She Ji. The Journal of Design Economics (2)
Editorial Scope
She Ji is a peer-reviewed, trans- disciplinary design journal with a focus on economics and innovation, design process and design thinking. The journal invites papers that enrich the understanding and practice that enable design innovation in industry, business, non-profit services, and government through economic and social value creation. These papers may explore how design thinking can inform wider social, managerial, and intellectual discourses with an added focus on strategy and management. She Ji also publishes articles in research methods and methodology, philosophy, and philosophy of science to support the core journal area. She Ji is fully open access. Tongji University and Tongji University Press support She Ji as a contribution to the design field and a public service to design research. Authors are not liable for any publication charges and all published articles are accessible free of charge from the journal web site.
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About the Cover
The cover shows a moment from a multidisciplinary duo that worked together to build an early stage prototype at IDEO. Design is increasingly
a co-creation activity. This emblematic image gives form to the synergy of multiple stakeholders involved in the design process. Photo courtesy of IDEO.
She Ji: The Journal of Design, Economics, and Innovation is a peer-reviewed, open access journal published quarterly (spring, summer, autumn, and winter).
For information about She Ji, visit: http://www.journals.elsevier. com/she-ji-the-journal-of- design-economics-and- innovation
Copyright © 2016, Tongji University and Tongji University Press. Production and hosting by Elsevier B.V. on behalf of the owner.
Full text available on ScienceDirect®.
She Ji: The Journal of Design, Economics, and Innovation Volume 2, Issue 1, Spring 2016 ISSN 2405-8726
Table of Contents
Editorial
1 From IDEO to Innovation Economics and the Growth of a Research Field
Ken Friedman
5 Design-Based Innovation for Manufacturing Firm Success in High-Cost Operating Environments
Göran Roos Commentary
23 Integrating Design into the Overall Innovation System
Yrjö Sotamaa
24 How Can Australia Compete Globally While Operating as Class Leader in the High-Cost Environment?
Heico Wesselius Authors’ Response
26 The Hurdles to Getting Design Accepted in Manufacturing Firms
Göran Roos
29 Don’t Be Addicted: The Oft-Overlooked Dangers of
Michael Lissack
46 Design-Related and Design-Focused Research: A Study of Publication Patterns in Design Journals
Gerda Gemser, Cees de Bont
59 Using Typography to Expand the Design Space of Data Visualization
Richard Brath, Ebad Banissi
In Conversation
88 David Kelley: From Design to Design Thinking at Stanford and IDEO
Maria Camacho
From IDEO to Innovation Economics and the Growth of a Research Field
With this third issue of She Ji, we look back at the launch of our journal. We’re
1 Derek Lomas, “In Conversa-
happy that the reception for this new journal has been strong and positive. We’re tion. India’s Design Guru: M. P.
Ranjan,” She Ji: The Journal of
still working with the technical challenges that face a new international journal
Design, Economics, and Inno-
available online. She Ji is a full open access journal. Online publishing permits au-
vation 1, no. 2 (2015): 153–73,
doi: thors to use as many illustrations and figures as they need, with as many full color http://dx.doi.org/10.1016/j.
sheji.2015.11.004 .
reproductions as they require. Our paper edition is a “virtual” copy of the digital version—we use it at conferences and we send it to our authors.
2 IDEO, accessed June 18, 2016, https://www.ideo.com . A “browse
In the second issue, we launched “In Conversation,” a dialogue between one
and graze” visit to the IDEO
of She Ji’s authors and a thought leader in the design field. Our first conversation
web sites will disclose a signif-
featured the late M. P. Ranjan. 1
icant range of free resources, toolkits, and guidebooks.
The current conversation features David Kelley of IDEO and Stanford d.school. Kelley and Maria Camacho talk about design thinking in action as they explore
3 For information of IDEO’s
education for professional designers. Kelley describes his start as a designer and
IDEO.org., accessed June 18,
design educator. He brings the ideas behind IDEO to life, showing how mentors
2016, https://www.ideo.org .
and professors helped him to develop a lively new way to understand design. This
4 For IDEO’s online learning
is a conversation between two experienced designers with one foot in industry and
program, see: http://www.ideou.
the other in university life. Their dialogue examines how a vital engagement with
com .
industry can advance the field of design, in research and practice both. But this means more than classroom projects. It involves the serious advances that design companies make in collaboration with paying clients.
IDEO is well known for a host of advanced design practices in a range of do- mains from engineering and energy provision to financial services, the food and
beverage sector, medical products, digital experience, and education. 2 IDEO also has a not-for-profit organization that generates projects in the public interest, 3 and
an online learning program to share IDEO’s knowledge base with anyone who
wants to learn more about the IDEO way of working. 4
In this issue, we also publish four research articles. Göran Roos considers the role of design for manufacturing firms in high-cost
operating environments—a challenge that affects many of the world’s manufac- turing firms. These firms cannot compete on price. They must innovate, and ac- cording to Roos, one way to innovate involves design-based innovation.
To increase productivity, firms in high-cost environments must identify and develop novel ways to meet the challenges of regulation, technological change, consumer trends, and other factors. These challenges also involve an ever-shifting balance between the global forces of fragmentation and the centralizing forces of supply chains, which firms must contend with even as they transform their in- ternal cultures.
Copyright © 2016, Tongji University and Tongji University Press. Publishing services by Elsevier B.V. This is an open access article under the CC BY-NC-ND license ( http://creativecommons.org/licenses/by-nc-nd/4.0/ ).
http://www.journals.elsevier.com/she-ji-the-journal-of-design-economics-and-innovation http://dx.doi.org/10.1016/j.sheji.2016.06.001
Editorial
5 Full disclosure: I was a
Most importantly, while demonstrating the importance of design, Roos ex-
co-author of that article together with Paul Hekkert.
plains that design is not the only factor that will contribute to firms’ ongoing suc-
See Gemser, Gerda, Cees de
cess. He explains how to use value-creation and value-appropriation in an inter-dis-
Bont, Paul Hekkert, and Ken
ciplinary and trans-disciplinary approach to four value-creation paradigms. These
Friedman, “Quality Perceptions of Design Journals: The Design
paradigms require integrating science and technology with design, art, and reverse
Scholars’ Perspective,” Design
hermeneutics to create and capture value for the firm.
Studies 33, no. 1 (2012): 4–23,
Michael Lissack examines the problems and challenges of simplification. Most
doi: http://dx.doi.org/10.1016/j. destud.2011.09.001 .
designers appreciate the value of simplicity, along with many economists and inno- vators. But simplification can lead to failure as well as success. According to Lissack, “simplification only works up to a point … after that point, all that lies on the road is failure.” In his article, Lissack discusses the limits of simplicity—how to decide when to make things simpler, and when to do something completely different. Lissack, president of the American Society for Cybernetics, describes the cybernetic principle of requisite variety, offering a heuristic guide on what to do when efforts at simplification fail.
While data visualization and typography are intimately linked in practice, there has been relatively little attention to typography as a key factor in data visu- alization. Richard Brath and Ebad Banissi examine this relationship, discussing how to use typography consciously as a way to expand the design space when visual- izing data.
Brath and Banissi analyze the use of text in data visualization, discovering gaps and missed opportunities in current design practices. Taking a cross-disciplinary perspective, they examine typography, cartography, and coding interfaces to better understand how to present data through text. Then they map these factors back- ward against well-understood principles that can expand the design space. They also examine potential applications based on their current research, and present six new visualization techniques. Finally, they draw on expert judgment to analyze examples of data visualization, considering opportunities and problems for prac- tice, while suggesting future research.
Design Research—Coming of Age?
Every growing research field reaches a point when its publishing patterns become
a subject of interest to the members of the field. Gerda Gemser and Cees de Bont have been pioneers in examining the publishing patterns of the design field. In an earlier article with additional authors, they examined the different journals of the
field. 5 In this article, Gemser and de Bont consider the publishing patterns that ex- emplify the research communities in different design schools. This kind of inquiry is a point of inflection, marking the progress and development of any field.
Three forces now influence the development of design as a discipline. The first is the pressure exerted by global ranking schemes on universities. One factor in every serious ranking program is published research. To compile rankings, the schemes must find ways to assess and evaluate research along with evaluating the publications in which scientists and scholars make their work known.
Some nations, such as the United Kingdom and Australia, mount national research exercises. National programs have the advantage of direct input from the universities and disciplines under study. They also have the distinct disadvantage of
a playing field that can be rendered uneven when the universities and departments to be studied influence criteria through lobby efforts. Even when lobbying doesn’t take place, universities can find ways to “game” the system by slicing and dicing submissions to ensure a high score in key departments while placing poor material in categories that don’t count—or in areas that don’t get measured because they are beneath a minimum number of measurable items.
2 she ji The Journal of Design, Economics, and Innovation Volume 2, Number 1, Spring 2016
Only a few global measurements capture research statistics in a transparent,
6 Reihard Werner, “The Focus
open system. The best known among these is ARWU, the Academic Ranking of on Bibliometrics Makes Papers
Less Useful,” Nature 517 (15
World Universities. There is reason for vigorous debate on the criteria—for ex-
January 2015): 245, doi: http://
ample, articles in journals covered in the Science Citations Index Expanded (SCIE)
dx.doi.org/10.1038/517245a .
weigh in with a full point, journals in articles covered in the Social Science Ci- tations Index (SSCI) count for half a point, and journals covered by the Arts and Humanities Citations Index (AHCI) do not count at all. This places design research at a disadvantage, no matter how good it is, because few of our journals are in- cluded in the SCIE or SSCI. On the university level, Nobel Prize laureates and Fields Medal winners play a significant role, with data going back a century. This means that a university with a history of Nobel laureates has a massive advantage over other universities in the ranking. While these measurements are subject to debate with respect to the weight given to any criterion or the absence of criteria, there is wide agreement that ARWU is fair in respect to application with no possibility for gaming, no possibility for subjective assessments, and no way to change criteria due to national lobbying or behind-the-scenes influence.
Whether the scope is national or global, universities feel the pressure to demonstrate successful research development by measuring publications. These are not always the same. The dean of design at one research university found that the national research assessment, as it was at one time, included several criteria that ran counter to ARWU criteria. He asked his vice chancellor which criteria to em- phasize—the vice chancellor said, “ARWU.” As more and more universities empha- size their place on the international lists, publishing choices will make a difference within the design field.
The second factor is the evaluation of individual researchers with respect to hiring and promotion. While this begins at the junior level, it becomes even more important when treatments hire at the senior level and universities hire senior ad- ministrators for schools and faculties. This is how universities translate hiring and promotion decision into their standing in the rankings. It also affects the choices of individual researchers with respect to publishing venues—and with respect to the jobs for which they will apply.
The third factor involves the competition among journals for articles. Several key factors influence author submission choices. These include the standing and reputation of published authors, the subject areas covered by any journal, the in- dexes that cover the journal, and the style and tone of the journal as a whole.
Taken together, this makes scientometric and bibliometric studies a key factor in the publishing patterns of any field. These studies may focus on different factors, but together they map the development and progress of a field.
Scientometrics use quantitative analysis to understand the key features and aspects of a research field. Gemser and de Bont exemplify the rigorous use of statis- tical analysis to better understand our field.
Because these kinds of research are embedded in the entire question of rank- ings and lists, there is a debate still to be held in the design field. In a 2015 column in the journal Nature, Reinhard Werner made the argument that bibliometrics
harms the fields it measures by focusing on the wrong criteria. 6
“How do we recognize a good scientist?” asks Werner. “There is an entire industry—bibliometrics—that would have us believe that it is easy: count journal articles, sort them according to the impact factors of the journals, and count all the citations.”
There are two positions on this argument in the design field. One group argues for scientific rigor in carefully peer reviewed articles, and this group is right to do so. Another group argues that many aspects of design do not yield easily to quanti- tative analysis or rigorous inquiry. There is merit to this view as well.
Editorial
Göran Roos points to the need for multiple approaches that influence research as much as development. To prosper, design research must integrate approaches from science and technology with design, with art, and with the hermeneutical inquiry that informs us about how things develop and create meaning.
We will return to these issues and to the question of how to assess research in future issues.
New Developments
In forthcoming issues, we will also develop three new features. The first of these will be book reviews. If you are interested in reviewing books for She Ji, please let us hear from you to discuss your interest and the possibilities. The second will be case studies. While the design field often involves tests and trials, there is a shortage of rigorous case studies that describe and demonstrate design problems and solutions in context. Case studies should be a natural genre for the design field. Nevertheless, design journals publish them only rarely. We plan to publish full-length peer reviewed case study articles. We also have room for short case studies to be published following editorial review.
We welcome case studies from working design studios, architecture firms, and industrial organizations as well as from universities and research organizations. If you have a case study to report, please let us hear from you. We’re happy to open a dialogue on how to write an effective case study for the journal.
Finally, we seek analytical literature reviews. The genre of the literature review is standard in most fields, and literature review articles are among the most cited in any field. Serious literature review articles pave the way to future contributions by identifying research gaps and opportunities for new work. As a result, the au- thors who fill those gaps or undertake new research cite the literature reviews on which they rely.
While a thorough literature review is a staple of every PhD thesis and disser- tation, we rarely see literature review articles in our journals. We’re eager to see younger scholars convert their literature review chapters into literature review articles for She Ji. We’re also eager to see senior scholars develop strong, analytical literature reviews on pressing topics.
If you have a useful literature review in mind, or you’d like to convert your thesis chapter into a literature review, please write us. We will be happy to confer with you on the possibilities.
We’re eager to see ideas for the full-length peer reviewed articles that form the heart of any research journal. We’ve had some wonderful pieces so far. As a regular journal, we’re always interested in ideas for articles—and we welcome manuscript submissions for peer review.
Building a journal involves building a community. She Ji is a community of practice, a community of interests and concerns shared by authors, readers, re- viewers and editors. We welcome to the third issue of She Ji.
Ken Friedman
4 she ji The Journal of Design, Economics, and Innovation Volume 2, Number 1, Spring 2016
Göran Roos , University of Adelaide, Australia; University of Technology Sydney, Australia; Nanyang Technological University, Singapore
Design-Based Innovation for Manufacturing Firm Success in High- Cost Operating Environments
Abstract The manufacturing sector is increasingly looking to innovation
Keywords
to ensure productivity growth, especially in high-cost operating environ-
Manufacturing
ments to achieve non-price based competition. The paper begins with an
Science and technology innovation
overview of regulatory, technological and consumer trends and develop-
Design-based innovation
ments impacting manufacturing. It considers the shifting balance between
Art-based innovation
fragmenting and concentrating forces of global supply chains, and how
Reverse hermeneutics-based innovation
manufacturing firms themselves are changing. This overview is followed
Value creation
by a discussion of the pivotal constituents of success for firms operating in high-cost environments, and concludes with the fundamental importance of innovation as a basis for success.
Received February 3, 2016
The paper then discusses value creation, value appropriation, and de-
Accepted March 3, 2016
sign-based innovation, and argues that manufacturers need to understand key differences between these paradigms. In particular, the difference Email
Göran Roos
between art and design is articulated, to avoid an otherwise common con-
(corresponding author) goran@roos.org.uk
fusion between the two. The importance of an inter- and trans-disciplinary approach to innovation is emphasized, including the use of four value creation strategies—science and technology, design, art, and reverse-herme- neutic innovation.
The paper concludes that the design-based innovation paradigm is increasingly important within the manufacturing industry, but that its benefit can only be maximized if it is integrated with the other three val- ue-creating approaches to innovation.
Copyright © 2016, Tongji University and Tongji University Press. Publishing services by Elsevier B.V. This is an open access article under the CC BY-NC-ND license ( http://creativecommons.org/licenses/by-nc-nd/4.0/ ). The peer review process is the responsibility of Tongji University and Tongji University Press.
http://www.journals.elsevier.com/she-ji-the-journal-of-design-economics-and-innovation http://dx.doi.org/10.1016/j.sheji.2016.03.001
Design-Based Innovation for Manufacturing Firm Success
1 Sharmistha Bagchi-Sen,
Introduction
“Product Innovation and Com- petitive Advantage in an Area of
In the manufacturing sector, innovation is seen as a fundamental way to ensure
Industrial Decline: The Niagara
productivity growth. This is especially important in high-cost operating environ-
Region of Canada,” Technovation 21, no. 1 (2001): 45–54.
ments where there is a need to engage in non-price based competition. Non-priced based competition is made up of a series of complex strategies that ensure inim-
2 Lluís Santamaría, María Jesús Nieto, Andrés Barge-Gil,
itability. Some examples of this are customer co-creation and customization, ser-
“Beyond Formal R&D: Taking
vice experience delivery, ongoing design-intensive innovation processes, and the
Advantage of Other Sources
production of offerings that operate on the performance frontier through techno-
of Innovation in Low- and
logical innovation. Successful non-price based competition requires continuous
Medium-Technology Industries,”
Research Policy 38, no. 3 (2008):
provision of multi-dimensional value for money—as opposed to offerings from
low-cost operating environments—and the adoption and deployment of advanced
3 Richard Leifer, G. Kasthuriran-
manufacturing technologies is seen as means to this end. 2
gan, and D. Robeson, “R&D
This complex operating environment is influenced by a number of forces.
Investment and Innovativeness: Their Contributions to Or-
These include government policy, technology development, productivity expansion
ganizational Success” (paper
and growth, ever-changing customer preferences, the shifting balance between
presented at the SMS confer-
fragmenting and concentrating forces of global supply chains, and the dynamics
ence, Vienna, Austria, October 29–November 1, 2006).
of change within the manufacturing firms themselves. Applying the appropriate value-creating paradigm is essential for successful innovation.
4 Barry Jaruzelski, Kelvin
It is possible to identify four value-creating paradigms: science and technology
Dehoff, and Rakesh Bordia, “Money Isn’t Everything—Lavish
innovation, design-based innovation, art-based innovation, and reverse herme-
R&D Budgets Don’t Guarantee
neutic-based innovation. Later in this paper these paradigms will be addressed in
Success. The Booz Allen Ham-
greater detail, but first there is a need to understand value creation, and the com-
ilton Global Innovation 1000 Tracked the World’s Heaviest
plex environment in which value-creating innovation is to take place. Value-cre-
Innovation Spenders Against
ating innovation should not be confused with an innovation strategy or an innova-
Common Measures of Perfor-
tion management system.
mance and Success,” Strategy and Business 41 (2005): 54–67.
An innovation strategy is not the same as a Research and Development (R&D) strategy. Research can be defined as the conversion of money to knowledge,
5 Gina C. O’Connor, Richard Leifer, Albert S. Paulson, and
whereas innovation is the conversion of knowledge to money. A research strategy
Lois S. Peters, Grabbing Lightning:
is the articulation of the domains in which new knowledge is to be developed. Any
Building a Capability for Break-
causality between R&D spending and firm success is ambiguous at best. However,
through Innovation (San Francis- co: John Wiley & Sons, 2008).
it is still necessary to dedicate R&D resources toward competencies development to explore options for innovation, even though this practice does not assure success. 3
6 For a detailed example of the structure and content of
Spending more money on R&D is not the simple answer, 4 nonetheless, firms that
a comprehensive innovation
invest heavily in R&D reap the benefits of invention in the form of patents and
strategy, see Bengt Anderberg
new insights that become published papers. Invention is not innovation. Invention
and Göran Roos, “Recommen- dations for an Effective Research
requires the successful introduction of something new into the firm and/or market-
and Technology Management
place. 5 In contrast, in its simplest form, an innovation strategy is the articulation
System within the BMVL”
of particular problems whose solutions would improve company performance, but
(proposal to Austrian Ministry of 6 Defence, 2004); Bengt Anderberg
for which there are presently no known off-the-shelf solutions. Anderberg and
and Göran Roos, “Vorschlag für
Roos note that an innovation management system embodies the processes, sys-
ein Forschungssystem des ÖBH”
tems, and structures that an organization deploys to ensure that innovation itself
[Proposal for a research system of the Austrian Armed Forces]
becomes a business process—and is managed as such—rather than a one-time solu-
(Vienna, Austria: Austrian
tion that occurs at random. The principle characteristics of an innovation manage-
General Staff, 2005).
ment system are described in detail in an earlier publication. 7
7 Göran Roos, “Innovation
Value-creating innovations are pursued to maximize the value that an innova-
Management: A Success Factor
tion holds from the customers’ point of view. These types of innovations are: 8
for Competitiveness” (paper presented at VTT Intelli-
• Efficiency improving innovations that enable cost cuts which are then (par-
gence Forum: Tuottavuus ja
tially) passed on to customers. These innovations normally occur when the
T&K-Strategia Murroksessa;
firm finds new ways of reducing the nine types of waste identified through
Miten Vastata Haasteeseen? [Productivity and R&D Strategy
the Lean approach—unnecessary transportation, rework, overstock, over-
in Transition: How to Respond
production, waiting time, non-value adding activities, non-value adding pro-
to the Challenge?], Helsinki
cesses, unused creativity, and intellectual waste, i.e., an overqualified person
2007), 42–61; Göran Roos,
on the job;
6 she ji The Journal of Design, Economics, and Innovation Volume 2, Number 1, Spring 2016
• Science and technology innovations that increase customer perceptions of
“Manufacturing in a High Cost
an offering’s instrumental value; Environment: Basis for Success
on the Firm Level,” in Global
• Design-based innovations that increase perceived instrumental value for cus-
Perspectives on Achieving Success
tomers, in this case via artifacts that cause changes in user behavior. Such
in High and Low Cost Operating
behavioral changes lead to the user feeling better off, and as a consequence, Environments, ed. Göran Roos
and Narelle Kennedy (Pennsylva-
the creator of the object is better off. In other words, design-based innova-
nia: Hershey, 2014), 393–480.
tions lead to a win-win situation;
8 Roos, “Manufacturing in a
• Art-based innovations that increase customer perceptions of a good’s in-
High Cost Environment, Firm
trinsic value. In consumer goods, art can add to the perceived authenticity
Level.”
of the good, and thereby increase its value in the eye of the consumer. 9 This
9 James Gilmore and Joseph
is critical in the luxury goods sector. Innovative techniques involving so-
Pine, Authenticity: What Comum-
cio-drama and psycho-drama can have a profound impact on innovation and
ers Really Want (Boston: Harvard Business School Press, 2007);
value creation both as a trigger in the innovation process and as a generator
James Gilmore and Joseph Pine,
of aesthetic arousal in the overall customer experience, while using sen-
Beyond Experience: Culture,
sory stimuli, e.g. ambient scent and music, causes consumers to value the
Consumer and Brand: Using Art
to Render Authenticity in Business
products higher. Haptic stimuli can in a similar way increase the value
Arts & Business (London: Arts &
perceived by customers through aesthetic arousal. 11 More can be said in
Business, 2009).
relation to the innovation processes in the art domain, 12 but this is not for 10 See for example: Anna S.
this paper;
Mattila and Jochen Wirtz,
• Innovations grounded in reverse hermeneutics that increase perceived
“Congruency of Scent and Music as a Driver of In-Store Evalu-
instrumental and intrinsic value for customers by changing their emotional
ations and Behavior,” Journal
state.
of Retailing 77, no.2 (2001): 273–89; Jochen Wirtz, Anna S. Mattila, and Rachel L.P. Tan, “The
To understand innovation, and hence the role of value-creating paradigms, we
Role of Arousal Congruency in
must first understand the key drivers of change. These drivers primarily relate to evolutions in global trends (in manufacturing), government policy, technology
faction Evaluations and in-Store
development, manufacturing productivity growth, shifting consumer and customer Behaviors,” International Journal
of Service Industry Management
preferences, and the shifting balance between fragmenting and concentrating
18, no. 1 (2007): 6–24; Treasa
forces in global supply chains. The need to look for new approaches to innovation
Kearney, Incorporating Environ-
occurs because the world in which manufacturing companies operate is constantly mental Stimuli into the Service changing.
Context: A Structural Equation Modelling Approach (PhD thesis, Dublin Institute of Technology,
Global Trends with Relevance for Manufacturing 2012). Certain key global trends are mentioned in the manufacturing literature. 13 Firstly, 11 Stewarta Birrell, Mark Young, and Alex Weldon, “Delivering
there is a drive for higher and higher productivity as a consequence of product
Smart Driving Feedback
and service personalization. Second, there is a blurring of the distinction between
Through a Haptic Pedal,” in Contemporary Ergonomics and
product and service, and an increasing focus on providing solutions rather than
Human Factors 2010: Proceedings
offerings. Third, there is a move from mass production to mass customization, as a
of International Conference on
consequence of technological advancements, changing and diverging global demo-
Contemporary Ergonomics and Human Factors 2010, ed. Martin
graphics and evolutions in demand-driving preferences. In particular, the emer-
Anderson (Oxford, UK: Taylor &
gence of BRIC middle class consumers is an important demand driver. In response
Francis Group, 2010), 431–39.
to customer needs and external impediments, manufacturing is forced towards
12 Albert Ali Salah, Hayley
ever more rapid change.
Hung, Oya Aran, and Hatice
Added to demand is the pressure to be competitive brought on by the growth
Gunes, “Creative Applications
of cheaper labor markets. At the same time, we can see changes to supply chain of Human Behavior Under-
standing,” in Human Behavior
operations including the globalization of supply chains and the simultaneous
Understanding: Volume 8212 of the
acceleration of innovation in global supply chain management. These changes are
Series Lecture Notes in Computer
combining with increasing product fragmentation to generate a function-centric Science (Cham, Switzerland:
Springer, 2013), 1–14.
view—focusing on specific elements of the supply chain—rather than the tradi- tional sector- or industry-wide view. In other words, individual firms as well as 13 See for example: CSIRO,
Manufacturing a Better Future:
governments must now think in terms of specializing, and concentrate on specific
The Role of Science, Technology
elements of a given global supply or value chain and the associated implications for
and Innovation: Report prepared
Design-Based Innovation for Manufacturing Firm Success Design-Based Innovation for Manufacturing Firm Success
localization. In addition, this development will increasingly require firms to simul-
Manufacturing Taskforce (paper 8) (CSIRO, 2012); Forfás, Making
taneously collaborate and compete, a process known as “coopetition.”
It in Ireland: Manufacturing 2020
At the same time there is accelerating technology development and acceler-
(Dublin: Forfás, 2013); Susan
ating diffusion and harmonization of technical capabilities and technology access
Christopherson, Ron Martin, Peter Sunley, and Peter Tyler,
across trading partners. This includes all existing general-purpose and key enabling
“Reindustrialising Regions:
technologies. In the short term, advanced manufacturing technologies like robotics
Rebuilding the Manufacturing
and additive manufacturing technologies will have a major impact, as will the
Economy,” Cambridge Journal of Regions, Economy and Society 7,
integration of information and communication technologies (including big data an-
no. 3 (2014): 351–58.
alytics and artificial intelligence) and sensors into the manufacturing process—oth-
erwise known as the Internet of Things (IoT) at the technology level, and Industry
14 The focus of the part of the
German industry policy known
4.0 at the paradigm level. In the medium to long term, development will pertain to
as Industry 4.0 is grounded
the adoption of synthetic biology-based manufacturing processes and the diffusion
in the insight that countries and companies that invest in
of capabilities enabling the creation of advanced materials to performance specifi-
cyber-physical capability and in-
cations. This is not limited to known enabling technologies—it also applies to those
frastructure will be positioned to
that are yet to be developed. The impact of ongoing technological development
lead by exploiting the resulting
is exemplified by the now ubiquitous role of ICTs, and the blurring of boundaries between real and virtual worlds, and the need for manufacturing firms to master
this cyber-physical interface. 14 The role of technological advancement is further exemplified by the trend towards increased reliance on modeling and simulation in the manufacturing process.
Increasing cost and risk related to emerging technology R&D means that these activities will be executed by those organizations that have enough capital to invest, and can accept higher levels of risk and increased delays in investment re- turns. For example, ROI after the development of new aircraft engines can be 8–10 years. As a consequence, R&D is moving to locations with a cultural acceptance for industry-related boundary conditions—defense industries to the US, transportation and other non-defense systems industries to Germany, the Netherlands, the Nordic region and parts of central Europe, cars to East Asia, and semiconductors and other sophisticated technology-based components and devices to East and Southeast Asia. There is an increased emphasis on environmental sustainability and resource effi- ciency, driven by the continuous requirement to derive more from less. This will further accelerate the adoption of new technologies and processes. For example, the additive manufacturing process generates only a high, single digit percentage of waste, whereas the normal subtractive manufacturing process generates a high, two-digit percentage of waste. Further environmental sustainability will be gained as more activities are moved into the virtual domain–exemplified by the increased use of modeling and simulation. Emerging, technologically enabled modes of oper- ation have negligible environmental impact when compared to current prototyping and testing methods in the physical world. These developments and trends drive new ways of working that harness the full potential of every individual in the work- place, and attract appropriately skilled new employees.
Government Policy
Government policies are driven by political objectives and the economic ‘lens’ they use to view the world. The most commonly used economic lenses are neoclassical, originating out of Adam Smith’s An Inquiry into the Nature and Cause of the Wealth of Nations, published in 1776; neo-Keynesian, originating out of John Maynard Keynes’ The General Theory of Employment, Interest, and Money, published in 1936; neo-Schum- peterian, originating out of Joseph Alois Schumpeter’s Capitalism, Socialism, and Democracy, published in 1942; evolutionary—which is sometimes clustered with the neoclassical and sometimes with the neo-Schumpeterian—originating out of Thor- stein Veblen’s Why Is Economics Not an Evolutionary Science?, published in 1898; and institutional, originating out of Walton Hale Hamilton’s The Institutional Approach
8 she ji The Journal of Design, Economics, and Innovation Volume 2, Number 1, Spring 2016 8 she ji The Journal of Design, Economics, and Innovation Volume 2, Number 1, Spring 2016
15 For a summary of these eco- nomic lenses from a manufactur-
demand- vs. supply-side of policy, and on the role of government, and hence create
ing perspective see Göran Roos,
different policy landscapes that are more or less conducive to the operation of man-
“Manufacturing in a High Cost
ufacturing firms.
Environment: Basis for success on the National Level,” in Global Perspectives on Achieving Success
Technology Development
in High and Low Cost operating
Technology development is impacting the cost of manufacturing via changes in op-
Environments, ed. Göran Roosand
portunity space and demand space. Opportunity space is what is possible in terms Narelle Kennedy (Pennsylvania:
Hershey, 2014),6–9,Table 1.
of manufacturing, and hence determines the future supply space of manufactured goods. Demand space follows from an increasing awareness among customers and 16 Roos, “Manufacturing in a
High Cost Environment, Nation-
consumers of what is available. All technologies develop, but some are likely to
al Level.”
have a greater impact than others. Those that are likely to have greatest impact are
17 Bee Yan Aw, Mark J. Roberts,
known as general-purpose technologies, or Key Enabling Technologies (KETs), and
and Daniel Yi Xu, “R&D In-
are characterized by their ability to simultaneously impact multiple industries, and
vestments, Exporting, and the
create entirely new industries. Evolution of Firm Productivity,” The list of pivotal KETs includes ICTs—Big Data,
The American Economic Review
Big Data Analytics, Artificial Intelligence, algorithmic development, and IoT; Addi-
98, no. 2 (2008): 451–56; Ulrich
tive Manufacturing technologies; industrial and service robotics; other advanced
Doraszelski and Jordi Jauman-
manufacturing technologies; micro- and nano-electronics; industrial biotechnology; dreu, “R&D and Productivity:
Estimating Endogenous Produc-
photonics; advanced materials; and nanotechnology.
tivity,” The Review of Economic Studies 80, no. 4 (2013): 1338–83;
Manufacturing Productivity Growth
Sun Ling Wang and Eldon Ball, “Agricultural Productivity
There are a number of key drivers of manufacturing productivity growth that need
Growth in the United States:
to be understood to maximize such growth:
1948–2011,” Amber Wave,
• Public and private research expenditures that enable continuing output growth USDA
4, 2014, http://www.ers.usda. without adding input. 17 gov/amber-waves/2014-janu-
• Learning-by-doing (closely linked to experience curve effects) encompassing
aryfebruary/agricultural-pro-
18 the balance between the positive productivity effects ductivity-growth-in-the-unit- that emerge from
ed-states-1948-2011.aspx#.
having, on one hand, past experience with the existing product design,
VXKEUc-qqkr .
past experience with other designs of similar products, experience with
18 These are listed by decreas-
an existing product design from a competing provider, and awareness of
ing order of impact.
competing providers’ experience producing other similar designs; 19 and on
the other hand, the rate at which the cumulative learning is depreciated. 20 19 Rebecca Thornton and Peter Thompson, “Learning
Learning-by-doing can be further strengthened by stable relationships that
from Experience and Learning
allow for mutual learning synergies with positive productivity outcomes. from Others: An Exploration 21 • Innovation as a core driver of both firm 22 23 and industry productivity. of Learning and Spillovers in Wartime Shipbuilding,” Amer-
• Service input provision, including R&D services; product design services;
ican Economic Review 91, no. 5
business support services (e.g., accounting, legal, IT, contact centers, etc.); (2001): 1350–68. provision of assets and processes services (e.g., outsourcing, contract manu-
20 C. Lanier Benkard, “Learning
facturing, solutions provision, equipment operations, preventive and correc-
and Forgetting: The Dynamics of Aircraft Production,” The
tive maintenance, vendor financing, etc.); communications services; supply
American Economic Review 90, no.
chain management; channel to market services; product promotion services;
transportation and logistics services; upgrade services; remanufacturing
21 Ryan Kellogg, “Learning by
services; recycling services; disposal services; utilities provision; financial
Drilling: Inter-Firm Learning and
services; government support services (e.g., infrastructure, education, public
Relationship Persistence in the
safety, regulatory services, etc.). 24
Texas Oilpatch” (NBER Working Paper No. 15060, National
• Labor productivity growth by upgrading capital equipment, 25 and the asso-
Bureau of Economic Research,
ciated labor skill levels; 26 replacing labor with capital equipment; 27 and
2009), accessed May 12, 2016, http://www.nber.org/papers/
skill-biased (or more generally factor-biased) technological change relating
w15060 .
specifically to KETs and mostly studied as they relate to ICT. 28 ICT stands
22 Marco Cucculelli, “Product
out because of its relative long-term presence in the economy, but it is likely
Innovation and Firm’s Growth
that similar effects will be seen in regard to other KETs as they become
in Family Firms: A Quantile
established.
Regression Approach,” Interna-
• Managerial capability has a major impact on the productivity growth in firms. 29 tional Journal of Entrepreneurship
Design-Based Innovation for Manufacturing Firm Success Design-Based Innovation for Manufacturing Firm Success
• Firm (re)structuring to achieve maximum benefit. Given the firm’s existing
no. 1 (2013): 124–41.
capabilities, optimizing resource allocation can generate positive produc-
23 Mary Crossan and Marina
tivity outcomes. 30 This can be by way of diversification, vertical integration,
Apaydin, “A Multi-Dimensional Framework of Organizational
or any other structure that achieves such optimization.
Innovation: A Systematic Review
• Operating in a highly competitive market drives productivity by rewarding the
of the Literature,” Journal of
more efficient producers and penalizing the less efficient producers, some-
Management Studies 47, no. 6 (2010): 1154–91.
times to the point of forcing the latter’s exit. At the same time, this raises productivity level requirements for potential entrants. 31 Competition also
24 Michael Ehret and Jochen Wirtz, “Creating and Capturing
contributes to enhanced productivity, since the adoption of new, higher pro-
Value in the Service Economy:
ductivity practices normally comes with an initial period of increased cost
The Crucial Role of Business
before the benefits starts to accrue—meaning that if there is no competitive
Services in Driving Innovation and Growth,” in The Handbook
pressure to increase productivity, the firm is likely to abstain from doing so
of Service Business: Management,
in order to avoid these temporary cost increases. 32
Marketing, Innovation and Interna-
• Agglomeration effects: Members of agglomerations, or clusters, are more pro-
tionalisation, ed. John R. Bryson and Peter W. Daniels (Beaverton:
ductive, and see more productivity improvement than firms that are not members of any agglomeration. Ringgold, 2015), 129–45. 33 Average firms that are part of clusters
show benefits over those not in clusters. These include an increase of four-
25 Ann Bartel, Casey Ichniowski,
and Kathryn L. Shaw, “How
teen percentage points to value added growth; seven percentage points
Does Information Technology
to profitability growth; and two percentage points to wages per employee
Affect Productivity? Plant Level Comparisons of Product Innova-
(a proxy for productivity). 34 Agglomeration effects include productivity
tion, Process Improvement, and
spillovers—which exist in both the technological domain and the business
Worker Skills,” The Quarterly
practice domain, and are impacted by location, product, process, tech-
Journal of Economics 122, no. 4 (2007): 1721–58.
nology, and position in ecosystem. In spite of the fact that transactions and exchanges can be made almost instantly and independent of location
26 Pekka Ilmakunnas, Mika Maliranta, and Jari Vainiomäki,
and distance, there are transactions and exchanges that—for one reason
“The Roles of Employer and
or another—do not follow this pattern, but are instead highly sensitive to
Employee Characteristics for
distance. 35 These activities need to be built on trust and a common insti-
Plant Productivity,” Journal of
tutional framework that can only be developed by face-to-face contact and
Productivity Analysis 21, no. 3 (2004): 249–76.
hence require geographical proximity. 36 Those beneficial aspects of close proximity which firms cannot control or achieve in any other way than
27 John Foster, “The Australian Multi-Factor Productivity
through close geographical and specialization proximity are what Storper
Growth Illusion,” The Australian
calls “untraded interdependencies.” 37 The strength of agglomeration effects
Economic Review 48, no. 1 (2015):
depends on many different factors, including—but not limited to—industry,
technology level, openness to exchange between participants, international
28 Thomas Strobel, “Directed
linkages, labor exchange, etc. 38
Technological Change, Skill Complementarities and Sectoral
• Deregulation or smarter regulation can drive productivity improvements. De-
Productivity Growth: Evidence
regulation can enhance competition and generate stronger agglomeration
from Industrialized Countries
effects. Smarter regulations impose productivity-reducing regulations on the
during the New Economy,” Journal of Productivity Analysis 42,
organization, which force it to innovate in order to re-establish its previous
no. 3 (2014): 255–75.
productivity level, a level required to remain competitive with jurisdictions
that do not have these productivity-reducing regulations. 39 Environmental
29 Cheyne Buckley and Ishita
Chatterjee, “Drivers of Product
regulations have a short-term negative but a long-term positive impact on
Innovation by Australian SMEs:
innovation, which means that regulation can be a powerful tool to drive
The Importance of Managerial
innovation within specific sectors—like construction—and technologies. Attitude” (part of Cheyne’s 40
Honours thesis, University
• Input markets are, on the one hand, made more flexible if institutions im-
of Western Australia, 2012),