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Technology My LIUC

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					Technology, Structure,
Strategy & Innovation
      Salvatore Sciascia
         16/05/2003
 Section 1:
Technology
   Defining “TECHNOLOGY”
– … we are referring either to a practical application
  of science to address a particular product or
  manufacturing need, or to an area of specialized
  expertise … the practical application of
  science. (A.D. Little)

– … it´s a specific process that produces a specific
  product … a manufacturing process … as a way
  a company does business or attempts a task.
  (McKinsey)
WHAT IS TECHNOLOGY?

       COMPANY




                 (Robbins, 1990)
WHERE IS TECHNOLOGY?


                       INFRASTRUCTURE

SUPPORT               HRM




                                                              MA
                       TECNOLOGY DEVELOPMENT




                                                               RG
                                                                IN
                         PROCUREMENT




                                                                IN
          INBOUND            OUTBOUND




                                                                RG
PRIMARY                                MARKETING
          LOGISTIC OPERATIONS LOGISTIC             SERVICES




                                                              MA
                                        & SALES
   Technology and
Organizational Structure
    Organizational Structure
• The tasks that each of the unit
  composing the organization must carry
  out (roles)
• The liasons established between such
  units (hierarchies and coordination
  mechanisms)
 TECHNOLOGY INFLUENCES
ORGANIZATIONAL STRUCTURE
 WHAT ELSE DOES INFLUENCE
ORGANIZATIONAL STRUCTURE?
               WOODWARD (60s)

Hypothesis: There is a best organizational/technology
 fit that leads to optimal efficiency!
WOODWARD
PERROW’S TECHNOLOGY CLASSIFICATION
PERROW’S TECHNOLOGY-STRUCTURE
          PREDICTIONS
THOMPSON’S TECHNOLOGY CLASSIFICATION



                            Sequential
                            interdependence




                            Pooled
                            interdependence




                            Reciprocal
                            interdependence
       THOMPSON’S types of technology
          coordination mechanisms
• A: Long-Linked Technology:
  moderate complexity and
  formalization (planning and
  scheduling)


• B: Mediating Technology:        client   T.P.   client
  low complexity and high level
  of formalization (rules and
  procedures)


• C: Intensive Technology:
  high complexity and low level
  of formalization (mutual
  adjustment)
          Common elements

• Routineness as common denominator
  – Complexity (-)
  – Formalization (+)
  – Centralization (+/-)
• Conflicting empirical results, since
  companies adopts several technologies
  at the same time. SMEs as fertile field
  of research!
INDUSTRY-TECHNOLOGY-SIZE-
   STRUCTURE IMPERATIVE
Technology and Strategy
STRATEGY, TECHNOLOGY and
   CORPORATE MISSION
      3 theoretical perspectives on
           the relationship S-T
T is a vital part of the S
planning process
                               T as input to S (Resource
                               Based Strategy)




                             S influences the T choices
      Technological Learning
Average
Unit Cost




                 Accumulated Production (~ time)
    The technological choice
1. Selection

2. Acquisition

3. Exploitation



                        (Dussauge 1992)
1. Selection: the Familiarity matrix
                New &
             unfamiliar




              New but
   Markets
              familiar




               Current

                                    Technologies
                          Current   New but fam.   New and unfam.
1. Success Rate of Innovations
             New &
          unfamiliar
                            30%                  10%


           New but
Markets                             40%
           familiar




                            90%                  30%

            Current

                                  Technologies
                       Current    New but fam.   New and unfam.
        1. Selection: the Risk matrix
                       High




     Business        Medium
     Exposure




                       Low

                                    Technical Uncertainty
(A.D.Little, 1981)            Low       Medium              High
1. Selection: the Impact/Success matrix




       Potential
     competitive
         impact




                      Probability of Success
            2. Acquisition: means (1)
Strategic                              Internal
Autonomy                               development

               Acquisition   External R&D
                             contracts

                                     Joint Venture


                Licences



                                             Time
             2. Acquisition: means (2)
                       New &
                    unfamiliar     Joint Venture    Educational      Spin off
                                   Internal Vent.   Acquisition        Sell


                                                        I.D        Educational
        Markets      New but           I.D
                     familiar                        Licensing     Acquisition
                                    Acquisition
                                                    Acquisition


                                                        I.D        Joint Venture
                                     Internal
                                                     Licensing     Internal Vent.
                                   development      Acquisition
                      Current

                                                    Technologies
                                 Current            New but fam.      New and unfam.
(Roberts and Berry, 1985)
            3. Exploitation
            Internal or External
• External exploitation in case of:
  – protection (patent)
  – barriers to entry / exchange of technologies
  – imposition of it as a standard
          Formulating a
technological strategy
                Business growth
                potential




                              Market position


Technological
capabilities
If mkt posistion and technology
          converge…
              The BCG matrix
                      Market Share (relative)
             High                                 Low
      High
                        STAR        ?     QUESTION
                                             MARK
Business
                 Maintain the           Invest heavily
Growth           position               or abandon

             $      CASH
                    COW             !       DOG
                                        Abandon
                 Exploit (deploy,
       Low       licence…)
  If mkt position and technology
diverge, in high growth context…



           G                      G



    T            M                       M
                           T


Compensate to your weaknesses through “alliances”
        If mkt posistion and technology
       diverge, in low growth context…
Minimize investments in order to generate
the largest possible CF

           G                                       G



   T                                        T             M
                  M

                                 Abandon the business
                                 redeploying your capabilities
Technology and Industry
              Industries and
        Investments in Technology
CAPACITY             CUTOMER       KNOWLEDGE
   driven              driven        driven
(textile, metals,    (households   (software,
   basic               durables,     electrical
   chemicals,          food…)        equipment…)
   paper…)



PHISICAL            CUSTOMER           R&D
 CAPITAL            RELATIONSHIP
 The concept of dominant design

• The design that wins the allegians of
  the marketplace, the one that
  competitors must adere to if they hope
  to command significant market
  following.
• It arises as result of an interplay
  between technical, market and cultural
  choices.                      Utterback (1994)
           Empirical evidence (1)

Number                     Ex. Studies:
of Firms                   Car and Type
                           writing industries




                                          Time
           Empirical evidence (2)

Number
of Firms

                        Fall of Unit Price
                        Raise of Entry Cost




                                              Time
           Empirical evidence (3)

Number
of Firms

                              Focus on Process Innovation
Focus on Product Innovation
                              Lower Innovation pace
Higher Innovation pace




                                                   Time
           Empirical evidence (4)

Number
of Firms


              USA         JAP




                                    Time
       How does it occur?
• Collateral assets (mkt channels, brand
  image, customer swithcing costs) (IBM)
• Industry regulation (RCA)
• Strategic maneuvering (JVC)
• Communication
Section 2:
Innovation
Introduction to Innovation
Long-term winners “have beaten
   their competitors through
   [focused] innovation and
           dynamism”

        Michael Porter
     The role of Innovation

Performance




                                     Time

                      Resource Investments
         A definition

 Innovation is the creation and
transformation of knowledge into
   new products, processes, or
services that meet market needs
The innovation process
     Il processo di innovazione




                       Invention
  Creativity
                                   Practises
Knowledge


                                   Innovation



               Diffusion
             innovation
        Theprocesso di innovazione process
          Il


                                                 COMPANIES
                             Invention
         Creativity
                                         Practises
       Knowledge


UNIVERSITIES &                           Innovation
RES. CENTERS

                      Diffusion


                 MARKET
  The Discipline of Innovation
• “Innovation is work rather then genius”
• “Innovation rarely springs from a flash
  of inspiration. It arises from a cold-eyed
  analysis of the sources of opportunities”
• “Effective innovation is simple and
  starts small”.
          » (Drucker, 1985)
 Sources of Opportunities (1)
• Process needs (modern advertising - NYT)
• Industry changes (deregulation)
• Market changes, in morphology or
  perception (health, robotics)
• New knowledge (PC)
 Sources of Opportunities (2)
• Unexpected occurences (IBM
  accounting machine, IKEA)


                       Emergent Strategy



   Intended Strategy                  Realized Strategy


                   Unrealized Strategy
Types of Innovation
         Incremental Innovation
Refining exixting products or processes (Microsoft)
        Radical Innovation
Introducing totally new product concepts
           Critical Activities:
radical Vs Incremental Innovations (1)
            Radical                 Incremental
  •   Commercialization +    •   Business & Market
  •   Strategic Planning +       opport. analysis +
  •   Tech. Dev. +           •   Commercialization +
  •   Screening              •   Tech. Dev. +
  •   Testing                •   Screening
  •   Business & Market      •   Testing
      opport. Analysis -     •   Strategic Planning -

                     Best Practices         Song et al. (1998)
           Critical Activities:
radical Vs Incremental Innovations (2)
            Radical                 Incremental
  •   Tech. Dev.             •   Tech. Dev.
  •   Business & Market      •   Strategic Planning
      opport. Analysis       •   Commercialization
  •   Commercialization      •   Screening
  •   Screening              •   Business & Market
  •   Strategic Planning         opport. analysis
  •   Testing                •   Testing

                     Current Practices
Innovation & R&D
          R&D and Innovation
• R&D does not automatically translate into innovation
(300 ideas Ü 1 new product)

• Innovation does not always begin in R&D: It May
begin in marketing, manufacturing, or engineering
through recognition of an opportunity or customer
need.

• R&D usually becomes involved, but other
requirements are money, good people, effective
management practices, and luck.
R&D Investment by Industry,
      1990-2000, USA
TOP 10 INDUSTRIAL R&D INVESTORS (1999)

 •   Ford                  $ 7.1 billion   (+ 13%)
 •   General Motors          6.8 billion   (+ 8%)
 •   Lucent Technologies     4.8 billion   (- 6%)
 •   IBM                     4.6 billion   (+ 2%)
 •   DuPont                  3.9 billion   (+ 41%)
 •   Motorola                3.5 billion   (+ 21%)
 •   Intel                   3.5 billion   (+ 31%)
 •   Microsoft               3.0 billion   (+ 19%)
 •   Pfizer                  2.8 billion   (+ 22%)
 •   Johnson & Johnson       2.6 billion   (+ 7%)

                           $42.6 billion
          “R&D” or “R Vs D”
            RESEARCH

•   Guided by search for knowledge
•   Driven by curiosity
•   Pulled by scientists
•   Long term oriented
•   Questions rather than answers
•   Scientifically oriented
•   Process focused
          “R&D” or “R Vs D”
           DEVELOPMENT

•   Based on existing knowledge
•   Driven by profit
•   Pushed by market
•   Short term oriented
•   Answers/Solutions rather than questions
•   Investment oriented
•   Goal focused
  R&D and MKTG: their role in
    innovation processes
• Technology push      • Market pull
  innovations:           innovations:
  – 20%                  – 80%
  – 80% success rate     – 20% success rate




           68 % of innovation pjts fail!
   R&D and MKTG:
barriers to comunication
        Mktg     R&D




                    Griffin et al. (1996)
           R&D and MKTG:
          means for integration

•   Relocation and phisical facilities
•   Personnel Movement
•   Informal social networks
•   Integrated reward systems
•   Organizational Structure… (see next slide)
         R&D and MKTG:
     organizing for integration

• Permanent coordinating groups
• Matrix organization
• Project teams
             Success and failure of
             innovation processes
Management factors
  –   Cost Management
  –   Information management
  –   Decision making
  –   Time management
                      Resistance factors
                         – Lack of Leadership
                         – Political Struggles
                         – Resistance to Innovation per se

                                          Cozijnsen (2000)
    Innovation and Governance
•   Proportion of long-term pay mix for TM
•   Separation of CEO and Chairman
•   Number and age (-) of TM
•   Number of Directors
•   Complemetary skills and backgrounds
    in TMT and BoD

                             Markman et al. (2001)
Coping with Inertial factors
      to Innovation
The not innovative attitudes (1)
• Many strands must be interwoven to
  create a compelling new product
  concept; but companies often
  RESPOND rather than INITIATE!
      The not innovative attitudes (2)

Market demand             Chase the latest
                           sales request               Follow the leader

Competitive environment




Technology
                                                  Incremental developments
                                                     Relying on suppliers
                                                    Replacing old products
                                  Stick to what
                                     we know
Company capabilities
“There is nothing as difficult as changing
   the order of things […] because the
 reformer has enemies among all those
 who benefit from the exixting order, and
only lukewarm support among those who
     might benefit from a new order”
         Machiavelli, The Prince
A) Why should we change? (1)
 Profits




    Goal level


                           Time
A) Why should we change? (B)
  Profits




                  New Goal level



     Goal level


                                   Time
A) Why should we change? (C)
• Forecasting Profits (customer
  satisfaction, industry dynamics, etc)
• Creating positive crises
  – fixing and communicating new goals
  – making them achievable
  – using rational, emotional and monetary
    levers
   B) Change into what? (1)
Challenge the current strategy


    WHO                          WHAT




                    HOW
    B) Change into what? (2)
Institutionalize a Questioning Attitude
  – Changing the CEO (“new blood to the
    head”)
  – Unauthorized projects (3M: 15% of time)
  – Specific Departments (“DODGI” at the
    Body Shop)
  – CEO Time devoted to employees (Lan &
    Spar Bank: 50%)
      C) Will it be a winner?
• Innovation is also gambling… Luck
  really exists!!
• Innovation stems from a variety of
  attempts, selected by the market:
  mistakes are the core of innovation
  (3M).
      D) How to organize?
• Convince everyone of the need and
  usefulness of the new idea
• Make the old and the new co-exist
  harmoniously
• Manage the transition gradually
                                   Chesbrough and Teece (1996)

           When is virtual virtuous?
        GM
                           Types of Innovation
                  Autonomous                     Systemic
  Exist outside


                        Go                  Ally
                      Virtual              with
Capabilities                              caution
                                                            IBM

                       Ally or                              SUN
                                         Bring in
                      bring in
                                          House
                       house
Must be created
    The right degree of
     decentralization

Incentive to
take risks                       Ability to settle
                                 conflicts and
                                 coordinate
                                 activities



Virtual Alliance   Joint     Corp. with Integrated
company            Venture   autonomous Corporation
                             divisions
Conclusions
     How to foster innovation (1)

•   Integrate Technology into Strategy
•   Invest in R&D
•   Integrate R&D and Mktg
•   Evaluate the nature of innovation
•   Analize the sources of opportunity
•   Adopt adequate Governance mechanisms
     How to foster innovation (2)

•   Anticipate the crises
•   Question your strategy
•   Don’t be afraid to make mistakes
•   Balance the old and the new
•   Don’t follow the trends blindly

				
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