Restoring the Innovative Edge
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Restoring the Innovative Edge

Driving the Evolution of Science and Technology

Jerry Hage

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eBook - ePub

Restoring the Innovative Edge

Driving the Evolution of Science and Technology

Jerry Hage

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About This Book

Considerable evidence indicates that the U.S. is falling behind when it comes to innovation. In part, this shift stems from the globalization of research and the advancement of other nations. But, it also arises from a widespread failure to adapt to the competitive environment generated by the evolution of science and technology.

The objective of this book is to provide possible remedies for eight key obstacles that the U.S. faces in restoring its innovative edge. Understanding that these remedies are complex, each chapter also discusses the dilemmas and impediments that make change a challenge. Unlike other books that suggest simple fixes to the U.S. innovation crisis, this book argues that the management of innovation requires multiple interventions at four different levels: in research teams, organizations, economic and non-economic sectors, and society at large.

Restoring the Innovative Edge offers specific recommendations for new forms of data collection, fresh ideas about cooperation between the public and the private sectors in manufacturing research, and a policy evaluation model that measures technical progressā€”and obstacles to itā€”in real time. Moreover, the book's multi-level perspective allows for the integration of a number of specialties within Sociology and Management around the theme of a new socio-economic paradigm, built on ideas of evolution and failed evolution.

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Year
2011
ISBN
9780804777575

1 ADOPTING STRATEGIC OPPORTUNITIES THAT FIT EVOLUTIONARY PATTERNS

Step One in Restoring the Innovative Edge

ONE OF THE greatest challenges for academics is to develop an evolutionary theory about how science and technology are evolving, the topic of this chapter. Perhaps the biggest obstacle to restoring the United Statesā€™ innovative edge is the tendency for business managers and policy makers to maintain the current strategies despite the many societal and global changes around them. If they change strategies, usually little consideration is given to how the world is changing and, more particularly, in what direction. Paradoxically, this lack of perspective is especially true of the many books and reports on the innovation crisis, which one would assume would have a view of evolutionary patterns. Most of them do report the growth in RDT expenditures and the globalization of competition, but in some respects these are not the most important evolutionary patterns for the purposes of shaping business strategies and federal and state government policies. All that these patterns do is indicate the spread of competition about innovation throughout the world.
Being successful and getting ahead of the innovation curve means having some information about several other evolutionary patterns. But this requirement raises a real doubt: Is it possible to predict the future? The answer is a qualified yes, meaning within general guidelines about evolutionary directions. I do not believe very much in what might be called technological forecasting that makes specific predictions that we will develop fusion energy or a cure for cancer or a substitute for copper within a certain time period. But I do believe that one can observe evolutionary patterns, and, if they can be explained, one can then select strategies that complement these patterns. These allow CEOs and policy makers to anticipate future directions of changes in tastes and also likely obstacles in being able to produce radical innovations.
The following six evolutionary patterns, or trends, are observable:
1. Growth in global research expenditures and therefore in the number of radical innovations
2. Globalization in the development of radical innovations
3. Differentiation in consumer tastes
4. Changes in the way in which radical innovations are produced
5. Expansion in the number of noneconomic concerns
6. Emergence of a new stage of manufacturing
The pace of these changes varies in each of the sectors, both high-tech and others, as we can see by simply looking at the differences in the amount of money invested in RDT within each sector (see NSF.gov/statistics).
Recognizing these evolutionary patterns provides some additional information for policy makers in the debate about ā€œpicking winners.ā€ Just as technological forecasting is suspect until proven wrong, federal government RDT investments in specific firms (except in those few industrial sectors where there are only one or two firms; see Chapter 6) could indeed be risky. But recognizing evolutionary patterns and facilitating all the firms in a particular sector avoids the pitfall of picking specific winners. And while it may seem that investing in particular sectors is another variation on the theme of ā€œpicking winners,ā€ it is not because the high-tech sectors are clearly visible globally. Or to put it in other terms, most countries appear to have the same list of high-tech sectors where RDT expenditures are growing, with nanoscience and nanotechnology at the top of this list. More fundamentally, government support of these evolutionary patterns would allow American firms to compete on a more even playing field with the European and Asian firms (see Chapter 6).
The first two patterns, the explosive growth in RDT expenditures and radical innovations and their globalization, mean that not only many more radical product and process innovations are launched on an annual basis but that increasingly they are coming from overseas. The rates of growth are uneven across countries and especially within sectors, but the decade averages in real terms and as a proportion of the nationā€™s GDP are relentlessly increasing. Between 1984 and 2004, the expenditures of the United States almost doubled, going from $152 billion in constant dollars to $286 billion, while Japanā€™s did double, moving from $53 billion to $105 billion.1 Just taking the last eleven years, the global expenditure has doubled (see Figure 1.1). At the same time, the number of countries involved in research is also expanding to include South Korea, Brazil, New Zealand, and of course China and India (see Figure 1.2).
image
Figure 1.1. Global expenditures in RDT
Source: Generated from NSF 2010 data.
Perhaps more revealing is the fundamental alternation in the relative importance of RDT investments as measured by the percentage of GDP allocated to research (see Figure 1.2). The percentage of GDP allocated to RDT expenditures over time has remained largely stable in the European Union and the United States despite the desires to raise it to 3 percent.2 For the United States, the percentage is 2.62, and for the Organisation for Economic Co-operation and Development (OECD), it is 2.25.3 The European Union set 3 percent as a goal in the Lisbon Accords, and recently the Obama administration also chose this figure as a goal. But given the current economic crisis, it is unlikely the United States or the European Union will reach these goals by the dates that they have set. Thus the growth in other countries becomes more ominous for the competitive position of the United States. As can be seen, several of the Asian countries, most notably Japan, South Korea, and China, have steadily increased their expenditures as a percentage of their GDP. Japan is now at 3.3 percent, Korea is at 2.96 percent, and Taiwan is at 2.46 percent. Not shown within the European Union, the figures for Sweden (3.89 percent) and Finland (3.48 percent) are also relatively high, and one might add that these countries are doing comparatively well in international competition. The highest expenditure is in one of the smallest countries, Israel, at 4.49 percent, and that is probably an underestimate. Together these two evolutionary trends mean that not only is the amount of investment in research in the high-tech sectors rising, but research is becoming more relevant even in the medium-tech sectors. One of the more important implications of this globalization in research is that, increasingly, U.S. firms will have to form global networks to remain competitive, which, as we have seen, is one reason why they are investing in RDT overseas.
image
Figure 1.2. Percentage of GDP spent on RDT for selected countries and regions
Source: Generated from NSF 2010 data.
The first three evolutionary patterns given on the list represent ways in which the nature of market competition is changing. Price as the determining factor becomes less and less important, especially in those high-tech sectors that are our greatest concern. More and more, being first with the most sophisticated technologyā€”provided there is product qualityā€”gains more market share, trumping product price as the determining factor. Thus an economic growth strategy based on developing new products rather than a productivity strategy of cutting costs is the surer road not only to profits but to growth in employment as well. But being first is not enough; manufacturers and service providers must continue to advance technologically. The failure of static strategies is illustrated by a study that showed that each dominant disk drive company failed to move to the next smaller size, that is, from 14-inch to 8-inch, then 5.25-inch, and on to 3.5-inch, and after this 2.5-inch, leading to their loss of market share. While admittedly each new advance meant a disruptive technology, the shifts should have been predicted on the basis of the needs of different segments of the market and the constant demand for smaller size, greater simplicity, and technological advance.4
In fact, a positive example of how to do this is provided by Hewlett-Packard (HP) and its solving difficult problems in producing printers for disparate users. Various models of their printers can print billboard advertisements, textbooks, or labels for Heineken beer bottles.5 Next, customized wallpaper for children printed by HP printers will be offered in the childrenā€™s chain stores of Nickelodeon and Dr. Seuss Enterprises. Customers can go to a website and enter the dimensions of the room along with a selection of the childrenā€™s favorite characters and then pick up the customized wallpaper at a local store for their childrenā€™s room. This example illustrates the importance of developing new kinds of distribution channels for radically new products as well as the principle of customization having superior market value.
The strategy of recognizing different customers has also been pursued by Nokia and its constant technological advance in cell phones, largely passing Motorola, which has lost market share in this very important and growing market niche. In turn, Apple with its iPhone has reasserted American leadership in design and versatility in this critical market. These examples also illustrate how, with global competition, managers need to plan on sets of products designed to meet both different cultural tastes and disparate national technological requirements. Cell phones are a perfect example of the increasing need for products and services that are designed to operate with varied technological platforms as well as cultural tastes.
Although the growth in RDT expenditures and its globalization has been widely recognized, the third pattern has been less often discussed and is therefore one of the foci of this chapter. By carefully explaining why and how consumer tastes are evolving toward more demands for technological sophistication, product and service quality, good design, and above all personalized products and services, managers are in a better position to plan their research to meet these demands and gain comparative advantage.
Likewise, understanding the consequences of continued growth in expenditures on RDT for how radical innovation is produced both within countries and globally suggests how this planning can be implemented, that is, what kinds of research teams and networks need to be constructed to take advantages of new ideas within one or more of the six research arenas indicated in Table I.1. The construction of bridges via networks to overcome the developing interdisciplinary communication gaps created by this evolution presents one of the most important tasks for managers of research organizations and firms. It is the failure to evolve to meet the new circumstances created by evolution that explains much about the innovation crisis in the United States as well as elsewhere.
The evolution in tastes and the way in which radical innovations are produced are not the only evolutionary processes unfolding. Some of the more interesting trends involve the growing concerns about the impact of products on the environment and on health. These impacts are created while producing the product as well in its operation, and they are hidden costs that are not part of the price charged for the product.6 The most dramatic of these hidden costs are various forms of pollution (from trash on the ground to smog in the sky), consequences of global warming (from melting ice caps at the poles to cyclones and hurricanes in the middle of the planet), dependency upon oil (from engaging in destructive wars in the Middle East to oil drilling in Alaska), the use of nonrenewable resources (from wood to metals), and health risks of various kinds (toys with lead paint to Love Canal) for the consumers. The recent oil spill in the Gulf of Mexico has educated everyone on the importance of hidden costs. Some of the biggest opportunities for restoring the innovative edge are in developing new manufacturing techniques that reduce risks to the individual and the environment. And, clearly, solving the problem of how to prevent a repeat of what happened in the Gulf of Mexico will require a number of scientific breakthroughs to learn how to cap wells 5,000 feet under the sea.
In addition to growing concerns about the hidden costs in the manufacturing of products, a number of global problems have emerged. The beginning of the twenty-first century saw the emergence, or perhaps better understanding, of some new problems, including terrorism, tribal wars, and pandemics such as AIDS and the avian flu. The most striking aspect of many of these issues is that they are truly global problems, that is, not one country, not even the United States, can solve them unilaterally. Cooperation, as well as scientific breakthroughs and technological advances, then becomes a key to making progress in solving these different problems.
Although I later suggest that being first with technological sophistication, good design, and other product factors such as reduction in carbon footprints provides protection against price being the determining factor, especially in the high-tech sectors, we must also recognize that price remains important, particularly in the low-tech sectors where most jobs are being exported. How does one maintain productivity and yet produce different sets of products for different parts of the world? The answer remains radical process innovations such as flexible manufacturing. But because the United States largely failed with the implementation of this area, as discussed in the Introduction, we seize the initiative and attempt to develop the third industrial divide, which involves being able to change the properties of parts on the assembly line.
We have, then, four strategic imperatives for restoring the innovative edge, each of which flows from a specific evolutionary pattern:
ā€¢ Customize products and services.
ā€¢ Recognize the evolution in the patterns of doing research.
ā€¢ Solve national concerns and global problems.
ā€¢ Increase flexibility in manufacturing by being able to change the composition of parts.
The evolutionary forces behind these imperatives are explained in the following four sections of this chapter.

THE EVOLUTION OF TASTES

In the Introduction, two major reasons were cited for the loss of American employment during the 1960s through the 1990s: failures to adopt radical product and especially process innovations and the consequences of the emphasis on cutting costs and increasing stock prices. Still a third reason for the loss of many jobs was the strategic failure to recognize the direction in the evolution of consumer tastes, and a fourth was the failure to adapt products to the international tastes of other countries. The failure of American car manufacturers to make cars with the steering wheel on the right side for Japan is well known. But the more critical failure is not recognizing the movement toward consumer demand for new technological advances, higher quality, good design, and, most important, individualized products and services. The continued purchases of the latest computer, video game consoles, GPS, cell phone, and high-definition television are illustrations of the importance of technological advance. Frequently, American companies did not shift their strategies toward higher quality until it was too late. Germany was able to protect its much higher wages by positioning itself in the high-quality end with individualized products in such areas as kitchen design, clothing, and, above all, machine tools.7 The continued penetration of the American automobile market by German and Japanese manufacturers occurs in large part because of their innovations, including those in fuel economy and the quality of their cars and their design.
The causes of the evolution in consumer tastes in these four directions can be explained by the growth in education and the increased occupational specialization.8 With education comes a more rational approach to weighing the costs and benefits of particular purchases and thus a concern about quality as well as an appreciation of technological advance. With occupational specialization comes a desire for a more specialized or individualized lifestyle. Some American companies have built their fortunes on these trends. Starb...

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