Five generations of innovation models

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Filed Under 5g, Innovation, Innovation model, linkedIn, Miller, Rothwell

The British sociologist Roy Rothwell was widely regarded as one of the pioneers in industrial
innovation with his significant contributions to the understanding of innovation management.

Rothwells five generations of innovation provides an historic overview of industrial innovation

management in the Western world from the 1950s onwards. He found that each new generation
was in fact a response to a significant change in the market such as economic growth, industrial
expansion, more intense competition, inflation, stagflation, economic recovery, unemployment
and resource constraints. The five generations of innovation management is a descriptive model
of how (manufacturing) companies structure their innovation processes over time. His research
focused on technological innovation at multinationals and high-tech start-ups. The model can be
used when defining a corporate innovation management strategy.

Traditionally, there are two ways to view the innovation process: the technology push approach
and the market pull approach. This simple linear model prevailed from the 1950s till early 1970s.

Technology push (1G)

From 1950 to the mid-1960s, fast economic growth allowed for a strong technology push and
industrial expansion in the Western world and in Japan. Companies focused predominantly on
scientific breakthroughs, or a more R&D in, more new products out approach. Science and
technology were seen to have the potential for solving societys greatest ills. Research &
Development was considered as corporate overhead and relegated to an ivory tower position
with little or no interaction with the rest of the company.

Technology push views the innovation process as simple linear and sequential with emphasis on
R&D. The market is seen as a receptacle of the results of R&D activity. Or in other words, this is
a supply side approach of the innovation process.

This 1G model, however, incorporates market information very late in the process, so that
commercial applications are often merely technical inventions and therefore often not adopted to
the market.
Market pull (2G)

The mid 1960s to early 1970 were characterized by a market shares battle with increased
competition that induced companies to shift their development focus to a need pull. During this
period of intensifying competition, investment emphasis began to switch from new product and
related expansionary technological change towards rationalization technological change (see e.g.
Mensch et al., 1980). The central focus became responding to the markets needs. Cost-benefit
analyses were made for individual research projects including systematic allocation and
management of resources. Stronger connections were initiated between R&D and operating units
by including product engineers in scientist run research teams in order to decrease time to
market.

Market pull views innovation, again, as simple, linear and sequential, but now with emphasis on
the market. The market is the source of ideas to direct R&D which plays a reactive role. Demand
side factors replace the supply side approach of the 1G model.

A major disadvantage of the 2G models is that there is too much emphasis on market-driven
improvements of existing products (optimization), resulting in a large variety of short-term
projects.

Coupling of R&D and marketing (3G)

From the mid 1970s to the mid-1980s, rationalization is necessary under the pressure of
inflation and stagflation. The strategic focus was on corporate consolidation and resulted in
product portfolios. Companies moved away from individual R&D projects. Marketing and R&D
became more tightly coupled through structured innovation processes. Operational cost reduction
was a central driver behind this coupling model.

Technological innovation comes from the coupling of markets needs and technological
opportunities. It is understood that innovation is rarely the result of pure technology push or
market pull forces, but rather the result of the matching and combination of the two. The process
is still sequential but with feedback loops. R&D and marketing play a balanced role. The
emphasis is given to the interface between the two.

According to Berkhout (2006), third-generation models can be seen as open R&D models,
emphasising product and process innovation (technical), and neglecting organisational and
market innovations (non-technical). This means that 3G innovation models tend to focus on the
companys new technological capabilities rather than including solutions for institutional barriers
and societal needs.
Integrated business processes (4G)

When the Western economy recovered from the early 1980s to the mid-90s, the central theme
became a time-based struggle as product life cycles shortened. The focus was on integrated
processes and products to develop total concepts. The innovation process moved from
sequential shifting from function to function, to innovation as a parallel process of development,
together with integration within the company, upstream with key suppliers and downstream with
leading customers.

There is more emphasis on the role of feedback and the non-sequential, messy character of the
innovation process. Innovation is also by definition, cross functional, and R&D is just one of the
functions involved in the innovation process. The fourth generation integrated model emphasises
on the concurrent learning with customers and suppliers.

Example of the 4G model from Graves (1987):

This representation of fourth generation focuses essentially on the two primary internal features
of the process, i.e. its parallel and integrated nature. Around this in practice is the web of external
interactions represented in the third generation process (see representation 3G model).

System integration and networking (5G)

Finally, from the 1990s onwards, resource constraints became central. As a result, the focus was
on systems integration and networking in order to guarantee flexibility and speed of
development. Business processes were automated through enterprise resource planning and
manufacturing information systems. Advanced strategic partnerships were setup as well as
collaborative marketing and research arrangements such as open innovation.

The fifth-generation process resembles networking processes similar to those of the fourth-
generation IP, with one major addition the time/cost tradeoff. Being a fast innovator is seen
increasingly as an important factor determining a companys competitiveness, especially in areas
where rates of technological change are high and product cycles are short. Accelerated
innovation however increases the development cost (see Rothwell, 1994 for more details)

The 5G model emphasises also the vertical linkages with suppliers and customers along the
whole innovation process (e.g. suppliers are involved in the co-development of new products,
and/or share the technical systems used for it), and the horizontal linkages take place in a variety
of forms (joint ventures, consortia, alliances, etc.). As Rothwell (1994) states, many of the
features of 5G are already in place in innovators that have mastered the 4G process; parallel and
integrated operations, flatter structures, early and effective supplier linkages, involvement with
leading customers and horizontal alliances. The most radical feature of 5G is the use of a
powerful electronic toolkit to enhance the efficiency of these operations. While electronic
measuring and computational devices and analytical equipment have for many years been
important aspects of industrial innovation, 5G represents a more comprehensive process of the
electronification of innovation across the whole innovation system.

Unlike the earlier generations, the latter two generations (4G and 5G) emphasise that
technological innovation is not sequential, but cross-functional by nature and often multi-actor.
Sources

Berkhout, A.J., Hartmann, D., van der Duin, P. and Ortt, R. (2006), Innovating the
innovation process, Int. J. Technology Management, Vol. 34, Nos. 3/4, pp.390404.
Graves, A. (1987), Comparative Trends in Automotive Research and Development, DRC
Discussion Paper No. 54, Science Policy Research Unit. Brighton: Sussex University.
Mensch, G., Kaash, K., Kleinknecht, A. and Schnapps, R. (1980), Innovation Trends and
Switching between Full- and Under-employment Equilibrium, 1950-1978, International
Institute of Management, Discussion Paper Series, Berlin, January.
Rothwell, R. (1992) Successful Industrial Innovation: Critical Factors for the 1990s.
R&D Management, 22:3. p.221
Rothwell, R. (1994), Towards the Fifth-generation Innovation Process, International
Marketing Review, Vol. 11 No. 1, 1994, pp. 7-31 (source images)
Rothwell, R. and Zegveld, W. (1985) Reindustrialisation and Technology. Longman:
Harlow.
Miller, W. and Morris, L. (1999) Fourth Generation R&D: Managing Knowledge,
Technology, and Innovation / Edition 1. John Wiley & Sons Inc.

Author: Kurt Buyse