Platt Perspective on Business and Technology

Considering a cost and benefits analysis of innovation 2: supply side and demand side innovation adaptation curves 2

Posted in macroeconomics by Timothy Platt on March 29, 2014

This is my second installment in a series on the costs and benefits of innovation as it is tracked and measured through a complete innovation manufacturing cycle – as that is measured and understood from both the supply and demand sides (see Part 1.)

I am going to start this posting with the innovation manufacturing cycle itself, noting that I sketched out its possible configurations in more than one way in Part 1, but that I only scratched the surface as to how that could be done there. So in Part 1, I outlined these business process cycles as:

• A design and development, production, distribution and sales and feedback cycle, and as
• A design, production, marketing and sales cycle.

As a third alternative I add here:

• A cycle of insight and design, to prototyping and production, to marketing and sales, and back to product refinement from feedback.
• And I add that the word feedback can and does cover a wide range as to what types of data are collected and at what points in the cycle, and for where this information would be used. Feedback per se could be added in anywhere here.

An innovation-driven manufacturing cycle can very legitimately take any of a number of distinct forms depending on the nature and timeframes of innovation pursued, developed and offered. As an obvious point of distinction here, a business that seeks to develop, offer and competitively build upon a disruptive new technology that holds potential for creating long-term market dominance, is going to need much more detailed feedback capabilities and at more points in its manufacturing and sales cycle, than would be needed by a business that successively and repeatedly churns out fad-oriented innovative offerings, where their key feedback requirements would be in knowing when to switch production from a now fading fad item production run, to a new and hopefully rising fad production run.

The basic thrust of my discussion here in this series, focuses more on the development and offering of innovation that offers significant potential for long-term returns on investment, and long-term increased market strength. But much of what I would write of here would apply to a more short-term return-per-innovation, serial fad offering business too, and particularly where profit margins and ongoing liquidity are tight and miscalculations could have even dire consequences.

Businesses should think through and develop, manage, and performance-track their operational processes in terms of their own business models and their own specific business performance needs. That applies to their more cyclically connected and recurring business process systems, at least as much as it does to any other part of their overall operations, and for their recurring nature this can be more important for their cyclically ongoing process systems. Inefficiencies and disconnects have more recurringly cumulative impact from them. So they need to think through and stage their business cycles accordingly. And with that stated I have everything in place except for one basic foundation piece before I can turn to consider the battery technology example that I began outlining in Part 1 and that I will continue looking into here.

Every step in the stage-organized manufacturing and sales business cycle that a company has, generally calls for physical or informational resources that would come from outside of the production and distribution and related systems that explicitly carry out that cycle. This can mean acquiring and bringing in pre-assembled specialty components, or it might mean gathering real-time market information to help fine-tune production schedules to meet actual market needs, and with minimal production over- or under-runs. And this is where adaptation curves can enter in, and on both the provider/supplier side and on the acquisition/demand side. And when there is a mismatch between willingness to provide, and need and willingness to acquire, this leads to friction and conflicts of interest. And that very specifically brings me to battery technology, and to recent and in the news controversies around the development and availability of new battery technology offerings.

And I continue this discussion here, from where I left off from it towards the end of Part 1, where I cited how battery failures that posed fire risk in airliners led to the grounding and at least temporary usage discontinuation of Boing’s new 787 Dreamliner with cancellation of orders of purchase for these new aircraft. This also sent spasms through production systems for these new batteries themselves. Look at this from the organizational granularity perspective of the innovation manufacturing cycle.

When prospective customers of a new technology – here a new battery technology, are blocked from buying a new battery technology, in this case due to risk management concerns that translate into already realized business and financial losses, this impacts upon the provider side for that new technology too, by raising matching due diligence concerns there. Friction in acceptance and diffusion into wider use of a new technology product on the demand side slows down willingness to develop and provide it on its provider side too. And in principle, and also in practice this can and does play out at essentially any type of manufacturing cycle step where outside resources have to be brought in and where that can mean bringing in the disruptively new, that if proven successful could create new marketable strengths.

In my aircraft and batteries example, few if any of an airline’s flying customers would know or care what specific components went into building the planes they travel on, but differences of that sort would be important when airline manufacturers were competing with each other in their efforts to sell their planes to commercial airlines.

So when I write of alignment or misalignment between provider and consumer, in where they are in accepting and using a new innovation, I write about friction or lack thereof on both sides as they pursue their manufacturing and distribution cycles. And in this case there are ripple effects. Friction concerns stemming from potential safety liability issues that revolve around new and more power-compact battery technologies impact on production and availability of every type of product that would use and benefit from longer-lasting and more powerful batteries based upon the same new technology. And as noted in Part 1, this already very clearly includes development of next generation more reliable hybrid automotive technology and all-electric cars and trucks, and it includes our increasingly ubiquitous handheld and wearable computational and communications devices. And if this friction could be overcome – when it is, whole new emergent technology uses will arise and add themselves to that list as new battery technologies make them possible.

I am going to continue this discussion in a next series installment where I will explicitly add the dynamics of mutability and change and of ongoing evolutionary and revolutionary technology change to it. Meanwhile, you can find this and related postings at Macroeconomics and Business.


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