1

Enactment of Technology Strategy

Developing a Firm’s Innovative Capability

2

Questions

How a firm’s innovative activities reflect its technology strategy?

How the enactment of technology strategy serves to further develop its innovative capabilities?

3

Outline

Innovation challenges in established firms

Strategic management of corporate research

Managing corporate entrepreneurship

Conclusion

4

Innovation Challenges in Established Firms

Three types of new product and new business development Induced strategic action

Incremental & architecture innovation In relation to its familiar external environments Ex: Next generation of aircraft

Autonomous strategic action Radical innovation Opens up new environmental niches Firm’s long-term survival and development Ex: Electronic fuel injection

A balance act

5

New Product and New Business Development

Autonomous strategic

action

Strategic context

Structural context

Concept of corporative

strategyInduced strategic

action

An evolutionary framework of the strategy-making process in established firms

6

Strategic Management of Corporate Research

The functions of corporate research

Managing key interfaces

Linking corporate research to corporate development strategy

7

The Functions of Corporate Research

Support of existing businesses (induced process) Improvements in existing products and processes

New strategic directions (autonomous process) Discover new areas of technology Ex: Du Pont’s nylon, EMI’s CT scanner

Effectively using the output of corporate research

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The Functions of Corporate Research

Innovations by:

New strategic directions

Support of existing businesses

Improving and strengthening the understanding of technologies in use

Diversifying to new applications and

markets

Identifying product and process improvements

Discovering and developing new technologies

Diversifying to entirely new businesses

Developing new processes for established products

9

The Functions of Corporate Research

Corporate service by:

New strategic directions Support of existing businesses

Intelligence Opening windows on new science and technology

Assessing threats and opportunities

Human resources Recruiting new kinds of skills

Recruiting talented people with high potential

Technology transfer

Identifying acquisition candidates with needed technological expertise

Recruiting for all divisions, from corporate research to operations

10

Manage Key Interfaces

Corporate research - divisional R&D interface (induced process) Attitudes of scientists in divisional R&D Attitudes of corporate research Administrative, geographical, and personal linkages

Corporate research - business research interface (autonomous process) Linking new technological solutions to market needs Obtaining additional resources to create a commercially viable new

business

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Manage Key Interfaces

　 Geographical

　 Closed Open

　 Personal Personal

　 　 Closed Open Closed Open

Administrative

ClosedTight

coupling　 　 　

Open 　 　 　No

Coupling

12

Systematic Differences betweenBusiness and R&D People

Work environmentR&D people Business research people

1. Structure Well defined: existence of research tradition; clearly described positions

Ill defined: no real research tradition; positions less clearly defined

2. Methods Scientific and codified Ad hoc and uncodified

3. Database Systematic and objective Unsystematic and largely subjective

4. Work and time pressures

Mostly internal; how long does it take?

Mostly external; how long do we have?

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Professional orientations

R&D people Business research people

5. Operating assumptions

Serendipity Planning

6. Goals “New” ideas; can it be improved?

“Big” ideas; does it work?

7. Performance criteria Quality of investigation Quantity of results

Systematic Differences betweenBusiness and R&D People

14

Quality of personnelR&D people Business research

people

8. Educational background

Ph.D. Master’s

9. Experience Deep and focused Broad and diverse

Personal interests

10. Career objectives Become venture manager?

Become venture manager?

Systematic Differences betweenBusiness and R&D People

15

Linking Corporate Research toCorporate Development Strategy

Assessing technological opportunity Five dimensions of the fundamental uncertainty

Technological innovations’ usefulness cannot be immediately appreciated.

Complementary inventions Difficult to conceptualize the new technological systems Attempting to solve very specific problems and leading to

unanticipated uses The ability to effectively link them to specific categories of human

needs

Ex: Laser

16

Linking Corporate Research toCorporate Development Strategy

The role of different levels of corporate research management Technicians Bench scientists Group leaders R&D managers Director of corporate R&D

Allocating resources to corporate research

17

Managing Corporate Entrepreneurship

The managerial challenge posed by autonomous strategic action

The use of new venture divisions A framework for assessing internal entrepreneurial

initiatives Designing alternatives for corporate entrepreneurship Choosing design alternatives Implementing design alternatives

18

The Managerial Challenge Posed byAutonomous Strategic Action

Firms almost continuously bring in new talent that interacts with the firm’s existing resources, competencies, and capabilities in ways that cannot be fully anticipated.

Ex: Calculator, Gene machine Top managers should consider the potential implications of

the initiative for the firm’s strategic position.

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Interface Problems Involving Venture Divisions

NVD – operating divisions interfaces

NVD – corporate management interfaces

Strategic interferences

Domain protection issues Synergy considerations

Lack of diversification strategy Limits to rate of strategic change that can be absorbed Effects on corporate image

Administrative/cultural frictions

Rigidities resulting from management system Personnel transfer issues

Circumvention of corporate rules and regulations Inadequate measurement and reward systems Resistance to institutionalization

20

A Framework for AssessingInternal Entrepreneurial Initiatives

Assessing strategic importance Considering the implications of an entrepreneurial initiative for the

firm’s product-market position Top managers depend on middle-level managers.

Assessing operational relatedness The degree to which an entrepreneurial initiative requires

competencies and capabilities that differ from the corporation’s core competencies

Corporate management needs to rely on substantive interactions with middle level managers.

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Design Alternatives for Corporate Entrepreneurship

Determining administrative linkages The assessment of strategic importance has implications for the

degree of control over the new business development If strategic importance is high, strong administrative linkages are in

order. Low strategic importance should lead corporate management to

examine how the new business can best be spun off. If unclear, relax the structural context and allow the new business some

leeway in its strategic management.

22

Design Alternatives for Corporate Entrepreneurship

Determining operational linkages The degree of operational relatedness has implications for the

efficiency If operational relatedness is judged to be high, tight coupling of the

operations of the new and existing businesses is in order. Low operational relatedness may require complete decoupling. If unclear, loose coupling seems most adequate.

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Internal Entrepreneurship InitiativesAssessment Framework

Key　dimensions　and　their　implications

Dimensions: Implications:

Strategic　importance

Degree　ofcontrol

AdministrativeLinkages

(authority)

Operationalrelatedness

Efficiencyconsiderations

Operationallinkages

(networking)

OrganizationDesign

alternatives

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Organization Designs for Corporate Entrepreneurship

Unrelated

Stronglyrelated

Partlyrelated

Very　important Uncertain Not　important

Operationalrelatedness

Strategic importance

321Direct4Micro　newVenture

3Special　　BusinessUnits

6IndependentBusinessUnits

9CompleteSpin-off

2New　productDepartment

5NewVentureDivision

8Contracting

1Direct　Integration

4Micro　New　Venture　Division

7NurturingandContracting

25

Implementing Design Alternatives

First, view the assessment framework as a tool to clarify. Second, establish measurement and reward systems. Third, as the development process unfolds, new information

may modify the perceived strategic importance and operational relatedness; the ventures can move dynamically.

26

Conclusion

Corporate research : Evaluate the businesses related to the corporate.

Managing corporate entrepreneurship : Evaluate the businesses out of the corporate.

Large established corporations provide a substratum of discovery and invention that feeds the innovation process. Many start-ups have been built on ideas that originated within large established corporations.