Technological Innovation © 2002 McGraw-Hill Companies

Key Concepts At the origin of technological innovation process are inventions or discoveries. Webster: “We discover what before existed, though to us unknown; we invent what did not before exist.” The criteria for success regarding inventions and discoveries are technical (Is it true/real?) rather than commercial (Does it provide a basis for economic rents?) 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. The criteria for success regarding technology are also technical (Can it do the job?) rather than commercial (Can it do the job profitably?). Technologies are usually the outcome of development activities to put inventions and discoveries to practical use. Some innovations are technology-based; other, are facilitated by new technology. The criteria for success of technological innovation are commercial rather than technical. Technological entrepreneurship refers to activities that create new resource combinations to make innovation possible, bringing together the technical and commercial worlds in a profitable way. © 2002 McGraw-Hill Companies

The Relationship Between Key Concepts Technical world Technological entrepreneurship Commercial world  Administration Capabilities  Results Inventions/discoveries/technologies Technological innovations Research activities Development activities Product/ Process development activities Market development activities Activities Tinkering/ experimenting

The Strategy-Environment Shifting From an Industry Focus to a Resource Focus THE FIRM Goals and Values Resources and Capabilities Structure and Systems THE INDUSTRY ENVIRONMENT Competitors Customers Suppliers STRATEGY STRATEGY The Firm-Strategy interface The Strategy-Environment Interface

Resources and capabilities Resources as the Basis for Superior Profitability (Tangible and Intangible) Rate of Profit in Excess of the Competitive Level Brands Product technology Marketing capabilities Process technology Plant size Low-cost inputs Bargaining power with suppliers Market share Patents Retaliatory capability Differentiation Advantage Cost Vertical Power Monopoly Barriers to Entry Industry Attractiveness Resources and capabilities

Technology Allan Afuah: Codified versus tacit knowledge Technology is in a broad sense the knowledge and skills used by an organization to transform inputs into outputs. Technology in this broad sense can be viewed as an organization’s ‘knowledge base’ Most organizations can be better viewed as having multiple technologies - a technology exists for every flow of activities that require knowledge and skills and transforms inputs to outputs. Codified versus tacit knowledge © 2002 McGraw-Hill Companies

Technology and Product-Market Strategy Product A Product B … Product N Technology 1 Technology 2 . Technology K (*) Note: Each entry (*) should establish the firm’s relative strength vis-à-vis the state of the art. This matrix should be followed by more detail explanation about the strength of firm’s capabilities.

Matching Business and Technology Portfolios STAR QUESTION MARK CASH COW DOG BET DRAW CASH IN FOLD B B A A Attractiveness Importance Competitive position Position Harris, Shaw, Somers suggest examining the relationship between the traditional portfolio business matrix and the technology portfolio matrix. Such analysis offers the possibility of investigating the match (or mismatch) of a firm’s business and technology portfolios and resulting technology investment priorities.

Technological Evolution and Forecasting Technology Life Cycle Stages in Technology Life Cycle Importance of Technologies for Competitive Advantage I Emerging Technologies Have not yet demonstrated potential for changing the basis of competition. II Pacing Technologies Have demonstrated their potential for changing the basis of, competition. III Key Technologies Are embedded in and enable product/process. Have major impact on value-added stream (Cost, performance, quality) Allow proprietary/patented positions IV Base Technologies Minor impact on value-added stream; common to all competitors; commodity.

Assessing Innovative Capabilities At least three question must be addressed by the assessors: 1. How has the firm been innovative in the areas of product and service offerings and/or production and delivery systems? 2. How good is the fit between the firm’s current business and corporate strategies and its innovative capabilities? 3. What the firm’s needs in term of innovative capabilities to support its long-term business and corporate competitive strategies?

Innovative Capabilities Innovative capabilities can be defined as the comprehensive set of characteristics of an organization that facilitate and support innovation strategies. Innovative capabilities exist at the business unit and corporate levels. Business Unit: a unit for which a particular strategy and resource commitment posture can be defined because it has a distinct set of product markets, competitors, and resources. Corporate: an audits at this level identifies the critical variables that influence both the relationships between corporate and business unit levels in term of innovative capabilities and the formulation and implementation of overall corporate innovation strategy.

Business Unit Level Audit Timing of market entry Technological leadership or followership Scope of innovativeness Rate of innovativeness Resource availability Understanding competitors’ innovative strategies and industry evolution Understanding business unit technological environment Business Unit innovative strategy Business unit structural and cultural context Business unit strategic management capacity

Corporate Level Audit The scope and rate of development of new product and services and /or production and delivery systems that are derived from combining innovative capabilities across existing business unit. The scope and rate of new business development based on corporate R&D and technology development effort. Timing of entry with respect to the above. Resource availability and allocation Understanding competitors’ innovative strategies and multi-industry evolution Understanding corporate technological environment Corporate innovative strategies Corporate structural and cultural context Corporate strategic management capacity