1. Special issues in technology strategy Business 290

2. Sometimes technology businesses are different  We’ve focused on two pillars of sustainable advantage Superior economic contribution Sustainable market position  Issues in market position were isolating mechanisms (making yourself hard to copy) ways of retaining customers (creating switching costs)

3. Some technology successes need further analysis  Why do people who hate Microsoft use Microsoft products? Yes, Microsoft creates switching costs, but it seems there’s more to it than that.

4. ‘High tech’ industries involve special circumstances  Computers  Software  Telecommunications  Consumer electronics  Pharmaceuticals  Maybe in the future Power generation Aerospace

5. Standards are obviously central in high tech  Bill Gates and the journey to becoming World’s Richest Man  DVD recorders  Picture phones

6. What is a standard?  A set of specifications that producers adhere to when making a product  Standard-setting is an ancient process Clocks in the Middle Ages Electricity in 19 th century

7. Standards lead to strategic victories  Matsushita wins with VHS  Sony wins with 3½ inch disk drive  Dolby noise reduction  ‘The Intel architecture’  Qualcomm cell phone technology

8. What is the best way to set standards? 

9.  Companies getting together?  Government action?  Battles in the marketplace?

10. Often ‘format wars’ set standards  ‘Network effects’ are central Sometimes the size of the ‘network’ of complementary products largely determines how much of a product can be sold When you get some success you get positive feedback loops

11. Costs in technology industries (sometimes)  Often in technology firms the costs of making is low the cost of designing (making the first one) is high.

12. In most industries the way to win is to create a distinctive competence  That’s crucial in tech industries, too  But standard-setting competition means it’s especially important how you compete when the standard is being set  Bill Gates at Boston Computer Society, 1984  eBay in 1998  Standards are very hard to change

13. Is it important to be a first mover?  First-mover advantages Create network effects / set standards Create brand loyalty Scale economies and learning effects Accumulate knowledge about the external environment Create switching costs for customers  ‘free’ wireless phone – the first guys could actually charge for the phone.

14.  Successful first movers Microsoft in computer languages Intel in microprocessors eBay in online auctions

15. But first-mover disadvantages also exist  Pioneering costs Motorola, Nokia, and the first cellular network providers had to educate everybody about cell phones Samsung can just copy.  Mistakes in an embryonic environment. Handwriting software in the Apple Newton.

16.  Pioneers have to invest in inferior technology. Early 1980s predecessors of the Internet. Tiny screens 300 bps.  Build capabilities to serve wrong customers - early adopters (techies) CompuServe When first AoL and later the Internet providers came out, the CompuServe skills became pretty much useless.

17.  Successful later entrants Sony in compact disks and video games Matsushita in VCRs AoL and Earthlink in on-line services Microsoft in operating systems