Download Technology and Innovation Strategies and Trajectories

Technology and Innovation
Strategies and Trajectories
Strategies and Trajectories,
Management of Technological
1
Management of Technological
Innovation
Lesson 4
Corporate Level Issues
• Corporate Strategies for Innovation
• Competitive Analysis
• Threats, Technology Trajectories,
and Constraints
Strategies and Trajectories,
Management of Technological
2
Innovation is “Creative Destruction
Creative Destruction In Singapore Inc.
“The new Cyber-economy has cast doubt on
Singapore Inc.’s decades old formula of
state-led success. Cant survive?”
[A. Shameen and A. Reyes, Asiaweek, 24 March 2000, pp. 43-47.]
Strategies and Trajectories,
Management of Technological
3
Population
Per-capita GNP (nominal)
Per capita GDP
(purchasing power parity),
Inflation
Exports
State companies among top
10 listed firms
Electronics as % of total
exports
Internet service providers
Population with Net access
Major private-sector
electricity suppliers
Rank in Global
Competitiveness Report
Singapore
Hong Kong
3.9 mil
US$21,828
6.9 mil
US$24,716
US$27,740
1.5%
US$115b
US$21,830
-5.3%
US$
6
0
67%
6
30%
30%
159
16%
0
2
1st
3rd
Strategies and Trajectories,
Management of Technological
4
“What Singapore has done right”
• Kept the economy broad-based
• Deregulated financial services
• Accelerated telecommunications
liberalization
• Opened up other parts of the economy
• Welcomed foreign talent
Strategies and Trajectories,
Management of Technological
5
“And what else Singapore needs to do”
• Fast-track the privatization of governmentlinked corporations
• Dismantle laws that restrict entrepreneur
ship
• Deregulate the media
• Tackle other sacred cows (e.g. money tied
up in Central Provident Fund)
• Build a critical mass of research-knowhow
Strategies and Trajectories,
Management of Technological
6
Quotes from Jerel Kwek, 21,
Founder of Angel.net in SGP
• “Singaporeans have never been known as risk takers.”
• “You are just taught that whatever they say is right, to
never question, and that everything else is wrong. That is
terribly cruel, it is wrong. It is not developing people to
their full potential. Our education [system] has done a
tremendous disservice to our budding entrepreneurs
because it pushes them into a box where they are taught
not to challenge, debate or question. But the New
Economy is about constantly reinventing yourself and
being creative and moving to where you can charge your
customer a premium. How else can you do that without
breaking rules?”
Strategies and Trajectories,
Management of Technological
7
Profit
Profit
goal
Gap to be
filled by
innovations
Forecast
Profit from
Current operations
Future years
Strategies and Trajectories,
Management of Technological
8
Distribution of New Products
Sales
Customers in
Europe, USA, etc.
Logistics
Technical
Service
Strategies and Trajectories,
Management of Technological
9
VALUE: Product Promotion
Production
Value
Product &
Service
Perceived
Value
+
Market &
Customers
Strategies and Trajectories,
Management of Technological
Business
Value
=
10
Decline
Cash
Flow
Product Concept
Sales
Design Concept
Fundamental
Design
Implemental
Design
+
Profit
Time
0
Designing
Feasibility
Testing
Promotion
Costs
PreProduction
Fixing
Specifications
[Takahashi, 1999]
Strategies and Trajectories,
Management of Technological
11
H
22.5
D
Market Growth Rate (%)
20.0
17.5
15.0
C
Growth-Share
Matrix
[Takahashi, 1999]
12.5
10.0
B
7.5
5.0
A
2.5
L
0
H
10x 8x
6x
4x
2x
1x 0.8x 0.6x
0.4x 0.2x
0.1x
L
Market Share Relative to Top-Product Other Than Your Own In the Product Group
Strategies and Trajectories,
Management of Technological
12
H
22.5
The diameter of each
circle is proportional to
the volume of sales
Market Growth Rate (%)
20.0
17.5
15.0
Products, A, B, C, ,
Red circles: Total volume for
belong to the same
each product type.
product group.
12.5
10.0
7.5Our
Client’s
Product
5.0
Competitor’s Product
Line representing same
Product Type
A
2.5
L
The Product with Top
Market share is placed
horizontally at 1x.
0
10x 8x
6x
4x
2x
1x 0.8x 0.6x
0.4x 0.2x
0.1x
H Market Share Relative to Top-Product in Product Group L
Strategies and Trajectories,
Management of Technological
13
Market Growth Rate (%)
H
22.5
Star
20.0

Problem
Child
17.5
15.0
?
12.5
10.0
?
7.5
5.0
2.5
L
Cash
0 Cow
10x 8x 6x
Dog
4x
2x
1x 0.8x 0.6x
0.4x 0.2x
0.1x
H Market Share Relative to Top-Product in Product Group L
Strategies and Trajectories,
Management of Technological
14
Market Growth Rate (%)
H
22.5
Problem
Child
Star
20.0
17.5
Strategic
Product
15.0
12.5
10.0
Priority
Product
7.5
Supplemental
Product
5.0
2.5
L
Cash
0 Cow
10x 8x 6x
Dog
4x
2x
1x 0.8x 0.6x
0.4x 0.2x
0.1x
H Market Share Relative to Top-Product in Product Group L
Strategies and Trajectories,
Management of Technological
15
Semantic Differential Method
In 1952, C.E. Osgood
proposed that
products could be positioned
on a scale of 5 or 7 (centered on 0)
between pairs of antonyms
that put subjective ideas into words.
Answers should be given rapidly,
according to intuition.
According to [Takahashi, 1999],
sample of at least 50 provides
a good average result.
Strategies and Trajectories,
Management of Technological
16
Extremely
Rather
Slightly
Neutral
Slightly
Rather
Extremely
Hard
Old-Fashioned
Warm
Soft
Modern
Cool
Complex
Simple
Masculine
Feminine
Elderly
Young
Subdued
Rural
Glitzy
Fashionable
Unfamiliar
Urban
Trashy
Classy
Dark
Light
Lo-tech
Unfashionable
Hi-tec
Familiar
Unconventional
Conservative
Plain
Gorgeous
Strategies and Trajectories,
Management of Technological
17
Product Positioning Map
[Takahashi, 1999]
Expensive
Characteristics
other than
Expensive,
Complex
may be used.
Window
of
Opportunity
Simple
Cheap
Strategies and Trajectories,
Management of Technological
18
Japanese Housing Styles
[Takahashi, 1999]
Western
Contemporary
Western
Modern Western
Eclectic
Contemporary
Traditional
Traditional
Western
Western
New
Japanese
Modern
Japanese
Japanese
Traditional
Japanese
Contemporary
Japanese
Futuristic
Experimental
Japanese
Strategies and Trajectories,
Management of Technological
19
Corporate Policy/Strategy
Creation Point of View
• Innovative Product
• Adaptive Product
• Continuation Product
Marketing (Product Life Cycle)
Point of View
• Strategic Product
• Priority Product
• Supplemental Product
[Takahashi, 1999]
Strategies and Trajectories,
Management of Technological
20
Design Tradition at Sony
[Takahashi, 1999]
Star
Epoch Making Design, high risk
(10 items per annum)
S
A
B
Ability/Awareness
Global design,
Stabilize or further penetrate market
(40-60 items per annum)
Business
Brand quality design, Maintain brand name
(1000 items per annum)
Strategies and Trajectories,
Management of Technological
21
A
S
A
B
B
Further
Technological Development,
Continuing Design Process
Initial Progress of
Innovative Product
[Takahashi, 1999]
Strategies and Trajectories,
Management of Technological
22
Innovation
Design
Personnel
Formation
Image
Media
Exposure
S
Innovation
Challenging
Young
Pioneering
Extreme
A
Build on
Quality &Trust
Sophisticated
Mature
Building Up
Wide
B
Mass
Production
Expanded Line
& Application
Vetran +
Junior
Maintaining
Moderate
SAB Design Development Formation
[Takahashi, 1999]
Strategies and Trajectories,
Management of Technological
23
Amount Sold
Supplemental
Product
Priority
Product
Strategic
Product
Time
Introduction
Growth
Maturity
Saturation
Decline
Product Life Cycle
[Takahashi, 1999]
Strategies and Trajectories,
Management of Technological
24
S
Problem
Child
Star
Market Growth
Star
Strategic
Product
Priority
Product
A
Supplemental
Product
B
Cash
Cow
Dog
Relative Market Share
Strategies and Trajectories,
Management of Technological
25
Corporate Technology Strategies
1. Offensive Strategy: Leadership - “First to Market”
2. Defensive Strategy: “Follow-the-Leader”
3. Imitative Strategy: “Me-Too”
4. Applications Eng. Strategy: Interstitial
5. Dependent Strategy: “Branch Plant”
6. Absorbent Strategy
7. Traditional Strategies
8. Other (Nontechnologically) Innovative Strategies
Strategies and Trajectories,
Management of Technological
26
Offensive Strategy: Leadership-“First to Market”
• Introduce revolutionary innovations in their fields. Initiate
a start of an industrial life cycle. Can reap rich rewards.
Uncertainties and risks are high.
• Successful examples: IBM in computers; RCA in
television; Texas Instruments in semiconductors.
• Failure examples: Comet airlines due to technological
reasons; Concorde due to political, economic, and
environmental reasons.
• Companies need to have all-round excellence.
• Potential technology-market synergies need to be spotted
continually through active participation in nondirected
research.
Strategies and Trajectories,
Management of Technological
27
• In close proximity to state of the art. R-tensive.
• R is characterized by scarcity of precedent and low
stability and predictability.
• An offensive organization usually has the following
characteristics:
1. Nondirective work assignments and indefinite objectives
which are “broadcast” widely.
2. Continuing evaluations of results and swift perception of
significant outcomes.
3. Values innovation over efficiency.
• Needs to be T-tensive too and invest in a bigger way in T.
• Strong need for patenting asap.
Strategies and Trajectories,
Management of Technological
28
• On marketing side, it is pursuing an as unmanifested but
latent customer need.
• Small companies can also adopt ‘offensive’ strategies.
They are typically opportunistic-offensive. Their
innovations are radical but not necessarily revolutionary.
Such companies are usually spun-off from parent
organizations, such as government, university laboratories,
or large companies where the invention to be innovated
was made. This pattern is particularly notable in the field
of scientific instruments.
EXERCISE
Identify two small companies that have succeeded in adopting the
technology leadership strategy. Discuss the factors and
characteristics that could have led to their success.
Strategies and Trajectories,
Management of Technological
29
Defensive Strategy: “Follow-the-Leader”
• The industrial life-cycle model suggests that
relatively good profit opportunities occur in the
performance-maximizing stage when the
innovation is initially marketed but the dominant
design has yet to emerge. Defensive strategists use
this opportunity. Follow the leader with own
improved version.Example: European
semiconductor industry.
• Higher returns at lower risks is the attraction.
Strategies and Trajectories,
Management of Technological
30
• Undertake some nondirected research coupled with
intensive applied research. Research may duplicate that of
offensive innovators so as to obtain autonomous scientific
knowledge.
• Must be strong in experimental development and design
engineering.
• Need to develop ones own patents so as to use them as
bargain counters while weakening the dominant position
enjoyed by the offensive counterpart.
• Need to place high premium on superior technological
product development, marketing intelligence and
responsiveness.
Strategies and Trajectories,
Management of Technological
31
3. Imitative Strategy: “Me-Too”
• Establishment of a dominant design stimulates,
delineates and coalesces the market. Excellent
opportunities then exist for incremental
innovations or improvements in the dominant
design, based more upon design, reliability and
cost considerations than on major technological
differences.
• Less R-intensive and more P(production)intensive.
Strategies and Trajectories,
Management of Technological
32
Tertiary
Development
&
Design
Pilot/
Prototype
Production
New
Product
Development
After
Sales
Service
Full
Production
Marketing
Test
Marketing
Education
&
Advisory
Services
Marketing
Knowledge
Reliability Engineering
&
Quality Control
Imitative Strategy Base
Strategies and Trajectories,
Management of Technological
33
• Imitative technology purchase through licensing from the
original primary innovator. A US primary innovator may
not have presence in a country and may wish to grant
license to a domestic innovator.
• Imitating company typically has a truncated technological
base from design engineering onwards. Compete only on
design improvements and lower manufacturing costs.
• More directive supervision.
• Greater use of management techniques such as PERT.
• Favor efficiency rather than innovativeness.
Strategies and Trajectories,
Management of Technological
34
4. Applications Eng. Strategy: Interstitial
• A judicious analysis of primary innovators’ strengths,
weaknesses, and strategies, combined with a search for
unrealized applications, frequently identifies specialist
niches so that incremental innovations for new markets
could be developed.
• Example: Control Data Corporation (CDC) was able to
market computer systems tailored to users whose needs
could not be satisfied by IBM computers.
• Less R&D-tensive. More M(market)-tensive and sensitive
to user needs.
Strategies and Trajectories,
Management of Technological
35
5. Dependent Strategy: “Branch Plant”
• A subsidiary or a specialist department of a large
firm. An MNC may want a local subsidiary to
exploit off-shore an market.
• Canada is largely a “branch-plant” economy. The
country’s technology is based on companies that
are subsidiaries of US or European parent
corporations (What about Singapore?).
• Technology base truncated to production and
marketing.
Strategies and Trajectories,
Management of Technological
36
After
Quality
Sales
Control
Service
Production
Branch Plant Base
Marketing
Education
&
Advisory
Services
Strategies and Trajectories,
Management of Technological
37
6. Absorbent Strategy
• The licensee from a primary innovator uses the surplus
cash flow and know-how to build up its own R&D
capability to launch performance-maximizing and costreducing incremental innovation.
• In time, the company could become and offensivedefensive innovator.
• Post second war Japan used this approach to avoid the
development of a ‘branch-plant’ economy.
Strategies and Trajectories,
Management of Technological
38
7. Traditional Strategies
• Adopted by companies belonging to a mature industry: e.g.
farming and wool-textile industries.
• Much business activity whether of low, medium, or high
technology encompasses the “harvesting” of profits from
established products (or old technology) in established
‘old’ markets.
• But, as US farming industry has shown, radical
technological innovations can be introduced., e.g.
pesticides and fertilizers for increased productiveness, and
freeze drying for food processing.
Strategies and Trajectories,
Management of Technological
39
8. Other (Nontechnologically) Innovative Strategies
• Innovations need not just be technological.
• Sales of existing products can be increased by innovations
in promotion, distribution, and financing. Many such
innovations may be technologically cosmetic (e.g. change
in packaging) but can boost sales. This approach is
particularly useful in consumer expendable industries such
as detergents, personal toiletries, and food.
• McDonald and Benihana of Tokyo have noninnovative
manufacturing and management principles (but
technologically innovative in their own industries) with
innovative marketing approaches in fast-food and
restaurant industries.
Strategies and Trajectories,
Management of Technological
40
Offensiv
e
Defensiv
e
Imitative
Applied
Eng.
Branch
Plant
Strategies and Capabilities
Nondirected fundamental research
M M N
Applied Directed Research
M M N
Experimental Development and Design
H H N
Advanced Development and Design
H H H
Pilot/Prototype to Full Production
M M H
Quality Control/Product Design
M M H
Patents and Licenses
H M L
“After-Sales” Services
H M H
Education and Advisory Services
H M L
Long-Term Planning
H M L
Key: N-None, L-Low, M-Medium, H-High
N
N
L/M
H
M
M
M
H
H
H
N
N
N
L
M
M
N
M
M
N
Strategies and Trajectories,
Management of Technological
41
Exercise
With the aid of the previous slide on
‘Strategies and Capabilities’ analyze
‘your’ corporation and outline a
feasible technology strategy.
Strategies and Trajectories,
Management of Technological
42
Technology-Market Matrix
Revolutionary
Normal
OLD
NEW
Generic Technological
Capabilities & Products
Internal Environment
External
Environment
Generic
Markets
&
Opportunities
OLD
NEW
Strategies and Trajectories,
Management of Technological
43
Michael Porter’s Competitive Analysis
• The unit of analysis is the industry
producing similar products.
• The goal of the strategic analysis is “to find
a position in industry where a company can
best defend itself against [the] competitive
forces or can influence them in its favor.”
• There are five types of forces to consider:
Strategies and Trajectories,
Management of Technological
44
The ‘Five’ forces
driving industry competition are
•
•
•
•
•
Relations with suppliers
Relations with buyers
New entrants
Substitute products
Rivalry amongst established firms
Technological change can influence all the five
forces.
Strategies and Trajectories,
Management of Technological
45
Analyze the following extract about computer
industry from the point of view of Porter’s five
forces driving industrial competition
The experience over the past 30 years of the US computer
industry is a spectacular example of the power of
technological change to transform completely the structure
and competitive conditions in an industry. In the early
1970s, the industry was dominated by a few mainframe
producers, some of whom were fully vertically integrated
from basic circuitry through to distribution. Barriers to
entry were high, suppliers relatively weak, and customers
had a limited range of choice.
Strategies and Trajectories,
Management of Technological
46
By the early 1990s, the industry had literally disintegrated,
with independent firms most of whom are new entrants
since the 1970s) competing at each stage from basic
circuitry to distribution. The main destabilizing factor has
been the rapid rate of technical improvement in the
microprocessor—the computer on a chip. This has
drastically reduced the costs of computing, thereby
lowering barriers to entry to the users of microprocessors
and opening of a whole range of potential applications
outside mainframes (of which the personal computer is one
of the most spectacular), and thereby creating a whole
range of new opportunities for firms in systems and
applications software.
An equally spectacular revolution is presently under way
following the development of e-mail, Internet and WWW.
Strategies and Trajectories,
Management of Technological
47
• Relations with suppliers: suppliers relatively weak
• Relations with buyers: a few mainframe producers,
vertically integrated from basic circuitry through to
distribution, suppliers relatively weak, customers had a
limited range of choice
• New entrants: independent firms most of whom are new
entrants since the 1970s) competing at each stage,
• Substitute products: rapid rate of technical
improvement in the microprocessor, a whole range of
potential applications outside mainframes
• Rivalry amongst established firms: lowering barriers
to entry to the users of microprocessors
Strategies and Trajectories,
Management of Technological
48
Analyze the following extract about computer
industry from the point of view of Porter’s five
forces driving industrial competition
The experience over the past 30 years of the US computer
industry is a spectacular example of the power of
technological change to transform completely the structure
and competitive conditions in an industry. In the early
1970s, the industry was dominated by a few mainframe
producers, some of whom were fully vertically integrated
from basic circuitry through to distribution. Barriers to
entry were high, suppliers relatively weak, and customers
had a limited range of choice.
Strategies and Trajectories,
Management of Technological
49
By the early 1990s, the industry had literally disintegrated,
with independent firms most of whom are new entrants
since the 1970s) competing at each stage from basic
circuitry to distribution. The main destabilizing factor has
been the rapid rate of technical improvement in the
microprocessor—the computer on a chip. This has
drastically reduced the costs of computing, thereby
lowering barriers to entry to the users of microprocessors
and opening of a whole range of potential applications
outside mainframes (of which the personal computer is one
of the most spectacular), and thereby creating a whole
range of new opportunities for firms in systems and
applications software.
An equally spectacular revolution is presently under way
following the development of e-mail, Internet and WWW.
Strategies and Trajectories,
Management of Technological
50
Analyze threats and
chose innovation trajectory
Threat: Potential entrants and substitute products
• Threats of new entrants can be increased through reducing
economies of scale (e.g. telecommunications, publishing),
and through substitute products (e.g. microcomputers,
aluminum for steel cans).
• They can be decreased through ‘lock-in’ to technological
standards (e.g. Microsoft), and through patents and other
legal protection (e.g. most major ethical drugs).
Strategies and Trajectories,
Management of Technological
51
Threat: Power of suppliers over buyers
• This can be increased by innovations that are more
essential to the firm’s inputs (e.g. microprocessors into
computers)
• It can be decreased by innovations that reduce
technological dependence on suppliers (engineering
materials)
Threat: Rivalry amongst established firms
• Rival firms can establish a monopoly position through
innovation (e.g. Polaroid in instant photography), or
destroy a monopoly position through imitation (US general
Electric in brain scanners).
Strategies and Trajectories,
Management of Technological
52
Five Major Technological Trajectories
•
•
•
•
•
Supplier-dominated
Scale Intensive
Information-intensive
Science-based
Specialized suppliers
Strategies and Trajectories,
Management of Technological
53
Supplier-dominated
Typical core sectors
Agriculture, Services, Traditional manufacture
Main sources of technology
Suppliers, Production, Learning
Main tasks of technology strategy
Use technology from elsewhere to strengthen
other competitive advantages
Strategies and Trajectories,
Management of Technological
54
Scale-intensive
Typical core sectors
Bulk materials, Automobiles, Civil engineering
Main sources of technology
Production engineering, Production learning,
Design offices, Specialized suppliers
Main tasks of technology strategy
Incremental integration of changes in complex
systems, Diffusion of base design and production
practice
Strategies and Trajectories,
Management of Technological
55
Information-intensive
Typical core sectors
Finance, Retailing, Publishing, Travel
Main sources of technology
Software and systems departments, Specialized
suppliers
Main tasks of technology strategy
Design and operation of complex
information processing systems,
Development of related products
Strategies and Trajectories,
Management of Technological
56
Science-based
Typical core sectors
Electronics, Chemicals
Main sources of technology
R&D, Basic Research
Main tasks of technology strategy
Exploit basic science, Development of
related products, Obtain complementary
assets, Redraw divisional boundaries
Strategies and Trajectories,
Management of Technological
57
Specialized Suppliers
Typical core sectors
Machinery, Instruments, Software
Main sources of technology
Design, Advanced users
Main tasks of technology strategy
Monitor advanced user needs
Integrate new technology incrementally
Strategies and Trajectories,
Management of Technological
58
Organizational Innovation: A HK Example
CPC/AJI (HK) LTD is a well-established food
manufacturer producing a range of 120 varieties
varieties of basic products and imports about 80
products from its foreign affiliates. Their products
include culinary aids, convenience foods, desserts,
cooking aids, bread spread dressings, snack and
beverages with famous brand names such as
“Bestfoods”, “Kingsford”, “Skipp”, and “Torto”.
Strategies and Trajectories,
Management of Technological
59
The company is applying quick changeover philosophy to
enhance flexibility while having minimum inventory in
their manufacturing operation. To ensure quality, the
company has implemented Good Manufacturing Practice
(GMP) and Hazard Analysis Critical Control Point
(HACCP) together with Safety Improvement Process (SIP)
which is in place for continuous improvement (Kaizen) of
the working environment.
The company was granted the “Gold Award - Effective
Communication” by the Labor Department and of the
“Productivity Award” of the HK Productivity Council. The
company was recognized by the judging panel to be
focusing on “customer satisfaction through excellent
quality and quick response.”
Strategies and Trajectories,
Management of Technological
60
Exercise
Identify the technological trajectory class of
CPC/AJI (HK) LTD.
Comment on the main sources of technology
for the company.
Discuss the main tasks to be considered while
developing the technology strategy of the
company.
Strategies and Trajectories,
Management of Technological
61
Exercise
Using the previous five slides as appropriate,
recommend and discuss an innovation strategy for
any one of the following companies and, later, for
‘your’ company:
• Microsoft
• Wellcome supermarket
• DHL
• Texas Instruments
• Cathay Pacific
• Sony
Strategies and Trajectories,
Management of Technological
62
Porter’s generic technology strategies
• Cost leadership
• Differentiation
The way the above strategies are applied in
product development could be different
from that in process development.
Strategies and Trajectories,
Management of Technological
63
Product Development
Cost Leadership
Lower material inputs, Ease of manufacture,
Improve Logistics, Minimum features
Differentiation
Enhance quality, Enhance features, Enhance
deliverability, Niche markets
Strategies and Trajectories,
Management of Technological
64
Process Development
Cost Leadership
Learning curve, Economies of scale, Minimize
costs
Differentiation
Precision, Quality control, Response time,
Precision, Quality control, Response time
Strategies and Trajectories,
Management of Technological
65
Exercise
Using the previous two slides as appropriate, expand
your previously recommended innovation strategy
for each of the following companies:
• Microsoft
• Wellcome supermarket
• DHL
• Texas Instruments
• Cathay Pacific
• Sony
Strategies and Trajectories,
Management of Technological
66
Constraints faced by individual firms
Established Product Base and Technological
Competencies
• Chemical companies do not diversify into
electronic products and vice versa.
• It is difficult for a company making traditional
textiles to make computers.
Firm Size
• Large firms adopt ‘broad front’ strategies.
• Small firms are ‘focused’.
Strategies and Trajectories,
Management of Technological
67
Public goodstype
knowledge
Other firm's
proprietory
knowledge
New Knowledge
generated jointly
with other firms
Endogenously
generated
knowledge
Publications, tech.
monitoring,
conferences,
informal contacts
Licensing, knowhow agreements,
mergers and
acquisitions
Consortia, joint
ventures, strategic
partnering
Firm's
stock of
knowledge
R&D, design & eng.,
learning by doing,
marketing
experience
How firms can acquire knowledge
Strategies and Trajectories,
Management of Technological
Obsolete
knoweldge
Forgetting by
not doing
68
The Nature of Firm’s Products and Customers
Compare food products, where there typically a wide
range of quality and prices, with ethical drugs and
passenger aeroplanes where product quality (I.e.
safety) is rigidly controlled. Food firms therefore
have a wider range of product innovation
strategies to choose from. In contrast, drug and
aircraft firms require large-scale expenditures on
product development and tigorous testing. They
are therefore more restricted in their innovation
choices.
Strategies and Trajectories,
Management of Technological
69
In the 1960s, the oil company Gulf defined its
distinctive competencies as producing energy, and
so decided to purchase s nuclear energy firm. The
venture was unsuccessful, in part because the
strengths of an oil company in finding, extracting,
refining and distributing oil-based products, I.e.
geology and chemical processing technologies,
logistics, consumer marketing, were largely
irrelevant to the design, construction and sale of
nuclear reactors, where the key skills are
electromechanical technologies and in selling to
relatively few, but often politicized electrical
utilities.
Strategies and Trajectories,
Management of Technological
70
Exercise
• What is the lesson you learn from the Gulf case
study?
• Why are companies engaged in nuclear energy
usually politicized?
• Explain the following terms with suitable
examples:
geology, logistics,
electromechanicaal technologies,
consumer marketing,
Strategies and Trajectories,
Management of Technological
71
Choosing an innovation strategy
involves predicting the future and
faith in an opinion.
But, as Neils Bohr, the famous
atomic scientist said,
“Prediction is difficult,
especially about the future.”
Strategies and Trajectories,
Management of Technological
72
Some predictions that have gone wrong and some
opinions that were questionable:
• “The war in Vietnam is going well and will
succeed” (R. Mcnamara, 1963)
• “I think there is a world market for about five
computers.” (T. Watson, 1948)
• “Gaiety is the most outstanding feature of the
Soviet Union.” (Joseph Stalin, 1935)
• “I cannot conceive of any vital disaster happening
to this vessel.” (Captain of Titanic, 1912)
Strategies and Trajectories,
Management of Technological
73
Most HK firms are small
• Can they innovate?
• What does experience elsewhere tell about
their prospects?
• What are their characteristics?
Strategies and Trajectories,
Management of Technological
74
Assertions
What the evidence shows
• ‘Small firms make the most of
innovation.’
• ‘Small firms make few
innovations since they do little
R&D.’
• ‘Small firms are much more
innovative than large firms,
since they account foe a higher
share of innovations than of
R&D.’
• ‘New firms create a lot of
employment.’
• ‘It depends on the product and
the technology.’
• They do lots of “informal”,
“part time” and non-measured
R&D, and produce a share of
total innovations roughly
equivalent to their output and
employment
• ‘Not if you include
unmeasured, part time R&D.”.
• ‘They also lose a lot since they
have high birth and death rate.’
Strategies and Trajectories,
Management of Technological
75
Characteristics of small firms
• Similar objectives—to develop and combine
technological and other competencies to provide
goods and services that satisfy customers better
than alternatives, and that are difficult to initiate;
• Organizational strengths—ease of communication,
speed of decision-making, degree of employee
commitment and responsiveness to novelty. This is
why small firms often do not need formal
strategies that are used in large firms to ensure
communication and co-ordination.
Strategies and Trajectories,
Management of Technological
76
Characteristics of small firms
(continued)
• Technological weaknesses—specialized range of
technological competencies, inability to develop
and mange complex systems, inability to find
long-term and risky programs.
• Different sectors—small firms make a greater
contribution to innovation in certain sectors, such
as machinery, instruments, and software, than in
chemicals, electronics and transport.
Strategies and Trajectories,
Management of Technological
77
Exercise
• Why are small firms usually not as effective
as large firms in innovating in fields such as
chemicals, electronics and transportation?
• Given the information on the previous slide,
what do you think is the chance of success
of the Chief Executive’s vision to transform
HKSAR into an innovative society?
Strategies and Trajectories,
Management of Technological
78