The Relationship of Innovation and Technology

Technology and innovation are inextricably bound together. While most people conflate the two, they are most certainly distinct. In this essay, we shall explore

Photo by Alex Knight on Unsplash

Technology and innovation are related, but distinct

The committee report on Innovation Measurement comprehensively defines innovation as "The design, invention, development and/or implementation of new or altered products, services, processes, systems, organizational structures, or business models for the purpose of creating new value for customers and financial returns for the firm." Meanwhile, Afuah defines innovation as "the use of new knowledge to offer a new product or service that consumers want."

It is interesting to note the absence of "technology" in these definitions. Technology, therefore, is not essential, much less central, to innovation. As Shaindlin puts it,"Technology is one outcome of innovation, not a necessary ingredient." At its essence, technology is the application of scientific knowledge to address the needs of man and society. However, we shall see later on that there is a large overlap between technology and innovation and that both are essential to the success of high-tech firms today.

We shall tackle this through two main theses: "Technology and innovation enable each other" and "Technology and innovation beget each other."

Technology and innovation enable each other

While separate from each other, we often see the words "technology" and "innovation" used interchangeably. This is because, these days, the two often go hand-in-hand and exist together in a firm. Why is this so? Because technology enables innovation, while the innovation -- especially marketing and process innovation -- supports the creation and development of technology.

On a high level, we see technology enabling innovation in the practice of predictive analytics and modeling. Private companies, universities, and research firms can now create more robust and complex statistical, physical, or mathematical models in today's age with the aid of computers -- much more than when these were done by hand. It is seen in a wide range of applications from the reduction of time to model airplanes with the use of digital modeling to automated statistical forecasting applied to supply chain management.

Let us now turn our gaze on the automotive industry to see examples of innovation supporting the creation and development of technology. Over 110 years ago, Henry Ford pioneered the use of the concept of the assembly line in his car manufacturing business - a revolutionary process innovation at the time. This set off an era of manufacturing excellence and efficiency, paving the way for Ford and other car manufacturers to create automotive technology more often and in shorter cycles.

The American Ford was not the only one to introduce an important process innovation in this industry. Japan's Toyota was the birthplace of Kanban - a visual work management tool. It provided a visual system where the steps of the manufacturing process are in cards (Kanban literally means card or visual signal), aiding employees in managing work. It is a valuable tool in Lean and Just-in-time Manufacturing. Kanban has found applicability throughout the years and in multiple industries, including high-tech firms. One can even see the influence of Kanban on Scrum, another work management framework, which empowers so much of Agile software development these days.

Technology and innovation financially enabling each other

The idea that technology and innovation enable each other not only works at the conceptual level, but also at the financial. According to experts like Michael Porter, innovation is necessary for a competitive strategy. Innovation creates competitive advantage that enriches the firm. Thus, a firm can only continue to innovate and create technology by innovating and thriving.

A 2008 study by Koellinger evaluated the technology and innovation usage of 7,302 European firms. Directly quoting, "The empirical results show that Internet-based technologies were an important enabler of innovation in the year 2003." Additionally, a positive correlation between the use and/or creation of innovation -- both Internet and Non-Internet-Based -- and employee growth and turnover. This affirms the need to innovate and apply technology so as to improve the financial standing of the firm and thus be able to innovate some more.

Technology and innovation beget each other

Photo by Drew Graham on Unsplash

Another reason why we see innovation and technology happening together is that they beget each other. That is, an innovation may bring up challenges or opportunities that call for a technological answer, and a technological issue may call for innovation. This cyclical relationship is the second facet of the relationship of technology and innovation that we shall examine.

Innovation calling for a technological answer

• Fulfillment by Amazon -  Fulfillment by Amazon, or FBA in short, is a process innovation pioneered by Amazon.com. It is arguably one of the most important and radical innovations in the e-commerce sector. Under FBA, Amazon itself takes care of end-to-end fulfillment process by keeping the seller’s inventory in its own warehouses and ships the products using its own logistical and operational systems. This innovative process necessitated the creation or improvement of technology ranging from item tagging, stowage optimization, picking and packing optimization, and API integration with sellers and 3PL's.
• Netflix - The root of Netflix's success is its video-on-demand business model - something we can consider a marketing innovation. Among media types, video requires the largest amount of data to transmit---and the demand only grows, with customers clamoring for higher resolutions, 3D, and more features. Thus, a technological need came up; Netflix had to design infrastructure that is high-capacity, scalable, and reliable. They made use of technologies such as Python, Cassandra, Amazon EC2, Java, Oracle, and Dynomite, among others. The business model could not have succeeded without the right mix of technology to support the innovation.

Technology calling for innovation

• e-Commerce - In the late 90's and early 2000's, e-Commerce gained traction with the advent of widespread internet access and emerging payment systems. Platforms to buy and sell online most certainly shook up consumers and, more importantly, businesses. The opportunity to sell beyond the physical storefront, enabled by technology, opened up the playing field to firms willing to innovate. And innovate they did. We saw eBay pioneering the online auction system, Paypal with integrated payments, and Amazon with its recommendation engine. The availability of technology in this sector brought out innovators out of the woodwork and allowed the technology to grow into a successful and mature sector.
• Telehealth - The Center for Connected Health Policy defines Telehealth as encompasing "a broad variety of technologies and tactics to deliver virtual medical, health, and education services. Telehealth is not a specific service, but a collection of means to enhance care and education delivery." Locally, we have the National Telehealth Center (NTHC) under UP Manila working on delivering eMedicine and eLearning, among other areas, with a focus on underserved communities. These are important technologies as they aim to improve health services. The NTHC's projects include CHITS, a health information system, and RxBox, a portable kit of life-saving devices built for rural communities. These technologies open up a new paradigm of health care delivery. It should challenge health care providers to rethink, and therefore innovate, the means of delivering medical and general health care to the public.

Conclusion

We have demonstrated that innovation and technology are distinct from each other. Even so, they are highly intertwined, and even interdependent. We say this on account of technology and innovation enabling each other -- conceptually and financially -- and technological challenges and opportunities calling for innovation and an innovation issue requiring a technological answer.

References

[1] Carl Schramm. Innovation Measurement: Tracking the State of Innovation in the

American Economy. url: http://users/nber.org/~sewp/SEWPdigestFeb08/InnovationMeasurement2001_08.pdf.

[2] Allan. Afuah. Innovation management : strategies, implementation and profits / by

Allan Afuah. English. Oxford University Press New York, 1998, x, 403 p. : isbn:

0195113462.

[3] Andy Shaindlin. Innovation Is Not About Technology. July 2013. url: http://www.

alumnifutures.com/2013/07/innovation-technology.html.

[4] What is Kanban? url: https://leankit.com/learn/kanban/what-is-kanban/.

[5] Michael E. Porter. The competitive advantage of nations. New York: Free Press, 1990,

pp. xxxii, 855.

[6] Philipp Koellinger. “The relationship between technology, innovation, and firm performance—

Empirical evidence from e-business in Europe.” In: Research Policy 37.8

(2008). Special Section on University-Industry Linkages: The Significance of Tacit

Knowledge and the Role of Intermediaries, pp. 1317 –1328. issn: 0048-7333. doi: https:

//doi.org/10.1016/j.respol.2008.04.024. url: http://www.sciencedirect.

com/science/article/pii/S004873330800108X.

[7] Fulfillment by Amazon. url: https://www.amazon.com/p/feature/pxekbkm47y7c9fd.

[8] A 360 Degree View of the Entire Netflix Stack - High Scalability -. url: http://

highscalability.com/blog/2015/11/9/a-360-degree-view-of-the-entirenetflix-

stack.html.

[9] What is Telehealth? url: http://www.cchpca.org/what-is-telehealth.

[10] National Telehealth Center - Projects. url: https://telehealth.ph/projects/.