Understanding Technological Innovation: Enabling the Bandwagon for Hydrogen Technology
By Boris Jermer
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About this ebook
Boris Jermer
Boris Jermer ist Unternehmer und Berater mit Leib und Seele. Ihn interessiert besonders das Zusammenwirken aus gesellschaftlichen Trends und der Entwicklung von neuen Technologien und Geschäftsmodellen. Dass dafür Persönlichkeiten, Personal und Organisationsstrukturen relevant sind, hat er früh erkannt. Boris Jermer coacht und begleitet seit 2001 Organisationen und Einzelpersonen in Veränderungsprozessen.
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Understanding Technological Innovation - Boris Jermer
ESST
The European Inter-University Association on
Society, Science and Technology
TABLE OF CONTENT
Synopsis
Introduction
Theoretical framework
3.1 The nature of innovations
3.2 Network effects
3.3 Technology diffusion
3.4 The conventional path of innovation
3.5 An interactive model of innovation
The status quo in today’s transportation market
4.1 Transportation technology and infrastructure
4.2 Problems and consequences
Hydrogen technology – A radical innovation?
5.1 Fuel cells and the automotive market
5.1.1 The history of the gas battery
5.1.2 Major players and their activities
5.1.3 What executives say
5.2 How fuel cells work
5.3 Classification of fuel cells
5.4 The dominant design
5.5 Political incentives - Projects and visions
Analysis
6.1 Fuel cell technology as a network technology
6.2 Diffusion of fuel cell technology
6.2.1 Stage 1 – Initial choice
6.2.2 Stage 2 – Lock-in
6.2.3 Stage 3 – Bandwagon-effect
6.3 Case study of an innovation process
6.3.1 Evaluation, decision making, and management
6.3.2 Definition and description of the problem
6.3.3 Finding a solution - clusters of knowledge
Conclusion and further discussion
Literature
List of abbreviations
Figures
Online resources
1. SYNOPSIS
This thesis aims to give a comprehensive survey of the ongoing technological change in automotive propulsion technology.¹ It attempts to substantiate current technological developments with theoretical approaches and to show current market developments at the same time. Combining both the theoretical and the practical points of view this thesis should lead to a deeper understanding of technological innovations within the field of hydrogen technology for vehicular applications² by (i) showing that this technology is embedded in other technological systems, (ii) analysing the actual stage of its diffusion, (iii) showing, on base of a case study, that hydrogen technology is close to market but needs to overcome several obstacles in order to enter large scale commercialisation, and (iv) describing the consequences for further development. It will conclude by suggesting potential market entry strategies and presenting some topics for further discussion.
Keywords: innovation, diffusion, network effects, hydrogen, fuel cell, automotive –
Schlüsselworte (deutsch): Wasserstoff, Brennstoffzellen, Innovation, Technologiewissenschaften, Netzwerkeffekte, Automobil, Diffusion
¹ I thank Andreas Reinstaller for his patient guidance and very helpful comments.
² ‘Hydrogen technology’ is synonymously used for ‘fuel cell technology’ throughout this thesis.
2. INTRODUCTION
The complexity of an innovation is not yet fully understood although it is widely acknowledged that innovations are the primary driving force for economic development³. Given the great variety of phenomena involved, the interrelations are often too manifold to allow a precise portrayal of this process. While an innovation itself (both in the sense of the process and the result)⁴ is difficult to capture, there can be made distinctions between different types of innovations. Among others, Bessant et al. (2001) describe a distinction between product, process, and social innovations as well as innovations in service and conditions. Another distinction can be made between incremental and radical innovations: Incremental innovations implicate minor changes where the socio-technical framework remains stable while radical innovations, by definition, lead to major changes in the existing regime so that markets and whole sets of beliefs are being changed towards another paradigm.⁵
Technological change which is often associated with innovation - can be described as the shifting methodology through which wealth is predominantly created. Technological change also describes the larger framework in which innovations take place. Economists accordingly study - besides its creation - also the distribution of wealth. The study of past changes in technology has contributed to a deeper understanding but does by no means indicate that ongoing changes become well-structured and predictable. According to Schumpeter, an innovation is the entirety of all purposeful actions of an entrepreneur that leads to new combinations.⁶ Innovations are inherently uncertain and involve human creativity, they offer chances and – in case of success – can enable the survival of a company in the long run.
The capability of development and the success of technological innovations play a crucial role in organizations⁷. Technological innovations can open up new markets where certain user groups might be interested in buying a new developed product. The study of innovation is quite new and still suffers from a flood of highly specialized studies and a lack of integrative and comprehensive approaches in the literature. Many case studies from the last decades show that the ability to innovate is far away from being a routine procedure and still represents a big obstacle for virtually all organizations, independent from their market position or size. Even industrial giants like IBM, GM, or Kodak have had to change significantly in order to stay in the market, and have gone through very challenging stages⁸. The mortality of industries and companies can be demonstrated by looking at the top 12 firms which made up the Dow Jones Industrial Average Index of the American stock exchange around 1900. Only one company – General Electric – is still in the market today while all the others have merged or went bankrupt. Some decades ago, an innovating firm could bank on gaining significant competitive advantages whereas today innovation is a necessity of even staying in the marketplace.
As Utterback (1994, p. 14) points out, innovation is ‘at once the creator and destroyer of industries and corporations’. Organizations need to innovate through downsizing, reengineering, starting joint ventures, or finding other methods to keep or increase market shares and to survive in the long run. Having to struggle with new circumstances, start-up firms came into monopolist positions and industrial giants fell because they were not receptive for changes in their environment.
Another misleading assumption would be to consider firms as acting alone,
i.e. separated from marketplace and society. Innovation requires much more than a research and development laboratory and can be seen as a creative and highly interactive process involving numerous heterogeneous influences like new production methods, new raw materials or changes in the customers’ taste.
This thesis attempts to show how innovations ‘occur’ and thus the bandwagon for a new technology is set into motion. Although there are several other interesting innovations⁹ currently going on, I chose hydrogen technology as framework for my analysis because this particular innovation probably has the most striking influence on our society within the next decades. With the aid of ongoing developments in hydrogen technology, I will apply various models and theories described in chapter
3 throughout my analysis. There are expectations with regard to steady improvements in hydrogen technology accompanied by further reductions of costs within the next decade to allow widespread usage in suitable applications where the technology is applicable. Within the manifold innovation studies the number of close-to-market analysis is very limited as most of the studies have been conducted in retrospective. The retrospective analysis is rather easy to conduct as the development already has come to a closure and thus allows a detailed study on past issues. On the contrary, real-time analyses offer a much more lively and speculative basis and allow an ‘educated guess’ while markets are being shaped. For this very reason I chose hydrogen technology as the subject for my analysis because it is still far away from being an established technology in our society and thus offers a chance to observe an innovation process in the making.
³ See Fischer