Chapter-3Development of Technological

Capabilities

IT as a Change Agent

• IT as an agent for social change• IT has changed the way businesses

are conducted and the way we work

Development of Technology Capabilities

• Once we understand the role of IT and the concept of technology strategy (Chapter-2), the next step is to build technology capabilities to accomplish the strategic and operational goals.

Technology Capability

Definition• Technological assets possessed by

a firm that have strategic significance, as well as the processes and practices by which these assets are developed and exploited (Harrison & Samson 2002)

• Mechanisms to develop a firm’s technological assets???

Core Technological Capabilities

A firm’s core technological capabilities encompass a set of following components:

• Differentiated Skills (reside in human capital)

• Organizational routines (share risk and responsibility)

• Specific assets (advanced manufacturing techniques, information systems, computer aided manufacturing etc.) that underlie competitive advantage (Hamilton, 1992).

• Ross et al. (1996) call these as 3 IT assets (Human, Relationship, and Technology Assets)

Develop Technology-based Capability

Three phases model of technology development (Jaikumar & Bohn, 1986)

• Phase 1: allows technology to be developed and implemented but not easily modified or enhanced

• Phase 2: fines tune the system• Phase 3: automates process controlThese 3 phases can be applied to both

process technology and product technology.

Developing Technology-Based Capabilities

Jaikumar and Bohn’s (1986) 3-phased (8-Stage Model)

1.Recognition of prototype – knowledge is based on intuitive judgment

2.Recognition of attributes within prototypes – distinction between processes by identifying their common properties and qualitative characteristics

3.Discrimination across attributes – distinction of processes in terms of measurable dimensions

4.Discrimination within attributes – quantitative measurement for a strong knowledge base

Developing Technology-Based Capabilities…

5. Local control of attributes – process optimization and control over the processes through experimentation and optimization

6. Fine tuning and considering the reaction on system to changes – may be market, technical or economic

7. Remaining in control of the process under changing conditions – computerized process control of sophisticated and automated code which is able to anticipate and respond to changing conditions

8. Having complete understanding and knowledge of possible contingencies – programmed control systems having all possible events

Managing Technological Capabilities

• Requires a strategic approach• Treats technology as a strategic tool

(instead of expense) • Includes technology in the business

strategy• A sustainable source of

competitive advantage is the ability to respond consistently to changing markets with new and improved products and ever improving competitiveness (Stalk 1992)

Strategic Value

Reasons why a capabilities focus increases the strategic value?

• Dependency of technological assets• Increased strategic relevance of

support activities• Complexity and organizational

diffuseness of technical processes

4 Inhibitors of Technological Capability Development

Mayer (1993) has identified four inhibitors of technological capability development:

• Entrenched short-term corporate mindset• Failure to adapt to generational technological

change… lack of forecasting and trend analysis capability

• Failure to invest in product and process improvement… poor decision making and organizational inertia

• Disestablishment of design teams (reassigning teams to other tasks) …. Incapability to redeploy the firm’s strategic resources (RBV)

Technology Transfer (Technology Diffusion and Adaptation)

• The process of movement or transfer of information, technical know-how and people among corporate technical functions (such as R&D, engineering and manufacturing) and nontechnical functions (such as marketing and sales) in order to yield innovative products and services that meet corporate business goals and fulfill customer needs (Hamilton, 1992).

• Inter-organizational transfer means transfer of technology from government, academic institutions and R&D organizations to Private Industry.– Paradoxical result – intra-organizational TT is less significant

due to incapability of its commercialization and management

• International TT focuses the technological movement among the countries

Mechanisms for Technology Transfer

• Public-Private Partnerships– Government co-financed developments

• Private-Private Partnerships– Joint Ventures with business fit

• University-Private Partnerships– Targeted R&D collaboration

• Technology Intermediaries– NGOs, Government

Drivers of Technology Transfer

• Incentives encouraging investment• Reduced risk (fixed tariffs, guarantees etc)• Increased information exchange• Alignment of actor interests in market chain• Clear, consistent, long term market signals• Entrepreneurialism and education• Integrated planning

Common Reasons for Failure in the Transfer of Technology…(Badawy,

1991)• Independent understanding of the role of technology

within the business strategy and the dynamic nature of technology.

• The nontechnical backgrounds of executive managers and communication inadequacies between business and technical managers.

• Failure to apply integration by management to integrate business strategy, R&D strategy and manufacturing and marketing functions.

• Executive focus on “big bang projects.”– New system is implemented in three ways – big bang adoption,

phased adoption and parallel adoption.

• Overemphasis on short-term profitability goals.• Failure to allocate R&D expenditure effectively.• Refusal to abandon the “not invented here (NIH)”

syndrome.

Categories of Barriers to Effective Technology Transfer…(Steele, 1989)

• Technical Barriers– TT is impossible without “people transfer” through intra-

organizational secondments (Betz, 1994).– This facilitates to overcome the “not invented here”

syndrome. • NIH – “when technologies are introduced from external sources”

• Attitudinal Barriers– Researcher’s view vs. Manager’s view about the relationship

between time and outcome and knowledge and action• Researchers view the outcome as an independent variable as

researchers are concerned about discoveries while managers think time is an independent variable because managers work on the time bound projects

• Another difference is the knowledge vs action orientation of researchers as opposed to managers

Critical Success Factors• A focus on the development of

technological capabilities• An ability to develop a strategic technology

culture• The recognition of the importance of

technological assets• An ability to balance short-term

requirements with long-term goals• An ability to effectively adapt to

technological change• Top management commitment and support

Intellectual Property:Protection Approaches

Patent

Copyright

Trademark

Trade Secret

All can be used concurrently, and SHOULD BE. “Investment grade” technologies tend to be in a “thicket” of protection

Patents

• SPECIFIC CRITERIA DEFINED BY LAWNovelty, Non-obviousness, Utility

• BURDEN OF PROOF ON THE APPLICANTApplicant must prove in the examination that the

invention meets the criteria

• CAREFUL EXAMINATIONTechnically qualified examinersReview of the “prior art”May take two to five years

• EVERY COUNTRY HAS A DIFFERENT SYSTEMPatents are granted by national officesOne invention may differ in coverage from country to

countryPatent cooperation Treaty and the European Patent Office

Patents

• TERM OF PATENTS20 years from date of applicationMost countries have similar terms

(harmonization)

• COST OF A PATENTExpensive to apply - legal costs and feesExpensive to maintain - maintenance fees

• “FIRST-TO-FILE” vs. “FIRST-TO-INVENT”U.S. is sole major “first -to-invent” countryMay mean an invention in Europe will not get a

U.S. patent

Patents (Cont.)

Copyrights• The exclusive right granted by the government to the

owner of an original work of authorship to reproduce, distribute, perform, prepare derivative works, and/or display the copyright work

• Term for individual is life plus 50 years; for organizations, publication plus 75 years (or creation plus 100 years)

• Covers the expression of an idea in tangible form but not the idea itself

• Traditionally the vehicle for mass market software protection, print material, and recorded materials (tapes, records, film)

• Acquisition upon creation; U.S. registration relatively easy• Automatically protected in many foreign countries• Issue: work for hire versus original creation

Trademarks• A name or logo which is affixed to goods or

services placed in commerce and indicates the source and quality of the goods or services

• Term is indefinite (while still in use)• Easily protected via registration, and easily

obtained indefinitely• May be worth more than the invention or

creation (e.g, Gatorade)• Trademarks can be registered within a state,

or nationally. Must be registered nation by nation.

Trade Secrets

• Derives economic value from not being known to persons who can obtain economic value from its disclosure or use

• Need explicit efforts to maintain secrecy, internal and external

• Incompatible long-term approach for universities, because of publishing norms (possible exception is “know-how”)

• Trade secrets can be commercialized, via license or other approaches

• Used when other protection approach can lead to “inventing around”

“8 Golden Rules” for Patenting

1. Avoid early public disclosure. File first, then disclose.

2. Do not publish interim results or speculate on broader applications of a discovery.

3. Do research on the commercial market and technical novelty of an invention before filing a patent application.

4. Consider the possibilities to license or develop an invention before filing.

5. If you cannot protect the patent from infringement, don’t file.

6. File locally first. Drop international applications if there is no interest in development in a reasonable time.

7. If you cannot prove the concept of a new invention in a reasonable time, drop the application.

8. Periodically clean out your patent portfolio if you are a research institute. Do not pay for non-productive patents.