1. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 1 Chapter 17 Managing Technology and Innovation

2. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 2 Technology And Innovation Technology the methods, processes, systems, and skills used to transform resources into products systematic application of scientific knowledge to a new product, process, or service Innovation a change in technology process innovations - changes that affect the methods of producing outputs product innovations - changes in the actual outputs themselves

3. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 3 Technology And Innovation The technology life cycle a predictable pattern followed by a technological innovation starting from its inception and development to market saturation and replacement cycle begins with the recognition that applied science can satisfy a need knowledge and ideas brought together, culminating in a technological innovation rate of product innovation tends to be highest in early years dominant design emerges when early problems are solved technology reaches upper limits of performance capabilities the technology remains in mature stage until it is replaced

4. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 4 The Technology Life Cycle Theoretical maximum Performance Time Early problems Emergence of a dominant design Development slows as a limit is approached

5. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 5 Technology And Innovation (cont) Diffusion of technological innovations spread in the use of new technology over time follows an S- shaped pattern adopters of new technology fall into five groups innovators - adventurous early adopters - critical to the success of a new technology include well-respected opinion leaders early majority - take longer to decide to use something new typically not the leaders late majority - approach innovation with great caution adopt out of economic necessity or increasing social pressure laggards - isolated and highly conservative

6. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 6 Technology Dissemination Pattern And Adopter Categories Early majority 34% Late majority 34% Laggards 16% Bell-shaped frequency curve Cumulative S-shaped curve Innovators 2.5% 100 Percentage of adopters 80 10 20 90 70 50 60 30 40 Early adopters 13.5% Time

7. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 7 Technological Innovation In A Competitive Environment Decisions about technology and innovation are very strategic and need to be approached in a systematic way technological innovations can support either: low-cost leadership strategy differentiation strategy new technology can completely change the rules of competition within an industry key issue is not whether to adopt a new technology but when to adopt it Technology leadership imposes costs and risks not the best approach for every organization

8. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 8 Advantages And Disadvantages Of Technology Leadership First mover advantage Little or no competition Greater efficiency Higher profit margin Sustainable advantage Reputation for innovation Establishment of entry barriers Occupying of best market niches Opportunities to learn Advantages Disadvantages Greater risks Cost of technology development Costs of market development and customer education Infrastructure costs Costs of learning and eliminating defects Possible cannibalization of existing products

9. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 9 Technological Innovation In A Competitive Environment (cont.) Technology followership deciding to be a leader or follower depends on how a company positions itself to compete, the benefits gained through the use of a technology, and the characteristics of the organization can be used to support low-cost and differentiation strategies adoption timing is dependent on the organization’s strategic needs and technology skills as well as the benefits of the new technology development of technology over time makes it easier to use complementary products and technologies may be developed that may make the technology easier to use

10. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 10 Assessing Technology Needs Measuring current technologies technology audit - process of clarifying the key technologies upon which an organization depends most important dimension of a new technology is its competitive value emerging technologies - still under development and unproven may alter rules of competition in the future pacing technologies - yet to prove full value have potential to alter the rules of competition key technologies - proven effective and offer strategic advantage base technologies - are commonplace in the industry offer little competitive advantage

11. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 11 Assessing Technology Needs (cont.) Assessing external technological trends several techniques used to better understand how technology is changing within an industry benchmarking - process of comparing the organization’s technologies with those of other companies important to consider practices of overseas competitors focus is what is currently being done scanning - focus is what can be done and what is being developed emphasizes identifying and monitoring the sources of new technologies in an industry extent of scanning determined by the importance of staying at the cutting edge of technology

12. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 12 Framing Decisions About Technological Innovation Anticipated market receptiveness in the short run, there should be an immediate application that demonstrates the value of the new technology in the long run, a set of applications must show the technology is the proven means to satisfy a market need Technological feasibility visions can stay unrealized for a long time technical obstacles may represent barriers to progress Economic viability must be a good financial incentive for the new technology development results in costs patents help to recoup the costs

13. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 13 Framing Decisions About Technological Innovation (cont.) Anticipated competency development technological innovations are the tangible product of intangible knowledge and capabilities that make up the organization’s core competencies firm’s must have (or develop) the internal competencies needed to execute their technology strategy Organizational suitability assess the fit of technological innovation with the organization’s culture and managerial systems proactive” technology-push” innovators defender - have a more circumspect posture toward innovation analyzer - allow others to prove the viability of the technology

14. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 14 Framing Decisions About Technological Innovation (cont.) Market Receptiveness - Assess external demand for the technology. Technological Feasibility - Evaluate technical barriers to progress. Economic Viability - Examine any cost considerations and forecast profitability. Competency Development - Determine if current competencies are sufficient. Organizational Suitability - Assess the fit with culture and managed systems. Cell phones, MP3, personal digital assistants (PDAs), HDTV, etc. Deep-sea oil exploration, physical size of PC microprocessors Solar fusion, fuel cell for automobiles, missile defense system Information technology in hospitals, digital technology in cameras Steel companies focusing on creativity and innovation ConsiderationsExamples

15. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 15 Sourcing And Acquiring New Technologies Each industry usually has specific sources for most of its new technologies in many industries, however, the primary sources of new technology are the organizations that use the technology make-or-buy decision the question an organization asks itself about whether to acquire new technology from an outside source or develop it itself Internal development - potentially advantageous to keep the technology proprietary Purchase - most technology is available in products or processes that can be openly purchased

16. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 16 Sourcing And Acquiring New Technologies (cont.) Contracted development - contract development to an outside source e.g., other companies, independent research laboratories Licensing - when technology is not easily purchased, may be able to license it for a fee Technology trading - may be used between rival companies becoming increasingly common because of the high cost of developing advanced technologies independently Research partnerships - each member enters the partnership with different skills or resources needed for successful new- technology development

17. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 17 Sourcing And Acquiring New Technologies (cont.) Joint venture - have greater permanence outcomes result in entirely new companies Acquisition of an owner of the technology outright purchase of the company that owns the technology acquiring a minority interest to gain access to the technology

18. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 18 Technology Acquisition Options Available for sale Available skills and resources Important to remain proprietary Yes Internal development Yes Purchase License Trade Yes No Joint venture Research partnership No Acquisition of the technology owner Exclusive research contract No

19. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 19 Technology And Managerial Roles Chief Technology Officer (CTO) executive in charge of technology strategy and development senior position at the corporate level with broad, integrative responsibilities coordinates technological efforts of the business units acts as a voice for technology supervises new-technology development assesses the technological implications of strategic initiatives

20. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 20 Technology And Managerial Roles (cont.) A variety of critical roles in developing new technology entrepreneur - invents ways to produce old products to exploit new technologies technical innovator - person who develops a new technology or has the key skills to install and operate the technology product champion - person who promotes a new technology throughout the organization in an effort to obtain acceptance and support for it executive champion - an executive who supports a new technology and protects the product champion of the innovation

21. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 21 Unleashing Creativity: 3M’s Rules For An Innovative Culture Focus on the customer Tolerate failure Facilitate, don’t obstruct Set goals for innovation Commit to research and development Inspire intrapreneurship

22. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 22 Organizing For Innovation Bureaucracy busting bureaucracy is an enemy of innovation establish special temporary project structures that are isolated from the rest of the organization “skunkworks” allowed to operate under different rules angura - “underground research” policy that allows Japanese scientists to pursue projects about which only their immediate supervisor knows cross-functional teams - solve problems and create innovative solutions are flat structures that create an environment that encourages collaboration and creativity

23. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 23 Organizing For Innovation (cont.) Implementing development projects development project - focused organizational effort to create a new product or process via technological advances fall into one of four categories research or advanced development projects - designed to invent new science for application in a specific project breakthrough development projects - designed to create the first generation of a product or process platform development projects - establish the basic architecture for a whole set of follow-on projects derivative development projects- designed to provide incremental improvements to an existing product or process

24. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 24 Organizing For Innovation (cont.) Implementing development projects (cont.) development project (cont.) typically relies on a special cross-functional team typically conducted under intense time and budget pressures development projects have multiple benefits cultivate skills and knowledge that can be used for future endeavors organizational learning - important criterion for evaluating the success of the project to achieve their fullest benefit, development projects should: build on core competencies have a guiding vision about what must be accomplished have a committed team instill a philosophy of continuous improvement

25. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 25 Organizing For Innovation (cont.) Technology, job design, and human resources adopting a new technology typically requires changes in the way jobs are designed sociotechnical systems - approach to job design that attempts to redesign tasks to optimize operation of a new technology while preserving employees’ interpersonal relationships and other human aspects of the work managerial choices on how to apply a new technology used to limit the tasks and responsibilities of workers used to achieve great accomplishments and improve the quality of workers’ lives consider technology’s effect on human resource systems

26. McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 26 Compensation Practices In Traditional And Advanced Manufacturing Firms Performance contingent Job contingent Person contingent Focus on individual incentives reflects division of labor and separation of stages and functions. Use of hourly wage assumes that the differences in employee con- tribution are captured in job classi- fications and that performance is largely determined by the production system. Seniority pay rewards experience as a surrogate for knowledge and skill in a stable environment and rewards loyalty to reduce uncertainty within the system. Extensive use of group incentives to encourage teamwork, cooperation, and joint problem solving. Use of salary assumes that em- ployees’ contributions transcend the job per se to substantially affect output. The distinctions between classes of employment are diminished. Skill-based pay rewards continuous learning and the value-added derived from increased flexibility in a dynamic environment Type of Compensation Practice Traditional factoryIntegrated manufacturing