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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin

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CPET 575 Management of Technology

A Specialty course for M.S. Technology - IT and Advanced Computer Applications

Purdue University Fort Wayne Campus

Lecture 2

Part One

Integrating Technology and Strategy:

A General Management Perspective Technological Innovation

Technological Innovation & Strategy

Paul I-Hai Lin, Professor

http://www.etcs.ipfw.edu/~linRequired text book:

Robert A. Burgelman, Clayton M. Christensen, and Steven C. Wheelwright, Strategic Management of Technology and Innovation, 5th edition, McGraw-Hill, ISBN 0073381543, 2009.

CPET 575 Management of Technology -Lecture 1, by Prof. Paul I-Hai Lin

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The Coverage Topics of Management of

Technology Part I, “Integrating Technology and Strategy – A

General Management Perspective”

Part II, “Design and Implementation of Technology Strategy: An Evolutionary Perspective”

Part III, “Enactment of Technology Strategy –Developing a Firm’s Innovative Capabilities”

Part IV, “Enactment of Technology Strategy –Creating and Implementing a Development Strategy”

Part V, “Conclusion: Innovation Challenges in Established Firms”

http://www.etcs.ipfw.edu/~lin

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A General Management Perspective

Lecture 2


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Topics of Discussion

Overview

Key Concepts (Technological Innovations) and

Their Relationship

Integrating Technology and Strategy

Assessing Innovative Capabilities

Conclusion

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Overview

Importance of Technology and Innovation

Budget and spending on technology and innovation –

related activities (typically spend at least 5 percent of

sales revenue)

• High-tech company

• Tech-oriented company

• Start-up company, …

R&D Spending Examples:

The 10 biggest R&D spenders worldwide,

http://fortune.com/2014/11/17/top-10-research-development/

Global Innovation 1000 Study,

http://www.strategyand.pwc.com/innovation1000


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The 10 Biggest R&D Spenders Worldwide - 2013

1. Volkswagen, www.vw.com (German carmaker): $13.5

billion, 5.2% of revenue

2. Samsung, www.Samsung.com (South Korean

conglomerate): $13.4 billion, 5.2% of revenue

3. Intel, www.intel.com (Santa Clara, CA-based chip

manufacturer): $10.6 billion, 20.1% of revenue

4. Microsoft, www.Microsoft.com (Seattle, WA): $10.4 billion,

13.4% of revenue

5. Roche, www.roche.com (Swiss biopharmaceutical

company): $10 billion,19% of revenue

http://fortune.com/2014/11/17/top-10-research-development/

http://www.strategyand.pwc.com/innovation1000

http://www.vw.com/

http://www.samsung.com/

http://www.intel.com/

http://www.microsoft.com/

http://www.roche.com/

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The 10 Biggest R&D Spenders Worldwide - 2013

6. Novartis AG, www.novartis.com (Pharmaceuticals, eye

care, and generics): $9.9 billion, 16.8% of revenue

7. Toyota, www.Toyota.com (Japanese automaker): $9.1

billion, 3.5% of revenue

8. Johnson & Johnson, www.jnj.com (American health care

company): $8.2 billion, 11.5% of revenue

9. Google, www.google.com (Mountain View, CA-based

Internet company): $8 billion, 13.2% revenue

10.MERCK, www.merck.com (NJ –based pharmaceutical

company): $7.5 billion, 17% of revenue


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Overview

Who is responsible for strategic management

of technology & innovation of a company,

organization, firm, etc.?

• CEO

• Vice President of Technology, VP for IT

• Director/Manager of Technology

• CTO (Chief Technology Officer)

• CIO (Chief Information Officer)

• Chief Strategy Officer

• Chief Risk Officer

• Chief Visionary Officer

http://www.novartis.com/

http://www.toyota.com/

http://www.jnj.com/

http://www.google.com/

http://www.merck.com/

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OVERVIEW

General Manager’s Responsibilities are to

1) Acquire, develop, and allocate an

organization’s resources

2) Develop and exploit the firm’s capability for

innovation


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KEY CONCEPTS AND THEIR RELATIONSHIP

• Inventions/Discoveries/Technologies

• Technological Innovations

• Technological Entrepreneurship

• Activities and Outcomes

• Interrelations Among Key Concepts

INTEGRATING TECHNOLOGY AND

STRATEGY

ASSESSING INNOVATIVE CAPABILITIES

CONCLUSION

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STRATEGY

• Perspectives on Strategy

• Connecting Technology and Strategy

• Technology and the Value Chain

• Technology Evolution and Forecasting


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STRATEGY


Positive vs. Normative Views

Product-Market versus Resource Based Views




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STRATEGY



Technology and Competitive Strategy

Technology and Product-Market Strategy

Technology Portfolio

Technology Portfolio and Business Portfolio




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INTEGRATING TECHNOLOGY AND STRATEGY



• Technology and the Value Chain (Exhibit 6) Inbound Logistics

Operations

Outbound Logistics

Marketing Sales

Service


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STRATEGY





Technology Life Cycle

Technology Forecasting


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ASSESSING INNOVATIVE CAPABILITIES

• Innovative Capabilities Audit Framework

Innovative Capabilities

Business Unit Level Audit

Corporate Level Audit

Audit Frames of Reference

Who Should Do the Audit?

Conclusion

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Key Concepts and Their Relationships

Inventions/Discoveries/Technologies

Technological Innovations

Technological Entrepreneurship

Activities and Outcomes

Interrelations Among Key Concepts


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Key Concepts and Their Relationships


• Inventions/Discoveries

Results of creative process

How to measure the success

• Technical (Is it true/real?) rather than

Commercial (Does it provide a basis for

economic rents?)

• Patents – allow their inventors/originators

to establish a potential for success

• Successful innovations (subsequent

refinement may be needed, with

significant time lag, 10 years or more)

Research & Development

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Key Concepts and Their Relationships (cont.)


• Technology

Refers to the theoretical and practical knowledge, skills, and artifacts that

• Can be used to develop products and services as well as their production and delivery systems

• Can be embodies in people, materials, cognitive and physical processes, plant, equipment, and tools

Technologies are usually the outcome of development activities to put inventions and discoveries to practical use

How to measure the success

• Technical (Can it do the job?) rather than commercial (Can it do the job profitably?)


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• Technology – success examples

The inventions of

• Transistor (1947), Bell Lab Bell Labs Top 10 Innovations, http://www3.alcatel-

lucent.com/wps/portal/BellLabs/Top10Innovations

• Integrated Circuit (1959), Texas Instruments & Fairchild Semiconductor Corporation

http://inventors.about.com/od/istartinventions/a/intergrated_circuit.htm

http://www.computerhistory.org/semiconductor/timeline/1960-FirstIC.html

• Microprocessor (1971), Intel http://www.computerhistory.org/semiconductor/timeli

ne/1971-MPU.html

http://www3.alcatel-lucent.com/wps/portal/BellLabs/Top10Innovations



http://www.computerhistory.org/semiconductor/timeline/1971-MPU.html

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• Technology – success examples

Successive generations of new technologies in the semiconductor industry

• Memory devices

• Microprocessor, microcontrollers

• Peripherals

Applications: personal computers, business automation, computer control, telecommunications, smartphones, tablet, smart sensors, Internet of Things, wearable smart devices, cloud computing, etc.


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Invention of Microprocessor

• In the November 1971, Intel announced the first

microprocessor Intel 4004 to the world, http://www.intel.com/museum/archives/4004.htm

• Busicom eventually sold some 100,000 calculators

Intel® 4004 microprocessor

Busicom* 141-PF printing calculator

http://www.intel.com/museum/archives/4004.htm

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Invention of Microprocessor• 1969

Nippon Calculating Machine Corporation, visited Intel to discuss its idea for custom Large-scale Integrated (LSI) circuits; and asked for designing 12 custom chips for its new Busicom 141-PF printing calculator

Ted Hoff, heading Intel’s application efforts, realized there was no practical way to implement the devices, and was sure a small general-purpose computer could do the job

Engineers Marcian E. “Ted” Hoff, Deferico Faggin, and Stan Mazor came up with a design that involved a set of four chips called MCS-4: 4004 CPU, ROM, RAM, and I/O


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Intel Museum http://www.intel.com/content/www/us/en/company-overview/intel-museum.html• 1972: 8008 Microprocessor

• 1974: 8080 Microprocessor, (8085)

• 1978: 8086-8088 Microprocessor

• 1982: 286 Microprocessor

• 1985: Inetl386TM Microprocessor

• 1989: Intel486TM DX CPU Microprocessor

• 1995: Intel® Pentium® Processor

• 1997: Intel® Pentium® II Processor

• 1998: Intel® Pentium II Xeon Processor

• 1999: Intel® Celeron® Processor

• 2003: Intel® Pentium® M Processor

• …

• 2012 …2014 and challenges …

http://www.intel.com/content/www/us/en/company-overview/intel-museum.html

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Intel 2015 Developer Forum: Aug. 18-20 IDF 15 San Francisco, http://www.intel.com/content/www/us/en/intel-

developer-forum-idf/san-francisco/2015/idf-2015-san-francisco.html

Technology Showcases, http://www.intel.com/content/www/us/en/intel-developer-

forum-idf/san-francisco/2015/idf-2015-san-francisco-technology-showcase.html

• Gold Sponsors: Dell, Ericsson, GE Software, Huawei, Lenovo, Micron Technology,

Inc., Microsoft, Rambus, Supermicro, http://www.supermicro.com/about/index.cfm , CISCO,

Clouddera, Facebook, Goodix, SK Hynix, TYAN

• Keynote and Mega Sessions

Opening Keynote with Brian Krzanich, Intel CEO (from

Intelligent infrastructure to Fashion Wearables to Cloud

Computing to Gaming, …), 1 hour 30 min;

http://intelstudios.edgesuite.net/idf/2015/sf/keynote/150818_bk/index.html

• Three Key Assumptions: Sensification, Smart and

Connected, Extension of You

• Sensification of Computing: (sound; voice control

experience – two ways conversation)


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Technological Innovations• Technology-based Innovations

Examples: disposable diapers, oversized tennis racquets, electronic fuel injection, personal computers, Tablets, Smartphones, ..

• Technology-facilitated Innovations

Examples:

• Business data processing & automation

• ERP (Enterprise Resource Planning)

• CRM (Customer Relationship Management.)

• SCM (Supply Chain Management)

http://www.intel.com/content/www/us/en/intel-developer-forum-idf/san-francisco/2015/idf-2015-san-francisco.html

http://www.intel.com/content/www/us/en/intel-developer-forum-idf/san-francisco/2015/idf-2015-san-francisco-technology-showcase.html

http://www.supermicro.com/about/index.cfm

http://intelstudios.edgesuite.net/idf/2015/sf/keynote/150818_bk/index.html

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• Outcomes

New, marketable products and services and/or

new production and delivery systems

• Levels of Significance

Incremental innovations involve adaptation,

refinement, and enhancement of existing ones

Radical innovations involve entirely new product

and service categories and/or production and

delivery systems.

Architectural innovations refer to reconfiguration

of the system of components that constitute the

product.


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Technological Entrepreneurship

• Individual or corporate entrepreneurship

• Activities

Create new resource combinations to make

innovation possible, bringing together the technical

and commercial worlds in a profitable way

• Administrative capabilities: efficient, effective

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Activities and Outcomes• Invention/Discoveries/Technologies Related Activities

Tinkering & Experimenting

Research Activities

Development Activities

• Outcomes (Results)

Inventions, Discoveries, and Technologies

• Technological Innovation Related Activities:

Product & Process Development Activities

Market Development Activities

• Innovation Outcomes (Results):



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Interrelations Among Key Concepts in the

Technological Innovation Process

Technical worldTechnological

entrepreneurshipCommercial world

Administrative

capabilities

Inventions/discoveries/technologies Technical innovations

Product/

process

development

activities

Market

Development

activities

Tinkering/

experimenting

Research

Activities

Development

activities

Results

Activities

=

+

EXHIBIT 1 The Relationships Among Key Concepts Concerning Technological Innovation

* The process can start with

market development or Technical

activities

* Iterative & concurrent

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Integrating Technology and Strategy: Perspectives on Strategy

Positive vs. Normative Views

• Positive View of Strategy:

Concerned with the firm’s actual strategy and how it comes to be

Resulted from organizational learning process

Top management belief’s about the basis of firm’s past and current success

a) Core competencies

b) Product market areas

c) Core values, and

d) Objectives, etc

• Normative View of Strategy

Concerned with what the firm’s strategy should be


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Integrating Technology and Strategy: Perspective on Strategy (cont.)

Product-Market vs. Resource-Based Views

• Product-Market View of Strategy

Concerned with how the firm competes with its products

and services

• Resource-Based View of Strategy

Concerned with how the firm can secure the factors

needed to create core competencies and capabilities

that form the basis for establishing and sustaining

competitive advantages

Asks: “How do competencies and capabilities help

create and sustain competitive advantages?”

• Current Trend: Integrating Product-Market &

Resource-based views

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Integrating Technology and Strategy: Connecting Technology & Strategy

Product-Market vs. Resource-Based Views

During the 1980s, technology is recognized as an

important element of business definition and competitive

strategy

References on page 4:

• Abell: “technology adds a dynamic character to the task of

business definition, as one technology may more or less rapidly

displace another over time.”

• Porter observes that technology is among the most prominent

factors that determine the rule of competition

• Friar and Horwitch explain the growing prominence of

technology as the result of historical forces


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Porter’s “generic strategies”, 1985, – a framework for classifying competitive

strategies: Technology Strategy

The Five Competitive Forces that Determine Industry Profitability

Potential Entrants

Industry Competitors/

Rivalry Among Existing

Firms

Suppliers Buyers

Source: M.E. Porter, Competitive Advantage, 1998, The Free Press, pp. 1-30

Substitutes

Threat of

New

Entrant

Threat of

Substitute Products

or Services

Bargaining Power

of Suppliers

Bargaining Power

of Buyers

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Integrating Technology and Strategy: Connecting Technology & Strategy (cont.)

Technology and Competitive Strategy

Porter’s “generic strategies”, 1985, – a framework for classifying competitive strategies: Technology Strategy

a) Industry-wide differentiation (broad range of industry segments)Quality, performance, features, delivery, supports, etc

Better products, services

b) Focused differentiation (a narrow set of industry segments)Customers’ willingness to pay a premium price

c) Industry-wide cost leadershipLower price, comparable products & services

d) Focused cost leadership (a narrow set of industry segments)Lower delivering cost infrastructure


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Key Aspects of Competitive Strategies

Marketing

Sales

Manufacturing

ProcurementDistribution

Research &

Development

Information

Services

Finance &

Control

Suppliers

Goals

Products

Workforce

Markets

Key Aspects of Competitive Strategies*Source: A modified version of The Wheel of Competitive Strategy developed in the Competitive Strategy by Michal E. Porter, The Free Press, 1998

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Integrating Technology and Strategy: Connecting

Technology & Strategy (cont.)

Technology and Competitive Strategy• Product-Related Technology

May be the basis for lower cost

Examples: designing different models of cars, sharing common structural components (e.g. chassis), to lower the cost of the diff. models

Windows 8 (touch screen and other features), 2012

iPhone 5 with two models (cheaper case, and regular product), 2014’s strategy

Ford F-150 truck. all aluminum body, 2014


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Technology and Competitive Strategy• Process –Related (manufacturing) Technology

May be the key to product performance and hence differentiation

Manufacturing excellence examples: early 1980s, it allowed Japanese DRAM manufacturers to differentiate their products from U.S. based competitors

Lean and advanced manufacturing processes

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Exhibit 2. Technological Policies and Generic Competitive

Strategies

Generic strategyFocus-segment diff.

• Product dev. to

meet exactly the needs of the particular business seg. application

Product Tech. Change

Process Tech. Change

Overall cost leadership

Overall diff.Focus-segment cost leadership

Technological Policies

• Product dev. to

reduce prod. cost by lowering materials content

• Facilitating ease manufacturing

• Simplifying logistical req.

• Learning curve

process improvement

• Process improvement to enhance economics of scale

• Product dev. to

enhance quality, features, deliverability, or switching costs

• Process dev. to

support high tolerance

• Greater QC

• More reliable scheduling

• Faster response time to orders

•Others

• Product dev. to

design only enough performance for the segment’s needs

• Product dev. to

tune production and delivery system to seg. needs in order to lower cost

• Process dev. to

tune the production & delivery system to seg. need in order to improve performance


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Technology and Product-Market Strategy

• Expressed in the products and services it brings to market

• Analyze the degree of integration Decompose each product and service into its constituting

technologies

Assess the relative strength – the degree of distinctive competence – the firm has with respect to that technology

Using the Product/Technology matrix

• Example: a firm manufacturing & marketing cameras Competence in optic

Sufficient info is needed to determine firm’s capabilities

Need to specifying how the strength can help – higher quality or lower cost?

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Exhibit 3. The Product/Technology Matrix

Note: Each entry (*) should establish the firm’s relative strengthvis-à-vis the state of the art

Source: Adapted from A. Fusfeld, “How to Put Technology into Corporate Planning,” Technology Review, May 1978

Technology 1

Technology 2

Technology ∞

.

.

.

Product A Product B Product N...

(*)


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Technology Portfolio

• Technology Life Cycle

• Technology Importance

Value it brings to a particular class of products

Value it could potentially bring to other classes for

the customer/user

• Relative Technology Position (reference to

competitors)

Patent position, know-how and trade secrets,

learning curve effects, and key talent

Strongly affected by the firm’s historical and future

levels of investment

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Exhibit 4. Developing the Technology Portfolio

Bet (full commitment)

Cash in(examine carefully)

Draw(Positioned

ambiguously)

Fold (disengage,

redeploy resource)

High

High

Low

Low

Relative Technology Position

Tech

nolo

gy I

mp

orta

nce

Source: J.M. Harris, R.W. Shaw Jr., and W.P.Somers. The Strategic Management of Technology (New York: Booz Allen Hamilton Inc., 1981)


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Exhibit 4 Developing the Technology Portfolio (cont.)

Bet quadrant (Rel. Tech. Pos. – High, Tech. Imp. – High)

• Warrant the full commitment:

• Frontier R&D, push the limits of its product

development process, and invest in the newest

equipment

Cash-In quadrant (RTP – High, TI – Low-Mid)

• Examined carefully

• Tech may have been important at one time, but it’s

importance is reduced

• Suggest that no further investment in these

technologies

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Exhibit 4 Developing the Technology Portfolio (cont.)

Draw quadrant (Rel. Tech. Pos – Low, Tech Imp – High)

• Technology is positioned ambiguously

• Important to ask why and how this change came

about

• React: Invest, probably heavily, in the technology?

• Disengage

Fold quadrant (RTP – Low, TI – Low)

• Inertial forces often lead to continue investment in

R&D beyond the level at which reasonable ROI can

be expected

• Requires reconsider its investments


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Technology Portfolio and Business Portfolio

• Companies

Has multiple businesses in their corporate

portfolio, each with its own technologies

• Portfolio planning tool - McKinsey’s framework based

on industry attractiveness and competitive position

dimensions

• Harris, Shaw, and Somers suggest examining the

relationship between

Traditional portfolio planning matrix

Technology portfolio matrix

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Exhibit 5. Matching Business and Technology Portfolios

Position

Source: J.M. Harris, R.W. Shaw Jr., and W. P. Somers, The Strategic Management of Technology (New

York: Booz Allen Hamilton Inc., 1981)

B

ABA

TechnologyBusiness

Competitive position

Im

porta

nce

Att

racti

ven

ess

Strategic Business AnalysisTechnology Analysis (Supporting business)

High High

HighHigh

Low Low

Low Low

A business – in a strong competitive position

Technology supporting business A is in weak position


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Technological Changes - Eastman Kodak

vs. Fuji Film Eastman Kodak – Wikipedia, https://en.wikipedia.org/wiki/Eastman_Kodak

The Last Kodak Moment? (Kodak is at death’s door;

Fujifilm, its old rival, is thriving. Why?, Jan. 14th 2012, http://www.economist.com/node/21542796

• CEO says firm, Kodak saw digital age coming, “The question

was, what to do about it”

• Disruptive Technologies

Digital photography => replace film

Smartphone => replace cameras.

Fujifilm Thrived by Changing Focus, by Kana Inagaki

and Juro Osawa, Jan. 20, 2012, http://www.wsj.com/articles/SB10001424052970203750404577170481473958516

https://en.wikipedia.org/wiki/Eastman_Kodak

http://www.economist.com/node/21542796

http://www.wsj.com/articles/SB10001424052970203750404577170481473958516

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Integrating Technology and Strategy: Technology & the Value Chain

Broader sense of technology• Encompasses the entire set of technologies employed in the

sequence of activities that constitute of a firm’s value chain

Activities• R&D, designing, manufacturing, marketing, delivering, and

supporting it’s product

Value13

• The amount buyers are willing to pay for what a firm provides them

• Measured by total revenue, a reflection of the price a firm’s product commands and the units it can sell

Value chain (total value, value activities)• Supplier’s value chain

• Channel’s value chain

• Buyer’s value chain …13M. Porter, Competitive Advantage


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Exhibit 6. Representative Technologies in a

Firm’s Value Chain

Transportation

technology

Material handling

technology

Storage and

preservation

technology

Communication

system technology

Testing technology

Information system

technology

Basic product technology

Material technology

Machine tool technology

Material handling technology

Packaging technologyMaintenance methods

Testing technologyBuilding design

operation technology

Information system technology

Transportation

technology

Material handling

technology

Packaging technology

Communication

system technology

Information system

technology

Media technology

Audio and video

recording technology

Communication system

technology

Information system

technology

Diagnostic and

testing technology

Communication

system technology

Information system

technology

Operations Outbound logistics Marketing sales ServicesInbound logistics

Source: M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, New York: Free Press 1985

Exhibit 6 Representative Technologies in a Firm’s Value Chain

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Integrating Technology and Strategy: Technology Evolution and Forecasting

Technology Product Life Cycle

• Technology change affecting firm’s competitive

position

• Firm find it difficult to respond to such changes

• Integrating technology & strategy

Understand life cycle of various technologies it

employs

Potential for competitive advantage


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Exhibit 7. Technology Life Cycle and Competitive

Advantages

Life Cycle

I. Emerging technologies

II. Packing technologies

III. Key technologies

IV. Base technologies

Importance of Technologies for Competitive Advantages.

Have not yet demonstrated potential for changing the basis of competition.

Have demonstrated their potential for changing the basis of competition.

Are embedded in and enable product/process.

Have major impact on value-added stream (cost, performance, quality).

Allow proprietary/patented positions

Have minor impact on value-added stream; common to all competitors; commodity

Stages in Technology

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Integrating Technology and Strategy: Technology Evolution and Forecasting

Technology Forecasting

• An important element in integrating technology and

strategy

Several Useful Techniques

• Technological progress function (S-curves)

Reading II-2, Exploring the Limits of Technology S-Curve.

Part I: Component Technologies, pp. 259

Reading II-3, Exploring the Limits of Technology S-Curve.

Part II: Architectural Technologies, pp. 278

• Trend extrapolation

• The Delphi Method,

https://en.wikipedia.org/wiki/Delphi_method

• Scenario development


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Analysis Examples – Technology Patent

PortfoliosApple

Apple Patents Portfolio, by Roberta Alidori, Aug. 20, 2015, http://www.macworld.co.uk/feature/apple/apple-patents-round-up-clues-future-iphones-ipads-macs-

watch-future-tech-3468138/

Apple’s growing patent portfolio offers clues about future products, by

Julia Love, Jan. 22, 2015, http://www.mercurynews.com/business/ci_27377473/apples-

growing-patent-portfolio-offers-clues-about-future

Google

Google Patent Programs, http://www.google.com/patents/licensing/

Google Patent Portfolio (Company Overview and Industry Comparison),

http://www.prime-patent.com/google-patent-portfolio/

Google even uses analytics to prioritize its patent portfolio, by Heather

Clancy, April 8, 2015, http://fortune.com/2015/04/08/google-analytics-patentiq/

Google’s Growing Patent Stockpile, by Antonio Regalado, Nov. 29,

2013, http://www.technologyreview.com/news/521946/googles-growing-patent-stockpile/

https://en.wikipedia.org/wiki/Delphi_method

http://www.macworld.co.uk/feature/apple/apple-patents-round-up-clues-future-iphones-ipads-macs-watch-future-tech-3468138/

http://www.mercurynews.com/business/ci_27377473/apples-growing-patent-portfolio-offers-clues-about-future

http://www.google.com/patents/licensing/

http://www.prime-patent.com/google-patent-portfolio/

http://fortune.com/2015/04/08/google-analytics-patentiq/

http://www.technologyreview.com/news/521946/googles-growing-patent-stockpile/

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Persons – who responsible for managing the innovation process

Firm’s innovative potential and into the barriers to innovation

Decisions on Innovations: managerial attention, resources

Innovation capabilities audit (address at least 3 questions)• How has the firm been innovative in the areas of product and

service offering and/or production and delivery systems?

• How good is the fit between the firm’s current business and corporate strategies and its innovative capabilities

• What are the firm’s needs in terms of innovative capabilities to support its long-term business and corporate competitive strategies?


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Assessing Innovative Capabilities: Innovative Capabilities Audit Framework

Innovation depends on

• Technological Capabilities, and other critical capabilities in the areas Manufacturing

Marketing and distribution

Human resource management

An example:

• Technology strategy – achieve superior product performance, must be complemented by A technically trained sales force that can educate the

customer regarding the product’s performance advantages, and

A high-quality manufacturing system

• A 1978 case: 16-bit microprocessors Intel 8086 vs. Motorola 68000 vs. Zilog Z800

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Innovation Capabilities

• The comprehensive set of characteristics of an organization that facilitate and support innovation strategies

Exist at both levels

• Business unit

A particular strategy and source commitment

A distinct set of product markets, competitors, and resources

• Corporate (multi-business)


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Business Unit Level Audit

• Focus on

New products and services, and/or

New production and delivery systems

• Cab be characterized in terms of

Timing of market entry

Technological leadership or follower-ship

Scope of innovativeness, and

Rate of innovativeness

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Business unit

Innovative

Strategy

Exhibit 8 Innovative Capabilities Audit

Framework – Business Unit Level

Business unit

strategic

management

capacity

Resource

availability

Understanding

business unit

technological

environment

Understanding

competitors’

innovative

strategies and

industry

evolution

Business unit

structure and

cultural context


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Business Unit Level: Innovative Capabilities Audit Framework

Five important categories of variables influence the innovation strategies of a business:

Important for formulation

1. Resources available for innovative activities

2. Capacity to understand competitors’ strategies and industry evolution with respect to innovation

3. Capacity to understand technological developments relevant to the business unit

Important for implementation

4. Structural and cultural context of the business unit affecting internal entrepreneurial behavior

5. Strategic management capacity to deal with internal entrepreneurial initiatives

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Exhibit 9. Business Unit Level: Innovative Capabilities Audit Framework

1. Resources Availability and Allocation

• Level of R&D funding and evolution: In absolute terms

As percentage of sales

A percentage of total firm R&D funding

As compared to main competitors

As compared to leading competitors

• Breadth and depth skills at business unit level R&D, engineering, and market research

• Distinctive competences in the areas of technology relevant to business unit

• Allocation of R&D to Existing product/market combinations

New product development for existing product categories

Development of new product categories


62

Exhibit 9 Business Unit Level: Innovative Capabilities Audit Framework (cont.)

2. Understanding Competitors’ Strategies and Industry Evolution

• Intelligence systems and data available

• Capacity to identify, analyze, and predict competitors’ innovative strategies

• Capacity to identify, analyze, and predict industry evolution

• Capacity to anticipate facilitating/impeding external forces relevant to business unit’s innovative strategies

32


63

Exhibit 9 Business Unit Level: Innovative Capabilities Audit Framework (cont.)

3. Understanding the Business Unit’s Technological Environment

• Capacity for technological forecasting relevant to business unit’s technologies

• Capacity to assess technologies relevant to business unit

• Capacity to identify technological opportunities for business unit


64

Exhibit 9 Business Unit Level: Innovative

Capabilities Audit Framework (cont.)

4. Business Unit Structural and Cultural Context

• Mechanisms for managing R&D efforts

• Mechanisms for transferring technology from research to development

• Mechanisms for integrating different functional groups (R&D, engineering, marketing, manufacturing) in the new product development process

• Mechanisms for funding unplanned new product initiatives

• Mechanisms for eliciting new ideas from employees

• Evaluation and award systems for entrepreneurial behavior

• Dominant values and definition of success

33


65

Exhibit 9 Business Unit Level: Innovative


5. Strategic Management Capacity to Deal with Entrepreneurial Behavior

• Business unit level management capacity to define a substantive development strategy

• Business unit level management capacity to assess strategic importance of entrepreneurial initiatives

• Business unit level management capacity to assess relatedness of entrepreneurial initiatives to unit’s core capabilities

• Capacity of business unit level management to coach product champions

• Quality and availability of product champions in the business unit


66

Corporate

Innovative

Strategies

Exhibit 10 Innovative Capabilities Audit

Framework – Corporate Level

Corporate

strategic

management

capacity

Resource

availability

and allocation

Understanding

corporate

technological

environment

Understanding

competitors’

innovative

strategies and

multi-industry

evolution

Corporate

structure and

cultural context

34


67

Exhibit 10. Corporate Level: Innovative Capabilities Audit Framework

1. Resource Availability and Allocation

• Level of R&D funding and evolution: In absolute terms

As percentage of sales

A percentage of total firm R&D funding

As compared to main competitors

As compared to leading competitors

• Breadth and depth skills at corporate level R&D, engineering, and market research

• Distinctive competences in the areas of technology relevant to multiple business units

• Corporate R&D allocation Exploratory research

R&D in support of mainstream business

R&D in support of new business definition

R&D in support of new business development


68

Exhibit 10. Corporate Level: Innovative


2. Understanding Competitors’ Strategies and Multi-Industry Evolution

• Intelligence systems and data available

• Capacity to identify, analyze, and predict competitors’ innovative strategies spanning multiple industries

• Capacity to identify, analyze, and predict industry evolution of interdependencies among multiple industries

• Capacity to anticipate facilitating/impeding external forces relevant to firm’s innovative strategies

35


69



3. Understanding the Corporate Technological Environment

• Capacity for technological forecasting in multiple areas

• Capacity to forecast cross-impacts among areas of technology

• Capacity to assess technologies in multiple areas

• Capacity to identify technological opportunities for business unit


70



4. Corporate Context (Structural and Cultural)

• Mechanisms to share technologies across unit boundaries

• Mechanisms to define new business opportunities across business unit boundaries

• Internal and external organization designs for managing new ventures

• Mechanisms for funding unplanned initiatives

• Evaluation and award systems for entrepreneurial behavior

• Movement of personnel between mainstream activities and new ventures

• Dominant values and definition of success

36


71



5. Strategic Management Capacity to Deal with

Entrepreneurial Behavior

• Top management capacity to define a substantive

long-term development strategy

• Top management capacity to assess strategic

importance of entrepreneurial initiatives

• Top management capacity to assess relatedness

of entrepreneurial initiatives to firm’s core

capabilities


72





• Middle-level management capacity to work with

top management to obtain/maintain support for

new initiatives (organizational championing)

• Middle-level management capacity to define

corporate strategic framework for new initiatives

• Middle-level management capacity to coach new

venture managers

37


73





• New venture managers’ capacity to build new

organizational capabilities

• New venture managers’ capacity to develop a

business strategy for new initiatives

• Availability of product champions to identify and

define new business opportunities outside of

mainstream activities


74

Assessing Innovative Capabilities: Innovative Capabilities Audit Framework (cont.)

Audit Frames of Reference

1. Interpreting the results of the innovative

capabilities audit

How the current situation compares to the

past

2. Firm’s position relative to current competitors

Identify - positions desired

38


75

Assessing Innovative Capabilities:

Innovative Capabilities Audit Framework cont.)

Who Should Do the Audit?

• Vice-president (General Manager, Senior Manager)

• Insiders - advantages/disadvantages

• Outsiders - advantages/disadvantages

• Undertaken by

Firm’s strategic planning department

Ad Hoc Audit team (task force)

• Strategic planning

• R&D

• New product managers

• Key functional managers


76

Conclusion

Key Concepts and Their Relationship

• Technology

• Innovative Strategies

Integrating Technology and Strategy


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