World of Color”.

Key Points: 1. Adoption of a new technology can be painfully slow if the price/performance ratio is unattractive and if it requires adoption by a number of different players. 2. First mover advantages need not be decisive, even in markets strongly subject to tipping. 3. Victory in a standards war often requires building an alliance. 4. A dominant position in one generation of technology does not necessarily translate into dominance in the next generation of technology.

War or Peace?: The authors discuss the importance of understanding that not all standards battles are “fight to the death”, and that most would be better off ending peacefully if possible. The authors talk about how Sony and Philips open licensed their CD patents in an effort to get consumers to “take a leap” and purchase CD players and compact disks. The authors also talk about how even bitter enemies such as Microsoft and Netscape have repeatedly cooperated to help establish standards in many different markets; i.e. Open Profiling Standard, 3-D image viewing, and Secure Electronic Transactions. The authors state that traditional principles of strategy need to be supplemented to account for peculiar economics of networks (pg. 14). It is also said that this sort of collusion between companies will not be seen an illegal acts of antitrust violation, but as beneficial to society if it provides consumers a benefit.

Classification of Standards Wars: The authors discuss the different types of standards wars that can be fought. The classification is based on the magnitude of switching costs and how compatible each company’s proposed technology is with the current.

Evolution strategy: new technology that is compatible with the old; based on offering superior performance with minimal consumer switching or adoption costs.

Revolution strategy: new technology that is incompatible with the old; based on offering compelling performance that consumers are willing to incur significant switching or adoption costs.

Rival Evolutions: competing company’s technologies are compatible with the old, but not with each other.

Evolution versus Revolution: your technology offers backward compatibility, but competitor’s does not; contest between backward compatibility and superior performance. Mirror image Revolution versus Evolution is also possible.

Rival Revolutions: neither technology is backward compatible.

Key Assets in Network Markets: The authors describe seven key assets in a standards war; control over an installed base of users, intellectual property rights, ability to innovate, first-mover advantages, manufacturing capabilities, strength in complements, and brand name and reputation. They also mention that no one asset is decisive in the outcome of the war, and that big customers are very powerful when it comes to swaying the final decision.

Control over an Installed Base of Customers: a company with a large base of loyal or locked-in customers can easily position themselves for an Evolution strategy. Control over a large base can prevent competitors from entering the market and forces them to go the Revolution strategy route.

Intellectual Property Rights: Firms with patents and copyrights are in a strong position. Software copyrights can be used to block compatibility and be very valuable.

Ability to Innovate: the ability to create new proprietary extensions to your current product line puts in you in a strong position.

First-Mover Advantages: Being farther down in the learning curve and having lots of experience in the product’s development can put you in a strong position.

Manufacturing Capabilities: Being a low cost producer due to scale economies or manufacturing competence puts you in a strong position. Cost advantages can help a company survive a standards war.

Strength in Complements: Having or producing a significant complement for the market will motivate the company in getting started. These compliments will lead to increased sales of other company products in the future.

Reputation and Brand Name: A premium brand name is highly valuable, especially in network markets. It is important to convince customers that you will win.

Preemption: The premise of this strategy is to build an early lead, so positive feedback works for your company and against your rival. The easiest way to preempt is to be first to market by having great product development and design skills, but preempt may have some dangers. Early introduction can lead to compromises in quality and greater risk of defects. The best way to preempt is to be aggressive and build an installed base of customers early. One way of building this early customer base is by “penetration pricing”; pricing below cost. Some companies can even go as far as paying customers to use their products, but this needs to be thought out thoroughly. Penetration pricing is most effective when used by a company with a proprietary system against a rival touting its openness (pg. 19).

Expectations Management: The second key tactic in a standards war, it is influencing customer expectations to help them make decisions to purchase your product, or to dissuade them from purchasing a competitor’s products. One classic tactic is “vaporware”, where one company announces the future launching of a superior product to freeze a competitor’s sales. One needs to be wary when using this tactic as to not be seen as “predatory product pre-announcements”. The best way to manage expectations is to assemble allies and make grand claims about your product’s current or future popularity (pg. 20).

Once You’ve Won: How to best proceed after you’ve won the standards war.

Staying on Your Guard: The authors suggest that one must keep looking out for the next generation of technology, and to defuse any threat to one’s core product that may arise from it. The author’s warn that if one had used a preemption strategy in the previous generation to win the standards war, you are more susceptible to an incompatible Revolution strategy against you. The authors also warn against moving early but lacking flexibility and talk about the French Minitel case as an example. One needs to present a migration path or roadmap for one’s own technology. “If you cannot improve your technology with time, while offering substantial compatibility with older versions, you will be overtaken sooner or later. Rigidity is death…” (pg. 22).

Offer Customers a Migration Path: By anticipating the next generation of technology and co-opting it, one can make it hard for rivals to execute a revolution strategy. Offer customers a migration path by giving older members of an installed base, free or inexpensive upgrades to a recent but not current version of one’s product (pg. 22).

Commoditize Complementary Products: Keeping an eye on complementary products as well as your own is important to open up revenue streams and market space. One needs to maintain a competitive market in complementary products, but not meddle in the affairs of the complement producers. Apple is given as an example where flip flopping and meddling in their developer relations lead to loss of market share. Improving complementary products can lead to more demand of your core products.

Competing Against Your Own Installed Base: The authors talk about market saturation, and eventually having to compete against customers that see no more need to purchase your products, because their needs have been fulfilled. The answer in this situation is to innovate better and faster to create new products that would fulfill needs that the customer would want fulfilled. Another method is to discount one’s product to attract the remaining customers that haven’t already purchased the product. However, this can be dangerous as it may lead to customers that will wait for discounts rather than purchase when needed. Economists recognize this as a “durable-goods monopoly”; where consumers come to anticipate price reductions and hold off buying until prices drop. A common prescription to this is “renting” one’s product, but this does not work for all types of goods.

Protecting Your Position: The authors point out that it is illegal to maintain a monopoly through anticompetitive means. However, to overcome this, it is recommended that one offer attractive terms to complementors and gain strong distribution. This however can cross into illegal territory once “exclusive benefits” come into play. Another method to protect your positions is to maintain and manage IP within the company as to make sure that you don’t infringe on other company’s patents; thus eliminating any future holds on being able to sell your product.

Leveraging Your Installed Base: The authors talk about leveraging into adjacent product spaces using the strong base of customers and competencies that the company already has. The authors also mention geographic expansion to widen one’s network, however there are dangers when entering regions where there is a very strong rival.

Staying a Leader: In order to stay a leader one needs to think towards the future with a good development team. A good development team can help a company cede current control over a technology through an “openness” approach while keeping control over improvements and extensions. This allows one to preserve important future rights as well as partnerships and alliances. If control over one’s technology starts to sway, developing proprietary extensions is one good method to regain partial control. However, one needs to be wary when using these tactics especially if a technology becomes too successful. This is because resource allocation becomes difficult and most resources will be eaten up to meet current demand rather than investing in future products.

Rear-Guard Actions: If one falls behind in the war and network externalities are not crushing, protection of a niche market may be possible and will lead to the potential for a run at leadership in the next generation of technology. Having even a small base of niche customers can prove to be beneficial in the future in the form of branding and reputation which can be a base to introduce new products. The danger of stranding even a small base of customers can be detrimental if not properly managed.

Adapters and Interconnection: Another way to survive if falling behind is using adapters and interconnections. This is basically a means to try and connect to a larger network using converters that link one’s technology to a larger customer base. The most important factor in this strategy is knowing whether one is able to or allowed to create such an adapter. However, sometimes even when an adapter or converter is in place, customers may question the quality of the connection and transfer. A key example of this is how Digital has been trying to interconnect into Intel’s large network. The bottom line is that adapters add some value, but can undermine confidence in the smaller network itself (pg. 29).

Survival Pricing: Another method one can use when falling behind is “survival pricing”. However, even though the tactic seems logical to try and attract customers through offering a cheaper product, the authors warn against it. “Survival pricing is unlikely to work. It shows weakness, and it is hard to find examples where it made much difference.” (pg. 29). The authors give examples like the “Simply Money” case, and the spreadsheet war between Borland, Lotus, and Microsoft. It is also important to note that “survival pricing” is different from “penetration pricing”.

Legal Approaches: “If all else fails, sue.” (pg. 30). This is only viable if a dominant company promises to be open with its technology, but reneges on that promise.

Structure of the Paper:

This paper focuses mostly on the software or electronic components industry other than the first 3 examples given at the very beginning. The paper is written without any empirical data, and is primarily a strategy and example paper. This is probably because it is a management paper. Most of the examples seem to be a summary and explanation of what happened without an in depth analysis. The overall layout of the paper goes from historical examples, oldest to most recent, then moves on to discuss the different classifications of standards wars, methods and requirements to win a standards war, how to protect your position when ahead, and finally how to make progress when falling behind. In my opinion, this paper would have been far better if examples from other industries were explained to emphasis the strategies.

Summary and Comments on “Architectural Innovation-The Reconfiguration Of Existing Product Technologies and the Failure of Established Firms”

2012-03-22T22:24:00.001-07:00

"Architectural Innovation-The Reconfiguration Of Existing Product Technologies and the Failure of Established Firms”

Henderson & Clark (1990)

Summary:

This article discusses the importance of architectural innovation. Much of the authors’ argument surrounds the notion that there is a much more noteworthy type of innovation than radical or incremental that may determine the future of a company more imminently than realized. The author suggests that the failure of some companies to realize the uniqueness of an architectural innovation, because it deals with the same core components that they are used to, and pass it off as an incremental innovation leads to their demise.

First the authors describe and provide examples of architectural innovation. Architectural innovation is described as a re-organization or re-combination of components that were previously used in similar technological products or services. The authors state that the level of “innovativeness” may be modest and that the core components or design concepts are left unchanged. The examples of company failure due to architectural innovation span from Xerox’s loss of market share in the copier industry to the photolithographic aligner (semiconductor) industry.

The authors explain that these companies failed in part for a few key reasons. First, they didn’t see architectural innovations as a major innovation, so they didn’t realize that they had to view the innovation in a different light. This meant that they treated the innovation as they did with their current products, and did not seek further knowledge or training regarding its new architectural design. Second, it is difficult to spot an architectural innovation since in the beginning it looks like a modest incremental innovation; but the two are very different. Thirdly, most companies in a market are encompassed by the “dominant design” of the market. This tunnels the organizations vision, and they have a tough time dealing with new architectural innovations in the market due to communication channels that have already been set in place within the company that is used to handling what they know. Finally, there is an element of fixed costs that the companies must endure to be able to switch to the new architectural innovation. However, if the innovation does not seem “radical” or “market changing” enough, then companies forego the switch. Again, not understanding or being able to spot the architectural innovation plays a part here.

Analysis and thoughts:

Personally, I was rather interested in this paper, because it was the first time I have read a paper specifically targeting “architectural innovation”. The difficulties in dealing with architectural innovation are very well explained, and the case study on photolithographic aligners was appropriate to explain the notion. One other thing that I found interesting about this paper was its similarity to “Disruptive Technologies” explained by professor Christensen of Harvard. The premise is pretty much the same.

Structure of the Paper:

· Abstract

OVERALL EXPLAINATION OF “ARCHITECTURAL INNOVATION”.

· Explaination of the concept of “architectural innovation”. The definition of architectural innovation. The problems that companies face due to architectural innovation

EXAMPLE OF THE PROBLEMS SHOWN THROUGH A CASE STUDY.

· Case study on the photolithographic alignment semiconductor industry

· Conclusion

· References

Abstract

Introduction
Conceptual Framework

2.1 Component and Architectural Knowledge

2.2 Types of Technological Change

2.3 Problems Created by Architectural Innovation

Innovation in Photolithographic Alignment Equipment

3.1 Data

3.2 The Technology

3.3 The Kasper Saga

4. Discussion and Conclusions

References

Accomplishing the Impossible through Him!

2012-01-05T16:43:00.000-08:00

So... It's been a while world hasn't it.

For all of you who come to this blog for my homework, sorry! The professors didn't seem to really appreciate it when I posted my work for all you free loaders out there :P

Anywho, if there is something that I think wouldn't undermine the academic policy at SKKU, I'll post it for you all.

As for now, I'll give you all an update of what's been going on in my life.

First off, I got a new J. to the O. to the B!!!

I now work for www.aron.co.kr. Is it a boat? Is it a plane? No, it's a WIG craft!

Looks cool doesn't it?

If you're interested in buying one, feel free to contact me! You'll find my email addy on the website. However, I can't promise you a discount.

This means that I left the FLC (Future Leadership Center). It was a good 3 years, but it was time for me to say goodbye. They just couldn't handle all this goodness. Infact, I almost got into an all out war with the management before I left, but they graciously backed off and extended me some favors. I'm still not 100% happy with the way they treated me while I was working there and when I left, but oh well, not everyone is nice.

As far as school is concerned, wow! I gots me some straight A's again!

Check it out!

I'm now ranked number 1 in my class!! WEWT!

It was a really tough sememster. The material was tough to digest and we had to do so many projects and reports. In one class, I basically wrote a thesis without it being a real thesis. Ouch!

As for my patent, I'm still undergoing talks with companies and the future looks bright. However, I got to get something done fast before I have to pay for international patents out of my own pocket. ㅠ.ㅠ

Before I end this post, I'd like to thank a few people in my life right now who have been really really helpful to me.

First off, my wife! Thank you Honey for supporting me and taking care of the children so well. I know it's not easy, but you do a great job.

Secondly, Mrs. Eun Jung. I thank you for all of your help and hard work to make FLC a little bit better than it actually is.

Thirdly, all of the professors at SKKU. You gentlemen are awesome!

Finally, MOMO! Thank youz foz myz SC2 fix. You may have ruined my future by giving me the game but I love the fact that now I'm not so bored. J.K. :P

THE END.

Patent Registered!!! 특허 등록

2011-11-07T21:27:00.000-08:00

First of all, I'd like to thank God for helping me with this process and leading me along the way.

I applied for the patent on Aug. 30th, went through expedited process Sept. 9th, and approved on Oct. 24th.

AMEN!

ICEBERG: Cooling Headset

2011-11-07T03:23:00.000-08:00

Round 2!!! Back for some more SKKU MOT

2011-09-06T19:28:00.000-07:00

So, I'm back to SKKU for some more MOT loving. First off, I'll let you all know what classes I'm taking.

1. Economics of Technology    Professor: 홍순기

2. Operations Research (Management Science)    Professor: 이호우

3. Management of Intellectual Property    Professor: 김정준 (LG Electronics Executive)

After last semester, I am currently ranked 7th in my class and received straight A+'s in all of my classes. I'm so excited to be the geek of the school and rock out with my socks out! :P

Anyway, I think all of my classes will be a great deal of help to me in the future. I've always been interested in economics, optimization, and patents.

Just to let you guys know, I've been on the road to patenting an invention of mine, and hopefully I'll be able to post some good news in the future. If all goes well, I'm expecting some huge profits! YAY!

SKKU makes it into the top 30 Asian Universities!!! ZOMG!!!

2011-05-23T01:03:00.000-07:00

3I know it's not number 1, but hey I'm proud to be studying at a school that's in the top 30 in Asia and 6th in Korea. Especially because SKKU is supposedly the first university established in Korea during the Chosun Dynasty.

Original Article Found Here

Summary and Thoughts on “An effective R&D performance measurement system: survey of Korean R&D researchers” By: Bowon Kim, Heungshik Oh

2011-05-18T22:20:00.001-07:00

Summary:

This study takes a look at the question, “How should R&D managers design the performance measurement system most suitable to their own organization?”. It approaches the question from 2 different angles; the first being “Who should evaluate R&D employees?”, and “What criteria should we use?”. The study sets off to help in resolving the age old issue that people work more effectively when they feel that they are being compensated fairly. Although fair compensation is at times both empirical and subjective, this study attempts to analyze the subjective matter empirically through use of surveys and statistical tools.

The study starts by outlining their research framework into three different core areas. The first area they look into is if there is an actual correlation between job satisfaction and a fair performance measurement system. The next area is who the performance evaluators should be. Lastly, they take a look at which criteria should be used to evaluate a researcher’s performance.

The research was performed by surveying 1000+ R&D workers in Korea, and was broken down into groups of Basic, Applied, and Commercial R&D firms. The participants were asked to rate the percentage of importance that should be given to the different evaluators, and rate the importance of different criteria based on a 7 point Likert scale. The survey asked the participants to do this twice, once for the current system and once for their ideal situation. The information was gathered and the differences were compared.

With regards to the first area, the research showed that there was a positive correlation between job satisfaction and a fair measurement system. The second area investigated showed that there was an increased need for weight placed upon the self, peer, subordinate, and customer evaluations, and a need to decrease the weight for director and chief evaluations within the system. This finding was similar across the board for the different types of R&D institutions. The final area investigated showed that in the general R&D category researchers ideally would like a situation where behavioral attributes were given priority over patenting and publications.

Personal Thoughts:

In my opinion, this study is both great and lack luster. The reason I find it to be great is because it was able to convert what most people already feel is needed into an empirical format. This will allow people to find greater strength in the future, when arguing the need for a more researcher oriented evaluation system. I find it to be lack luster, because it didn’t really show me anything that I didn’t already know or believe to be true. However, I feel that it is important to note that although one might feel something to be true, without empirical evidence it is often difficult to argue.

I also feel that this study will show similar results regardless of what country or nation you do the study in, because in essence this is a question about how humans value themselves. In any study such as this, I feel that most people will value their worth higher than their worth shown on paper through results more oriented only on goals or objectives met. It’s not unheard of to hear people say that it’s not about what happens in the end, but the process that you go through that counts.

Another, interesting point I would like to study is “Why was the evaluation system such in the first place?”. Perhaps there are managerial or executive level decisions that we are not taking into consideration. I wouldn’t know because I have not been at an executive position, nor have I had any formal training on how to run a company. I’m sure that the people who implemented the current system didn’t do so just to make it bad or unfair to the researchers. I think a further study investigating why the directors, or management in R&D firms have implemented such a system in the first place, and why it has taken so long to change the system is needed.

Also the basic research performed in this study is somewhat unclear. I would like to know first off all, who they asked when they said they asked “researchers”. Are these new recruits, managers included, senior level researchers, and so on? This portion of the study was not clearly described, which I feel may change the results of the study.

Summary and Thoughts on “The 4RS of Motivation” By: Michael Maccoby

2011-05-18T03:34:00.001-07:00

Summary:

This article tries to shed some light on the way people are motivated at the workplace. The author talks about the 4R’s of motivation and labels them as, Responsibilities, Relationships, Rewards, and Reasons.

Responsibilities are explained as motivating people by engaging them in activities that are meaningful and utilize their abilities. The article states that caring people are motivated by work that allows them to help others, craftsmen are motivated by the challenge of producing high quality products, and that exacting manager types are motivated by the responsibility to implement strategies and accomplish projects. This is supported by a study by Jonsson, where he finds that there is a strong correlation between work satisfaction and a feeling that one’s capabilities are being used well.

Relationships are explained as the interconnection between bosses, customers, and collaborators. As with successful sports teams, people are motivated by their peers who are trying as a collective to accomplish a common goal. It was also said that a good relationship with one’s boss is paramount, and that a good boss is one that cares, coaches, and listens to one’s ideas.

Rewards are described as both appreciation and recognition, and monetary rewards. This articles talks about the fact that while monetary compensation is important, it doesn’t always motivate people to work better. In fact, a study shows that 80-85 percent of the people studied were satisfied with recognition for a job well done even if it’s not monetary.

Reasons are described as the most powerful motivators of all. An example of WWII assembly line workers working to help their country with the war is given. As well, as the difference between western and Chinese workers who feel that they are satisfied with their jobs because they feel that they are helping their country become a powerful economy.

Personal Thoughts:

I think that this is one of the best articles that I have read so far this year, because it really explains some of the problems that I am currently having with my job. As the article states, people need to be rewarded intrinsically, challenged, and given a purpose in order to be motivated to do one’s job. I feel as though I lack all three of these things at my current place of work, and that the only thing keeping me here is the monetary benefits, as well as, my good relationship with my boss. It was very interesting to see that money isn’t the solution to all problems, and that different people are motivated through different responsibilities. This is something that I haven’t heard nor thought about in the past.

However, I feel that one of the biggest problems is that most people who know this might not be able to actually employ these methods within the company. From the company’s point of view, salary and monetary rewards control is the only thing that they can do. The other intrinsic rewards have to be performed by the leaders of the company. In a situation where the leaders are not intrinsically rewarded, the problem seems to trickle down and gets bigger. I also feel that this method of motivating people would be difficult to employ in different cultural contexts. I don’t have any empirical evidence nor do I have any qualitative evidence to support my ideas, but I just think that in a country such as Korea, it is uncommon to find praise and recognition being given out to those who deserve it.

Duncan's new multiple range test from WIKIPEDIA

2011-05-18T03:28:00.001-07:00

Duncan's new multiple range test

wikipedia link

From Wikipedia, the free encyclopedia

In statistics, Duncan's new multiple range test (MRT) is a multiple comparison procedure developed by David B. Duncan in 1955. Duncan's MRT belongs to the general class of multiple comparison procedures that use the studentized range statistic q_r to compare sets of means.
Duncan's new multiple range test (MRT) is a variant of the Student–Newman–Keuls method that uses increasing alpha levels to calculate the critical values in each step of the Newman–Keuls procedure. Duncan's MRT attempts to control family wise error rate (FWE) at α_ew = 1 − (1 − α_pc)^k−1 when comparing k, where k is the number of groups. This results in higher FWE than unmodified Newman–Keuls procedure which has FWE of α_ew = 1 − (1 − α_pc)^k/2.
David B. Duncan developed this test as a modification of the Student–Newman–Keuls method that would have greater power. Duncan's MRT is especially protective against false negative (Type II) error at the expense of having a greater risk of making false positive (Type I) errors. Duncan's test is commonly used in agronomy and other agricultural research.
Duncan's test has been criticised as being too liberal by many statisticians including Henry Scheffé, and John W. Tukey. Duncan argued that a more liberal procedure was appropriate because in real world practice the global null hypothesis H₀= "All means are equal" is often false and thus traditional statisticians overprotect a probably false null hypothesis against type I errors. Duncan later developed the Duncan–Waller test which is based on Bayesian principles. It uses the obtained value of F to estimate the prior probability of the null hypothesis being true.
The main criticisms raised against Duncan's procedure are:

Duncan's MRT does not control family wise error rate at the nominal alpha level, a problem it inherits from Student–Newman–Keuls method.
The increased power of Duncan's MRT over Newman–Keuls comes from intentionally raising the alpha levels (Type I error rate) in each step of the Newman–Keuls procedure and not from any real improvement on the SNK method.

[edit] References

Duncan, D B.; Multiple range and multiple F tests. Biometrics 11:1–42, 1955.

Summary and Thoughts on “Hierarchies with dependence of technological alternatives: A cross-impact hierarchy process”

2011-05-16T01:25:00.000-07:00

Summary and Thoughts on “Hierarchies with dependence of technological alternatives: A cross-impact hierarchy process”

By: Keun-Tae Cho, Cheol-Shin Kwon

Summary:

This paper discusses the use of CHP (Cross-impact hierarchy process) in helping R&D managers determine which projects to pursue in order to maximize the use of their resources and assets. CHP is described as an extension of AHP (Analytic hierarchy process) as it utilizes the main framework, but also adds the ability to analyze dependent variables through the combination of CIA (Cross impact analysis).

The authors begin by describing the need for such methods as the CHP. Their belief is that, although AHP is often used satisfactorily in helping R&D managers determine which projects to pursue in the future, often times the factors being examined are interdependent. This means that the selection or non-selection of a technology or project will directly affect the selection or non-selection of another project. If this is true, the authors feel that AHP alone will not suffice in handling such a complex situation, and have thus devised CHP.

CHP is described as having 4 main stages; the hierarchy construction stage, the occurrence and nonoccurrence probability estimation stage, the cross-impact estimation stage, and finally the priority setting stage.

The basic premise of each stage is as follows:

The hierarchy construction stage: In this stage a hierarchy of the factors being analyzed is created much like in the AHP. With the goal of the study being at the first level, the larger sub categories being at the second level, and detailed factors that make up the second level categories on the lowest level. This study shows an example with a 3 level hierarchy, however, deeper level hierarchies can be utilized.

The occurrence and non-occurrence probability estimation stage: This stage requires the input of experts in the field or area being studied. The experts must be asked to determine the initial probabilities of certain events occurring and also the subsequent conditional probability that this will affect the other events. Only the initial and conditional probability of occurrence needs to be estimated, because the probability of nonoccurrence can be calculated using a method suggested by Sage.

Cross impact estimation stage: This is where the heart of this method lies. It becomes a bit complicated in this section according to the paper, but the authors try to combine the results of a pair wise comparison found in AHP with CIA. First, pair wise comparisons of events are performed against the second level hierarchy categories several times for each event alternative. This results in several weight vectors as in the normal AHP, however, the only difference here is that there will be several different weight vectors, one for each event alternative. The same process is then repeated to estimate the circumstance of nonoccurrence of an event. Finally, all of the weight vectors for occurrence are combined into a matrix, and all of the weight vectors for nonoccurrence are combined to form another matrix.

Priority setting stage: In this final stage, the weight matrices are used to determine the final mean weight for each alternative event. This result is obtained by running a Monte Carlo simulation many times. After the mean weight is determined, it is synthesized with the weights of elements in the hierarchy to obtain the overall priorities of the alternatives.

Personal Thoughts:

I feel that this is a very good method of analysis for all situations where there is an interdependence in events being studied. It is able to take the best elements of AHP and improve it with the combination of CIA. The only concern that I have is the level of difficulty this process might present when the hierarchy becomes very complex. In this paper only a 3 level hierarchy is represented, but it is not uncommon to see a hierarchy with further levels. Also, I feel that it might have been more beneficial to use an example that is a bit more specific than using event A, B, and C. This is because the method is somewhat hard to follow even after reading the paper 2 or 3 times, and a detailed example might have made it easier to understand. I also feel that an example of the initial and conditional probabilities that are derived from the experts would be beneficial. All of this would just help the reader better understand and visualize the use of this process; although it may not be considered very “academic” for purposes of submission to a journal. I personally believe it’s always better to communicate easily and effectively.

Summary of: “Mastering Chaos at the High-Tech Frontier: An Interview with Silicon Graphics’s Ed McCracken” By: Steven E. Prokesch

2011-05-13T19:03:00.001-07:00

This article discusses the strategy necessary for high tech companies to lead in a fasted paced industry like computers, through an interview with Silicon Graphics’ President, Ed McCracken. Mr. McCracken discusses the necessities for companies to innovate rather than treat the industry like a commodities industry. By treating the industry like a commodity, people are only focused on getting products to market faster and cheaper. This can be dangerous because companies will have to continue to reduce margins as the competition gets fierce and will soon be down a one way track that they would not be able to recover from. Once companies start to reduce margins they begin to invest less and less in R&D and will not be able to stay at the cutting-edge of technology to recover. They will also not be able to open their ears to their customers and will fall further behind in the race.

Mr. McCracken’s strategy to have a competitive advantage in the computers market is to create products that are closely aligned to the customer’s needs and to also actively seek out new technologies that the customer might want. Basically, he wants to create chaos in the market by being the leader in innovation. This is not an easy task and it seems very unique to this company’s philosophy, but it works. The company is able to keep a close ear to the demands of the customer by creating working relationships between engineers and end users. The management only get involved if the relationships start to deteriorate or if there are not any projects that the engineers are confident about in the pipeline. This enables the engineers who are creating the new products to pre-emptively select new technologies that they see fit in providing a solution to the customer.

Being at the cutting edge of technology requires that the company reduce project planning terms and keep a development cycle short. Mr. McCracken emphasizes the fact that it is difficult and dangerous for companies to try and predict the future too far out. Silicon Graphics tries to keep their product development terms as short as possible. He feels that 2 to 3 years is a long term project, and that 5 years is so long that the results may be laughable. In order to keep project cycles short, the company trusts in the judgment of its employees and also hires the best and brightest in the industry.

This leads to another competitive advantage, which is their size and manageability. The company purposely tries to remain small in order to be able to flex and move with the market more easily. This also has another positive effect on its productivity and workers, because it provides a safe and secure environment. Workers do not have to be worried about downsizing or the company going on a hiring and fireing spree, because of this. Mr. McCracken also talks about the ease of management within a system like this. Because the company is small and compact, managers are able to manage more efficiently, and they are able to allow workers more freedom because they select highly creative and capable individuals. This system allows the workers more freedom to explore innovative products, trust their instincts, and be flexible if the company decides to change direction.

Mr. McCracken also discusses the benefits of outsourcing to accomplish new innovations, and how this allows a company to excel in almost any area through strategic partnerships. He also talks about the need for open communication within the company, and the need for employees to have fun to increase productivity.

Summary of: “Disruptive Technologies: Catching the Wave” By: Joseph L. Bower and Clayton M. Christensen

2011-05-13T19:01:00.000-07:00

This Harvard Business Review articles seems to be a short excerpt explaining the concepts presented in Professor Christensen’s book “The Innovator’s Dilemma”. In this article, the same concepts arise, why do large corporations loose to smaller emerging companies, the danger of only listening to your customers, and how to spot a disruptive technology. As in the book, the theory of disruptive technology is explained using a number of case studies, namely the hard disk drive industry. Professor Christensen explains his views on disruptive technology and its importance by taking a look at a fast paced industry with a long history of companies falling and rising to the top spot in the market.

The article first takes a look at what current management and larger corporations do to plan a strategy for their technological development. It has always been the norm to stick close to one’s customers in order to fulfill their needs and stay competitive in the market. Managers who are looked upon to take risks and succeed based on their ability to stay competitive, follow the voice of their customer’s because this is the safest bet. However, this article discusses the great risks that the companies and managers are taking by doing this.

Understanding why these managers and companies do this allows Professor Christensen to explain how this strategy is detrimental to a company’s future. As the article states, the managers are making the right choices given their situations. The large markets that these companies supply rely closely on the opinions of their customers and that is why these large companies are reluctant to pay attention to emerging technologies that do not meet their current customer’s needs. These disruptive technologies are also unattractive because at the time of review they may not even have a large enough potential market to make it worth while for a company to pursue. However, these are judgments made from only a large company’s perspective, and Professor Christensen believes that it does not fully take into consideration of a new technology’s potential.

Professor Christensen believes that a disruptive technology can be spotted and pursued using a few key checkpoints. First, a smaller company’s perspective must be used when evaluating the potential of a technology. A technology may only poses a small market today, but may have a market that exceeds the market of the current company’s main clients tomorrow. Second, asking the right people about a new technology is key. Asking current clients about a new technology is misleading because disruptive technologies are not ones that meet the current client’s demands. Instead, this article suggests that a technology development graph be drawn by asking experts working with the technology to see if the technology will ever meet the current client’s needs in the near future; here the steepness of the tech development curve is key. Finally, use smaller start up companies that are separate from the larger company to find a market for this technology and keep it there. This last aspect is key for continued development and success of the disruptive technology. Many companies find that smaller companies have a stronger desire and closeness to the technology to help it succeed. Professor Christensen warns companies not to try and merge a smaller company once it succeeds in bringing a technology into market, because the operating standards may be very different and premature merging may lead to the death of the disruptive technology. Resource allocation within the company may also prove challenging.

Finally, the article talks about the need for companies to be willing to allow disruptive technologies into the business cycle. Fear of a technology cannibalizing their current business will only lead them to failure in the end. It is these new technologies that will allow companies a new future once their mainstream products meet the end of their own life cycles.

Summary and Thoughts on “Outsourcing non-core assets and competences of a firm using analytic hierarchy process”

2011-05-13T18:54:00.000-07:00

Summary and Thoughts on “Outsourcing non-core assets and competences of a firm using analytic hierarchy process”

By: K. Hafeez, N. Malak, Y.B. Zhang

Summary:

This paper discusses the use of the AHP in creating a framework to evaluate a company’s assets, competences, and capabilities. Using this framework, the author suggests that a company would be able to determine which resources to invest in, which ones to outsource, and which ones to form strategic partnerships for in order to remain competitive.

The authors begin by describing the AHP’s ability to take qualitative data and produce quantitative results. This is important because the authors do not just take financial or performance data into consideration in this study, but also non-empirical and highly subjective data. This subjective data, such as, a company’s know-how and intellectual assets, proves to be valuable and critical to a company’s competitiveness and success. This study reconfirms the basis surrounding the “competence-based competition” theory, and goes a step further by validating it through a case study of a U.K. steel production company.

The core evaluation in this case study is based around 4 key steps. First, the mapping of a firm’s capabilities; evaluating the uniqueness and collectiveness of these capabilities; determining the firm’s competences; and finally determining the key assets using AHP indexes from the previous steps. The firm’s capabilities were mapped as being Purchasing, Manufacturing, Sales and marketing, R&D, and Performance management. The criteria used to evaluate uniqueness were rareness, inimitability, and non-substitutability. The criteria used to evaluate collectiveness were across-product, across-function, and across-business. The results of the first 3 steps showed that the company valued R&D the highest followed by manufacturing in both uniqueness and collectiveness categories. This means that these two competencies are crucial in the company’s ability to fight off competition with its uniqueness, and utilize similar competencies and assets across the different areas of the company with its collectiveness. Finally, the case study identifies the key assets of the company through a similar AHP approach. The results showed that this company’s key assets of reputation and customer relationships were valued higher than the rest.

The final portion of this study uses Lorange and Roo’s taxonomy of strategic alliances to help the company determine which areas to continue to develop themselves and which areas to outsource. The authors suggested that the company does not make any radical changes by outsourcing, because much of their intangible assets are derived from their tangible assets.

Personal Thoughts:

This study was a great example of how the AHP can be useful in helping evaluate subjective qualitative data, especially in a company’s asset and competency analysis situation. It was a great example that gives strength to the theory of competence-based competition. I appreciate the fact that the authors chose uniqueness and collectiveness as categories in determining the value of each asset and capability, because it takes a little bit of the subjectiveness out of the equation. I feel that it’s easier for someone to determine what things are unique to a situation or able to be applied across different sectors of a company than to ask them to determine what things will help the company’s future or bring the company financial success. This is a great example of how important the formation of the hierarchy is in the AHP, because choosing the wrong sub categories could lead to a non valid determination.

On a side note:

I have always had a problem with trying to analyze empirically subjective matter. I feel that subjective material, however it is analyzed to produce results that represent the collective whole, is still subjective material in the end. Although the theory of competence-based competition makes great sense and I believe it to be true, I feel that the fact that it is still a theory is because of the highly subjective nature of the content that it tries to describe.

Summary of: “How do technology clusters emerge and become sustainable? Social network formation and inter-firm mobility within the San Diego biotechnology cluster” By: Steven Casper

2011-05-01T23:36:00.000-07:00

This study takes a look at the formation of the San Diego Biotech cluster. The author utilizes social network analysis tools to identify and monitor the growth of this cluster from its beginnings with, Hybritech, to its current position as one of the most successful Biotech cluster.

The author’s introduction discusses key factors for success within Silicon Valley’s semiconductor cluster. He borrows from the studies of, Saxenian, and talks about the need for a highly mobile workforce to help diffuse technology and reduce the risk for individuals to join startups. With this information as the starting point of the author’s study, he begins to investigate how clusters form from virtually nothing, and the stages that the cluster goes through in order to stabilize itself as a sustainable cluster.

The author chooses to study the careers of senior managers within the San Diego region beginning from 1978 to 2005 in order to trace the development of the cluster. He examines “career affiliation networks” formed by the managers of, Hybritech, who decided to leave a successful business that was later sold to a larger company, and had its original management staff dissolved due to disagreements in company management protocols, specifically, because he feels that these managers where the initiators of the cluster and formed the essential backbone.

Data was collected through a number of different platforms ranging from Industry directories, Industry guides, newspaper articles, and internet searches like Google. The author discusses the potential for bias within the data collected due to the difficulty in locating the data for failed businesses, as well as, finding senior management data within some companies. The author compensates for these potential biases by setting standards for companies and managers to be included in the study. Some of the standards were only including companies that had published scientific articles, and that were only research intensive and independent. Some of the standards applied to the social ties between senior managers were 5 year decay rule, and only including senior managers listed on SEC filing pages in the study.

The results showed that the cluster showed a 15% average increase in the number of firms in the region every year and a dramatic growth in the number of senior managers. Not only did the cluster grow substantially, it was also able to maintain a great number of network ties throughout its grown, having an average of 3.5 to 4 indirect ties. This number is astonishing because the cluster had grown about 7 times its initial size, yet had enough inter-firm mobility to sustain such a number of ties.

The study also took a look at some hypothetical catastrophic tie dislocations and found that the dislocation of ties might prove to catastrophic in the early stages of cluster formation, but only has a slight impact on the San Diego cluster past 1995. This portion of the study was done by removing one of the major institutions from the study and comparing the data with the institution included. By 1995, the cluster had developed enough to maintain sustainability even without the inclusion of the early institution.

The formation of the backbone of the cluster by Hybritech was also shown in the results of the study. The managers of Hybritech left the company to form their own startup companies with reliance on their strong connections with other influential members in the area. These start-up companies later grew and improved the overall status of the cluster, thus eventually gaining benefits from networks of scale.

This study solidified previous studies on job mobility within clusters, as well as, gave us an insight into the formation of clusters from its early beginnings. The data showed that clusters form slowly, in this particular case it took 15 years, and that formation of clusters requires more than just national frameworks; informal networks is at the core of its formation.

Summary and Comments on: “Matching of technological forecasting technique to a technology” by Somnath Mishra, S.G. Deshmukh, Prem Vrat

2011-05-01T23:34:00.001-07:00

Summary:

This paper describes the author’s proposed method of matching a technology forecasting technique to a technology. The author discusses the need to select appropriate technology forecasting techniques in order to improve the quality of the forecast and also allow the user to consider time, space, and technology specific options. The study begins with a literature review of the current technology forecasting methods available. The author was able to identify over 30 different techniques and subsequently grouped them into 3 categories, subjective assessment methods, exploratory methods, and normative approaches. These methods were then analyzed to see what types of deficiencies they carried. The deficiencies were broadly divided into six categories, limitations of quantitative techniques, limitations of qualitative techniques (exploratory), limitations of qualitative techniques (normative), human related problems with forecasters, limitations of TF translated to TT/implementation problems in selection of technique. Of these the selection of a technique for a particular technology was considered.

The author’s methodology in performing this study relied heavily in participation of other experts in the field. Experts were first asked in helping the author select the core characteristics common to both technology and technique. The subsequent findings resulted in identifying 22 characteristics. These characteristics where then analyzed by experts to give each characteristic a weighting in comparison with each other, and resulted in a table as shown on page 10 of the study.

The next stage of the study required selection of experts pertaining to the fields of MBTs (Main Battle Tank) and IT. 20 experts participated in the MBT study, and 25 experts for the IT study. These experts were asked to give a rating of 1 to 10 to each of the 22 characteristics as they applied to the given technology. The averages of the scores were taken, then normalized, and represented on line graphs. The weights of each characteristic was also included in the data analysis and multiplied with the averages. The resultant data clearly shows the importance of each characteristic with relation to its technology which it is being applied.

The author then takes the research a step further by grouping the TF techniques into 3 major groups for sake of calculation and then choosing a representative method from each group. These representative methods were Delphi, Normative Profile, and Quantitative Profile. Experts from academia, who did not participate in the other portion of this study to reduce data bias, were asked to score the methods against the 22 characteristics. The resultant data was then superimposed on to previous tables to visually represent how each method aligned with the weights of each characteristic when compared to the technology under study. To further ensure accuracy, technology weightage, technique weightage, Error, and Error squared were all taken into consideration.

The results showed that Normative techniques would best fit for TF in the MBT scenario, and that Delphi most closely matches the IT case. The author suggests that to ensure even more accuracy in TF use, that the runner up technique be used to double check the first technique.

Comments:

This study seemed to be very well written and easy to follow. The study was able to clearly identify 22 different characteristics of technology and TF methods needed to be considered in any industry. The step by step approach outlined in the study is very neatly organized and seems to be very easy to follow and reproduce.

The only concerns that I have with this study is that the sample of experts used to compare TF methods against the characteristics seems to be too small. Perhaps there would have been a slightly different outcome if the expert pool was increased. Another, concern that arises, which the author also addressed briefly, is that the internal weighting associated to each characteristic may change under different circumstances. Applying the internal weighting itself might pose as a challenge when using this method for other technical industries.

I believe that a study on the different innovative tools, such as, SCAMPER, SIT, and TRIZ in comparison with each other in different situations, similar to this study may prove to be very interesting. This study has shown me a great methodology to follow in my own thesis research.

Delphi method from Wikipedia

2011-04-26T00:42:00.001-07:00

Delphi method

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The Delphi method (pronounced /ˈdɛlfaɪ/ DEL-fy) is a structured communication technique, originally developed as a systematic, interactive forecasting method which relies on a panel of experts.^[1]
In the standard version, the experts answer questionnaires in two or more rounds. After each round, a facilitator provides an anonymous summary of the experts’ forecasts from the previous round as well as the reasons they provided for their judgments. Thus, experts are encouraged to revise their earlier answers in light of the replies of other members of their panel. It is believed that during this process the range of the answers will decrease and the group will converge towards the "correct" answer. Finally, the process is stopped after a pre-defined stop criterion (e.g. number of rounds, achievement of consensus, stability of results) and the mean or median scores of the final rounds determine the results.^[2]
Other versions, such as the Policy Delphi,^[3] have been designed for normative and explorative use, particularly in the area of social policy and public health.^[4] In Europe, more recent web-based experiments have used the Delphi method as a communication technique for interactive decision-making and e-democracy.^[5]
Delphi is based on the principle that forecasts (or decisions) from a structured group of individuals are more accurate than those from unstructured groups.^[6] This has been indicated with the term "collective intelligence".^[7] The technique can also be adapted for use in face-to-face meetings, and is then called mini-Delphi or Estimate-Talk-Estimate (ETE). Delphi has been widely used for business forecasting and has certain advantages over another structured forecasting approach, prediction markets.^[8]

Hicks-Ahmad Induced innovation

2011-04-19T21:28:00.000-07:00

FOUND THIS WONDERFUL ARTICLE @ http://innovatorium.wordpress.com/2010/05/04/induced-innovation/#comments

THANK YOU WHOEVER YOU ARE! Because I have a test coming up and I had no clue!

Induced innovation

Posted in Innovation, model, Theory by (kb) on May 4, 2010

What is induced innovation ?
Schumpeter distinguished three stages in the process of technical change: (i) invention, i.e. the act of creation of a new technology, (ii) innovation, its commercial introduction, and (iii) diffusion, its gradual adoption. The latter two stages have been studied extensively, but the first stage much less. Technological search is often depicted to be random to a certain extent. The incentives and motivations leading entrepreneurs to produce new products (services, processes, etc.) are not analysed in an appropriate way.
Still induced innovation goes back as far as John Hicks‘ book The Theory of Wages (1932 – pp. 124-125):

The real reason for the predominance of labor saving inventions is surely that which was hinted at in our discussion of substitution. A change in the relative prices of the factors of production is itself a spur to invention and to inventions of a particular kind – directed at economizing the use of a factor which has become relatively expensive.

Induced innovation is thus a macroeconomic hypothesis stating that a change in the relative prices of the factors of production is itself a spur to invention, and to invention of a particular kind, i.e. directed at economizing the use of a factor which has become relatively expensive. In this sense it is a demand-pull theory of innovation.
Literature
Considerable literature has been produced on this hypothesis. The induced innovation became popular after some influential papers by Ahmad (1966) and Kamien and Schwartz (1968).
Binswanger (1974) introduced uncertainty to the induced innovation literature by adapting the stochastic model of Evenson and Kislev (1975). The main results of Binswanger are that an increase in the expected total cost of a factor leads to an increase in R&D focused on reducing use of that factor, and that a decline in the productivity of R&D to conserve a factor leads to a decrease in R&D on conserving the factor. The induced innovation hypothesis focuses on the impact of factor prices on the directionR&D will take, but it does not address convincingly the question of how new knowledge is developed.
The induced innovation literature relies on an innovation possibilities frontier (IPF) that maps the amount of research spending on various factors to new knowledge related to those factors. The IPF, illustrated below, can be seen as a production function for new knowledge. However, the induced innovation literature says little about where the IPF comes from. By ignoring the determinants of the IPF, the induced innovation hypothesis does not truly endogenize the path of technological change (see Nordhaus (1973)).

Note: In this diagram, P does not represent actual prices, but is simply a label for the relative price lines. The figure presents an example of the innovation possibilities frontier. At time t, the IPF is represented by IPFt. It is the envelope of several possible isoquants, each relating to a different technology. The actual technology chosen depends on the relative prices. It represents the isoquant chosen with prices represented by the price line PtPt. In the next period, technological advances move the IPF to IPFt+1. If relative prices remain the same, the new technology is represented by isoquant It+1. However, if the price of labor increases, as shown here, a different isoquant, I’t+1, is chosen instead. The new prices lead to technological change that uses less labor and more capital then before.
Neoclassical economists on technical change have long studied John Hicks’ induced innovation hypothesis in the framework of aggregate production functions. This literature studies the inducement mechanism relying on the principle that a rise in real wages will trigger labor-saving innovation.
The problems arising from this type of work is that the aggregate production function framework seems not to be appropriate as technological change is an inherently microeconomic phenomenon. Secondly, Neo-classical production functions of the Cobb-Douglas, CES or translog type are strongly separable. Separability amounts to the claim that the marginal rate of substitution of any pair of inputs is unaffected from changes in the level of another input. Inputs or groups of inputs cannot be complementary. As the innovation process is not only a micro-economic phenomenon but also determined by the systemic character of firms and the technology they use, this assumption is quite strong (see Hözl & Reinstaller (2003)).
Example studies
An example of the induced innovation hypothesis is that higher energy prices lead to the development of more energy-saving technologies. Higher energy prices make energy-efficient inventions more valuable, either because larger energy savings (in money terms) occur, or because the market for energy-efficient inventions will be larger (see e.g. Newell et al. (1998)).
However results are not always as convincing. According to Liu and Shumway (2006) the induced innovation hypothesis is not confirmed and policy makers cannot rely exclusively on price signals to induce efficient technical change.
Remark
This is at best a quick introduction so you know at least what is meant by induced innovation. Check the literature list at the end to study this concept in more detail.
The induced innovation hypothesis is an interesting approach in my view as it is a rather simple mechanism that can promote and direct R&D. Obviously R&D or innovation in a broader sense, needs to be incentivised in a much more diverse way (subsidies, policy measures, entrepreneurship, knowledge and information management, etc.).
Sources and further readings (check your library for copies…)

Ahmad, S. (1966), On the Theory of Induced Innovation, Economic Journal, 76, 344-357.
Binswanger, Hans P. (1974), A Microeconomic Approach to Innovation, Economic Journal, 84, 940-958.
Binswanger, Hans P. (1978a), The Microeconomics of Induced Technical Change, In: Induced Innovation: Technology, Institutions, and Development, ed. by H. Binswanger and Vernon Ruttan, John Hopkins University Press, Baltimore, MD.
Binswanger, Hans P. (1978b), Issues in Modeling Induced Technical Change, In: Induced Innovation: Technology, Institutions, and Development, ed. by H. Binswanger and Vernon Ruttan, John Hopkins University Press, Baltimore, MD.
Evenson, Robert E. and Yoav Kislev (1975), Agricultural Research and Productivity, Yale University Press, New Haven, CT.
Hicks, John R. (1932), The Theory of Wages, Macmillan, London.
Hözl, W., Reinstaller, A. (2003), Complementarity constraints and induced innovation: some evidence from the first IT regime, Working paper No. 26, Vienna University of Economics and Business Administration.
Kamien, Morton I. and Nancy L. Schwartz (1968), Optimal Induced Technical Change, Econometrica, 36, 1-17.
Liu, Y., Shumway, C.R. (2006), Induced Innovation in the Agricultural Sector: Evidence from a State Panel, Selected Paper prepared for presentation at the American Agricultural Economics Association Annual Meeting, Long Beach, California July 23-26, 2006.
Neweel, R.G., Jaffe, A.B., Stavins, R.N. (1998), The Induced Innovation Hypothesis and Energy-Saving Technological Change, Discussion Paper 98-12 (Revised) Published in Quarterly Journal of Economics. August: 941-975, October 1998.
Nordhaus, William (1973), Some Skeptical Thoughts on the Theory of Induced Innovation, Quarterly Journal of Economics, 87, 208-219.
Ruttan, Vernon W. (2000), Technology, Growth, and Development: An Induced Innovation Perspective, Oxford University Press.

Summary and Thoughts on Phillip’s Case Study Professor 조근태's class

2011-04-14T02:58:00.000-07:00

*Case Study from R&D STRATEGY and ORGANISATION (misspelled on actual cover of book)

VITTORIO CHIESA

Summary:

This case study takes a look at how Phillips chooses it’s technologies to develop for the future. The author follows the “Imaging the Future” process which is a project taken on by 3 divisions within the company, Philips Research, Strategic Planning Board Staff, and Philips Corporate Design. Each group plays a special role in helping determine which technologies will prove to be most influential or profitable in the future. Philips Research studies the evolution of technologies. The Board Staff attempts to forecast the future beyond the technologies that they have at the moment. Philips Design takes a look at the future of technology from many different angles, such as, anthropological, social, and the impact on the economy. The three groups participate in joint projects such as the “Vision of the Future” project which was started in 1995 in an effort to help determine the technological paths that the company should take. The joint effort came up with over 300 different scenarios which was then reduced to 60 and analyzed to find the key components of technology needed by the company to obtain their desired product results.

The author follows the group’s decision making process in this project, as they try and determine the future of products that allow consumers to be “connected”. The group first started by defining 2 different scenarios of market diffusion in the future. The first one being, where the there is a low amount of early adoption and low growth, and the other being a high amount of early adoption and sustained high growth. These two scenarios were then complimented by key applications of future products that the company desires to create. Each application was analyzed and finally a matrix was created to visually represent the core technologies that were needed to produce the products for application. This is listed as Figure A.2. in the article.

Then, the author describes the selection process and how numerical figures are given to the different technologies to represent the weight of importance that the technology experts feel should be placed on each. This process is explained in much detail by the author through actual data and various formulas. One important thing to note is that the process very closely represents AHP which was developed by professor Saaty. This is because the weights given to each technology is normalized and then multiplied to its original value to give the reader a clear view of how each technology compares in importance with each other.

The analysis is very systematic and each category of importance is taken into consideration. In this case study, the relevance of the technologies to each other and the probability of success are both looked into. It is also important to note that each category above contains subcategories which are also looked at in detail. For example, the probability of success is calculated in terms of commercial and technical risk, where commercial risk is the probability for economic return, and the technical risk is the probability that the company will be able to produce technology that will meet their expectations.

The final stage of this process is where the data is collected and further analyzed through a visual plot of the results, comparing a technology’s relevance and its probability of success. This plot allows the reader to clearly see, which technologies are expected to have a high risk of success and high relevance to the desired products, and which technologies are not. Further analysis of this diagram can also show which technologies are inter-related and may influence the decision of management to pursue a technology that has a low probability of success and un-related. This is because the inter-relationship between one technology and its counterpart can influence the potential market success of the other. The author also lists a nice chart at the end of the article to show the step by step process that the Philips group followed in this process.

Comments:

I feel that this case study was very informative, but somewhat poorly written. There were a lot of syntactical problems which caused problems in understanding the material. The content however was very interesting in general, because it showed how calculations or process like the AHP can be applied to real life situations. The difference in plotting the outcomes and results and representing their interdependencies is something that the AHP seems to lack. The fact that decision makers can take one look at this diagram and determine which technologies to fund and support makes this system very desirable.

Personally, I couldn’t quite follow the data shown in the study, because it seems as though some of the processes were left out due to confidentiality reasons. Certain figures which were not their in the previous table, suddenly appeared after a simple multiplication with another variable. Correct me if I’m wrong but zero times anything is zero.

Overall, I enjoyed the case study and its look into how companies like Philips determines the future development of their technologies. I would really like to see the process which a Korean company like Samsung takes in determining their future outlook. I think that the process would seem similar but a bit more tunneled or focused on a shorter future period, because they tend to move with the market more closely.

Summary and Thoughts on Open Innovation

2011-04-10T16:47:00.000-07:00

Summary:

The open innovation is basically a paradigm shift away from the old closed system of innovation. The closed system of innovation is one where the companies or firms in an industry are self contained and do their own research and development without the help of other firms or companies. This limiting closed atmosphere puts larges amounts of pressure on the company’s R&D capabilities to come up with innovative products to extend into the company’s fixed market. This also restricts some of the companies unused ideas to find it’s way into the general market, because the company would normally put projects that they deem will not have instantaneous success on the back burner. This type of innovation is not only limiting to the potential profits of the company, but limiting to the ability for these projects to find their way into the market in a different industry. Thus the concept of open innovation was developed.

In the open innovation system, ideas are shared and there is a much higher probability that a potential innovation will find its way into the market. This is because companies both large and small will be able to license their research to other companies that have a need for their technology. This method allows technologies to find their way into the market through avenues not only within the developing company, but through other companies or join ventures. There are a few reasons why this open innovation system came to be. First of all, the information age has cause a lot of workers to be better skilled and knowledgeable. This allowed the workers to be mobile because any industry desires skilled workers. As companies continued to stay closed, they saw that their skilled workers would leave their industry in search for better opportunities, or in search of markets where their research would be put to use. Another reason the open innovation system came to be was the increasing capability of external suppliers. Companies had the opportunity to tap into bountiful resources, but lacked the innovative products to use them. There was also a lot of venture capital available in the market, as well as, the clear potential for market success of unused technologies.

In essence, the open innovation system was the remedy to these problems. Through open innovation, the companies would be able to maintain its skilled workers and their potential projects by licensing their unused technologies to other companies. This caused the increase in join ventures as well as increased revenue for the company just through the licensing. It also allowed society to benefit because now the technology would not have to stay within just one industry, but could be applied to many other industries as well. Smaller companies and larger companies both benefit mutually through this process because the larger companies would not have to spend a large amount of capital to pursue projects, due to the fact that they would only have to purchase licenses for the portions of technology they would want to use, and smaller companies would be allowed to license to many different industries.

Thus, the open innovation system would allow technologies to find entry into markets through routes that were not previously available in the closed system as well as find entry quicker. Both smaller firms and larger firms would benefit, and society would benefit as they would be able to see technologies that normally would have been tossed to the side in the market and put to use. This model has been very successful thus far, as many large corporations have put it to use and have come out with great profits. Intel, IBM, Lucent, and many other tech and non-tech companies have been able to leverage the power of an open innovation system. It also explains why companies such as 3M, which was a shoot off of XEROX, has been able to find such great success, even more so than XEROX where most of the initial 3M technologies came from.

Personal Thoughts:

The previous reading assignment for this homework “Profiting from Technological Innovation” by David TEECE, now seems to be a model for a closed innovation model, after having researched the open innovation material. According to TEECE, companies and innovators should stick close to innovations that are easily appropriated or that which have complimentary assets that are tightly manageable. This results in companies to seek a more closed innovation paradigm, as they would have to do their research and development in house, as well as, the manufacturing of the product. The over importance on asset control and appropriability may cause companies to shy away from an open innovation concept. I did however, raise a few questions regarding this over importance or dependence by questioning the author’s thesis in relation to the “innovator’s dilemma” and “blue ocean” strategies.

The open innovation system seems to be a more profitable and socially acceptable concept as it allows everyone to win and seems to have less competitors. This system seems to go back to the grass roots of social culture where “sharing is caring”, and now by sharing companies can also profit. The open innovation system allows smaller companies to succeed and also provides a platform where true inventive thinkers can think outside the box instead of staring down a narrow tunnel towards a market. Perhaps the U.S. was headed in the right direction with it’s initial “dynamic market” approach, but lacked the insight of an open innovation concept.

I can foresee a time where clusterization of industries like the Silicon Valley in America may not be as necessary, due to systems such as open innovation and the continued globalization of companies world wide. The only issue that I see with the open innovation concept is appropriability. I do agree with TEECE that most patents are not able to fully protect the intellectual property of the innovator. Then, in the case of open innovation where sharing of ideas through licensing is crucial, would not the system break down if appropriability is not tight?

Summary and Comments on “Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy” David J. TEECE*

2011-04-10T16:45:00.001-07:00

Reflection:

The author of this thesis looks into, why companies that innovate first in the industry are not the reapers of large profits in the end. The author starts his investigation by introducing a few key failures of companies in the past, such as, RC Cola, EMI’s CAT scanner, and De Havilland’s Comet 1. The author describes their failures by analyzing it on the basis of the appropriability regime, complementary assets, and the dominant design paradigm.

First, he discusses appropriability, which is defined as the environmental factors that govern an innovator’s ability to capture profits generated by an innovation. The author feels that a lot of the time most patents do not protect the innovator’s idea. He therefore warns readers to analyze the appropriability of their inventions and take appropriate market steps to protect them from imitators.

Next, he discusses complementary assets. The author believes that being able to seize control of complementary assets through contractual agreements or through integration of sub companies is crucial to the success of an innovation. Complementary assets are broken down into general, specialized, and cospecialized assets. General assets as the name states are general in nature and found very easily. Specialized assets are assets needed by the innovator and are dependent on them to succeed in the market. The last type of asset described is the cospecialized asset. These assets have a interdependence between the provider of the asset and the innovator himself. An example of Mazda’s rotary engine and rotary engine repair shops is given.

Finally, there is a discussion of dominant design paradigm which talks about the phases of scientific development. The first stage is the preparadigmatic stage where design concepts are starting to emerge and competitors are competing over prototype designs. The last stage is the paradigmatic stage where a industry standardized design emerges and thus shifts competition away from design and into price reduction or asset allocation.

After a discussion of these key elements, the author then talks more in detail about the different combinations of these elements or varying situations that would be found in the real world and how to maneuver through them. The author first starts of by investigating tight appropriability situations, where basically the innovator will some how come out on top in the end as long as the innovator does not make the mistake of loosing sight of his complementary assets. The weak appropriability situations are a bit more complex and the author takes it a step further by discussing preparadigmatic and paradigmatic stages within this situation.

In the preparadigmatic stage, the author suggests that the innovator keep a “floating” design until a industry standard design starts to emerge. This is because, if the innovator starts commercialization too soon, and imitators are about to easily modify the invention and make it better, it may be difficult for the innovator to start over.

In the paradigmatic stage, the author suggests that the innovator’s success depends solely on his ability to find the right terms and conditions upon which complementary assets can be procured. This important dependence on complementary assets leads the author into a discussion of contractual or integrational strategy.

Contractual strategy is one where the innovator reaches out to the supplies of complementary assets through an arms length deal where there are mutual benefits to both parties. Although this strategy is often low in cost and proves to be less timing sensitive, there are some very clear dangers surround it. The most hazardous situation that may arise from a contractual strategy is one where the supplier out performs the innovator in the market by being in a stronger asset position.

The integrational strategy demands a high amount of capital and is very time sensitive. There is also the additional need to determine potential competitor’s capacity to allocate assets.

There is a lot more to the thesis than what I have just summarized here, mainly a discussion of international policy suggestions and a warning to the U.S. about creating “
Dynamic Networks”. All in all, the author puts great emphasis on the need for complementary asset management as the key to an innovator’s market success.

Analysis and thoughts:

The information presented by the author is somewhat common sense in my opinion for those who have a basic understanding of market theory. I personally was aware of some of the basic concepts surround the author’s core premises. We all know that being the first to create something helps, but doesn’t mean that you are the best, and that not all inventions make it to market successfully. However, I do appreciate the author’s systematic approach and breakdown of the different situations with varying degrees of appropriability, market phases, and asset types.

I feel that the information provided by this thesis should have been taken to heart by the U.S. government and their plans for technological development. The author states that manufacturing and control of assets will reign supreme in the end after the dust of innovation settles. I believe this to be true, and feel that this is why America is currently on a downward economic spiral. All of the manufacturing and control of assets are being shipped overseas, and the U.S. seems to be positioning itself as an intellectual center. This would work if there is a high level of appropriability around the world, but as many have seen in the recent years, this is not the case.

However, there are some questions regarding the author’s premise regarding an R&D focus only on manageable assets and high appropriability technologies arise. What about the theories presented by professor Christiensen and his work on the “innovator’s dilemma”? Aren’t these the same things that have lead to the downfall of larger corporartions?

Summary of "The Bass Model: Marketing Engineering Technical Note" Professor 신준석's class

2011-03-30T04:15:00.000-07:00

This article discusses the practical applications of the Bass Model in market planning. Using coefficients of p and q as well as a parameter N, the Bass Model is able to help marketing forecasters time and predict the amount of people that will purchase their products. The first coefficient p is the coefficient of innovation, or the extent of the products innovativeness that will draw new customers. The second coefficient q is the coefficient of imitation or “word of mouth”, which describes the diffusion of a product from one user to the next through internal influences. The last parameter is N which is defined as the total number of customers in the adopting target segment who will eventually adopt the product.

The Bass Model works only under 2 conditions. The first one being that there is enough sales data of a product for a period of time in order to estimate the coefficients, and the second being that the coefficients are estimated through judgment which is based on similar market items in the past. There is also a reliance on non-linear or linear regression of the pooled data to estimate the coefficients and parameters. This is one of the most appealing aspects of the Bass Model, because even with limited data a very close prediction of market diffusion can be realized.

This model focuses on the effects of “word to mouth” diffusion as well as the level of innovation of a product to determine the probability of a customer to purchase their products. This model helps in allowing people time when to push their budgets into marketing to support the sale of their products, and when to pull out. It has been used to predict and model many different product market stages, and has been a basis for most companies to plan their marketing strategies.

There are also many variations of this Model to adapt to different market situations and to tailor the model against its dependence on the key coefficients. For example, there has been a Generalized Bass Model to allow for marketing mix variables. These variations are created by either keeping certain coefficients fixed, specifying certain variables and parameters, allowing for product co-dependence, and by relaxing certain assumptions.

Although this articles seems like it comes from a software manual, the explanation of the Bass Model is very well organized and easy to understand.

My Thoughts on the Current State of Korea's R&D Professor 조근태's class

2011-03-29T21:08:00.000-07:00

*Data will be available upon request and only with the professor's approval.*

My Thoughts on the Current State of Korean R&D

Reflection:

The information provided on the charts and graphs, regarding the opinions of the people actually working in the R&D field in a variety of Korean companies, was very interesting. I believe that Korea is headed in the right direction with their R&D but there seems to be a few flaws.

First of all, I see a few good things present in the data. I think that Korea is doing a good job in emphasizing the fact that R&D and other departments need to work together. For example, in the data, many people felt that the R&D departments and the marketing departments, as well as, the production departments were cooperating effectively. This is important because taking a product from the development stage to the actual product stage will require the cooperation of all of these departments. This tells me that the management understands the importance of a streamlined process. The data also showed that the leaders of the Korean companies are focused and willing to support R&D development. Most of the decisions regarding R&D and R&D investment seemed to happen directly at the top without the use of middlemen to lengthen the decision making period. This can be seen as a good thing and a bad thing, but overall I feel that it is good. The overall confidence that the researchers feel in their technological position in comparison to the world is also a good indication that the R&D field has been developing and is now at a comfortable stage. It seems as though, psychologically we have moved away from being followers and copiers of other countries technologies and now feel that we can stand on our own. However, I see a few things that I personally feel can be changed to improve the overall future outlook of the Korean R&D departments.

The first thing and perhaps the most critical issue that I saw came from the last page of the data. The researchers felt that there is not a system set in place to reward outstanding achievements in research within the company. I find this to be the biggest problem among the others because this will pose the greatest threat to the quality of the researcher’s research. This is a harmful situation where there seems to be no positive intrinsic reward for good deeds and only punishment by firing if results are not obtained. Anyone will tell you that a system like this will bear down on the workers and eventually the system will fail. Perhaps this is why some of the major companies in Korea have to strengthen their security and be wary of potential information leaks. I feel that if the company was to take care of their researchers by acknowledging and rewarding their commitments, we would not have such a problem.

The second thing that was somewhat startling to me was the fact that most of the research in companies is too conscientious about the market. This is obviously not entirely bad, because the market does have one of the largest affects on the success of failure of a new product, but I feel that this is tunneling the vision of the company’s research. As shown in the data, most research in done on short term projects with emphasis to create successes in the market in a short amount of time. We all know that getting something right the first time and fixing all of the problems in the initial stages saves the company a lot of money in the long run, but these things take time. I also feel that this emphasis on short term projects does not allow the researchers freedom to pursue more innovative and creative ideas for research. I can just imagine that most of the research done would only have to be improvements of modifications of previous technologies, because those are the easiest to do in a short amount of time.

Another aspect of the current situation that needs some more looking into is government run research center cooperation. It seems as though most companies are asking university to assist them in their research, but I’m not sure if this is the best solution for Korea. As many people know, the system in Korea is a bit different from that of America. The American system puts the universities at the core of research and there are very few if any government sponsored research centers like Korea. In Korea, there are more government research centers and more focus on research in those institutions than in the universities, because the government feels that the universities are not at the capacity yet to handle the research load. This is why I feel that it is crucial for Korean companies to bridge ties with the government operated research facilities.

On a final note, I do feel that the data is showing an improvement in the direction of R&D in Korea overall. It clearly shows that the management is aware of the importance of investing in R&D and the potential that the department has in terms of future profits. However, I feel that there are a lot of internal issues with the actual researchers that the company needs to resolve, if they truly believe in R&D. In the end, it is not the department that is doing the research and coming up with new products, it is the people working there. If the people are not happy and fully supported, no amount of money will be able to take that situation and make it more efficient.