managing technology and innovation

Managing Technology and InnovationManaging Technology and Innovation

Customization

Toyota is gearing itself to deliver a custom built car within five days of receiving the order.

Dell promises delivery of a customized PC within a few days of receiving the order.

Motorola delivers their made-to-order cellular phones the next day to customers anywhere in the United States.


Customization

Standardization starts upstream - raw materials, fabricating

Customization starts downstream - special features & services

Key question is how far upstream in the value chain can or should product/service be customized?


Customization

Standardization Strategies for Enabling Customization– Part Standardization: By using common components across

members of a product line, the firm reduces costs (due to economies of scale), reduces inventories (due to risk pooling), reduces parts proliferation, and improves the predictability of requirements for components.


Customization Standardization Strategies for Enabling

Customization– Process Standardization: requires that the process be

modular and enables the firm to store inventory in semi-finished form (before full information about demand is realized) and later customize the product according to requirements.

Benetton's sweater-making process primarily consists of two stages: knitting and dyeing. The original process was to dye first and then knit based on requirements. However, the main source of demand uncertainty came from the choice of colors that customers wanted. So in order to exploit that Benetton resequenced the process by first knitting the sweaters and then dyeing them after perfect demand information was obtained.


Customization

Standardization Strategies for Enabling Customization– Product Standardization: offer large variety of

end products, but stock only a few in inventory. Advertise availability of products far greater than

actual availability on average.


Customization Standardization Strategies for Enabling

Customization– Product Standardization (continued)

If customer requests product version not normally stocked, the manufacturer either makes the product after receiving the order or, downward substitutes (provides the customer one of the available models that has a superset of features required by the customer.)

– Downward substitution is quite common in the semiconductor industry where a higher speed/functionality chip (under appropriate circumstances) is marked as a lower speed/functionality chip when the lower-end chip is not available in inventory


SpeedIt is not enough to be fast - one also has to achieve a better balance of speed, low cost,

high performance, and high quality.

For example: Rule of 10X - technology in question must be 10 times better than what it is replacing.

More accurately, Consumers need to perceive new technology to be 10 times better to think it worth the

upheaval of changing.


Speed

Speed depends on the ability to:

1. Initiate and manage change inside company

2. Use and provide leverage in market chains to initiate change in other companies.


Speed

Ability to change inside the firm depends on ability to avoid the “competence trap”

Competence trap: firms that strive for competence within a given strategy can become trapped in this strategy and miss opportunities for strategic change


Speed

Competence trap derived from routines and procedures successful in past:

promotion and hiring incentive systems capital budgeting organizational structures personal commitment to status quo


Speed

Some methods for avoiding the competence trap:

Avoid organizing around strict product “modules”(Intel’s emergent product teams).

Avoid complete dependence on existing customers and suppliers for new product & service ideas (Microsoft’s multiple vendors of X-Box software).

Focus new product development teams entirely on unserved markets (Nokia’s evolution into “wireless home”).


Knowhow

The critical role of CLUSTERS in global strategy

Competition is dynamic, depends on innovation, search for strategic differences

Location affects competitive advantage through impact on productivity and productivity growth


Knowhow


A Cluster is a critical mass of companies in a particular field in a particular location and include a group of companies, suppliers, firms in related and complementary industries, infrastructure providers, knowledge creators, and collective associations.


Knowhow


Clusters improve productivity by providing access to specialized inputs and information, facilitating complementarities among cluster participants, improving performance measurement improving rate and success of innovation lowering barriers to entry


KnowhowThe critical role of CLUSTERS in global strategy

Cluster theory and Globalization a firm must harness advantages of spreading activities across

locations but also capture the innovation advantages of home base

outsourcing reduces locational disadvantages, but limits access to cluster-associated resources

locating in cluster may reduce overall costs


Knowhow


Examples of Emerging Clusters in Nanotechnology:– Northern California– Austin, Texas– Tsukuba, Japan– Stirling, Scotland


Time Pacing: Combining Speed and Knowhow

Time Pacing Creating new products or services, launching new businesses, or

entering new markets according to the calendar. Time-pacing is not (just) SPEED ;

– It is synchronizing SPEED and INTENSITY OF EFFORT.


Time Pacing: Combining Speed and Knowhow

Manage TRANSITION and RYTHM

– Transition: capable of moving into new products, businesses, markets, acquisitions, mergers, etc.

– Rhythm: in sync with cycles linked to external agents – customers,

suppliers, competitors, and even regulators.


Industry Case: The race for the world VCR market

Product development is a 100-yard dash;

Industry development & transformation is a triathlon.

Stages of Industry Development and Transformation

1. Competition for Industry Foresight and Intellectual Leadership

2. Competition to Foreshorten Migration Paths

3. Competition for Market Position and Market Share



Competition for Industry Foresight and Intellectual Leadership Race to commercialize VCR spanned decades, rather than years Ampex, 1959 - 1st VCR; Matsushita, late 1970’s - first mass

commercialization of VHS standard VCR VCR was 1st major innovation in consumer electronics

commercialized first in mass markets by Japanese firms, rather than U.S. or European companies.



Competition for Industry Foresight and Intellectual Leadership

Philips, Sony and Matsushita (JVC) each worked for close to 20 years to produce VCR for home use.

New Product Adoption Model - Technologies: Learning how to make extremely precise, revolving video-recording heads presented major competence-building challenge to all comers.



Competition for Industry Foresight and Intellectual Leadership New Product Adoption – Product Functionalities and

Customer Segment Continued experimentation in marketplace with multiple

models. The more rapid the pace of market experimentation, the

quicker the learning about what customers really want in a product.



Competition for Industry Foresight and Intellectual Leadership Gain deeper understanding than competitors of trends and

discontinuities - technological, demographic, regulatory, or lifestyle

Trends and discontinuities will transform industry boundaries and create new competitive space

New types of customer benefits, or radically new way of delivering existing customer benefits



Competition to Foreshorten Migration Paths

Creating an industry standard battle between Sony’s Beta, JVC’s VHS, and Philips’ V2000 winner reaps benefits of software availability, licensing income,

and economies of scale in component production



Competition to Foreshorten Migration Paths

Sony took early lead, 85% market share by end of 1976 JVC introduced 2-hour record time JVC co-opted licensee partnerships - Telefunken (Germany),

Thorn (Great Britain), Thomson (France), RCA and GE (U.S.). These companies were initially sourcing components and

finished VCRs from JVC



Competition to Foreshorten Migration Paths Influence the direction of industry development Race to accumulate

– necessary competencies, – test and improve alternate product/service concepts, – attract coalition partners who have critical complementary

resources, – construct product/service delivery infrastructure, – get agreement around standards



Competition for Market Position and Market Share

Wide selection of VHS brands and models, relative to Beta, convinced software suppliers to back VHS and w/in two years market battle between Beta and VHS was over.

Philips launched V2000 18 months after VHS - D.O.A.! Matsushita sold several million VCRs around the world,

continuing to reduce costs and improve features



Competition for Market Position and Market Share

Centered around well-defined parameters of value, cost, price and service

Maximize efficiency and productivity Craft appropriate market positioning strategy Building worldwide supplier network Preempting competitors in critical markets.


The Future of the VCR, DVD, etc.?? Today, a TV set is the focal point of the average living room; In

the future, digital TVs and their accompanying devices will be hidden until they are turned on.

Home media center have a single control unit that incorporates receivers, tuners, decoders, a CPU, and an embedded OS and an embedded camera and microphone for video e-mail and voice mail.

Display innovations: First step - gas plasma; Next - streamlined displays based on light-emitting polymers.

Speakers will continue to shrink in size, following the trend in today's satellite speaker systems.

managing technology and innovation

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