1. McGraw-Hill/Irwin © 2009 The McGraw-Hill Companies, All Rights Reserved

2. 1-2 Part One: Integrating Technology and Strategy Chapter One Offers Three Elements Key concepts concerning technological innovation Elements of the integration of technology with corporate strategy Frameworks for auditing and accessing a firm’s innovative capability

3. 1-3 Part One: Integrating Technology and Strategy Definition of Terms Invention versus discovery: “We discover what before existed, though to us unknown; we invent what did not before exist.” – Webster Basic versus applied research: Basic research refers to activities involved in generating new knowledge; applied research is geared to solving particular technological problems

4. 1-4 Part One: Integrating Technology and Strategy Definition of Terms Technology: This 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. Technology can be embodied in people, materials, cognitive and physical processes, plant, equipment and tools

5. 1-5 Part One: Integrating Technology and Strategy Definition of Terms Technological Innovation: This can be technology-based or facilitated by technology. We define successful technological innovation as that which returns the original investment plus some additional returns

6. 1-6 Part One: Integrating Technology and Strategy Definition of Terms Innovation process: This can be defined as the combined activities leading to new, marketable products and services and/or new production and delivery systems

7. 1-7 Part One: Integrating Technology and Strategy Definition of Terms Types of Technological Innovation: Incremental innovation: adaptation, refinement and enhancement of existing products or services Radical innovation: entirely new product and service categories Architectural innovation: reconfigurations of the systems or components that constitute the product

8. 1-8 Part One: Integrating Technology and Strategy Technology and Competitive Strategy Porter’s “generic strategies” concept is a widely used framework for classifying competitive strategies. The generic strategies are: Industrywide differentiation Focused differentiation Industrywide cost leadership Focused cost leadership

9. 1-9 Part One: Integrating Technology and Strategy Generic strategy Overall cost leadership Overall differentiation Focus-segment cost leadership Focus-segment differentiation Technological policies Product technological change Product development to reduce product cost by lowering materials content, facilitating ease of manufacture, simplifying logistical requirements, etc. Product development to enhance product quality, features, deliverability, or switching costs Product development to design only enough performance for the segment's needs Product design to meet exactly the needs of the particular business segment application Process technological change Learning curve process improvement Process development to enhance economies of scale Process development to support high tolerances, greater quality control, more reliable scheduling, faster response time to orders, and other dimensions that improve the ability to perform Process development to tune production and delivery system to segment needs in order to lower cost Process development to tune the production and delivery system to segment need in order to improve performance

10. 1-10 Part One: Integrating Technology and Strategy Technology and Product-Market Strategy A firm’s strategy is expressed in the products and services it brings to market. One way to get at the integration of a firm’s technology and product-market strategy is: Decompose each product or service into its constituting technologies and assess the relative strength—the degree of distinctive competence—the firm has with respect to that technology

11. 1-11 Part One: Integrating Technology and Strategy Technology Portfolio Harris, Shaw, and Somers suggest: Once various technologies have been identified, they can be classified in terms of their importance for competitive advantage Next, the firm’s position relative to its competitors can be assessed

12. 1-12 Part One: Integrating Technology and Strategy BetDraw Cash inFold High Low Technology importance Relative technology position High Low

13. 1-13 Part One: Integrating Technology and Strategy Technology Forecasting It is the capacity to perform systematic technological forecasting. Some useful techniques for forecasting are: Technological progress functions (S-curves) Trend extrapolation The Delphi method Scenario development

14. 1-14 Part One: Integrating Technology and Strategy Business Unit Level Audit This framework measures five important categories of variables that influence the innovation strategies of a business: Resources available for innovative activity Capacity to understand competitors’ strategies and industry evolution with respect to innovation Capacity to understand technological developments relevant to the business unit Structural and cultural context of the business unit affecting internal entrepreneurial behavior Strategic management capacity to deal with internal entrepreneurial initiatives

15. 1-15 Part One: Integrating Technology and Strategy Business unit innovative strategy Resource availability Understanding competitors’ innovative strategies and industry evolution Understanding business unit technological environment Business unit structural and cultural context Business unit strategic management capacity

16. 1-16 Part One: Integrating Technology and Strategy Corporate Level Audit At this level, the audit investigates whether and how the innovative capabilities of the corporation are larger than the sum of those at the individual business units. Five key categories are: Resource availability and allocation Capacity to understand multi-industry competitive strategies and evolution Capacity to understand technological developments Corporate structural and cultural context Corporate strategic management capability

17. 1-17 Part One: Integrating Technology and Strategy Corporate innovative strategies Resource availability and allocation Understanding competitors’ innovative strategies and multi-industry evolution Understanding corporate technological environment Corporate structural and cultural context Corporate strategic management capacity

18. 1-18 Key Drivers of Strategic Actions in High Technology Companies Technology development Product development Business strategy Part One: Integrating Technology and Strategy

19. 1-19 Key Drivers of Strategic Actions in High Technology Companies Technology Development - Pros Part One: Integrating Technology and Strategy Breakthroughts Be first Big competitive advantage Attract top talent Motivating Capitalize on the efforts of others

20. 1-20 Key Drivers of Strategic Actions in High Technology Companies Technology Development - Cons “Bleeding edge” Time to market too Slow Always starting from scratch Locked-in with one approach Difficult to manage well Big bets Dependent upon others Part One: Integrating Technology and Strategy

21. 1-21 Key Drivers of Strategic Actions in High Technology Companies Product Development - Pros Part One: Integrating Technology and Strategy Champion exists Strong commitment More customer oriented Clear intent Easier to manage Build product facilities Maximize learning

22. 1-22 Key Drivers of Strategic Actions in High Technology Companies Product Development - Cons Part One: Integrating Technology and Strategy More short term oriented One product company Lack of continuity Multiple directions Lose focus Less push for infrastructure (all are different) Inward looking Lose touch with market requirements (disruptive technologies) Over-stretch resources (no trade-offs)

23. 1-23 Part One: Integrating Technology and Strategy Key Drivers of Strategic Actions in High Technology Companies Business Strategy – Pros Clear direction Explicit about competitive advantage Support infrastructure for new product development product development Focus and tradeoffs Long term Beyond one product Outward looking

24. 1-24 Part One: Integrating Technology and Strategy Key Drivers of Strategic Actions in High Technology Companies Business Strategy – Cons May be difficult to initially change the environment with no clear industry structure May not be able to implement (lacking technology or market need) Wellthought-out and articulated business strategies carry their own seeds of inertia