CPET 575 Management Of Technology

Transcription

1 CPET 575 Management Of Technology Part III. Enactment of Technology Strategy Developing A Firm s Innovative Capabilities References: 1. Robert A. Burgelman, Clayton M. Christensen, and Steven C. Wheelwright, Strategic Management of Technology and Innovation, 5th edition, 2009, McGraw-Hill, pp Paul I-Hai Lin, Professor A Specialty Course for M.S. Technology - IT and Advanced Computer Applications Purdue University Fort Wayne Campus 1 Enactment of Technology Strategy Developing A Firm s Innovative Capabilities Overview Innovation Challenges in Established Firms Strategic Management of Corporate Research Managing Corporate Entrepreneurship Conclusion 2 1

2 Enactment of Technology Strategy Developing A Firm s Innovative Capabilities Overview Innovation Challenges in Established Firms New Product and New Business Development Strategic Management of Corporate Research The Functions of Corporate Research Managing Key Interfaces Linking Corporate Research to Corporate Development Strategy Managing Corporate Entrepreneurship Conclusion 3 Enactment of Technology Strategy Developing A Firm s Innovative Capabilities Overview Innovation Challenges in Established Firms Strategic Management of Corporate Research Managing Corporate Entrepreneurship The Managerial Challenge Posed by Autonomous Strategic Action The Use of New Venture Divisions A Framework for Assessing Internal Entrepreneurial Initiatives Design Alternative for Corporate Entrepreneurship Choosing Design Alternatives Implementing Design Alternatives Conclusion 4 2

3 Review of Part II Part II. Design and Implementation of Technology Strategy: An Evolution Perspective Technology == Resources, likes financial and human resources Managing technology is a basic business function. Technological competencies and capabilities were views as the foundation of technology strategy. The evolution of technology strategy was examined in the context of a matrix generative selective forces that shape innovation processes within the firm, within an industry, and in a broader system encompassing multiple industries or major segments within an industry 5 Part II: Review Fundamental Business Strategy Decisions 1) Which distinct technological competences and capabilities are necessary to establish and maintain competitive advantages? 2) Which technologies should be used to implement core product design concepts and how should these technologies be embodied in products? 3) What should be the investment level in technology development? 4) How should various technologies be sourced internally or externally? 5) When and how should new technology be introduced to the market? 6) How should technology innovation be organized and managed? CPET 575 Management of Technology, Prof. Paul I-Hai Lin 6 3

4 Overview Technology Strategy Making Technology Strategy: a function of the quantity and quality of technical capabilities and competences Experience: obtained from enacting technology strategy feeds back to technological capability and technology strategy CPET 575 Management of Technology, Prof. Paul I-Hai Lin 7 Part III: Enactment of Technology Strategy: Developing the Firm s Innovative Capabilities Examining: How a firm s innovative activities reflect its technology strategy? How the enactment of technology strategy serves to further develop its innovative capabilities? Technology Strategy Enactment: (three Key Tasks) A. Sourcing technology (on a continuous basis) B. Development of new products and new businesses (new markets for new technologies) C. Internal Corporate Venturing 8 4

5 Part III: Overview Technology Strategy <=> Innovative Activities <=> Innovative Capabilities Technology strategy is enacted through the performance of a sequence of key tasks in order to stay ahead of competitors: Technology Sourcing (on a continuous basis) Many Firms: Licensing agreements, R&D with other firms, Consortia, Strategic alliance, Joint ventures, Acquisitions, etc. High-Tech Firms: Must source their new technology internally through investment in R&D Corporate Innovation Challenges New product and new business development Technology Support Marketing and Sales Train Users, Field Services? 9 Sourcing Technologies Examples Sourcing Technology Dell s $67 billion acquisition of EMC (Vmware), Mr. Ives predicting that EMC and Dell will have a tough time integrating and saying he has serious doubts about the long-term success of a Dell/EMC (and Vmware) merger. EMC Cloud Computing, Data Storage, IT Security and Big Data, VMware Virtualization for Desktop & Servers, Applications,

6 Innovation Challenges in Established Firms New Product and New Business Development Induced Strategic Action Exploiting Innovation Opportunities in the Induced Process Autonomous Strategic Action Exploiting Innovation Opportunities in the Autonomous Process A Balancing Act Related Ideas 11 Innovation Challenges in Established Firms EXHIBIT 1 An Evolutionary Framework of the Strategy-Making Process in Established Firms Autonomous strategic action Induced strategic action Strategic context Structural context Concept of corporate strategy 12 6

7 Innovation Challenges in Established Firms The Evolutionary Process Model of Strategy Making, Exhibit 1 Induced strategic process Incremental and architectural innovations New product development Autonomous strategic process R&D, Radical Innovations Induced Strategic Action Familiar external environments Corporate strategy (Top down) Reflects top management s belief about the basis of the firm s past and current success Beliefs => Firm s views => Distinctive (core) competences Product-market domains for successful competition 13 Innovation Challenges in Established Firms Structural Context (Large Established firms) Serves to select strategic initiatives (corporate strategy, organizational learning) Encompasses: Administrative mechanism (resource allocation rules) Cultural mechanism (rules of expected behavior) 14 7

8 Innovation Challenges in Established Firms Autonomous Strategic Action Outside the scope of the current corporate strategy and opens up new environmental niches Not derived from strategic planning Guided by management teams strategic recognition (Bottom UP) Middle-level managers Formulating a broader strategy for the initiatives of internal entrepreneurs and acting as organizational champions to convince top management to support Senior & top management 15 Exploiting Innovation Opportunities in the Induced Process Innovations Associated with Incremental or architectural innovations Not necessarily small innovation Initially not large Management of Technology Short to Medium term Managing incremental and architectural innovation Longer term Managing disruptive innovations To meet this challenge Firms must develop strong but flexible product and process development capabilities 16 8

9 Exploiting Innovation Opportunities in the Induced Process Example - Boeing Developing a new air frame for the next generation air craft incremental Well understood in the context of firm s corporate strategy How about: the new Boeing 787 Dreamliner, unparalleled fuel efficiency and range flexibility, 17 Exploiting Innovation Opportunities in the Autonomous Process Innovations Associated with Radical Innovations Emerge somewhat unexpectedly from the firm s R&D investment (corporate research) Initially not large Innovation Challenges Important for a firm s long-term survival and development Exploit growth opportunities in marginally related (or even unrelated) areas of business To meet the innovation challenge associated with the autonomous process Firms must develop a capability to manage internal entrepreneurship 18 9

10 Exploiting Innovation Opportunities in the Autonomous Process Examples Bendix Corporation Electronic Field Injection (EFI) invented by Bendix in the automotive supply industry $100 million-plus segment Apple - find and exploit growth opportunities in marginally related (or even unrelated) areas of business Corporate Governance, Apple s Systemic Approach to Innovation, Innovative products, Innovative business model 19 Innovation Challenges in Established Firms A Balancing Act Two innovation challenges Innovation challenges associated with the Autonomous Process Innovation challenges associated with the Induced Process Different management approaches Address challenges Sequentially Simultaneously 20 10

11 Innovation Management Exploration Exploitation Related Ideas Autonomous strategy process Unexpected Lower cost, initially Results of exploration => New exploitation opportunities Examples Intel s new microprocessor development Incremental Development cost hundreds of millions of dollars 21 Strategic Management of Corporate Research R&D funding => Technology areas => Highest ROI How tightly R&D projects are linked to business objectives in the promising areas of technology Strategic Management The Functions of Corporate Research Making Key Interfaces Linking Corporate Research to Corporate Development Strategy 22 11

12 Examples Open Innovations R&D Funding IBM s Rometty pitches high value innovation, reinvention, $4 billion more into growth business, 2015/2/26, 23 Strategic Management of Corporate Research Corporate Research Helps meet the innovation challenges associated with the Induced and Autonomous Strategic Processes The Functions of Corporate Research Exhibit 2 Support of Existing Business (Induced Process) New Strategic Direction (Autonomous Process) Effectively Using the Output of Corporate Research Examples Sourcing Technology Dell s $67 billion acquisition of EMC (Vmware),

13 Strategic Management of Corporate Research EXHIBIT 2 The Functions of Corporate Research The research charter must be specified. The research charter represents the shared understanding of the mission that research is expected to fulfill. Innovation by: Improving and strengthening understanding of technologies in use New strategic directions Diversifying to new applications and markets Support of existing business Identifying product and process improvement Discoveries and developing new technologies Diversifying to entirely new business Developing new processes for established products Corporate service by: Intelligence Opening windows on new science and technology Assessing threats and opportunities Human resources Recruiting new kinds of skills Recruiting talented people with high potential Technology transfer Identifying acquisition candidates with needed technological expertise Recruiting for all divisions, from corporate research to operations Source: R. S. Rosenbloom and A. M. Kantrow, The Prof. Nurturing Paul Lin of Corporate Research, Harvard Business Review, January-February pp Strategic Management of Corporate Research Managing Key Interfaces Corporate Research Divisional R&D Interface (Induced Process) Corporate Research Business Research Interface (Autonomous Process) Examples of Corporate Research & Development 26 13

14 Strategic Management of Corporate Research Examples of Corporate Research & Development Intel Labs, IBM Research, Microsoft Research, GE R&D, GM Design & Technology, Schneider Electric Innovation and R&D, r-electric-innovation-rd.page 27 Strategic Management of Corporate Research: Managing Key Interfaces EXHIBIT 3 Linkages Among R&D Units Geographical Closed Personal Open Personal Closed Open Closed Open Administrative Closed Open Tight coupling No coupling February 12,

15 Strategic Management of Corporate Research Linking Corporate Research to Corporate Development Strategy Assessing Technological Opportunities The Role of Different Levels of Corporate Research Management Allocating Resources to Corporate Research 29 Strategic Management of Corporate Research: Managing Key Interfaces EXHIBIT 4 Systematic Differences Between Business and R&D People Work environment 1. Structure 2. Methods 3. Database 4. Work and time pressures R&D People Well defined; existence of research tradition; clearly described positions Science and codified Systematic and objective Mostly internal; how long does it take? Business research people ill defined; no real research tradition; positions less clearly defined Ad hoc and uncodified Unsystematic and largely subjective Mostly external; how long do we have? Professional Orientations 5. Operating assumptions Serenpidity 6. Goals New ideas; can it be improved? Planning Big ideas; does it work? 7. Performance criteria Quality of personnel 8. Educational background Quality of investigation Ph.D. Quantity of results Master s 9.Experience Deep and focused Broad and diverse Personal interests 10. Career objectives Become venture manager? Become venture manager? Source: Burgelman and Sayles, Inside Corporate Innovation (New York Free Press, 1986) 30 15

16 Linking Corporate Research to Corporate Development Strategy Assessing Technological Opportunities: Five Dimensions of Uncertainty 1. Usefulness of innovation cannot be immediately appreciated (example: Laser invention at Bell Lab, 1958, no possible relevance to the telephone industry) 2. The impact of innovation often depends on improvements in complementary inventions (ex: Laser in telecomm and Fiberoptics) 3. Major innovations often constitute entirely new technological systems, but it is difficult to conceptualize such systems (ex: telephone => primarily a business instrument) 31 Linking Corporate Research to Corporate Development Strategy Assessing Technological Opportunities: Five Dimensions of Uncertainty 4. Major innovations often originated from an attempt to solve very specific problems and leads to unanticipated uses (ex: steam engine => pumping water out of flooded mines) 5. The ultimate impact of innovations depends on the ability to effectively link them to specific categories of human needs (ex: David Sarnoff, who linked the wireless communication to extended human needs) 32 16

17 Linking Corporate Research to Corporate Development Strategy Assessing Technological Opportunities: Initial Screening Questions Assessing Technological Opportunities: Next Level Screening Questions Need Qualitative Judgment Quantitative Analysis Easier to predict technical dimensions of opportunities Nature of market for the innovation? 33 Linking Corporate Research to Corporate Development Strategy Assessing Technological Opportunities: Initial Screening Questions [George Pake, former VP of Cooperate Research at Xerox] Are first-class researchers available to pursue them? Is major investment likely to yield major advances? How many years will take before we see successful results? How many failures and successes have others had in this areas? 34 17

18 Linking Corporate Research to Corporate Development Strategy Assessing Technological Opportunities: Next Level Screening Questions [George Pake, former VP of Cooperate Research at Xerox] Can the expert technology be obtained from vendors or through acquisition? What costs would be incurred to displacing an existing research program to implement the new proposal? Is there enough hope that a successful results can be transferred downstream? Will the necessary capital be available? 35 Linking Corporate Research to Corporate Development Strategy The Role of Different Levels of Corporate Research Management Technicians, Technologist, Engineers Bench scientist Group leaders R&D managers Director of corporate R&D 36 18

19 Managing Corporate Entrepreneurship The Managerial Challenges Posed by Autonomous Strategic Action The Use of New Venture Divisions A Framework for Assessing Internal Entrepreneurial Initiatives Design Alternatives for Corporate Entrepreneurship Choosing Design Alternatives Implementing Design Alternatives 37 Managing Corporate Entrepreneurship The Managerial Challenges Posed by Autonomous Strategic Action Technology-based internal entrepreneurship activity emerges spontaneously Examples 1966, Mechanical-based Calculators => Electronic Calculator, unfavorable market research forecast, William Hewlett personally championed the project Mechanical Calculator, s, SAP company 42-year history,

20 Managing Corporate Entrepreneurship The Managerial Challenges Posed by Autonomous Strategic Action Examples 1980, Sam H. Eletr, a manager in Hewlett-Packards lab, tried to persuade HP s new product people to get into biotechnology; Sam Elter quit HP to start his own business (Venture $5.2 Million) to make Gene machines, which make DNA, the basic material of the generic code 39 Managing Corporate Entrepreneurship The Use of New Venture Divisions (NVD) NVD Operating Division Interface Problems NVD Corporate Management Interface Problems Exhibit 5 Interface Problems Involving the NVD 40 20

21 Managing Corporate Entrepreneurship EXHIBIT 5 Interface Problems Involving the NVD Strategic interferences Administrative/ Cultural frictions NVD-Operating divisions interface * Domain protection issues * Synergy consideration * Rigidities resulting from management system * Personal transfer issues NVD-corporate management interface * Lack of diversification strategy * Limits to rate of strategic change that can be absorbed * Effects on corporate image * Circumvention of corporate rules and regulations * Inadequate measurement and reward systems * Resistance to institutionalization Source: Adapted from R. A. Burgelman, Managing the New Venture Division: Research Findings and Implications for Strategic Management, Strategic Management Journal, January-March Managing Corporate Entrepreneurship A Framework for Assessing Internal Entrepreneurial Initiatives Assessing Strategic Importance Assessing Operational Relatedness Exhibit 6 Toward an Assessment Framework 42 21

22 Managing Corporate Entrepreneurship EXHIBIT 6 Toward an Assessment Framework Key dimensions and their implications Strategic importance Operational relatedness Degree of control Efficiency considerations Administrative linkages (authority) Operational linkages (networking) Organizational design alternatives Source: R. A. Burgelman, Managing Corporate Entrepreneurship: New Structures for Implementing Technological Innovation, Technology in Society (December 1985), pp Managing Corporate Entrepreneurship Assessing Strategic Importance Critical Issues to be Addressed: How does this initiative maintain the firm s capability to move in areas where major current or potential competitors might move? How does this help the firm determine where to go? How does it help the firm create new defensible niches? How does it help mobilize the organization? To what extend could it put the firms at risk? When should the firm get out of it if it does not seem to work? What is missing in the analysis? 44 22

23 Managing Corporate Entrepreneurship Assessing Operational Relatedness Critical Issues and Questions to be Addressed: What key capabilities are required to make this project successful? Where, how, and when will the firm get them if it doesn t have them yet, and at what cost? Who else might be able to do this, perhaps better? How will these new capabilities affect the capabilities currently employed in the firm s mainstream business? What other areas may possibly require successful innovative efforts if the firm move toward with this project? What is missing in the analysis? 45 Managing Corporate Entrepreneurship Design Alternatives for Corporate Entrepreneurship Determine Administrative Linkages Strategic importance: Very important, Uncertain, Not important Strong: Exert control over? Spin-off? Determining Operational Linkages Maximized synergies, maximized cost of transactions? Operational relatedness Unrelated Partly related Strongly related 46 23

24 Managing Corporate Entrepreneurship Choosing Design Alternatives Exhibit 7: Nine Design Alternatives 1. Direct Integration 2. New Product Department 3. Special Business Units 4. Micro New Venture Department 5. New Venture Division (NVD) 6. Independent Business Units 7. Nurturing plus Contracting 8. Contracting 9. Complete Spin-Off 47 Managing Corporate Entrepreneurship EXHIBIT 7 Organization Designs for Corporate Entrepreneurship Operational relatedness Unrelated Partly related Strongly related 3 Special business units 2 New product development 1 Direct integration 6 Independent business units 5 New venture division 4 Micro new venture department 9 Complete Spin-off 8 Contracting 7 Nurturing and contracting Very important Uncertain Not important Strategic importance Source: R. A. Burgelman, Designs for Corporate Entrepreneurship in Established Firms, California Management Review (Spring 1984), pp

25 Implementing Design Alternatives Three Major Issues and Potential Problems 1. Corporate management and the internal entrepreneur should view the assessment framework as a tool for clarity at a particular moment their community of interests and independencies and to structure a non-zero sum game 2. Corporate management must establish measurement and reward systems capable of accommodating the incentive requirements of different designs 3. As the development process unfolds, new information may modify the perceived strategic importance and operational relatedness, which may require a renegotiation of the organization design. The organization design framework must thus be used dynamically, with ventures potentially moving from one type of arrangement to another. 49 Implementing Design Alternatives Three Major Issues and Potential Problems (continue) Stability of relationship Appropriate benefits from the entrepreneurial endeavors Provide the entrepreneur with opportunity to be more successful Policies Protect proprietary corporate capabilities and skills, intellectual property, etc 50 25

26 Conclusion 51 26