Successful companies in arty industry recognize the importance of invo
lving customers and suppliers in the design and development of product
s and services. When complex product and process technologies are invo
lved, these relationships create a network of companies and industries
, each of which is a potential source for technological innovation. At
the same time, however, such interrelationships further complicate th
e already challenging task of analyzing the evolving nature and source
s of innovation. Using ethylene manufacture as a case study, Peter Hut
cheson, Alan Pearson, and Derrick Ball present a three-stage model of
innovation. The model provides a framework for understanding the evolu
tion of technological innovation in ethylene manufacturing, as well as
the changing roles of the equipment suppliers, the process plant supp
liers, and the operating companies througout this evolution. The appli
cability of this approach to other sectors of the chemical processing
industry is also evaluated. In much the same way that a product's life
cycle can be traced through distinct phases of creation, growth, matu
rity, and decline, technological innovation progresses through three m
ain phases: uncoordinated, segmental, and systemic. The progression th
rough these three phases is marked by changes in the relative levels o
f product and process innovation activity. In this three-stage model,
innovative activity progresses from an extreme of high product and low
process innovation during the uncoordinated phase, through the segmen
tal period of low product and high process innovation, to the low prod
uct and medium process innovation levels of the systemic phase. In oth
er words, as the industry matures, the focus of innovative activity gr
adually shifts from the product to the process. As illustrated by the
example of ethylene manufacturing, companies operating in an industry
that has reached the systemic stage will find little or no scope for i
nnovation in the end product or the core manufacturing technolagies. I
n such a mature market, the product is a commodity item, and the funda
mentals of the manufacturing process are well known. At this stage, th
e at quest for productivity improvements focuses on cost reductions fr
om task structuring and specialization, task integration, and automati
on. As such, equipment manufacturers play an increasingly important ro
le in refining existing technologies and improving equipment reliabili
ty and capabilities. Such efforts are facilitated by close cooperation
with the operating companies, which can contribute process expertise
that the equipment manufacturers might otherwise lack.