Technology strategy

Technology Strategy• What distinctive technological competences and

capabilities are necessary to establish and maintain competitive advantage?

• Which technologies should be used to implement core product design concepts and how should these technologies be embodied in products?

• What should be the investment level in technology development?

• How should various technologies be sourced – internally or externally?

• When and how should new technologies be introduced to the market?

• How should technology and innovation be organized and managed?

Source: Burgleman and Rosenbloom (1989)

Adler (1989) defined the concept of ‘fit’ in three different and interrelated perspectives:•Business strategy and technology strategy•Technology posture and functional decision-making practices•Synergy between decision-making practices

Technology strategy includes the following elements:1.Dimensions of technology policy – normatively related to one or more dimensions of business strategy

2.Integrative models that prescribe fit between different dimensions of technology policy and business strategy.

Technology Strategy and the Concept of “Fit”Technology Strategy and the Concept of “Fit”

Maidique and Patch (1988) introduced six dimensions of technology strategy:a)Type of technology

b)Desired level of competence

c)Technology make versus buy (internal/external sourcing)

d)R & D investment

e)Timing of technology introductions

f)R & D organization

3.Empirical links between particular dimensions of technology strategy and business strategy (e.g, study of intensity of product innovation activity and business strategy by Hambrick et al., (1983), they concluded that ‘prospectors’ emphasize product innovation more than ‘defenders’)

Technology Strategy and the Concept of “Fit”…Technology Strategy and the Concept of “Fit”…

Five basic principles to be considered by managers while managing technology (Clark, 1989):1.Understand their technological base and envision that base as a strategic advantage.2.Take an international perspective in regard to technology and seek out the best technology wherever it can be found.3.Discipline their business function around the function of production. Therefore technical knowledge should be focused on value adding to the customer.4.Integrate all business functions through the information system of the firm.5.Focus on time as the critical factor in using innovation for competitive advantage.

Business Competitiveness and TSBusiness Competitiveness and TS

According to Betz (1993) the strategic technology management process focuses on the following three key areas:

1.The identification and development of firm’s technological capabilities.

2.Product/processes that provide a competitive advantage.

3.The integration of areas one and two

Three Key Areas of Strategic Technology Three Key Areas of Strategic Technology Management ProcessManagement Process

According to Zahra et al., (1994) the best practice mechanisms indicate the following characteristics for superior performance:1.Championship of technology issues by a unit or group that overseas strategic technological decision making.2.Adequate levels of technological competence within a firm’s executive management.3.The selection of structural form of the units responsible for technology development.4.Coordination between functional technology related units and other functions of the firm.5.The extent and timing of strategic control used to ensure progress in achieving the objectives of TS6.Technology transfer mechanisms. Many companies fail to commercialize the new technology due to obsession with the technology to the exclusion of market consideration, organizational bureaucracy and dysfunctional behavior

Characteristics of Superior PerformanceCharacteristics of Superior Performance

Substance of Technology Strategy

• Technology strategy can be discussed in terms of four dimensions:

• 1) the deployment of technology in the firm’s product-market strategy to position itself in terms of differentiation (perceived value or quality) and delivered cost and to gain technology-based competitive advantage;

• 2) the use of technology, more broadly, in the various activities comprised by the firm’s value chain;

• 3) the firm’s resource commitment to various areas of technology; and

• 4) the firm’s use of organization design and management techniques to manage the technology function.

Competitive Strategy Stance 1

• From a competitive strategy point of view, technology can be used defensively to sustain achieved advantage in product differentiation or cost.

• On the other hand, technology strategy can be used offensively as an instrument to create new advantage in established lines of business or to develop new products and markets.


• Technology Choice:• The distinction between design concepts and their

physical implementation and the distinction between components and architecture in product design and development are useful to establish a framework for technology choice.

• For example, a room fan is a system for moving air in a room. Its major components include the blade, the motor that drives it, the blade guard, the control system, and the mechanical housing.

• A component is defined as ‘a physically distinct portion of the product that embodies a core design concept and performs a well-defined function.


Technology Choice:•Core design concepts correspond to the various functions that the product design needs to embody so that manufactured product will be able to serve the purposes of its user (e.g. the need for fan to move corresponds to a core design concept).•Core design concepts can be implemented in various ways to become components (e.g. the movement of the fan could be achieved through manual or electrical power).•Each of these implementations, in turn, refers to an underlying technological knowledge base (e.g. an electrical fan would require knowledge of electrical and mechanical engineering).


Technology Choice:•Each of the core concepts of a product entails technology choices.•In addition to components, a product also has an architecture that determines how its components fit and work together. DD makes the architecture stable.•Technology choices require careful assessment of technical as well as market factors and identify an array of targets for technology development.•The relative irreversibility of investments in technology makes technology choice and targets for development an especially salient dimension of the TS.


Technology Leadership:•Often refers to timing (relative to rivals) of commercial use of new technology (product-market) strategy.•A broader definition views technological leadership in terms of relative advantage in the command of a body of technological competencies and capabilities.•Leadership results from commitment to ‘pioneering’ role in the development of a technology rather than a more passive ‘monitoring’ role.•Technology leaders, thus, have the capacity to be first movers but may choose not to do so.


Technology Leadership:•A firm’s competitive advantage is more likely to arise from the unique aspects of its TS than from characteristics it shares with others.•The capabilities-based strategies of such firms cannot easily be classified simply in terms of differentiation or cost leadership; they combine both.•Thinking strategically about technology means raising the question of how a particular technical competence or capability may affect a firm’s future degrees of freedom and its control over its fate.•This involves identifying and tracking key technical parameters, considering the impact on speed and flexibility of product and process development as technologies move through their life cycles.


Technology Licensing:Companies may not be able to fully exploit their technologies by themselves alone:1.Not all technologies generated by a firm’s R&D fit into its lines of business and corporate strategy.2.Firms may consider licensing their technologies to maximize returns on R&D investments, as patent periods are limited. Licensing is a useful tool to prevent competitors from coming up with alternative technologies.3.Smaller firms may lack resources and complementary assets.4.Local government regulations may require licensing to local firms.5.Anti-trust legislation requirements.6.Technology-rich companies should therefore consider developing a special capability for marketing their technologies beyond embodiment in their own products.

Value Chain Stance

• Technology encompasses the whole value chain rather than just in products and services and so its competitive use in all the value chain activities is important.

• TS in relation to the value chain defines its scope – the set of technological capabilities that the firm decides to develop internally (core vs. peripheral). Peripheral now may become core later.

• Broader set of core technologies places a firm in a better position in relation to its competitors. But, resources need to be used efficiently.

• It is important to limit the scope of TS to the set of technologies considered by the firm to have a material impact on its competitive advantage.

• Keep entry of new technologies in mind.

Value Chain

Resource Commitment Stance

• The third dimension of TS concerns the intensity of its resource commitment to technology.

• Resource commitments determine the depth of the firm’s TS: its strength within the various core technologies, expressed in terms of the number of technological options that the firm has available.

• Depth of TS is likely to be correlated with the firm’s capacity to anticipate technology developments in particular areas.

• Greater depth may provide increased flexibility and ability to respond to new demands from customers/users.

Management Stance

• TS encompasses a management stance: the choice of a management approach and organization design that are consistent with the stances taken on the other substantive dimensions.

• Firms that can organize themselves to meet the organizational requirements flowing from their competitive, value chain and resource commitment stances are more likely to have an effective TS.

• Example: Central R&D (for science-based technology leader) vs. decentralized R&D to major businesses (exploiting existing technologies).

Evolutionary Forces Shaping TS 1

• An evolutionary process perspective raises the question of how a firm’s TS actually comes about and changes over time.

• Evolutionary theory applied to social systems focuses on variation-selection-retention mechanisms for explaining dynamic behavior over time.

• TS is shaped by the ‘generative forces’ of the firm’s ‘strategic action’ and the ‘evolution of technology’ and by the ‘integrative or selective forces’ of the firm’s ‘organizational context’ and the ‘industry context’.

Technology Evolution• A firm’s technical capabilities are affected in significant ways by the

evolution of the broader areas of technology of which they are part and that evolve largely independently of the firm:

• 1) evolution of technologies along S-curve trajectories;• 2) interplay between product and process technology development

within design configurations over the course of a particular technological trajectory;

• 3) emergence of new technologies and their trajectories (S-curves);• 4) competence-enhancing or –destroying consequences of new

technologies;• 5) dematurity: renewed technological innovation in the context of

well-established markets, high production volumes, and well-established organizational arrangements; and

• 6) organizational determinants of technological change.

Technology Sourcing

• Internal sourcing: Each firm’s TS finds partial expression in the way it funds, structures and directs the R&D activities, whose mission is to create new pathways for technology.

• In-house R&D also determines the ‘absorptive capacity’ of the firm.• External sourcing: Many technologies used in the value chain are

outside the capabilities of the firm. So, technologies need to be sourced externally through alliances or licensing.

• Continuous concern with improvement in all aspects of value chain could guard the firm against idiosyncratic moves in external sourcing.

• One requirement is a continuous concern for gaining as much learning as possible from the relationship in terms of capabilities and skills rather than being concerned solely with price.

Education

Technology strategy