Home' Technology Review : March April 2010 Contents 32 YEARS AGO
TECHNOLOGY REVIEW MARCH/APRIL
The companies that the editors of
Technology Review selected for the
TR50 all have strong records of
innovation. But how does the innovation
process at a startup like Twitter compare
with that at IBM? In a series of articles in
the 1970s, including a 1978 contribution
to TR, Harvard business professor Wil-
liam J. Abernathy and MIT professor of
management and engineering James M.
Utterback posed this basic question:
How does a company's innovation---and
its response to innovative ideas---change as
the company grows and matures?
Abernathy and Utterback created a
model, still in use, that described the life
cycle of industrial innovation. They began
with two extreme cases to define the limits
of their "spectrum of innovators":
Past studies of innovation imply that any
innovating unit sees most of its innovations
as new products. But that observation
masks an essential di erence: what is a
product innovation by a small, technology-
based unit is often the process equipment
adopted by a large unit to improve its
high-volume production of a standard
The authors found that small compa-
nies or groups are most often the source
of radical product innovations.
New products which require reorienta-
tion of corporate goals or production facili-
ties tend to originate outside organizations
devoted to a "specific" production system; or,
if originated within, to be rejected by them.
A more fluid pattern of product change
is associated with the identification of an
emerging need or a new way to meet an
existing need; it is an entrepreneurial act. ...
It is reasonable that the diversity and uncer-
tainty of performance requirements for new
products give an advantage in their inno-
vation to small, adaptable organizations
with flexible technical approaches and good
external communications, and historical
evidence supports that hypothesis.
To be sure, radical innovations generate
excitement and attract attention, but these
are merely the beginning of the story for
products that succeed in the marketplace.
One distinctive pattern of technological
innovation is evident in the case of estab-
lished, high-volume products such as incan-
descent light bulbs, paper, steel, standard
chemicals, and internal-combustion engines.
... In all these examples, major systems inno-
vations have been followed by countless
minor product and systems improvements,
and the latter account for more than half of
the total ultimate economic gain due to their
much greater number.
Of course, the two extreme cases are
just that, and companies like the ones pro-
filed in this issue fall at all places on the
spectrum. In fact, the authors argue that
successful companies are likely to move
from one end to the other in their lifetime.
The histories of two very di erent indus-
tries illustrate the common trajectory.
Two types of enterprise can be identified
in this early period of the new [semiconduc-
tor] industry---established units that came
into semiconductors from vested positions
in vacuum tube markets, and new entries
such as Fairchild Semiconductor, I.B.M.,
and Texas Instruments, Inc. The established
units responded to competition from the
newcomers by emphasizing process inno-
vations. Meanwhile, the latter sought entry
and strength through product innovation. ...
Since 1968, however, the basis of competi-
tion in the industry has changed; as costs and
productivity have become more important,
the rate of major product innovation has
decreased, and e ective process innovation
has become an important factor ... .
Like the transistor in the electronics indus-
try, [Douglas Aircraft's] DC-3 stands out as
a major change in the aircraft and airlines
industries. ... Just as the transistor put the
electronics industry on a new plateau, so the
DC-3 changed the character of innovation in
the aircraft industry for the next 15 years. No
major innovations were introduced into com-
mercial aircraft design from 1936 until new
jet-powered aircraft appeared in the 1950s.
Instead, there were simply many refinements
to the DC-3 concept---stretching the design
and adding appointments; and during the
period of these incremental changes airline
operating cost per passenger-mile dropped
an additional 50 percent.*
The way companies manage this transi-
tion from the initial "fluid" phase to the
later "specific" stage is vitally important.
*For a review of Boeing's new 787 Dreamliner, see
"Reinventing the Commercial Jet," p. 80.
HOW COMPANIES DEVELOP NEW
PRODUCTS AND HOW THE COMPANIES
THEMSELVES DEVELOP IN THE PROCESS
By MATT MAHONEY
Technology Review (ISSN 1099-274X), Reg. U.S. Patent Office, is published bimonthly by the Massachusetts Institute of Technology. Entire contents ©2010. The editors seek diverse views, and authors opinions do not represent the official
policies of their institutions or those of MIT. Printed by Brown Printing Company, Waseca, MN. Periodicals postage paid at Boston, MA, and additional mailing offices. Postmaster: send address changes to Technology Review, Subscriber
Services Dept., PO Box 16327, North Hollywood, CA 91615, or via the Internet at www.technologyreview.com/customerservice. Basic subscription rates: $39 per year within the United States; in all other countries, US$52. Publication Mail
Agreement Number 40621028. Send undeliverable Canadian copies to PO Box 1051 Fort Erie, ON L2A 6C7. Printed in U.S.A.
32 YEARS AGO IN TR
Douglas Aircraft s DC-3,
introduced in 1936, was
Links Archive January February 2010 May June 2010 Navigation Previous Page Next Page