2. MGMT 738: Management of Technology W.L. Dougan

3. Lecture 1 INTRODUCTION AND OVERVIEW

4. ©2009 Prentice Hall1-3 Learning Objectives 1.Define technological innovation, its importance, and how firms use it to achieve their objectives 2.Describe how technological innovation occurs, and its effects 3.Define technology strategy, and its importance 4.Describe the approach to technology strategy taken in the book, and explain why that approach is important 5.Identify the core areas of technology strategy, and spell out how they affect businesses 6.Describe how the core areas of technology strategy differ for new and established firms

5. Interdisciplinary Nature of MOT

7. Khalil – MOT and Wealth Creation

8. Technology Afuah – –Technology is in a broad sense the knowledge and skills used by an organization to transform inputs into outputs. –Technology in this broad sense can be viewed as an organization’s ‘knowledge base’ –Most organizations can be better viewed as having multiple technologies - a technology exists for every flow of activities that require knowledge and skills and transforms inputs to outputs. Codified versus tacit knowledge

9. Technology Khalil - definition of technology –All knowledge, products, process, tools methods and systems employed in the creation of goods or in providing services Hardware Software Brainware Know-how

10. ©2009 Prentice Hall1-9 Defining Technological Innovation Technology is the application of tools, materials, processes and techniques to human activity Innovation is the process of using knowledge to solve a problem Technological Innovation is the use of knowledge to apply tools, materials, processes and techniques to come up with new solutions to problems

11. Innovations -- at the Intersection of Need, Design and Technology NeedForms Technology New Product “C”= Concepts C C C

12. ©2009 Prentice Hall1-11 Why Technological Innovation Is Important An important source of value creation A profound effect on the creation of wealth for individual entrepreneurs and corporate shareholders A major impact on our lives as people May have adverse consequences

13. Mobile Transactions Example Benefit: “Consumers want to make financial transactions, but can’t stay at their desks.” Form: “We should make financial transactions mobile.” Technology: “There’s a new software platform and communications protocol that allows financial transactions to be executed on mobile electronic devices.”

14. Forms of innovation A new product or service New methods or technology New markets New sources of raw materials and resources New forms of industrial organization

15. ©2009 Prentice Hall1-14 Important Implications 1.Technological innovation doesn’t have to profitable 2.There are many different kinds of technological innovations 3.There is not a direct, one-to-one, relationship between technological change and new products or processes

16. INNOVATION Afuah –Innovation is the use of new technological and market knowledge to offer a new product or service to customers. A product/service can be considered ‘new’ if: –its costs are lowered –it has new attributes –it is, indeed, a new product or service

17. Profits Profits = Revenues – Costs = P( z, q ) x q( z ) – C( q, z ) where P = price C = cost q = quantity z = attributes

18. INNOVATION Competences and Assets New technological knowledge New market Knowledge New Product -Low Cost -Improved Attributes -New Attributes

19. ©2009 Prentice Hall1-18 Why Technology Strategy? A technology strategy is the approach that a firm takes to obtaining and using technology to achieve a new competitive advantage, or to defend an existing technology-oriented competitive advantage against erosion

20. ©2009 Prentice Hall1-19 Technology strategy is different from overall business strategy 1.Higher uncertainty 2.More use of intellectual property 3.Sometimes results are new to the world 4.Create strategies and dynamics that are different 5.Require different organizations 6.Use different decision making tools 7.Opens up new opportunities 8.Face different strategic issues

21. ©2009 Prentice Hall1-20 Large Vs. Small Firms Many aspects are the same Some differences: –The way of protecting intellectual property –R&D intensity –Approach to generating competitive advantage

22. Khalil - Need for MOT We are living in a knowledge age –High velocity businesses –Economies of scale, scope and integration –Relative cost to maintain technological currency with competitors –Globalization of competition –Trade Blocks

23. Importance of Technological Innovation Technological innovation now the single most important driver of competitive success in many industries –Many firms earn over one-third of sales on products developed within last five years –Globalization has increased competitive pressure; Product innovations help firms protect margins by offering new, differentiated features. Process innovations help make manufacturing more efficient.

24. Importance of Technological Innovation –Advances in information technology have enabled faster innovation CAD/CAM systems enable rapid design and shorter production runs –Net effect: Shorter product lifecycles (more rapid product obsolescence) More rapid new product introductions Greater market segmentation

25. Examples of New Industries Based on Innovations Personal computers Biotechnology Wireless cable TV Fast oil changes FC software Desktop information Wireless communication/handheld devices Healthy living products Electronic paging Voice mail information technology services Cellular phone services CD-ROM Internet publishing and shopping Desktop computing Virtual imaging Convenience foods superstores Digital media and entertainment Pet care services

26. Impact on Society Innovation enables a wider range of goods and services to be delivered to people worldwide –More efficient food production, improved medical technologies, better transportation,etc. –Increases Gross Domestic Product by making labor and capital more effective and efficient –However, may result in negative externalities, E.g., pollution, erosion, antibiotic-resistant bacteria

28. Innovation by Industry: The Importance of Strategy To be successful at innovation, firms need carefully crafted strategies and implementation processes. Innovation funnel –Most innovative ideas do not become successful new products.

29. Innovation Funnel

30. How long does new product development take? –Study by Abbie Griffin of 116 firms found: Length of development cycle varies with innovativeness of project Incremental improvements took 8.6 months from concept to market introduction Next generation improvements took 22 months. New-to-the-firm product lines took 36 months New-to-the-world products took 53 months. Half of the companies had reduced their cycle time by an average of 33% over last five years.

31. Time for new technologies to reach 25% of the U.S. Population –Household electricity (1873)—46 years –Telephone (1875)—35 years –Automobile (1885)—55 years –Airplane travel (1903)—54 years –Radio (1906)—22 years –Television (1925)—26 years –Videocassette recorder (1952)—34 years –Personal computer (1975)—15 years –Cellular phone—13 years –World Wide Web—7 years New Technology

32. Long Wave Cycle Waves of Growth and Recession due to infrastructural technologies –Cutting edge technology –High technology products replace old products –Technology life cycles influence long cycles in national economies –New technology comes from science, science come from new discoveries in nature –New technologies create new waves

33. Parallel Waves Parallel waves in –Process technologies –Product Technologies

34. Schilling - The Strategic Management of Technological Innovation Part One: The foundations of technological Innovation –Sources of innovation –Types and patterns of innovation –Standards battles and design dominance –Timing of Entry Part I: Industry Dynamics of Technological Innovation Chapter 2 Sources of Innovation Chapter 5 Timing of Entry Chapter 4 Standards Battles and Design Dominance Chapter 3 Types and Patterns of Innovation

35. Schilling - The Strategic Management of Technological Innovation Part Two: Formulating Technological Innovation Strategy –Defining the organization’s strategic direction –Choosing innovation projects –Collaboration strategies –Protecting innovation Part II: Formulating Technological Innovation Strategy Chapter 6 Defining the Organization’s Strategic Direction Chapter 9 Protecting Innovation Chapter 8 Collaboration Strategies Chapter 7 Choosing Innovation Projects

36. Schilling - The Strategic Management of Technological Innovation Part Three: Implementing Technological Innovation Strategy –Organizing for innovation –Managing the new product development process –Managing new product development teams –Crafting a deployment strategy Part III: Implementing Technological Innovation Strategy Chapter 10 Organizing for Innovation Chapter 13 Crafting a Deployment Strategy Chapter 12 Managing New Product Development Teams Chapter 11 Managing the New Product Development Process