tmitti 1 © sakari luukkainen t-109.410 technology management in the telecommunications industry (2...

© Sakari Luukkainen

TMitTI 1

T-109.410 Technology Management in the Telecommunications Industry (2 cr)

Sakari LuukkainenHelsinki University of Technology

Telecommunications Software and Multimedia Laboratory


TMitTI 2

Background of the course

• 2001 R&D investments in Finland were 5 billion € of which was privately financed 72 %, major R&D performed by telecom sector, which quadrupled its size in the 90´, currently largest manufacturing sector (Statistics Finland, 2001)

• Telecom company´s cost structure is dominated by the R&D cost, which is biggest fixed cost

• Majority of those fixed costs are sunk costs which can not be easily recovered if technology commercialization fails


TMitTI 3

• Current slowdown - the development moves two steps forward and one step backward

• Media catalysts overestimated expectations in growth phase, and panic in decline phase

• Asymmetric information in the technology financing market

• High 3G license costs delay development

• Most of the success is related to GSM technologies

• No history data of business – difficult to forecast, unreliable market research



TMitTI 4


• VC financing has so far resulted in a very few new success stories

• Only 20 % of R&D performed by companies can be exploited commercially (3i, 2002)

• The role of liquidity constraints is negligible in determining R&D investment – steady R&D spending (Niininen, 1999)

• The effect of public financing has had a significant but limited effect, it works in firms that already have high R&D intensity – successful R&D requires process knowledge (Niininen 1999)

• Financing by own cashflow puts more pressures to allocate R&D according to market need


TMitTI 5

• Market uncertainty is however high - many technical possibilities open up with unclear market need - many failures and unexpected success

• Incumbent companies often lose their competitive position in discontinuous change

• Incremental change easier to management, focus now on management of discontinuous change by incumbent firms

• The role of technology and innovation management is increasing

Background for the course


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Goal of the course

• To describe technology management as a part of the business process of a telecommunications company

• The course handles the structure of the telecommunications industry and its innovation characteristics, technology choices, R & D financing, standardization and product strategy


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Graduating the course

• The course is especially designed to students taking Telecommunications Management for their major or minor, but is suitable for all students that are interested in techno-economic issues related to telecommunications

• The preferred but not compulsory prerequisite for this course is TU-91.123 Strategic Management of Technology and Innovation, it can be graduated e.g. parallel during this course

• Replaces courses T-111.050 and TU-91.126


TMitTI 8


• 11 lectures, on Thursdays hall T2, at 9.15-11

• Exam requirements consist of the lectures and the following books:

Carl Shapiro, Hal R. Varian, Information Rules, A Strategic Guide to the Network Economy, chapters 5-10

Charles Edquist, The Internet and Mobile Telecommunications System of Innovation, 2003

• Following books will also be touched in the lectures:

M. McGrath: Product Strategy for High Technology Companies A. Gawer and M. Cusumano: Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation M. Gaynor: Network Services Investment Guide - Maximizing ROI in Uncertain Times C. Christensen: Seeing What's Next: Using the Theories of Innovation to Predict Industry Change


TMitTI 9


• First examination is 9.12.2004 at 13.00 - 16.00 in lecture hall T1 and the enrollment to the exam will be done via Topi, 4 exams / year

• Exam consists of three essay questions of which two is compulsory, six concept definitions and one applied question concerning some real life business case

• The exam results will be published within a month in the course www-page and T-109 notice board


TMitTI 10

Telecommunications Management

Telecommunications StrategicManagement

Internet & Multimedia


TMitTI 11


Telecommunications(Application area,research target)

StrategicManagement (Theory)

Internet & Multimedia(Application area,research target)


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Prerequisites

TU-22.101 Introduction to Industrial Management and Engineering 3-4

Compulsory courses

T-110.350 Computer Networks 3 TU-91.129 Principles of Strategic Management 2TU-91.123 Strategic Management of Technology and Innovation 3T-109.410 Technology Management in the Telecom Industry 2T-109.501 Research Seminar on Telecommunications Business I 2T-109.551 Research Seminar on Telecommunications Business II 3

Optional courses

T-124.100 Development of Business Processes 2S-38.001 Telecommunications Forum 1-3S-38.041 Networking Business 2TU-22.120 Introduction to Project Management 2TU-53.309 Cross-Cultural Management 2TU-91.108 Marketing Management 2,5T-110.456 Next Generation Cellular Networks 3



TMitTI 13

Master’s Thesis Scope

Technology / Product Strategy Analysis

Telecom Service Design

Integration of ICT & Business Processes

Business Analyses Specific to Telecom Sectors


TMitTI 14

Recent master´s theses

Utilisation of WAP technology in extranet business

Monetary transactions in mobile environment

Mobile location product strategy

Mobile information systems in maintenance industry

Discriminatory pricing of telecommunications services

UWB technology strategy analysis

Consolidation in the Finnish consumer ISP industry

Disruptive technologies and the music industry


TMitTI 15

Product Management Organization

Vice President, Sales and Marketing

MarketingServices

Advertising MarketingResearch

ProductManagement

Sales

ProductManager

ProductManager

AccountManager

AccountManager


TMitTI 16Product management is business process management

Product Manager

R&D

TopManagement

Sales

FinancePurchasing

Production

Customers Legal

Marketing


TMitTI 17Business Assessment: Hierarchy of Strategies

VisionCorporate StrategyDivisional StrategyProduct/Market StrategyMarketing TacticsCustomer Satisfaction

Source: Gorchels

Focus ondeveloping andleveraging corecompetencies

Focus oncustomer-specific needs


TMitTI 18PM´s balance of management activities

strategicstrategic

the goal the reality

short-term

day-to-day

short-term

day-to-day

Source: Gorchels


TMitTI 19

Technology Management• Technology is an ensemble of theoretical and practical

knowledge, knowhow, skills and artifacts that are used by the firm to develop, produce and deliver its products and services

• Technology is a resource that is as pervasively important in the organization as are financial and human resources

• Its mangement is a basic business function and adds dynamic character to the business definition

• Key issues in technology management: designing a technology strategy, designing and innovative organization, and implementing a development strategy

• Vieving technology as a functional capability implies the need to develop a technology strategy


TMitTI 20

Technology Strategy

Interrelated decisions related to

• Technology choice

• Technology sourcing

• Level of technology competence

• Level of funding for R&D

• Organization for R&D

• Timing

• Technology introduction in new products/services

• Marketing of products/services


TMitTI 21

• The deployment of technology in the firm´s product-market strategy strategy to position itself in terms of differentiation

and cost, and gain technology-based competitive advantage

• The use of technology, more broadly, in the various activities comprised by the firm´s value chain

• The firm´s resource commitment to various areas of technology

• The firm´s use of organization design and management techniques to manage the technology function

Technology Strategy

Source: Burgelman & Rosenbloom


TMitTI 22

Determinants of technology strategy

TechnologyStrategy

TechnicalCapabilities Experience

INTEGRATIVE

MECHANISMS

GENERATIVE

MECHANISMS

StrategicBehaviour

Internal Environment

External Environment

OrganizationalContext

TechnologyEvolution

IndustryContext



TMitTI 23

Characteristics of Innovation

• New or improved product, service or process from market point of view, which contains new technological solutions and has been commercially successfully introduced to the market

• Radical, disruptive, sustained, incremental, architectural, service and process innovations

• Innovator gets competitive advantage through timing advance and IPR protection by patents – short monopoly

• Monopoly will loosen through trade of patents and licenses or knowledge spillovers when competitors copy the technology and proprietary technology gets common to all players in the industry


TMitTI 24

Innovation process

Science base

Generictechnologies

Proprietarytechnologies

R&Dinvestment

Technology push

Market appeal

Product innovation

Service innovation

Process innovation

Videotext, HDTV, X.400, X.500, videophone, ISDN, WAP, ERMES, IN, ATM, public WLAN, DVB, UMTS?

GSM, Internet, fax, I-mode, LAN, ADSL, indoor WLAN


TMitTI 25

Growth by industrial sector

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

Paper

Electronics

Textile

Teleservices


TMitTI 26

Historical milestones

• 1876 Bell invented telephone• 1882 Founding of first private teleoperator• 1920 State owned teleoperator• 1950 Nokia supplies telecables• 1969 Nokia supplies transmission systems• 1971 ARP• 1978 First digital switching centre DX-200• 1982 NMT 450• 1986 Nokia´s mobile switching centre• 1987 NMT 900• 1991 GSM• 1994 Liberalization of teleservices starts• 2000 Nokia is the dominant mobile phone

manufacturer in the world


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Explanation for 90´s competitiveness

Firm strategy,structure and

rivalry

Factor conditions

Demandconditions

Related andsupportingindustries

Gov.action

IBA

Source: Porter


TMitTI 28Telecommunications value chain - telecluster

Telecomindustry

Networkoperator

Serviceoperator

Contentproviders

Softwarecompanies

Consumers

Semiconductorproducers

Circuit boardproducers

Mechanicsproducers

Computerindustry

Businessservices

Circuit boardinstallation

Banking,health care,traffic…

Regulation,tech. policy


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”Possibilities for new ways of competing usuallygrow out of some discontinuity or change in industry structure often created by new technologies or by new demands that bring existing technologies to market in new combinations and forms.

Often innovators are outsiders to the existing industry. A firms ability to sustain its success is most likely a result of constant innovations to adapt to changing circumstances.”

Porter, 1990


TMitTI 30

Discontinuous technology

Incremental change

Discontinuous change- radical innovation

Mag

nitu

de o

f C

hang

e

Time

Impr

ovem

ent t

rajec

tory

of in

cum

bent

s

Source Tushman, 1997


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Disruptive technology

Per

form

ance

Time

Improve

ment trajecto

ry of in

cubents

Disruptive technology

Source Christensen, 1997


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Technology sourcing

• Internal / external

• Induced / autonomous


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Classification of R&D

Source: adapted from Pitkänen 2000, ADL 1991

Type of R&D Incremental Discontinuous Fundamental

Probability of technical success

40-80% 20-40% Small, difficult to assess

Time to completion 0,1-2 years 2-4 years 5-10 years

Competitive potential Modest, but necessary

Large Large, difficult to assess

Durability of competitive advantage

Short, imitable by competitors

Long, protectable by

patents

Long but risky


TMitTI 34

Technology strategy process in firms

Autonomous strategic

action

Induced strategic

action

Strategiccontext

Structural context

Concept of corporate strategy



TMitTI 35

Technology strategy enactment in firms

Induced- applied research on new technologies opportunities and

threats to support existing and emerging businesses- standardization, alliances- product development- joint ventures- acquisitions

Autonomous- science-based research- internal corporate venturing- external corporate venturing

and if they fail the last change is followership by copying / contracting / licensing without timing and cost advantage


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Timetable

16.9. Introduction, Sakari Luukkainen23.9. Technology Marketing, Jari Haggren30.9. Market Dynamics of Telecom Industry, Sakari Luukkainen7.10. Standardization, Sakari Luukkainen14.10. Case GSM, Sakari Luukkainen21.10. Product Strategy, Eino Kivisaari28.10. Product Strategy, Eino Kivisaari4.11. R & D Management, Sakari Luukkainen11.11. R & D Management, Case TeliaSonera, Jyrki Härkki18.11. Corporate Venturing, Case Nokia, Taina Tukiainen25.11 Technology Foresight, Sakari Luukkainen

9.12. Examination

tmitti 1 © sakari luukkainen t-109.410 technology management in the telecommunications industry (2...

Documents

course slide

technology management

sakari luukkainen background

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telecommunications management

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rd cost

course vc financing