TMitTI 1 © Sakari Luukkainen T Technology Management in the Telecommunications Industry (3 cr)

TMitTI 2 © Sakari Luukkainen Background of the course R&D investments in Finland are 5 billion € of which is privately financed 72 %, major R&D performed by telecommunications industry 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 © Sakari Luukkainen Growth by industrial sector Source: Stat Finland

TMitTI 4 © Sakari Luukkainen 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, hyper price competition in mobile voice and SMS No history data of business – difficult to forecast, unreliable market research Background of the course

TMitTI 5 © Sakari Luukkainen Background of the course 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 The role of liquidity constraints is negligible in determining R&D investment – steady R&D spending 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 technological change

TMitTI 6 © Sakari Luukkainen 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

TMitTI 7 © Sakari Luukkainen Graduating the course The course is especially designed to students taking Telecommunications Management / Networking Business 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 Strategic Management of Technology and Innovation, it can be graduated e.g. parallel during this course Replaces courses T , T and TU

TMitTI 8 © Sakari Luukkainen Graduating the course 9 lectures, 2 industry speakers, on Tuesdays hall T3, at Exam requirements consist of the lectures and the following books: Carl Shapiro, Hal R. Varian, Information Rules, A Strategic Guide to the Network Economy, 1999 Michael E. McGrath: Product Strategy for High Technology Companies, 2001 Following books will also be touched in the lectures: Mäenpää, K., Luukkainen, S.: From Telecommunications Technology to Multimedia Communications: The Competitiveness of the Telecommunications Cluster, 1994 Luukkainen, S: The Effect of the Developmental Dynamics of the Line of Business on the International Competitiveness of the Telecommunications Industry, 1996 Gawer, A., Cusumano, M.: Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation, 2002 Christensen, C.: Seeing What's Next: Using the Theories of Innovation to Predict Industry Change, 2004 Afuah, A.: Innovation Management: Strategies, Implementation and Profits, 2003 Palmberg, C., Martikainen, O.: Overcoming a Technological Discontinuity - The Case of the Finnish Telecom Industry and the GSM, 2003

TMitTI 9 © Sakari Luukkainen Graduating the course First examination is at 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

TMitTI 10 © Sakari Luukkainen Telecom Management / Networking Business Telecommunications (Application area, research target) Industrial Management (Theory) Internet & Multimedia (Application area, research target)

TMitTI 11 © Sakari Luukkainen TU Strategic Management of Technology and Innovation 5 S Telecommunications Forum 1-5 S Operaattoriliiketoiminta 3-5 T Research Seminar on Telecommunications Business 5 T Verkottuneet liiketoimintaprosessit ja –mallit 4 Related courses

TMitTI 12 © Sakari Luukkainen Master’s Thesis Scope  Emerging technology / Product strategy analysis  New telecom service design  Integration of ICT & business processes

TMitTI 13 © Sakari Luukkainen Product Management Organization Vice President, Sales and Marketing Marketing Services Advertising Marketing Research Product Management Sales Product Manager Product Manager Account Manager Account Manager

TMitTI 14 © Sakari Luukkainen Product management is business process management Product Manager R&D Top Management Sales Finance Purchasing Production CustomersLegal Marketing

TMitTI 15 © Sakari Luukkainen Business Assessment: Hierarchy of Strategies Vision Corporate Strategy Divisional Strategy Product/Market Strategy Marketing Tactics Customer Satisfaction Source: Gorchels Focus on developing and leveraging core competencies Focus on customer- specific needs

TMitTI 16 © Sakari Luukkainen PM´s balance of management activities strategic the goal the reality short-term day-to-day short-term day-to-day Source: Gorchels

TMitTI 17 © Sakari Luukkainen 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 18 © Sakari Luukkainen Science base Generic technologies Proprietary technologies R&D investment Technology push Market appeal Product innovationService innovationProcess innovation X.400, ISDN, WAP, ERMES, ATM, UMTS? GSM, Internet, fax, I-mode, Ethernet, IN, ADSL, CATV data Innovation process

TMitTI 19 © Sakari Luukkainen Discontinuous technology Incremental change Discontinuous change Magnitude of Change Time Improvement trajectory of incumbents Source Tushman, 1997

TMitTI 20 © Sakari Luukkainen Technology cycle Source Tushman, 1997

TMitTI 21 © Sakari Luukkainen Disruptive technology Performance Time Improvement trajectory of incubents Disruptive technology Source Christensen, 1997

TMitTI 22 © Sakari Luukkainen Technology Management Technology is a resource that is as pervasively important in the organization as are financial and human resources 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 firm´s resource commitment to various areas of technology The firm´s use of organization design and management techniques to manage the technology function Vieving technology as a functional capability implies the need to develop a technology strategy

TMitTI 23 © Sakari Luukkainen 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 24 © Sakari Luukkainen Technological change Market change Standardization Productization Marketing R&D Technology Assessment and Forecasting Market Assessment and Forecasting Innovation process

TMitTI 25 © Sakari Luukkainen Technology strategy process in firms Autonomous strategic action Induced strategic action Emerging context Existing context Concept of corporate strategy

TMitTI 26 © Sakari Luukkainen Technology strategy enactment in firms Induced -applied research on new technologies opportunities and threats to support existing businesses - standardization, alliances - product development - joint ventures - acquisitions Autonomous - science-based research - internal corporate venturing - external corporate venturing: VC, venturing alliances and if they fail the last change is followership by copying / contracting / licensing without timing and cost advantage

TMitTI 27 © Sakari Luukkainen Timetable Introduction, Sakari Luukkainen R&D Management, Sakari Luukkainen Standardization Strategy, Sakari Luukkainen Product Strategy, Sakari Luukkainen Market Dynamics of Telecom Industry, Sakari Luukkainen Cases ERMES and GSM, Sakari Luukkainen Cases DOCSIS and ADSL, Sakari Luukkainen Technology Management in Nokia Siemens Networks, Ossi Pöllänen Technology Management in Ericsson, Visa Friström Examination