Division of Labour
Definition: Allocation of different jobs to different people based on their comparative advantage;
allows for specialization and efficiency
Key Points:
Allows workers to specialize, gain skills, be more productive
Most products today involve division of labor across many people
Limits: occupation type, capital available, size of market
Critics argue it can lead to overspecialization, narrow-mindedness, alienation
Examples:
Adam Smith's pin-making example - division of labor increased output vastly
Flexible manufacturing in cars - workers trained in multiple roles instead of one specialized task
Innovation
Definition: Commercial application of an invention - creating new products or processes
Key Points:
Translates knowledge into reality
Can cause downfall of entire industries if disruptive innovation from outside
Innovations in one industry can spur whole new industries (e.g. computers -> internet -> business
process outsourcing)
Types:
Neutral innovation: neither capital- nor labor-saving
Capital-saving: produces more output for a given capital input
Labor-saving: produces more output for a given labor input
Key Takeaways:
Focused on the market and customers
Requires learning culture and continuous improvement
Applies across all business areas - design, products, marketing, pricing, service, etc.
Management is major driver
