fraunhofer iao, germany developing integrated business and technology strategies

© Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 1

Fraunhofer IAO, Germany

Developing Integrated Business and Technology Strategies

NITM International Seminar SeriesA series of Seminars for Executives & Managers

NITM, Dublin, September 17th, 2003

Frank Wagner & Flavius Sturm

Fraunhofer Institute for Industrial Engineering


AgendaAgenda

• Introduction

• Strategic Management for SMEs “Navigating in Turbulent Times”

• Business and Technology Strategies

• Portfolio, Balanced Scorecards and other Tools

• How Scenarios and Roadmaps can help (Cases)

• Business and Technology Scouting


Linking Linking Business & Business & TechnologyTechnology

Integrated Integrated Strategy Strategy

Development Development

ExamplesExamples


Network Strategy

Corporate Strategy

Business Strategy / Technology Strategy

Strategic Management framework: Business & Technology Strategy


business

2

Prod/Serv 1 Prod/Serv 2

--

Core product

2

business

1

Core product

1

Corecompetence 1

Corecompetence 2

Corecompetence 3

Prod/Serv 3 Prod/Serv 4

Business & Technology – From core competences to products


What are Technologies?

Technologies:Bundling of scientific-technical and application-oriented knowledge in respect to possible problem solutions.Technologies therefore represent a specific knowledge base for potential products and processes

Source: Peiffer, 1992, p.36

Product Technologies - are incorporated in products and become part of them.

Process Technologies - are used to develop, produce, or market products- support the achievement of the company goals- are not incorporated in products and do not become part of them


There are different kinds of Technology

Pacing Technologies - Technologies that have the potential to change the entire basis of

competition but have not yet been embodied in a product or process.- These technologies often develop into key technologies

Key Technologies - Technologies that are most critical to competitive success because they

offer the opportunity for meaningful process or product differentiation- These technologies yield competitive advantage

Base Technologies- Technologies that, although necessary and essential to practice well, offer

little potential for competitive advantage- These technologies are typically widespread and shared

Source: Roussel, Saad, Erickson; Third Generation R&D; 1991


Parameter

Timing

Technology Source

Technology Utilisation

Field of Application

Options

PerformanceTechnology Leader

Pioneer Early Follower

Technological Presence

Late Follower

Obtain Licences

Contract Research

Acquisition

Self-Utilisation Issue Licences

Technology selling

Used Technology

Unused Technology

New Technology

(Source: Brodbeck, 1999)

Strategic Dimensions of Technology Management


External Procurement

External Procurement

Internal R&DInternal R&D

Pay for licenses

Buy Components

Buy Technology

Buy Patent

Acquire a business

Joint Research, Joint Venture

Contract Research

Sources of TechnologySources of Technology

(Source: Brodbeck, 1999)

Sources of Technology


ExternalExternal

InternalInternal

Licence to other Industry

Licence to competitor

Licence to supplier/customer

Shared utilisation in alliances

Shared utilisation in Joint-Venture

Sell patent

Sell technology

Launch Spin-off business

Utilisation of TechnologiesUtilisation of Technologies

(Source: Specht, 1996)

Utilisation of Technology


cumulated R&D-effort

Cap

acity

of

tech

nolo

gy(b

enfit

/cos

ts)

Source: Krubasik (1982)

Limit of new technology

Limit of old technology

R&D-effort

performance Technology

potential

Newtechnology

Oldtechnology

= Status at the point of time when a change of technology is considered

Problem with Technologies: Substitution potential (Double-S-Curve)


Very few companies are able to retain dominance in the Fortune 500 (Neely, 1998). These

companies introduce sustainable innovations and continually improve their products and

processes, but they get caught unaware by newcomers who have introduced disruptive

innovations, capturing and transforming traditional markets (Christensen, 1997)

03

Time

Pro

du

ct P

erf r

om

ance

Progr

ess

due

to s

usta

inin

g te

chno

logi

es

Performance demanded at

the low end of the marketPerformance demanded at

the high end of the market

Progr

ess

due

to s

usta

inin

g te

chno

logi

es

Disru

ptiv

e

Tech

nolo

gica

l

Inno

vatio

n

The problem: Disruptive Technologies


Examples of disruptive technologies

05

• Digital photography has eroded the profits and viability of companies like Polaroid and Kodak.

•

• Digital video recorders (DVRs) — which require no tape medium, allow ads to be skipped, and allow TV shows to be transmitted via the Internet — threaten the business models of pay-for-view TV programming.


The problem with disruptions: cause for a new business cycle- Business Cycles traditional and disruptive

Source: Cosier & Hughes, 2001


Metaphor for understanding Technology Development - Cambrian Explosion (Exploration vs. Exploitation)

“In the Cambrian period, some 500 million years ago, a

burst of biological creativity took place. Over a relatively

brief period of time, a vast diversity of fundamentally

different life forms appeared. The way in which

technology evolves is strikingly similar to the

Cambrian explosion. Diverse forms branch out bushily at

the beginning, then the rate of branching declines,

extinction sets in, and, like today's phyla, only a few major

alternative forms persist at the end”.

Source: Kaufmann, 1995


Why the Need for an Integrated Business & Technology Strategy?Technology Lifecycles and Growth opportunities

Current Current SituationSituation

Product/Technology Lifecycles

Searching for innovative technologies,

searching for new growth opportunities!

Time

Potential / Age

?

• For a good business & technology strategy it is crucial to identify the current maturity level of the technologies applied.


Classical Options for Business Development: Ansoff‘s Classic Matrix

ExistingMarket

NewMarket

ExistingProduct

New Product

Market Penetration

Product Development

Market Development

Diversification

Why the Need for an Integrated Business & Technology Strategy?Classical Business Strategy Options

Source: Ansoff, ...


ProductNew Technology

TechnologicalProduct

Substitution

High Technology

Ansoff‘s EXTENDED Matrix – for Technology Intensive Environments

Why the Need for an Integrated Business & Technology Strategy?Dealing with disruptive new technologies

Source: ...

ExistingMarket

NewMarket

ExistingProduct

New Product

Market Penetration

Product Development

Market Development

Diversification


• Even without technological innovation in an expanding market customers will enter the market place without product knowledge

• The company must not only learn about the new customer but also educate the customer about the product

• The less the customer knows about the product the more difficult the task is for the marketer.

• The customer is often not only unfamiliar with the product but also with its underlying technology.

• The company will have to educate the customer about the technology before the customer can be shown the benefits of the new product

Why the Need for an Integrated Business & Technology Strategy?New Issues in Technology-Intensive Contexts


Needs

existing

emerging

existing emerging

Currentbusinesspotential

Future business potential

Technologies

Source: CCSO, 1998

Integrated Business & Technology StrategyLinking emerging needs with emerging technologies


Source: Day et al., 2001

Linking emerging needs with emerging technologies - Example


Disruptive Innovation –

Ofita Spanish Market Leader in Office Furniture

05

GENIUS - THE INTELLIGENT PLATFORM – disrupting the office furniture market

concept of platform, basing the product on adaptability, easy and simple transformations of the work stations, always using the same parts


Disruptive Innovation –Networked Home Appliances – Smart Kitchen

New technologies disrupting business models

New strategic alliancesNew value proposition

New pricing strategyNew customer segments

New competitors


Necessitiy to actively search for technological synergies between

different applications

Up to now new technology investment decisions have not been linked sufficiently with future market

demand and the customer needs

Base Technologies

Product & Process Technologies

Tec

hn

olo

gy

Market A

Market B

Market ...

• Segment A.1• Segment A.2

• Segment B.1• Segment B.2• Etc. etc.

Markets & Applications

...

Market

Cost

Efficiency

Solution Functionalities and Performance Criteria

Quality

Performance

...

Technology Push

Market Pull

Integrated Business & Technology Strategy - considerations


Business Analysis Innovation Analysis Technology Analysis

Search field Generation

SWOT- Analysis SWOT - AnalysisSWOT- Analysis

Innovation StrategyTechnology StrategyBusiness Strategy

Formulation of Strategic Programm for Business

Units

Formulation of Strategic Programm for Technology

Development Units

Business-portfolio

Technology Portfolio

Innovation Portfolio

Business List Technology List

Source: Bürgel et al., 1996

Strategy Development: Strategic Analysis for integrated Technology and Market Planning


Pulllback

Selection

Investment

Attractivity of Technology

Strength of resources

Indicators on requirements

Indicators on potential

Potential for further development• Extend of technological

Further development• performance increase

Compatibilitypositive or negative

influences on alreadyused technologies

Broadness of application• Dispersion of technical

further development• fields of application

Strength ofKnow-How

Financialstrength

State of Know-How

BudgetStability of

Know-HowsContinuityof budgets

Technical qualitativedegree of mastery

Quality (economic+techn.)of own solution compared

to competition

PotentialsFurther development potentials in

personnel, financialand legal resources

Speed of action

Speed to market compared to competition

Source: Pfeiffer et al., 1991

Strategy Development: Technology Portfolio Development for the Evaluation of Alternative Solutions (Example)


External Analysis

Competitors Stakeholders Customers Scenario Development

Scenario I

Scenario II

Scenario III

Markets

Environ-ment

Customers

Society

Competitors

Gap Analysis & Options Development

Business Today

Internal Analysis

- Technologies- Markets- Products- Competencies

Technology Delphi Study


Delphi-Method

Identify Technology Experts worldwide

Questionaire

Round 1

CoolingTechnology

Questionaire

Round 1

CoolingTechnology

Questionaire

R ound 1

C ooling Technolog y

Questionaire

R ound 1


Elaborate Questionairebased on expertise of R&D Staff

Send the Questionaire to the Experts

Expert 1

Expert 2

Expert ...

Collect, analyse and advance

Questionaires

Results:•New Technologies identified•Future-scenarios

Questionaire

R ound 1


Questionaire

R ound 1


Questionaire

R ound 1


Questionaire

R ound 1


Continuous Technology Scouting Process

Technology Assessment

Chances & Risks

External Technology Roadmaps

Technology Portfolios

Technology Strategy

Internal Technology Roadmaps

xx

xxx

Project Portfolios

Make & Buy

Integrated Business & Technology Strategy Development PROCESS


Assessment of current markets, products, competencies and technologies

Scenarios for the future of the business context

Strategic Gaps and Options for business development

.

.

Integrated Business & Technology Strategy - Typical RESULTS (1/2)


Strategic Technology Roadmaps for promising technology fields

A robust and integrated Technology & Business Strategy

Continuous Technology Scouting Process and instrumentation

Szenario-feld

GFKAbsatz

Absatz

WerkstoffeWerkstoffe

EnergieverbrauchEnergieverbrauch

GlobalitätGlobalität

TechnologieauswahlT1 T2 T3 T4

Kriterien

PortfolioPortfolio

SzenarioSzenario

KostenKosten

SummeSumme

Innovation Concept/

projects /

Integrated Business & Technology Strategy - Typical RESULTS (2/2)





ExamplesExamples


Pneumatic handling of micro parts

New production technologies

New services

Medical-technology

as new market

Evaluation criteria

- available and necessary competences of the company

- Integration of different disciplines

- Activities of competitors

- Maturity of technology

- Substitution of technology

- Necessary R&D-Budget

- Time to market

Market potential Changing Environment

- customers demand lighter and smaller devices

- reduced available space for components

- weight reduction of parts and modules - convergence of technologies

Micro- and Nanotechnology as future technology in automation (EXAMPLE)

Holistic evaluation of innovation opportunities and risks

Technology Orientation: Assessing new technologies


Impact of changing environment on pneumatics

Direct impact on pneumatics

• Pneumatics can be used for new applications micro actuators in medicine technology

micro-fluidic subsystems with pneumatic drives for biotech and gene analysis applications

• New valves and drives can be developed using new production technologies

Indirect impact on pneumatics

• part sizes in the automobile industry have drastically decreased

• engineering industry demands small autonomous subsystems

• tool machines demand higher precision

new handling devices are needed

standard pneumatics can not be used for these applications

Investment in Micro-Technologies will:

open great potential new markets

avoid the risk of loosing important markets

High market potential

Market demands lighter, smaller and integrated devices and parts

Trend towards Micro Technologies


medium highlow

low

mediu

mhig

h

Integrated Technology Strategy in Micro Technologies

• high market potential

• early state in technology lifecycle

• medium to high ‘time to market’

• high acceptance of Micro Technology

• overall enhancement of competitive position

Technology attractivity

Technology position of the company

• medium relevant R&D competencies

• few activities of the competitors

• high R&D budget available

• technological leader on the market

Strong Investment

Medium

High


Today short-term medium term long-term

Day-to-day

business

Extrapolate via roadmaps

• Products

• Technologies

• Customer

requirements

Retropolate from

Scenarios:

New markets

New customer requirements

New technologies

New business possibilites

Automation & control

Information & communications

Lighting

Medical

Power

Transportation

individual

society

policy

economy

environment

customers

technology

competition

Strategic visionScenarios = pictures for the Siemens-operation areas

Influencing factors

Source: Austrian Research Center, 2002

Strategy Orientation: Bridging the gaps between today and the future


Portfolio Management: Market Attractiveness/Probability of Success

medium

low

50 75 10025

high

Probability of Success (%)

Project b

Project h

Project g

Project fProject eProject d

Project c

Project a P

ote

nti

al P

rofi

t

Project costs

1 Mio $


Portfolio Management: Market/Technology Project Portfolio

new for

known for

new for totally newknown for

totallynew

Project costs

1 Mio $ Technology

Project b

Project h

Project g

Project f

Project eProject d

Project c

Project a M

ark

et

fraunhofer iao, germany developing integrated business and technology strategies

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