Dahmén, Arthur, Hughes, Geels

Pär Blomkvist Industriell dynamik, KTH [email protected] Strategic analysis of threats and opportunities Micro vs. Evolutionary

Neo-classical (micro) economics - Five factors of production: • Raw materials • Machinery • Labour services • Capital goods • Land

Function of production: F (X1, X2…X5) + Residual Erik Dahmén

• Equlibrium is not in focus • Metaphores from biology (population, organic growth, selection, evolution, nisch)

According to Dahmén the economy developes because of structural tension: = Certain steps in a technical or an industrial process can be ahead or lagging

• Example from the textile industry: The flying shuttle (1730--) caused a shortage of thread. • This created a structrual tension in the industry which halted developement

• A pressure was formed to develop new methods for spinning thread faster and in large quantities (1750--). • Theses new spinning machines was, in their turn, so effective that the weaving technologi lagged behind – again a new structural tension in the industry

Spinning machine

• The overproduction of thread in the spinneries became acute and was solved eventually (1790 --) by the mechanical weaving machine. • Finally the industry was in a balanced situation Structural tension

3 levels: • : Bottle necks • Industry: Markets //methods of production are not fitted together • Society: When many linked industrial sectors are out of phase and not compatible The result: Develpement block

• A series of structural tensions (disequilibria) are solved and connected which leads to a balanced situation = Development block (many components in the economy pulls in the same direction) Development bloc

Dahméns metaphor: The plant – first a seed – sprouts under the soil – above the ground steam and leaves are developed (and the roots are at rest) – in the next phase it is time for the root system to develope: equilibrium or a balanced situation occurs when all components are in phase and fully developed Why transformation?

• Positive transformation pressure or…

• Negative transformation pressure Positive transformation pressure (opportunities):

• New methods for production and marketing

• New products and services better suited to the market

• The discovery of totally new markets

• New sources of raw matherial or energy sources Negative transformation pressure (necessity):

• Old methods of production, services and marketing are left behind

• Old products and services no longer wanted

• The fall of old markets

• The fall of old raw matherial and enery sources Dahmen´s challenge:

How to reformulate a necessity (negative transformation pressure) to an opportunity? Brian Arthur

• Path Dependance

• Lock-In-effect

(Random Walk – The mathematical illustration to Arthur’s thesis)

Stability…

Conservative factors: Path Dependency – Lock in – (leads to Dominant design)

OBS: Absolutly necessary with some conservatism!

WHY??? Examples

• PC – Apple/Mac (???)

• VHS – Betamax

• BlueRay – HD-DVD

• Google – Yahoo – Alta Vista

• MP3 – CD-records – Vinyl records

The long perspective The short perspective Examples

• 1956 Nuclear power in the USA

• Gas-reactors?

• Light water reactors?

• Deuterium reactors?

• The winner: Reactors cooled by light water!

• Why?: Use in Sub marines; US-Navy and NSC important actors

• Lock-in created Path Dependence even in Sweden in spite of earlier deuterium-path

Examples

• Qwerty – Dvorak • Qwerty – Objective: to slow down typing speed (1870) – most common letters at the left hand due to mechanical problems in the hammers and levers

• Obs: Old technology in a NEW combination

Where to build the factory? 4 Mechanisms creating Path Dependance/lock-in

• 1-2 Stathic factors

• 1: High fixed costs Entry on the market becomes expensive

• 2: High transaction costs Gives an advantage to big companies 4 Mechanisms creating Path Dependance/lock-in

• 3-4 Dynamic factors

• 3: Learning by doing/using

• 4: Self fulfilling prophecy Where to locate production?(Kista – Sillicon Valley)

Systems Diagnosis

Infrasystems are complicated to handle and manage becauset they are big, complex and embedded in society

System diagnosis: The method

• ”Anamnes” (the of the patients illness)

• Find unbalanced (sick) parts in the system

• Objective: To find new business ideas and models; to deliver new services

Thomas P. Hughes

Large Technical Systems (LTS)

LTS: ”primary” infrasystems (society´s basic functions) • ”Sociotechnical systems” • ”System builder” • ”Momentum” • ”Salients – Reverse salients”

LTS dynamics – three phases

• Build up – Expansion – Stagnation

• S-curve!

• Different system builders in all three phases S-curve Where is your industry?

Build up – Expansion – Stagnation (Etablering, Tillväxt, Mognad, Nedgång) Technology diffusion and the S-curve…

Källa: http://www.dallasfed.org/fed/annual/1999p/ar96.pdf 2007-11-08. Waves of technologies - attacks and counter attacks performance a3

a2

a1 C

B

A

time

35 35 How to innovate in Large Socio- Technical (infra-) Systems?

The problem:

Momentum

Innovation i Infrasystem The problem: Momentum

”Momentum” – sociotechnical inertia • The built infra- structure • Mental ”path- dependence” Physical momentum

Mental (phsyological/social) Momentum Within the system: A shared systems culture – system builders has a common view on what is rational, possible or impossible. Actors are often not open to solutions or possibilities outside of the systems culture

In society: The system is deeply embedded in society and affects our daily lives in a profound way (where to live, how to shop, how to plan our future, etc.). Also embedded in politics, institutions, laws and in the ecomomy. Solution: Find unbalanced parts in the system ”Salients – Reverse salients”: Unbalanced parts in the system

Salient: Parts or components in a system that is more developed than other parts

Reverse salients: Parts or components in a system that is lagging behind

Ryaverket: Salients/rev. salients Reverse salient in part of the Systems culture in LTS

”Salients/ Reverse salients”

• Amorph problems in an advancing front

• Must be defined as a ”critical problem”

Reverse salient – Salient

Reverse salient Salient Salients/reverse salients

• HDTV; Jet-engine; check-in

• Magnetic compass; Electrical adapters Swedish rail road tracks: Two reverse salient in the system ”Critical Problem”

A critical problem IS NOT the same as a salient/reverse salient

”Defining a reverse salient as one or more critical problems is in it self a major step toward a solution, or invention, for it is well known that the ability to define an amorph situation as a problem is often an anticipation of a solution” (Hughes, p. 100) Innovations in LTS

• Originates from salients/reverse salients

• Find the Critical problem:

Define a salient/reverse salient as a ”critical problem” and find the solution More exemples… Identify Salients/Reverse salients in your industry – define the critical problem and suggest a solution (a business idea)

“When a reverse salient cannot be corrected within the context of an existing system, the problem becomes a radical one, the solution of which may bring a new and competing system.”

(Thomas P. Hughes)

Frank Geels: Sociotechnical systems on three levels Strategic Niche Management in Large Sociotechnical Systems