introduction

According to some of the philosophies of technology we looked at, technological development, that is, the creation of new products and new technologies is crucial to the economic development. The creation and success or failure of innovation has been widely studied. Businesses need to understand it. To be competitive, they need to stay ahead of trends in processes, products, and consumers' tastes. Looking into the future, assessing trends, and anticipating future innovations are key critical thinking tasks for managers, no matter which type of business they work in.

In the beginning – systems theory

A system – as defined by Thomas P. Hughes in 1983 – is "a configuration of parts connected and joined together by a web of relationships." A web is another word for, a network* (*see title of the course).

Systems theory: A study of how physical artifacts, social institutions, and the social context all interact in complex ways to influence design and cause social change.

Hughes three stages

1. Technological development: a technology or innovation takes shape.
   • invention
2. Technology transfer: innovations are transmitted from one geographic area or social group to others. Agents of change (influencers) play a central role
   • adoption and diffusion of technology
3. System growth: The system grows, but unevenly. Not all parts develop at the same rate. Improvements need to be made in one element to allow growth in another.
   • a sub-system which does not develop sufficiently prevents the technology system achieving its targeted development. Hughes names these problematic sub-systems reverse salients. The name comes from a backward bulge in the advancing line of a military front.

Example of these three stages -- the PC,

Development of the personal computer: The confluence of a number of inventions and technological developments – each of which is a sub-system of the whole machine

1. Computer programming
2. Microprocessors
3. Idea of hypertext

1. Computer technology – developed rapidly
   • Moore's law
   • Kryder's law

Technology Transfer:

Use of personal computers spread to businesses first and then to the general public

The personal computer is first developed by those entrepreneurs who imagined that there was a market for a personal computer beyond fringe groups of hackers or recreational users.

1. Software
   • development of single purpose machines - e.g. a machine to break code
   • development of general purpose – i.e. reprogrammable machines
   • developement of recreational uses - i.e. computer games
2. Methods of working
   • Zuboff's laws - finding what can be informated (changed into a form capable of being input and operated on by a computer)
   • finding out what technologies can be used in other contexts – e.g. what military uses of self-driving vehicles can be adapted for civilian uses
3. Spread of technology from academic and research labs to businesses and to personal uses

System Growth:

1. Computer technology changes to meet demands for speed and power for business purposes and home computing uses – e.g. games
2. Methods of working – adapt or change to adopt computerized work
3. Changes in workforce and society during those years ~1980 – 2000
4. Software – demands outpace the power of the hardware
   • example of reverse salience: imbalance in the growth of a system's sub-components, for example, VR technology requires a lot of computing power and very little drag or latency in transferring data in response to a user's head movements or gestures. Without this speed, use of the technology can become tiring and disorienting and so less attractive to consumers

(We will have more to say about systems theory later.)

can you think of another innovation that went through these 3 stages?

Economic development & innovation

Ideas of Joseph Schumpeter – American-Austrian economist

Schumpeter: the creative process – the development of the economy through the production process – a central part of economic prosperity

Schumpeter would probably be a Substantivist – technology and innovation are important and determine the shape of the world and the economy. Popular influence or social construction are not important.

According to Schumpeter, consumers and consumer preferences are not significant factors in economic change. Preferences do not undergo change spontaneously. And consumers play a passive role. For Schumpeter structural changes driven by innovation are major major factors.

For this reason, Schumpeter believed in the importance of entrepreneuriship:

He argued that both an inventor's inventions and an entrepreneur’s innovations are important. Schumpeter pointed out that entrepreneurs innovate not just by figuring out how to use inventions, but also by introducing new means of production, new products, and new forms of organization. These innovations, he argued, take just as much skill and daring as does the process of invention.
(Joseph Alois Schumpeter source: econlib.org)

Schumpeter divides the creative process into three stages:

1. invention
2. innovation
3. imitation

Invention phase occurs as possibilities in a stationary state where production (i.e. supply) and demand are balanced. Inventions are things like

1. a new product
2. a new method of production
3. a new market
4. a new source of raw materials

Innovation phase: brings about radical transformations, and a fundamentally different social system. During this stage, 4 types of changes occur

1. Increases in salaries
2. Population growth
3. Changes in consumer tastes and choices
4. Changes in how production happens

Schumpeter introduced the term creative destruction to summarize the social, economic, and cultural consequences that the innovation stage brings about.

Old ways of doing things are destroyed and new ways created. Old economic patterns and structures die and new ones are created. For example, the horse and buggy industry dies – people who look after horses are out of work, buggy factories cease to exist. But, the automobile industry starts and Henry Ford invents the assembly line and people are hired to assemble cars or sell gas or make tires or automotive parts, or build car washes or build better roads.

The opening up of new markets, foreign or domestic, and the organizational development from the craft shop to such concerns as U.S. Steel illustrate the same process of industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.
(Schumpeter, 1942, Capitalism, Socialism, and Democracy)

At the same time the innovation stage is the most risky for investors and businesses. It is difficult to know which innovations will succeed and what their benefit will ultimately be. So, buying into an innovation or adopting it is risky.

Imitation phase Once a product or innovation is diffused into the market, other manufacturers imitate the product. After a while the market will be over-saturated, leading to a crash in the market.

And then when the market returns to a balance, we return to the Invention phase.

Conclusion – according to Schumpeter:

1. Innovation is at the centre of the economy
   1. technical innovation and entrepreneurship combined as a force
2. Research and development is necessary for economic growth
3. New technologies are a source of economic, political, and social change
4. The economy has a cyclical structure centred on innovation and on the destruction of existing technologies and methods production
5. innovation is a "process of industrial mutation, that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one".
6. humans live in a world and a society shaped by the cycle of technological development

So, where are we now in the cycle that Schumpeter describes?

Note the accelleration of these economic peaks and troughs

Conclusion: Schumpeter

Schumpeter considers an economic pattern of rise and fall very similar to the one Christensen describes – as we will see. One could map the S-curve of Christensen onto the model of Schumpeter's economic cycles. Creative destruction is a process like the innovator's dilemma. Established patterns are disrupted by innovation.

Industry 4.0

According to some, we are in the Invention phase or perhaps the Innovation phase of a new industrial order – some people call it the 4th Industrial Revolution.

According to those who write about it, this 4th revolution will have all the creative and destructive characteristics that Schumpeter writes about. Perhaps we are now in the invention stage of this process.

In this fourth revolution, we are facing a range of new technologies that combine the physical, digital and biological worlds. These new technologies will impact all disciplines, economies and industries, and even challenge our ideas about what it means to be human.
These technologies have great potential to continue to connect billions more people to the web, drastically improve the efficiency of business and organizations and help regenerate the natural environment through better asset management, potentially even undoing all the damage previous industrial revolutions have caused.
But there are also grave potential risks. Schwab outlines his concerns that organizations could be unable or unwilling to adapt to these new technologies and that governments could fail to employ or regulate these technologies properly. In the book he postulates that shifting power will create important new security concerns, and that inequalities could grow rather than shrink if things are not managed properly.
For example, as automation increases, computers and machines will replace workers across a vast spectrum of industries, from drivers to accountants and estate agents to insurance agents. By one estimate, as many as 47 percent of U.S. jobs are at risk from automation.
(Marr, Bernard. (2016) Why Everyone Must Get Ready For The 4th Industrial Revolution. Forbes / Tech

In other words, we need to prepare for the creative destruction of the 4th industrial revolution. Risks include

• need to adapt,
• government failing to regulate new technologies properly,
• growing inequality,
• challenges to security

the 4th industrial revolution