1. T-109.410 Technology Management in the Telecommunications Industry (2 cr)
Sakari Luukkainen
Helsinki University of Technology
Telecommunications Software and Multimedia Laboratory
© Sakari Luukkainen

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
© Sakari Luukkainen

3. Background of the course
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
© Sakari Luukkainen

4. 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 (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
© Sakari Luukkainen

5. Background for the course
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
© Sakari Luukkainen

6. 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
© Sakari Luukkainen

7. 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 Strategic Management of Technology and Innovation, it can be graduated e.g. parallel during this course
Replaces courses T and TU
© Sakari Luukkainen

8. Graduating the course 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
© Sakari Luukkainen

9. 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
The exam results will be published within a month in the course www-page and T-109 notice board
© Sakari Luukkainen

10. Telecommunications Management
Strategic
Management
Telecommunications
Internet & Multimedia
© Sakari Luukkainen

11. Telecommunications Management
Strategic
Management (Theory)
Telecommunications
(Application area,
research target)
Internet & Multimedia
(Application area,
research target)
© Sakari Luukkainen

12. Telecommunications Management
Prerequisites
TU Introduction to Industrial Management and Engineering 3-4
Compulsory courses T Computer Networks 3 TU Principles of Strategic Management 2 TU Strategic Management of Technology and Innovation 3 T Technology Management in the Telecom Industry 2 T Research Seminar on Telecommunications Business  I 2 T Research Seminar on Telecommunications Business  II 3
Optional courses T Development of Business Processes 2 S Telecommunications Forum 1-3 S Networking Business 2 TU Introduction to Project Management 2 TU Cross-Cultural Management 2 TU Marketing Management 2,5 T Next Generation Cellular Networks 3
© Sakari Luukkainen

13. Master’s Thesis Scope Technology / Product Strategy Analysis
Telecom Service Design
Integration of ICT & Business Processes
Business Analyses Specific to Telecom Sectors
© Sakari Luukkainen

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
© Sakari Luukkainen

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

16. Product management is business process management
Top
Management
Sales
R&D
Purchasing
Finance
Product
Manager
Marketing
Production
Customers
Legal
© Sakari Luukkainen

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

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

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
© Sakari Luukkainen

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
© Sakari Luukkainen

21. Technology Strategy
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
© Sakari Luukkainen
Source: Burgelman & Rosenbloom

22. Determinants of technology strategy
Internal Environment G E N R A T I V M C H S I N T E G R A V M C H S
Strategic
Behaviour
Organizational
Context
Technical
Capabilities
Technology
Strategy
Experience
Technology
Evolution
Industry
Context
External Environment
© Sakari Luukkainen
Source: Burgelman & Rosenbloom

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
© Sakari Luukkainen

24. Innovation process Market appeal Technology push
Process innovation
Market appeal
Service innovation
GSM, Internet, fax, I-mode, LAN, ADSL, indoor WLAN
Product innovation
Proprietary
technologies
R&D
investment
Videotext, HDTV,
X.400, X.500, videophone, ISDN, WAP, ERMES, IN, ATM, public WLAN, DVB, UMTS?
Generic
technologies
Science base
Technology push
© Sakari Luukkainen

25. Growth by industrial sector
© Sakari Luukkainen

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
© Sakari Luukkainen

27. Explanation for 90´s competitiveness
Firm strategy,
structure and
rivalry
IBA
Factor
conditions
Demand
conditions
Gov.
action
Related and
supporting
industries
© Sakari Luukkainen
Source: Porter

28. Telecommunications value chain - telecluster
Regulation,
tech. policy
Content
providers
Computer
industry
Network
operator
Service
operator
Consumers
Mechanics
producers
Telecom
industry
Business
services
Banking,
health care,
traffic…
Semiconductor
producers
Circuit board
installation
Software
companies
Circuit board
producers
© Sakari Luukkainen

29. ”Possibilities for new ways of competing usually
grow 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
© Sakari Luukkainen

30. Discontinuous technology
Improvement trajectory of incumbents
Magnitude of Change
Discontinuous change
- radical innovation
Incremental change
Time
© Sakari Luukkainen
Source Tushman, 1997

31. Disruptive technology
Performance
Improvement trajectory of incubents
Disruptive
technology
Time
© Sakari Luukkainen
Source Christensen, 1997

32. Technology sourcing Internal / external Induced / autonomous
© Sakari Luukkainen

33. Classification of R&D 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
© Sakari Luukkainen
Source: adapted from Pitkänen 2000, ADL 1991

34. Technology strategy process in firms
Autonomous
strategic
action
Strategic
context
Concept of
corporate
strategy
Induced
strategic
action
Structural
context
© Sakari Luukkainen
Source: Burgelman & Rosenbloom

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
© Sakari Luukkainen

36. Timetable 16.9. Introduction, Sakari Luukkainen
Technology Marketing, Jari Haggren
Market Dynamics of Telecom Industry, Sakari Luukkainen
Standardization, Sakari Luukkainen
Case GSM, Sakari Luukkainen
Product Strategy, Eino Kivisaari
Product Strategy, Eino Kivisaari
R & D Management, Sakari Luukkainen
R & D Management, Case TeliaSonera, Jyrki Härkki
Corporate Venturing, Case Nokia, Taina Tukiainen
Technology Foresight, Sakari Luukkainen
Examination
© Sakari Luukkainen