Dahmén, Arthur, Hughes, Geels Pär Blomkvist Industriell dynamik, KTH [email protected] Strategic analysis of threats and opportunities Micro vs. Evolutionary economics 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: • Technology: Bottle necks • Industry: Markets /technologies/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 history 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 Innovations 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 .