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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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CPET 575 Management of Technology
A Specialty course for M.S. Technology - IT and Advanced Computer Applications
Purdue University Fort Wayne Campus
Lecture 2
Part One
Integrating Technology and Strategy:
A General Management Perspective Technological Innovation
Technological Innovation & Strategy
Paul I-Hai Lin, Professor
http://www.etcs.ipfw.edu/~linRequired text book:
Robert A. Burgelman, Clayton M. Christensen, and Steven C. Wheelwright, Strategic Management of Technology and Innovation, 5th edition, McGraw-Hill, ISBN 0073381543, 2009.
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy:
A General Management Perspective
Lecture 2
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy:
A General Management Perspective
Topics of Discussion
Overview
Key Concepts and Their Relationship
Integrating Technology and Strategy
Assessing Innovative Capabilities
Conclusion
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Overview
Importance of Technology and Innovation
Budget and spending on technology and
innovation – related activities
• High-tech company
• Tech-oriented company
• Start-up company, …
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Overview
Who is responsible for strategic management
of technology & innovation of a company,
organization, firm, etc.?
• CEO
• Vice President of Technology, VP for IT
• Director/Manager of Technology
• CTO (Chief Technology Officer)
• CIO (Chief Information Officer)
• Chief Strategy Officer
• Chief Risk Officer
• Chief Visionary Officer
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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OVERVIEW
General Manager’s Responsibilities are to
1) Acquire, develop, and allocate an
organization’s resources
2) Develop and exploit the firm’s capability for
innovation
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy:
A General Management Perspective
KEY CONCEPTS AND THEIR RELATIONSHIP
• Inventions/Discoveries/Technologies
• Technological Innovations
• Technological Entrepreneurship
• Activities and Outcomes
• Interrelations Among Key Concepts
INTEGRATING TECHNOLOGY AND
STRATEGY
ASSESSING INNOVATIVE CAPABILITIES
CONCLUSION
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy:
A General Management Perspective
INTEGRATING TECHNOLOGY AND
STRATEGY
• Perspectives on Strategy
• Connecting Technology and Strategy
• Technology and the Value Chain
• Technology Evolution and Forecasting
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy:
A General Management Perspective
INTEGRATING TECHNOLOGY AND
STRATEGY
• Perspectives on Strategy
Positive vs. Normative Views
Product-Market versus Resource Based Views
• Connecting Technology and Strategy
• Technology and the Value Chain
• Technology Evolution and Forecasting
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy:
A General Management Perspective
INTEGRATING TECHNOLOGY AND
STRATEGY
• Perspectives on Strategy
• Connecting Technology and Strategy
Technology and Competitive Strategy
Technology and Product-Market Strategy
Technology Portfolio
Technology Portfolio and Business Portfolio
• Technology and the Value Chain
• Technology Evolution and Forecasting
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy:
A General Management Perspective
INTEGRATING TECHNOLOGY AND STRATEGY
• Perspectives on Strategy
• Connecting Technology and Strategy
• Technology and the Value Chain (Exhibit 6) Inbound Logistics
Operations
Outbound Logistics
Marketing Sales
Service
• Technology Evolution and Forecasting
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy:
A General Management Perspective
INTEGRATING TECHNOLOGY AND
STRATEGY
• Perspectives on Strategy
• Connecting Technology and Strategy
• Technology and the Value Chain
• Technology Evolution and Forecasting
Technology Life Cycle
Technology Forecasting
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy:
A General Management Perspective
ASSESSING INNOVATIVE CAPABILITIES
• Innovative Capabilities Audit Framework
Innovative Capabilities
Business Unit Level Audit
Corporate Level Audit
Audit Frames of Reference
Who Should Do the Audit?
Conclusion
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships
Inventions/Discoveries/Technologies
Technological Innovations
Technological Entrepreneurship
Activities and Outcomes
Interrelations Among Key Concepts
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships
Inventions/Discoveries/Technologies
• Inventions/Discoveries
Results of creative process
How to measure the success
• Technical (Is it true/real?) rather than
Commercial (Does it provide a basis for
economic rents?)
• Patents – allow their inventors/originators
to establish a potential for success
• Successful innovations (subsequent
refinement may be needed, with
significant time lag, 10 years or more)
Research & Development
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships (cont.)
Inventions/Discoveries/Technologies
• Technology
Refers to the theoretical and practical knowledge, skills, and artifacts that
• Can be used to develop products and services as well as their production and delivery systems
• Can be embodies in people, materials, cognitive and physical processes, plant, equipment, and tools
Technologies are usually the outcome of development activities to put inventions and discoveries to practical use
How to measure the success
• Technical (Can it do the job?) rather than commercial (Can it do the job profitably?)
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships (cont.)
Inventions/Discoveries/Technologies
• Technology – success examples
The inventions of
• Transistor (1947), Bell Lab Bell Labs Top 10 Innovations, http://www3.alcatel-
lucent.com/wps/portal/BellLabs/Top10Innovations
• Integrated Circuit (1959), Texas Instruments & Fairchild Semiconductor Corporation
http://inventors.about.com/od/istartinventions/a/intergrated_circuit.htm
http://www.computerhistory.org/semiconductor/timeline/1960-FirstIC.html
• Microprocessor (1971), Intel http://www.computerhistory.org/semiconductor/timeli
ne/1971-MPU.html
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships (cont.)
Inventions/Discoveries/Technologies
• Technology – success examples
Successive generations of new technologies in the semiconductor industry
• Memory devices
• Microprocessor, microcontrollers
• Peripherals
Applications: personal computers, business automation, computer control, telecommunications, smartphones, tablet, smart sensors, Internet of Things, wearable smart devices, etc
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships (cont.)
Invention of Microprocessor
• In the November 1971, Intel announced the first
microprocessor Intel 4004 to the world, http://www.intel.com/museum/archives/4004.htm
• Busicom eventually sold some 100,000 calculators
Intel® 4004 microprocessor
Busicom* 141-PF printing calculator
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships (cont.)
Invention of Microprocessor• 1969
Nippon Calculating Machine Corporation, visited Intel to discuss its idea for custom Large-scale Integrated (LSI) circuits; and asked for designing 12 custom chips for its new Busicom 141-PF printing calculator
Ted Hoff, heading Intel’s application efforts, realized there was no practical way to implement the devices, and was sure a small general-purpose computer could do the job
Engineers Marcian E. “Ted” Hoff, Deferico Faggin, and Stan Mazor came up with a design that involved a set of four chips called MCS-4: 4004 CPU, ROM, RAM, and I/O
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships (cont.)
Intel Museum http://www.intel.com/content/www/us/en/company-overview/intel-museum.html• 1972: 8008 Microprocessor
• 1974: 8080 Microprocessor, (8085)
• 1978: 8086-8088 Microprocessor
• 1982: 286 Microprocessor
• 1985: Inetl386TM Microprocessor
• 1989: Intel486TM DX CPU Microprocessor
• 1995: Intel® Pentium® Processor
• 1997: Intel® Pentium® II Processor
• 1998: Intel® Pentium II Xeon Processor
• 1999: Intel® Celeron® Processor
• 2003: Intel® Pentium® M Processor
• …
• 2012 …2014 and challenges …
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships (cont.)
Technological Innovations• Technology-based Innovations
Examples: disposable diapers, oversized tennis racquets, electronic fuel injection, personal computers, Tablets, Smartphones, ..
• Technology-facilitated Innovations
Examples:
• Business data processing & automation
• ERP (Enterprise Resource Planning)
• CRM (Customer Relationship Management.)
• SCM (Supply Chain Management)
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships (cont.)
Technological Innovations
• Outcomes
New, marketable products and services and/or
new production and delivery systems
• Levels of Significance
Incremental innovations involve adaptation,
refinement, and enhancement of existing ones
Radical innovations involve entirely new product
and service categories and/or production and
delivery systems.
Architectural innovations refer to reconfiguration
of the system of components that constitute the
product.
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships (cont.)
Technological Entrepreneurship
• Individual or corporate entrepreneurship
• Activities
Create new resource combinations to make
innovation possible, bringing together the technical
and commercial worlds in a profitable way
• Administrative capabilities: efficient, effective
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Key Concepts and Their Relationships (cont.)
Activities and Outcomes• Invention/Discoveries/Technologies Related Activities
Tinkering & Experimenting
Research Activities
Development Activities
• Outcomes (Results)
Inventions, Discoveries, and Technologies
• Technological Innovation Related Activities:
Product & Process Development Activities
Market Development Activities
• Innovation Outcomes (Results):
Technological Innovations
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Interrelations Among Key Concepts
Technical worldTechnological
entrepreneurshipCommercial world
Administrative
capabilities
Inventions/discoveries/technologies Technical innovations
Product/
process
development
activities
Market
Development
activities
Tinkering/
experimenting
Research
Activities
Development
activities
Results
Activities
=
+
EXHIBIT 1 The Relationships Among Key Concepts Concerning Technological Innovation
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Perspectives on Strategy
Positive vs. Normative Views
• Positive View of Strategy:
Concerned with the firm’s actual strategy and how it comes to be
Resulted from organizational learning process
Top management belief’s about the basis of firm’s past and current success
a) Core competencies
b) Product market areas
c) Core values, and
d) Objectives, etc
• Normative View of Strategy
Concerned with what the firm’s strategy should be
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Perspective on Strategy (cont.)
Product-Market vs. Resource-Based Views
• Product-Market View of Strategy
Concerned with how the firm competes with its products
and services
• Resource-Based View of Strategy
Concerned with how the firm can secure the factors
needed to create core competencies and capabilities
that form the basis for establishing and sustaining
competitive advantages
Asks: “How do competencies and capabilities help
create and sustain competitive advantages?”
• Current Trend: Integrating Product-Market &
Resource-based views
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Connecting Technology & Strategy
During the 1980s, technology is recognized as an
important element of business definition and competitive
strategy
Abell: “technology adds a dynamic character to the task
of business definition, as one technology may more or
less rapidly displace another over time.”
Porter observes that technology is among the most
prominent factors that determine the rule of
competition
Friar and Horwitch explain the growing prominence of
technology as the result of historical forces
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Connecting Technology & Strategy (cont.)
Technology and Competitive Strategy
Porter’s “generic strategies”, 1985, – a framework for classifying competitive strategies: Technology Strategy
a) Industry-wide differentiation (broad range of industry segments)Quality, performance, features, delivery, supports, etc
Better products, services
b) Focused differentiation (a narrow set of industry segments)Customers’ willingness to pay a premium price
c) Industry-wide cost leadershipLower price, comparable products & services
d) Focused cost leadership (a narrow set of industry segments)Lower delivering cost infrastructure
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Connecting Technology & Strategy (cont.)
Technology and Competitive Strategy• Product-Related Technology
May be the basis for lower cost
Example: designing different models of cars, sharing common structural components (e.g. chassis), to lower the cost of the diff. models
Windows 8 (touch screen and other features), 2012
iPhone 5 with two models (cheaper case, and regular product), 2014’s strategy
Ford F-150 truck. all aluminum body, 2014
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Connecting Technology & Strategy (cont.)
Technology and Competitive Strategy• Process –Related (manufacturing) Technology
May be the key to product performance and hence differentiation
Manufacturing excellence example: early 1980s, it allowed Japanese DRAM manufacturers to differentiate their products from U.S. based competitors
Lean and advanced manufacturing processes
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 2. Technological Policies and Generic Competitive
Strategies
Generic strategyFocus-seg. diff.
• Product dev. to
meet exactly the needs of the particular business seg. application
Product Tech. Change
Process Tech. Change
Overall cost leadership
Overall diff.Focus-seg. cost leadership
Technological Policies
• Product dev. to
reduce prod. cost by lowering materials content
• Facilitating ease manufacturing
• Simplifying logistical req.
• Learning curve
process improvement
• Process improvement to enhance economics of scale
• Product dev. to
enhance quality, features, deliverability, or switching costs
• Process dev. to
support high tolerance
• Greater QC
• More reliable scheduling
• Faster response time to orders
•Others
• Product dev. to
design only enough performance for the segment’s needs
• Product dev. to
tune production and delivery system to seg. needs in order to lower cost
• Process dev. to
tune the production & delivery system to seg. need in order to improve performance
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Connecting Technology & Strategy (cont.)
Technology and Product-Market Strategy
• Expressed in the products and services it brings to market
• Analyze the degree of integration Decompose each product and service into its constituting
technologies
Assess the relative strength – the degree of distinctive competence – the firm has with respect to that technology
• Example: a firm manufacturing & marketing cameras Competence in optic
Sufficient info is needed to determine firm’s capabilities
Need to specifying how the strength can help – higher quality or lower cost?
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 3. The Product/Technology Matrix
Note: Each entry (*) should establish the firm’s relative strengthvis-à-vis the state of the art Source: Adapted from A. Fusfeld, “How to Put Technology into Corporate Planning,” Technology Review, May 1978
Technology 1
Technology 2
Technology ∞
.
.
.
Product A Product B Product N...
(*)
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Connecting Technology & Strategy (cont.)
Technology Portfolio
• Technology Life Cycle
• Technology Importance
Value it brings to a particular class of products
Value it could potentially bring to other classes for
the customer/user
• Relative Technology Position (reference to
competitors)
Patent position, know-how and trade secrets,
learning curve effects, and key talent
Strongly affected by the firm’s historical and future
levels of investment
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 4. Developing the Technology Portfolio
Bet (full commitment)
Cash in(examine carefully)
Draw(Positioned
ambiguously)
Fold (disengage,
redeploy resource)
High
High
Low
Low
Relative Technology Position
Tech
nolo
gy I
mp
orta
nce
Source: J.M. Harris, R.W. Shaw Jr., and W.P.Somers. The Strategic Management of Technology (New York: Booz Allen Hamilton Inc., 1981)
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 4 Developing the Technology Portfolio (cont.)
Bet quadrant (Rel. Tech. Pos. – High, Tech. Imp. – High)
• Warrant the full commitment:
• Frontier R&D, push the limits of its product
development process, and invest in the newest
equipment
Cash in quadrant (RTP – High, TI – Low-Mid)
• Examined carefully
• Tech may have been important at one time, but it’s
importance is reduced
• Suggest that no further investment in these
technologies
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 4 Developing the Technology Portfolio (cont.)
Draw quadrant (Rel. Tech. Pos – Low, Tech Imp – High)
• Technology is positioned ambiguously
• Important to ask why and how this change came
about
• React: Invest, probably heavily, in the technology?
• Disengage
Fold quadrant (RTP – Low, TI – Low)
• Inertial forces often lead to continue investment in
R&D beyond the level at which reasonable ROI can
be expected
• Requires reconsider its investments
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Connecting Technology & Strategy (cont.)
Technology Portfolio and Business Portfolio
• Companies
Has multiple businesses in their corporate
portfolio, each with its own technologies
• Portfolio planning tool - McKinsey’s framework based
on industry attractiveness and competitive position
dimensions
• Harris, Shaw, and Somers suggest examining the
relationship between
Traditional portfolio planning matrix
Technology portfolio matrix
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 5. Matching Business and Technology Portfolios
Position
Source: J.M. Harris, R.W. Shaw Jr., and W. P. Somers, The Strategic Management of Technology (New York: Booz Allen Hamilton Inc., 1981)
B
ABA
TechnologyBusiness
Competitive position
Im
porta
nce
Att
racti
ven
ess
Strategic Business AnalysisTechnology Analysis (Supporting business)
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Technology & the Value Chain
Broader sense of technology• Encompasses the entire set of technologies employed in the
sequence of activities that constitute of a firm’s value chain
Activities• R&D, designing, manufacturing, marketing, delivering, and
supporting it’s product
Value13
• The amount buyers are willing to pay for what a firm provides them
• Measured by total revenue, a reflection of the price a firm’s product commands and the units it can sell
Value chain (total value, value activities)• Supplier’s value chain
• Channel’s value chain
• Buyer’s value chain …13M. Porter, Competitive Advantage
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 6. Representative Technologies in a
Firm’s Value Chain
Transportation
technology
Material handling
technology
Storage and
preservation
technology
Communication
system technology
Testing technology
Information system
technology
Basic product technology
Material technology
Machine tool technology
Material handling technology
Packaging technologyMaintenance methods
Testing technologyBuilding design
operation technology
Information system technology
Transportation
technology
Material handling
technology
Packaging technology
Communication
system technology
Information system
technology
Media technology
Audio and video
recording technology
Communication system
technology
Information system
technology
Diagnostic and
testing technology
Communication
system technology
Information system
technology
Operations Outbound logistics Marketing sales ServicesInbound logistics
Source: M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, New York: Free Press 1985
Exhibit 6 Representative Technologies in a Firm’s Value Chain
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Integrating Technology and Strategy: Technology Evolution and Forecasting
Technology Product Life Cycle
• Technology change affecting firm’s competitive
position
• Firm find it difficult to respond to such changes
• Integrating technology & strategy
Understand life cycle of various technologies it
employs
Potential for competitive advantage
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 7. Technology Life Cycle and Competitive
Advantages
Life Cycle
I. Emerging technologies
II. Packing technologies
III. Key technologies
IV. Base technologies
Importance of Technologies for Competitive Advantages.
Have not yet demonstrated potential for changing the basis of competition.
Have demonstrated their potential for changing the basis of competition.
Are embedded in and enable product/process.
Have major impact on value-added stream (cost, performance, quality).
Allow proprietary/patented positions
Have minor impact on value-added stream; common to all competitors; commodity
Stages in Technology
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Assessing Innovative Capabilities
Persons – who responsible for managing the innovation process
Firm’s innovative potential and into the barriers to innovation
Decisions on Innovations: managerial attention, resources
Innovation capabilities audit (address at least 3 questions)• How has the firm been innovative in the areas of product and
service offering and/or production and delivery systems?
• How good is the fit between the firm’s current business and corporate strategies and its innovative capabilities
• What are the firm’s needs in terms of innovative capabilities to support its long-term business and corporate competitive strategies?
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Assessing Innovative Capabilities: Innovative Capabilities Audit Framework
Innovation depends on
• Technological Capabilities, and other critical capabilities in the areas Manufacturing
Marketing and distribution
Human resource management
An example:
• Technology strategy – achieve superior product performance, must be complemented by A technically trained sales force that can educate the
customer regarding the product’s performance advantages, and
A high-quality manufacturing system
• A 1978 case: 16-bit microprocessors Intel 8086 vs. Motorola 68000 vs. Zilog Z800
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Assessing Innovative Capabilities: Innovative Capabilities Audit Framework
Innovation Capabilities
• The comprehensive set of characteristics of an organization that facilitate and support innovation strategies
Exist at both levels
• Business unit
A particular strategy and source commitment
A distinct set of product markets, competitors, and resources
• Corporate (multi-business)
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Assessing Innovative Capabilities: Innovative Capabilities Audit Framework
Business Unit Level Audit
• Focus on
New products and services, and/or
New production and delivery systems
• Cab be characterized in terms of
Timing of market entry
Technological leadership or follower-ship
Scope of innovativeness, and
Rate of innovativeness
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Business unit
Innovative
Strategy
Exhibit 8 Innovative Capabilities Audit
Framework – Business Unit Level
Business unit
strategic
management
capacity
Resource
availability
Understanding
business unit
technological
environment
Understanding
competitors’
innovative
strategies and
industry
evolution
Business unit
structure and
cultural context
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Business Unit Level: Innovative Capabilities Audit Framework
Five important categories of variables influence the innovation strategies of a business:
Important for formulation
1. Resources available for innovative activities
2. Capacity to understand competitors’ strategies and industry evolution with respect to innovation
3. Capacity to understand technological developments relevant to the business unit
Important for implementation
4. Structural and cultural context of the business unit affecting internal entrepreneurial behavior
5. Strategic management capacity to deal with internal entrepreneurial initiatives
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 9. Business Unit Level: Innovative Capabilities Audit Framework
1. Resources Availability and Allocation
• Level of R&D funding and evolution: In absolute terms
As percentage of sales
A percentage of total firm R&D funding
As compared to main competitors
As compared to leading competitors
• Breadth and depth skills at business unit level R&D, engineering, and market research
• Distinctive competences in the areas of technology relevant to business unit
• Allocation of R&D to Existing product/market combinations
New product development for existing product categories
Development of new product categories
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 9 Business Unit Level: Innovative Capabilities Audit Framework (cont.)
2. Understanding Competitors’ Strategies and Industry Evolution
• Intelligence systems and data available
• Capacity to identify, analyze, and predict competitors’ innovative strategies
• Capacity to identify, analyze, and predict industry evolution
• Capacity to anticipate facilitating/impeding external forces relevant to business unit’s innovative strategies
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 9 Business Unit Level: Innovative Capabilities Audit Framework (cont.)
3. Understanding the Business Unit’s Technological Environment
• Capacity for technological forecasting relevant to business unit’s technologies
• Capacity to assess technologies relevant to business unit
• Capacity to identify technological opportunities for business unit
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 9 Business Unit Level: Innovative
Capabilities Audit Framework (cont.)
4. Business Unit Structural and Cultural Context
• Mechanisms for managing R&D efforts
• Mechanisms for transferring technology from research to development
• Mechanisms for integrating different functional groups (R&D, engineering, marketing, manufacturing) in the new product development process
• Mechanisms for funding unplanned new product initiatives
• Mechanisms for eliciting new ideas from employees
• Evaluation and award systems for entrepreneurial behavior
• Dominant values and definition of success
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 9 Business Unit Level: Innovative
Capabilities Audit Framework (cont.)
5. Strategic Management Capacity to Deal with Entrepreneurial Behavior
• Business unit level management capacity to define a substantive development strategy
• Business unit level management capacity to assess strategic importance of entrepreneurial initiatives
• Business unit level management capacity to assess relatedness of entrepreneurial initiatives to unit’s core capabilities
• Capacity of business unit level management to coach product champions
• Quality and availability of product champions in the business unit
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CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Corporate
Innovative
Strategies
Exhibit 10 Innovative Capabilities Audit
Framework – Corporate Level
Corporate
strategic
management
capacity
Resource
availability
and allocation
Understanding
corporate
technological
environment
Understanding
competitors’
innovative
strategies and
multi-industry
evolution
Corporate
structure and
cultural context
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 10. Corporate Level: Innovative Capabilities Audit Framework
1. Resource Availability and Allocation
• Level of R&D funding and evolution: In absolute terms
As percentage of sales
A percentage of total firm R&D funding
As compared to main competitors
As compared to leading competitors
• Breadth and depth skills at corporate level R&D, engineering, and market research
• Distinctive competences in the areas of technology relevant to multiple business units
• Corporate R&D allocation Exploratory research
R&D in support of mainstream business
R&D in support of new business definition
R&D in support of new business development
30
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 10. Corporate Level: Innovative
Capabilities Audit Framework (cont.)
2. Understanding Competitors’ Strategies and Multi-Industry Evolution
• Intelligence systems and data available
• Capacity to identify, analyze, and predict competitors’ innovative strategies spanning multiple industries
• Capacity to identify, analyze, and predict industry evolution of interdependencies among multiple industries
• Capacity to anticipate facilitating/impeding external forces relevant to firm’s innovative strategies
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 10. Corporate Level: Innovative
Capabilities Audit Framework (cont.)
3. Understanding the Corporate Technological Environment
• Capacity for technological forecasting in multiple areas
• Capacity to forecast cross-impacts among areas of technology
• Capacity to assess technologies in multiple areas
• Capacity to identify technological opportunities for business unit
31
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 10. Corporate Level: Innovative
Capabilities Audit Framework (cont.)
4. Corporate Context (Structural and Cultural)
• Mechanisms to share technologies across unit boundaries
• Mechanisms to define new business opportunities across business unit boundaries
• Internal and external organization designs for managing new ventures
• Mechanisms for funding unplanned initiatives
• Evaluation and award systems for entrepreneurial behavior
• Movement of personnel between mainstream activities and new ventures
• Dominant values and definition of success
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 10. Corporate Level: Innovative
Capabilities Audit Framework (cont.)
5. Strategic Management Capacity to Deal with
Entrepreneurial Behavior
• Top management capacity to define a substantive
long-term development strategy
• Top management capacity to assess strategic
importance of entrepreneurial initiatives
• Top management capacity to assess relatedness
of entrepreneurial initiatives to firm’s core
capabilities
32
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 10. Corporate Level: Innovative
Capabilities Audit Framework (cont.)
5. Strategic Management Capacity to Deal with
Entrepreneurial Behavior
• Middle-level management capacity to work with
top management to obtain/maintain support for
new initiatives (organizational championing)
• Middle-level management capacity to define
corporate strategic framework for new initiatives
• Middle-level management capacity to coach new
venture managers
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Exhibit 10. Corporate Level: Innovative
Capabilities Audit Framework (cont.)
5. Strategic Management Capacity to Deal with
Entrepreneurial Behavior
• New venture managers’ capacity to build new
organizational capabilities
• New venture managers’ capacity to develop a
business strategy for new initiatives
• Availability of product champions to identify and
define new business opportunities outside of
mainstream activities
33
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Assessing Innovative Capabilities: Innovative Capabilities Audit Framework (cont.)
Audit Frames of Reference
1. Interpreting the results of the innovative
capabilities audit
How the current situation compares to the
past
2. Firm’s position relative to current competitors
Identify - positions desired
CPET 575 Managgement of Technology -Lecture 2, Prof. Paul I-Hai Lin
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Assessing Innovative Capabilities:
Innovative Capabilities Audit Framework cont.)
Who Should Do the Audit?
• Vice-president (General Manager, Senior Manager)
• Insiders - advantages/disadvantages
• Outsiders - advantages/disadvantages
• Undertaken by
Firm’s strategic planning department
Ad Hoc Audit team (task force)
• Strategic planning
• R&D
• New product managers
• Key functional managers