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Patterns of Industrial

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Innovation William J. Abernathy and James M. Utterback

How does a company’s innovation-and its response to

innovative ideas-change as the company grows and

matures? Are there circumstances in which a pattern

generally associated with successful innovation is in

fact more likely to be associated with failure? Under

what circumstances will newly available technology,

rather than the market, be the critical stimulus for

change! When is concentration on incremental

innovation and productivity gains likely to be of

maximum value to a firm? In what situations does this

strategy instead cause instability and potential for crisis

in an organization?

Intrigued by questions such as these, we have examined

how the kinds of innovations attempted by productive

units apparently change as these units evolve. Our goal

was a model relating patterns of innovation within a

unit to that unit’s competitive strategy, production

capabilities, and organizational characteristics.

This article summarizes our work and presents the basic

characteristics of the model to which it has led us. We

conclude that a productive unit’s capacity for and

methods of innovation depend critically on its stage of

evolution from a small technology-based enterprise to

a major high-volume producer. Many characteristics of

innovation and the innovative process correlate with

such a historical analysis, and on the basis of our model

we can now attempt answers to questions such as

those above.


Past studies of innovation imply that any innovating

unit cs most of its innovations as new products. But

that observation masks an essential difference: what

constitutes 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

product. We argue that these two units-the small,

entrepreneurial organizations and the larger unit

producing standard products in high volume- are at

opposite ends of a spectrum. in a sense forming

boundary conditions in the evolution of a unit and in

the character of its innovation of product and process


One distinctive pattern of technological innovation is

evident in the case of established, high-volume

products such as incandescent light bulbs, paper, steel,

standard chemicals, and internal-combustion engines,

for examples.

The markets for such goods are well defined; the

product characteristics arc well understood and often

standardized; unit profit margins are typically low;

production technology is efficient, equipment intensive

and specialized primarily on the basis of price. Change

is costly in such highly integrated systems because an

alteration in any one attribute or process has

ramifications for many others.

In this environment innovation is typically incremental

in nature, and it has a gradual, cumulative effect on

productivity. For example, Samuel Hollander has

shown that more than half of the reduction in the cost

of producing rayon in plants of E. I. du Pont de

Nemours and Company has been the result of gradual

process improvements which could not be identified as

formal projects or changes. A similar study by John

Enos shows that accumulating incremental

developments in petroleum refining processes resulted

in productivity gains which often eclipsed the gain from

the original innovation. Incremental innovations, such

as the use of larger railroad cars and unit trains, have

resulted in dramatic reductions in the cost of moving

large quantities of materials by rail. In all these

examples, major systems innovations 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. While cost reduction seems to

have been the major incentive for most of these

innovations, major advances in performance have also

resulted from such small engineering and production




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Such incremental innovation typically results in an

increasingly specialized system in which economies of

scale in production and the development of mass

markets are extremely important. The productive unit

loses its flexibility, becoming increasingly dependent

on high-volume production to cover its fixed costs and

increasingly vulnerable to changed demand and

technical obsolescence.

Major new products do not seem to be consistent with

this pattern of incremental change. New products

which require reorientation of corporate goals or

production facilities 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


Many studies suggest that such new product

innovations share common traits. They occur in

disproportionate numbers in companies and units

located in or near affluent markets with strong science-

based universities or

other research institutions and entrepreneurially

oriented financial institutions. Their competitive

advantage over predecessor products is based on

superior functional performance rather than lower

initial cost, and so these radical innovations tend to

offer higher unit profit margins.

When a major product innovation first appears,

performance criteria are typically vague and little

under- stood. Because they have a more intimate

understanding of performance requirements, users

may play a major role in suggesting the ultimate form

of the innovation as well as the need. For example,

Kenneth Knight shows that three-quarters of the

computer models which emerged between 1944 and

1950, usually those produced as one or two of a kind,

were developed by users.

It is reasonable that the diversity and uncertainty of

performance requirements for new products give an

ad- vantage in their innovation to small, adaptable

organizations with flexible technical approaches and

good external communications, and historical evidence

supports that hypothesis

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