approaches to technology strategy

APPROACHES TO TECHNOLOGY

STRATEGY

THE POSITIONING APPROACH TO STRATEGY

focuses on market structure and positioning within

an industry,

THE RESOURCE EASED APPROACH TO

STRATEGY

The starting point is the firm’s competencies and

resources.

Firm’s competence is the actual source of

sustainable and long term competitive advantage.

Significant performance differences among firms.

Customer needs change much more rapidly than

firm’s competencies.

RATIONALIST AND

INCREMENTALIST APPROACHES

INCREMENTALIST

includes a strong commitment to a single narrow

or focused technology area,

a comparatively small, informal and changing

organizational structure,

a technological champion as head of the firm or

part of the top management team, and an overall

climate and style of entrepreneurship and risk-

taking.

It is the typical mode of small high-technology

firms.

RATIONALIST AND

INCREMENTALIST APPROACHESRATIONALIST

large scale corporation R&D operating in

multi-division, multi-product, multi-market contexts.

includes strategic choices or tradeoffs along a variety of dimensions:

types of technological innovation,

the specific technologies to develop,

the timing or positioning of technology introduction into the marketplace.

A number of complex internal strategic activities included.

allocation of technological resources,

monitoring and evaluation of technological undertakings,

Historical View

Porter(70s and early 80s,)

A.D. Little(1980)

Booz-Allen & Hamilton (1981)Hax and Majluf (1984)McKinsey (1986)

Prahalad and Hamel

(1989,1990,1993) D’Aveni (1994)

Itami and Numagami (1992)

POSITIONING APPROACH

RESOURCE EASED APPROACH

Review – Chiesa (2001)

Selection

Mod of Acquisition

Timing

Porter’s approach

Selecting the appropriate business area

likely to be profitable in the medium-long term;

Tools: Five Force

Positioning within the selected business area.

Tools: Value Chain

Porter’s approach

technology is a determinant of the industry

structure and therefore affects the profitability

within the industry;

technology affects a firm’s potential to generate

competitive advantages and can be at the basis

of the firm’s positioning within the business area.

Porter’s approach StepsIdentification of the specific technologies and sub-technologies of the firm’s value chain;

Identification of the relevant technologies available in other industrial sectors;

Definition of the probable patterns of technological change;

identification of the technologies critical for the firm’s competitive advantage and favorable for the industry structure;

Valuation of the firm’s capabilities and the required investments.

selection of a technology strategy able to reinforce the firm’s competitive position

Selection of the technologies on which to invest,Be leader or follower, License out technologies(whether to sell or not).

Porter’s approach-Outcome

Three key decisions:

The selection of the technologies to develop;

Be leader or follower;

Sell the technology or not.

Hax and Majlufs Contribution to

Technology Strategy

A.D. Little Methodology

identification of the technologies required,

definition of the strategic importance and

the selection of the technology to achieve

key success factors,

Base :essential to be in the business

key :high competitive impact

Pacing :under experimentation by some

competitors competitive impact likely to be high,

Emerging : competitive impact unknown but

promising

A.D. Little Methodology

determination of the fm’s technological

strengths and weaknesses,

Clear leader :recognized as such in the industry,

Strong :able to express independent technical

actions and set new directions),

Able to sustain technological competitiveness

Tenable :unable to set independent course

Weak :unable to sustain quality of technical outputs

A.D. Little Methodology

technology strategy formulation.

Build

nurture,

maintain,

repair and

invest selectively.

A.D. Little Methodology

Booz-Allen & Hamilton

Methodology

technology situation assessment

identification of the technologies to analyse in a

product/business area,

assessment of the importance of the technologies

to the specific products/businesses,

definition of the firm’s technology relative position

Booz-Allen & Hamilton

Methodology

1. technology portfolio development

identifies the appropriate technology strategy of

the business according to the two key dimensions

which are

technology importance (the extent to which the

technology is vital to compete),

technology relative position (the position of the firm

in that technology relative to competitors).

1. technology portfolio

development

Booz-Allen & Hamilton

Methodology

2. matching business and technology strategy

identify the technologies supporting the best

positioned

Booz-Allen & Hamilton

Methodology

3. define the technology investment priorities

McKinsey Methodology

Foster suggests that the appropriate R&D

strategies should take into

account the potential of technologies for productivity

yield improvements

McKinsey Methodology

Prahalad and Hamel’s Core

Competence

1. identifying the evolutionary patterns of the

concerned industries;

Industry foresight is a key issue and provide the

required basis and the right direction to competence

building and competition.

2. define the strategic architecture;

strategic intent.

The road to achieve the required objectives has to

be designed in details.

3. recognize that competition is played at different

levels and that differentials should be achieved at

each level.

The tangible link between core competencies and

end products is the core product

the core component that generates the value of the

end products.

fix stretched objectives and leverage

competencies (stretch and leverage);

design an appropriate organisation.

D’ Aveni Hypercornpetition

Arenas of which the boundaries are well defined

price and the perceived quality where the

dimensions of the perceived quality are stable over

time.

Arenas of which the boundaries are well defined

where competition is played on two dimensions:

price and perceived quality where the perceived

quality changes over time.

Arenas where boundaries are weakly defined and

competition is played on the ability to generate

new product/market combinations.

D’ Aveni Hypercornpetition

These three categories also address three different

ways of creating competitive advantage:

performing better than competitors on an already

existing dimension of competition (either cost or

already existing dimensions of quality);

establishing a new dimension of quality on which

to compete;

creating a new product/market combination.

Itami and Numagami

The types of interactions between strategy and

technology are three:

between current strategy and current technology;

between current strategy and future technology;

between future strategy and current technology.

Itami and Numagami

The underlying assumptions are that technology

can act on strategy in three ways:

a weapon to differentiate the fm from its

competitors;

a constraint to which firms must adapt;

a threat firms have to guard against and cope

with.