Critical Factors in Managing Technology Chapter 6

2 Introduction Technology is an expression of human creativity. Managing technology is involves continuous effort in creating technology, developing novel products and services, and successfully marketing them. This requires great creativity along with a system designed to exploit it. It also required investment in R&D. R&D is a costly endeavor. It is a risky investment and therefore needs to be well managed.

3 Creativity factor Technology is an expression of human creativity. Creativity: Invention Creation of novel technology from scientific discoveries Innovation Creation of products, services, processes that are new to an organization. To satisfy customer needs by integrating existing technology and invention.

4 Link between science & technology Invention Scientific Discovery Innovation Market Buying or ignoring the innovation May never be developed into marketable products Has no instantaneous commercial value Adopting invention stimulate time lags

5 Types of innovation An innovation must contribute to the creation of value. Radical breakthrough innovation Usually based on an invention, e.g. semi-conductor, chips, … Incremental or evolutionary innovation Important improvement in products, process or services, e.g. portable PC in 1981, Windows technology Routine innovation New to the firm but very similar to what it had in the past

6 Creativity and innovation Innovation – creation of value or satisfaction of a customer need. Creativity – engine of innovation Combining two or more ideas to arrive at an entirely new one.  to fix a previous problem  to adapt with new technology or new society  to block customer switching cost... Depends on both people and environment.

7 Characteristics of creative environment in an organization Permits people to work in areas of their greatest interest. Encourages employees to have broad contact with stimulating colleagues. Allows taking moderate risks. Tolerates some failures Provides appropriate rewards and recognition.

8 Bringing innovation to market Manipulation of time span is an important and effective competitive weapon. A company that owns a technological innovation may want either to delay or to speed up the diffusion of technology in market in order to fully exploit its benefits. E.g. Osborn Computer Company The sooner an innovation reaches the marketplace, the sooner a company can reap its rewards.

9 Technology-price relationship Technology Gap between owner and customer Price Technology gap , price  ; Technology gap , price 

10 Time or Diffusion Technological Knowledge Gap Owner knowledge Customer knowledge Customer can improve on the initial technology.

11 Managing change Management must be able to deal with both stability and change. Managers of technology must be able to recognize and react to external change as early as possible. Example: the failure of Kodak Company

12 Changing Trends in Industry FactorTraditionalNew 1Life cycleLong life cyclesShort life cycles 2InnovationFewContinuous 3Competition Expected; Competitors are the enemy; Cooperation not allowed Stronger; Alliance with competitor accepted 4Market Expected; Local Uncertain; Global 5QualityFirm DesirableCustomer Desirable

13 6ProductionMass; no commitment to suppliers; large inventories; fixed manufacturing Customerized; suppliers are partners; reduced inventories; flexible manufacturing 7OrganizationLarge corporations vertically; integrated companies; bureaucratic organizations; financial methods control the organization Smaller plants; companies rely on outsourcing; nimble organizations; financial methods to serve the organization’s objective Changing Trends in Industry (con-)

14 Being a Technology leaders or followers A leader is a firm that is the first to market an innovation. A follower This firm misses the initial wave of capitalization on the technology but recognizes the technology’s impact on its business. She follows closely behind the leader

15 Advantages of being a leader innovation Name recognition Better market position A chance to define the industry standard A head start on the learning curve Protective barriers (e.g. through patents) High profit due to technology gap between customers and products

16 Delayed customer switching Favorable response by outsiders Supports from government, venture capitalists, other industrialists.

17 Disadvantages of being a leader Large cost associated with research, prototyping, testing and overall development Costs associated with updating the technology Initial investment in design and production may create difficulty, if a competitor introduce a better technology or an improved design Market uncertainty As a target for competition

18 Outcome from innovation process - Pilkington (Float Glass) - G.D. Searle (NutraSweet) - Du Pont (Teflon) - RC Cola (Diet Cola) - EMI (Scanner) - Bowmar (Calculator) - Xerox (“Star”) - DeHavilland (Comet) - Kodak (Instant photography) - Northrup (F20) - DEC (PC) - IBM (PC) -Matsushita (VHS format for CR) - Seiko (Quartz watch) WIN LOSE INNOVATORFOLLOWER

19 How can innovation leaders sustain their leadership ? To invest in R & D to continue the development of technology. To build technological resources. To diffuse their own technology while delaying competitors from getting into the technology.

20 How can a follower firm do ? To examine a leader’s product and to attack it at its weakest point. To have lower initial investment in R & D. To improve on what already exists.

21 Introducing environmentally Friendly Technologies Technology that not harm to the world and human. Some fundamental principles are as follows: Reduce, Reuse, Recycle and Replace the use of natural resources (the 4 R) The selecting technology consider Economic Feasibility, Endowment Rationality and Environment Sustainable (the 3 E) Green Technology

22 Example: Using less polluting and less hazardous raw materials In October 1990 McDonald’s in US switched from plastic clamshell hamburger boxes to paper wrappers (Recyclable and biodegradable) Example : Modifying products to minimize use of hazardous materials and processes Many pharmaceutical companies now try to use water-based coating instead of solvent based coatings for tablets. This reduces solvents spray emissions into air.

23 Discuss Questions 1-Identify a company that changed from being a follower to being a leader. What was its approach? How long did they take?