TECHNOLOGICAL S CURVES ANALYSIS OF THE DIFFUSION OF TECHNOLOGICAL INNOVATIONS.

FIVE MODELS COMPARISSION JHON WILDER ZARTHA SOSSA Agroindustrial Engineer, Master in Technological Management, Professor Researcher, Coordinator of the Investigation group in Technological Management, Universidad Pontificia Bolivariana, Medelln Colombia email: jhon.zartha@upb.edu.co. Circular 1 # 70 -01 Bloque 7. Medelln Colombia. ANDRES FELIPE AVALOS PATIO Investigation group in Technological Management, Circular 1 # 70 -01 Bloque 7. Medelln Colombia, avalosp@gmail.com. SERGIO AGUILAR URREA Investigation group in Technological Management, Circular 1 # 70 -01 Bloque 7. Medelln Colombia, sergioaguilarug@gmail.com. JUAN DIEGO LPEZ GMEZ Investigation group in Technological Management, Circular 1 # 70 -01 Bloque 7. Medelln Colombia, juandizepol@gmail.com. NGEL DANIEL ROS OSORIO Investigation group in Technological Management, Circular 1 # 70 -01 Bloque 7. Medelln Colombia, adro138@hotmail.com.

ABSTRACT In the Colombian Industry there is a lack of understanding about the way the technological innovations are diffused, especially when it comes to new product life cycle researching. Mathematical models according to this analysis have not been set. This article follows the paper 'technological s curves analysis of the diffusion of technological innovations' presented at IAMOT 2009 Management of green technology with the paper Technological S curves analysis of the diffusion of technological innovations, in that research was held an analysis on technological innovations diffusion using the logistic model, so that the S curves were obtained and this curves supported the development of technological innovation strategies. Nevertheless the result was not compared with other models. So that the current article brings more tools that provide more accurate information about the product life cycle In this article, a research of the life cycle of six products from food Colombian companies of the meat sector was made. In order to this, five mathematical models were used, which were: 5 parameters Weibull, 3 parameters Gaussian, 5 parameters Gaussian, 4 parameters Logistic Model and Bass Model. These Models graphics describe S curves which represent the product life cycle. These curves were obtained from a performance parameter (Sold Units) cumulative along time. A Non linear regression was applied to this data series according to each one of the models, using specialized software. Statistical indicators given by the

software were compared in order to determine the best fitting model, which was used to find the inflection point of the graphic. This point may be used as a tool for making strategic decisions in products as to: determine key moments for launching technological innovations, make investments and perform marketing strategies. Keywords: S Curves, Technological Innovation, Inflection Point, Performance Parameters, Marketing Strategies.

INTRODUCTION Technological innovations can be analyzed through S curves and in this curves stages are clearly identified (Fernndez, 2005), (Kucharavy, 2007; 2008) (Shilling, 2004). Carlota Prez (2001) purposes four stages in an S curve which are further consistent with the analysis made by Melissa Schilling (2004).In the initial stage the product is valued by its high novelty level, even though it could show failings, in this stage high investments must be done in order to achieve product positioning. At second stage the product is highly profitable; this is the appropriate time to turn knowledge into confidential, at this time high investments are done in order to keep the product in the market. In the third stage the growth is slower than in the previous stage, the product starts the maturity stage and has attained a good position in the market, this stage must is focused to the cost - efficiency rate, so that the investment level must be lower than in the previous stage, the investment are reduced only to process improvements. At the fourth stage the product comes to obsolescence, the knowledge previously confidential can turn into public, at this time spends are reduced. The knowledge at the time when a stage ends and another begins may be very important for making decisions also for planning and subsequent execution of the investment, marketing and innovation strategies, so that the S curves knowledge is important in the management of technology because it indicates the appropriate time for investments to be done, also it can be very useful to define the time for incremental or radical innovations (Godet ,1993) ( Prez, 2001). The S curves are useful tools to study the products life cycle, as well as for the analysis of technological innovations, but before using this tools it must be validated according to the productive sector in order to define the length of each innovation stage and it can only be achieved through its application in industries. In order to build an S curve it is necessary to have the information about a performance parameter along time, this information will show up the product past behavior. The result of this analysis can be taken as an indicator of what should happen in the future of the product or sector, is so that has been discovered that the innovation cycles tend to diminish, but to conclude this it is necessary to study the S curves for as many products as possible from a sector in order to get a representative sample that shows up the real sector behavior, therefore is necessary a continuous and step S curve study. According this, models different than the logistic are analyzed applied to meat sector. It is necessary to study as many S curves to the most quantity of products from a sector as possible in order to get a representative sample that shows the actual behavior of the productive sector, so it is necessary a continuous and step study of the graphics. Based on the S curves and its inflection point it can be known the appropriate time for radical

or incremental innovation to the product, looking for market competitiveness of the product and increase productivity for the company. The inflection point show the instant when the product market performance diminish and the maturity stage begins (Godet ,1993; Prez, 2001). To define it, it is necessary a model that describes this kind of behaviors. In the article presented at IAMOT 2009 Management of green technology in the paper Technological S curves analysis of the diffusion of technological innovations (Zartha et al., 2009), was used only the logistic model. IN this article are analyzed four different models in order to compare the results and define the best fitting model through its statistical parameters. The analyzed time series were taken from innovative products in the last six years from a Colombian company of the meat sector

The S Curve Margaret White y Garry Bruton (2007), present an analysis of the S curve related to the marketing strategy, the key persons, the feeding sources, the communication and the required information more convenient for each stage of the graphic, see Figure 1. En the first stage of the curve it is necessary to invest in R&D focused to the new product and the bran development, the required persons must have high technical knowledge, it is necessary to keep in contact with external groups as a source of knowledge, and also it is required information about science trends and developments. In the growth stage the investments in product and brand development must continue, it is required professional sales people, in this stage is very important the marketing, and the communication must be focused on the client, it is necessary to get information about the market trends and the competitor actions, watchin for new competitors. In the third stage the investments must be reoriented to the brand renovation and expansion, the key persons are focused in the production process, marketing and R&D, communication mist be focused on the efficient production and trends detection, it is very important the information about the competitors and other possible uses for technology, the company must be centered in solving problems. In the fourth stage, the company must be focused on avoiding losses, it is very import the cost benefit ratio, so that it is very important the activities from the sales people and costing experts, decisions about the brand must be made.

Maturity Growth l

Decline

Initial Stage

New Paradigm

Time
Figure 1. S curve stage

The S curve as a tool for uncertainty reduction Innovations are associated to some uncertainty related to market, technology and commerce, which increase with the necessity of information or knowledge about the variables that join in the launching process of a new product or the improvement of an existent one. Technological uncertainty bears upon the necessity of additional knowledge about the components an the way they are related, the methods and the techniques in order to reach the appropriate performance of the new product. Market uncertainty is the additional information about the clients and their needs. The uncertainty can be reduced by studying the technological and market trends and the use of appropriate innovation strategies. The most satisfactory way to analyze technological trends is through the S curves, this let the company analyze the innovation performance in time (Afuah, 1999). In the same way the market trends can be analyzed through S curves, thats why the Product Life Cycle has been studied in marketing (Kotler, 1996). In the quest for reducing technological and market uncertainty, the company must watch the S curves that describe the performance, but it is also important to watch S curves for other companies from the same productive sector (Afuah, 1999), this motivates the analysis of the mathematical model that describe S curves in order to get the best fitting for each sector.

Methodology For this analysis it was taken a mathematical S curves models database (LPEZ., et al 2005 ), four models from that list were compared to the logistic model. The used models were: Weibull 5 parameter, see table 1, Gaussian 3 parameter, see table 2, Gaussian modified 5 parameters, see table 3 and Bass model, see table 4. After that, six time series with more that 30 periods of meat innovative products were taken in order to make a non linear regression according to each one of the models. After this, the inflection point, and the R2 and Durbin Watson (DW) values were calculated, shown in table 6. For the logistic model case, it was not necessary to draw on the second derivative to find the inflection point, in the previous paper anterior (Technological S curves analysis of the diffusion of technological innovations), is demonstrated that the d value shows that point. The equation of this model and the interpretation of its constant values is show as follows:

y(t ) a
With:

b 1 e c ( t d )

y(t) = Performance as a function of time. a+b = Upper asymptote of the curve. c = Growth parameter. d = Inflection point. To calculate the inflection point for each one of the models it was used the second derivative concept. All the functions used differentiable throughout its domain , so that the inflection point can be found if exists an open interval which contains n, so (n,f(n)) is an inflection point if f(n) exists and f(n) =0 (Leithold,1998). After that, the values of the constants calculated with the non linear regression were replaced in the second derivatives, so that the time could be calculated by solving these derivatives and finally find the inflection point.
Table 1 Weibull 5 parameter Model

Weibull 5 parameter Model 1ra derivative Equation

2da derivative

Table 2 Gaussian 3 parameter Model

Gaussian 3 parameter Model 1ra derivative Equation 2da derivative

Table 3 Gaussian Modified 5 parameter Model

Gaussian Modified 5 parameter Model 2da derivative 1ra derivative Equation

Table 4 Bass Model

Bass Model 1ra derivative Equation 2da derivative

RESULTS After making the non linear regression for each model, were obtained the results shown in tables 5, 6, 7, 8
Table 5. Results for Weibull 5 parameter Model

Parameter a b c L m

Product Product E D 669,3358 548,9908 265,4787 30,1205 34,7757 319755,7393 183769,8844 619005,6632 9351,7235 62298,6863 11406,5594 6846,1989 21271,1012 415,874 3064,787 53,1416 55,9615 43,6736 7,6107 13,4342 -61,7403 -48,391 -35,3711 -11,5708 -10,2876 Product A Product B Product C

Product F 21,2031 79,3922 3,1511 12,5873 -6,3868

Table 6. Results for Gaussian 3 parameter Model

Parameter Product A a b L

Product D 522827,0887 417180,1666 176823,4817 14,3504 36,4367 34,3737 31,916 15,5572 94,4407 93,665 78,2789 34,0618 Product B Product C

Product Product E F 18,3152 9,7996 15,7179 16,0814 35,6506 34,1834

Table 7. Results for Gaussian Modified 5 parameter Model

Parameter a b c L m

Product Product E D -669,374 -548,9834 -265,5026 26,8971 -34,7664 130852,7298 245846,4835 265054,2122 28,6339 15793,6418 4668,2962 9159,6424 9108,1476 1,7144 777,8582 130808,7393 245799,2903 265020,0398 41,6932 15786,8197 607,6544 500,5875 230,1326 -10,216 24,4961 Product A Product B Product C

Product F 21,0458 68,3839 3,3848 87,858 -6,3213

Table 8. Results for Bass Model

Parameter p q

Product A 0,0029 0,0686

Product B 0,0021 0,0741

Product C Product D Product E Product F 0,0051 0,0706 0,0204 0,1091 0,0164 0,1144 0,0240 0,0807

The parameters values calculated for the logistic model was not necessary in order to find its inflection point. These values were replaced in each model second derivative in order to fin the inflection point, the results are shown in table 9. In that table are also the values of R2 and DW calculated for each model.
Table 9. Results for Products A, B, C, D, E y F.

Product A Inflection point R^2 D-W Product B Inflection point R^2 D-W Product C Inflection point R^2 D-W

Gaussian 3 parameter 58,004 0,9987 0,0464 Gaussian 3 parameter 59,29 0,9984 0,0337 Gaussian 3 parameter 46,36 0,9969 0,0497

Gaussian 5 parameter 63.414 0,9998 0,2270 Gaussian 5 parameter 65.795 0,9999 0,3395 Gaussian 5 parameter 54.341 0,9987 0,1012

Logistic 66,805 0,9998 0,1926 Logistic 69,65 0,9998 0,3091 Logistic 60,66 0,9986 0,1022

Weibull 5 Bass parameter 63.413 44,245 0,9998 0,9852 0,2271 0,0166 Weibull 5 Bass parameter 65.795 46,764 0,9999 0,9879 0,3395 0,0200 Weibull 5 Bass parameter 54,337 34,713 0,9987 0,9833 0,1012 0,0206

Product D Inflection point R^2 D-W Product E Inflection point R^2 D-W Product F Inflection point R^2 D-W

Gaussian 3 parameter 18.50 0,9945 0,1285 Gaussian 3 parameter 19.93 0,9958 0,1291 Gaussian 3 parameter 18.10 0,9938 0,1463

Gaussian 5 parameter 15.946 0,9998 0,7537 Gaussian 5 parameter 20.8759 0,9999 1,3407 Gaussian 5 parameter 13,078 0,9997 0,8078

Logistic 15,05 0,9998 0,7754 Logistic 20,36 0,9998 1,2722 Logistic 13.078 0,9996 0,7965

Weibull 5 Bass parameter 15.7947 12,947 0,9998 0,9912 0,7630 0,0703 Weibull 5 Bass parameter 20.8773 14,85 0,9999 0,9911 1,3408 0,0742 Weibull 5 Bass parameter 12.2459 11,582 0,9997 0,9940 0,8045 0,0870

Results Analysis The time series for product A and B is composed by 74 data each one, watching in the table the Durbin Watson value, it was found that exist positive residual autocorrelation with the obtained results. In the case of product C the time series have 62 date, and exist positive residual autocorrelation with the obtained results too. The time series for product D and F is composed by 32 data each one and the results of the Durbin Watson value show that exist positive residual autocorrelation with the obtained results too. For the product E there are 32 data. For this data the Durbin Watson values obtained with the Gaussian 5 parameter, logstic y Weibull 5 parameter models are 1.3407, 1.2722 y 1.3408, and this values does not show positive residual autocorrelation, but with the Gaussian 3 parameter y Bass models exist positive residual autocorrelation The curves for product A, B and C are shown in Figures 2, 3, 4 with its inflection points according to the best Durbin Watson value.

Inflection Inflection point point

Figure 2. S curve Product A

For product A the Gaussian 5 parameter and Weibull 5 parameter models show a similar behavior with the inflection point in the month 63.41, and the Durbin Watson model was the same for both models 0,227, so it can be concluded that either model can be used for this products line The Gaussian 3 parameter model, the logistic model and the Bass model are far from the result by 8,53%, 5,35% y 30, 22 % respectively

Figure 3. S curve Product B

For Product B the Gaussian 5 parameter and Weibull 5 parameter models show a similar behavior with the inflection point in the month 65.79, and the Durbin Watson model was the same for both models, so it can be concluded that either model can be used for this products line The Gaussian 3 parameter model, the logistic model and the Bass model are far from the result by 9,8%, 5,8% y 28,92% respectively

Inflection point

Figure 4. S curve Product C

For product C the best fitting model was the logistic, with the inflection point in the month 60.66 The Gaussian 3 parameter model, Gaussian 5 parameter, Weibull 5 parameter and the Bass model are far from the result by 27,57%, 10,41%, 10,42% y 42,77%respectively It can be seen that the 4 and 5 parameters models (Gaussian y Weibull) show a better result that the 3 parameter Gaussian model and the Bass model, accordingly to the R 2 and Durbin Watson values

Conclusions The study of different models that draw S curves is fundamental to optimize the data fitting process of a time series. By increasing the numbers of parameters in a model the fitting is improved, it can be seen in the Gaussian model with 3 and 5 parameters which shows a big difference for the DW value, being better for the 5 parameters model. In general, the complexity of the model (higher number of parameters) is recommended to obtain a better fitting, but it makes harder to calculate the inflection point due to it is difficult to calculate the second derivative, which makes this method less practical and efficient. It is important to develop the same process with new data of products from the same sector in order to get an appropriate model for this sector, also it is necessary to compare the results with other model. The methodology shown in this article is useful to calculate the inflection point of the product life cycle, but requires appropriate software tools which makes complex the process To complement this article, the meaning of the constants and parameters must be studied for each model, so that this can bring important information abut the moments for the application

of innovation and marketing strategies, and for information and resources management It is necessary to find another method to calculate the inflection point, this can be achieved by using either a numerical or graphical method .
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