17 - 1

Chapter

17 Managing
Technology and
Innovation

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 17 - 2
Technology And Innovation

Technology

the methods, processes, systems, and skills used to transform

resources into products
systematic application of scientific knowledge to a new

product, process, or service

Innovation

a change in technology
process innovations - changes that affect the methods of

producing outputs
product innovations - changes in the actual outputs

themselves
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 17 - 3
Technology And Innovation

The technology life cycle

a predictable pattern followed by a technological innovation
starting from its inception and development to market saturation
and replacement
cycle begins with the recognition that applied science can satisfy a
need
knowledge and ideas brought together, culminating in a

technological innovation
rate of product innovation tends to be highest in early years

dominant design emerges when early problems are solved

technology reaches upper limits of performance capabilities

the technology remains in mature stage until it is replaced

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 17 - 4
The Technology Life Cycle

Theoretical Development slows

maximum as a limit is approached

Emergence of a
Performance

dominant design

Early
problems

Time
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 17 - 5
Technology And Innovation (cont)

Diffusion of technological innovations

spread in the use of new technology over time follows an S-shaped
pattern
adopters of new technology fall into five groups

innovators - adventurous
early adopters - critical to the success of a new technology

include well-respected opinion leaders

early majority - take longer to decide to use something new
typically not the leaders
late majority - approach innovation with great caution
adopt out of economic necessity or increasing social pressure
laggards - isolated and highly conservative
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 17 - 6
Technology Dissemination Pattern
And Adopter Categories
100

90

80 Cumulative
Percentage of adopters

70
S-shaped curve

60
Early
50 adopters
13.5%
40 Bell-shaped
Innovators frequency curve
30 Early Late
2.5%
majority majority
20 34% 34%
Laggards
10
16%

Time
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 17 - 7
Technological Innovation In A
Competitive Environment
Decisions about technology and innovation are very strategic
and need to be approached in a systematic way
technological innovations can support either:
low-cost leadership strategy
differentiation strategy

new technology can completely change the rules of competition

within an industry
key issue is not whether to adopt a new technology but when to

adopt it
Technology leadership imposes costs and risks
not the best approach for every organization
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Advantages And Disadvantages Of
Technology Leadership
Advantages
First mover advantage
Little or no competition
Greater efficiency
Higher profit margin
Sustainable advantage
Reputation for innovation
Establishment of entry barriers
Occupying of best market niches
Opportunities to learn
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Disadvantages
Greater risks
Cost of technology development
Costs of market development and
customer education
Infrastructure costs
Costs of learning and eliminating
defects
Possible cannibalization of
existing products
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 17 - 9
Technological Innovation In A
Competitive Environment (cont.)
Technology followership
deciding to be a leader or follower depends on how a company
positions itself to compete, the benefits gained through the use
of a technology, and the characteristics of the organization
can be used to support low-cost and differentiation strategies

adoption timing is dependent on the organizations strategic

needs and technology skills as well as the benefits of the new

technology
development of technology over time makes it easier to use
complementary products and technologies may be developed

that may make the technology easier to use

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 17 - 10
Assessing Technology Needs

Measuring current technologies

technology audit - process of clarifying the key technologies upon
which an organization depends
most important dimension of a new technology is its competitive

value
emerging technologies - still under development and unproven
may alter rules of competition in the future
pacing technologies - yet to prove full value
have potential to alter the rules of competition
key technologies - proven effective and offer strategic advantage
base technologies - are commonplace in the industry

offer little competitive advantage

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 17 - 11
Assessing Technology Needs (cont.)

Assessing external technological trends

several techniques used to better understand how technology is
changing within an industry
benchmarking - process of comparing the organizations
technologies with those of other companies
important to consider practices of overseas competitors
focus is what is currently being done
scanning - focus is what can be done and what is being developed
emphasizes identifying and monitoring the sources of new technologies
in an industry
extent of scanning determined by the importance of staying at the
cutting edge of technology

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 17 - 12
Framing Decisions About
Technological Innovation
Anticipated market receptiveness
in the short run, there should be an immediate application that
demonstrates the value of the new technology
in the long run, a set of applications must show the technology is

the proven means to satisfy a market need

Technological feasibility
visionscan stay unrealized for a long time
technical obstacles may represent barriers to progress

Economic viability
must be a good financial incentive for the new technology
development results in costs patents help to recoup the costs

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 17 - 13
Framing Decisions About
Technological Innovation (cont.)
Anticipated competency development
technological innovations are the tangible product of intangible
knowledge and capabilities that make up the organizations core
competencies
firms must have (or develop) the internal competencies needed to

execute their technology strategy

Organizational suitability
assess the fit of technological innovation with the organizations
culture and managerial systems
proactive technology-push innovators
defender - have a more circumspect posture toward innovation

analyzer - allow others to prove the viability of the technology

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 17 - 14
Framing Decisions About
Technological Innovation (cont.)
Considerations Examples
Market Receptiveness - Assess external Cell phones, MP3, personal digital
demand for the technology. assistants (PDAs), HDTV, etc.

Technological Feasibility - Evaluate Deep-sea oil exploration, physical size

technical barriers to progress. of PC microprocessors

Economic Viability - Examine any cost Solar fusion, fuel cell for automobiles,
considerations and forecast profitability. missile defense system

Competency Development - Determine Information technology in hospitals,

if current competencies are sufficient. digital technology in cameras

Organizational Suitability - Assess the Steel companies focusing on creativity

fit with culture and managed systems. and innovation
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 17 - 15
Sourcing And Acquiring New
Technologies
Each industry usually has specific sources for most of its
new technologies
in many industries, however, the primary sources of new
technology are the organizations that use the technology
make-or-buy decision

the question an organization asks itself about whether to acquire

new technology from an outside source or develop it itself
Internaldevelopment - potentially advantageous to keep the
technology proprietary
Purchase - most technology is available in products or

processes that can be openly purchased

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 17 - 16
Sourcing And Acquiring New
Technologies (cont.)
Contracted development - contract development to an outside
source
e.g., other companies, independent research laboratories
Licensing - when technology is not easily purchased, may be
able to license it for a fee
Technology trading - may be used between rival companies

becoming increasingly common because of the high cost of

developing advanced technologies independently
Research partnerships - each member enters the partnership
with different skills or resources needed for successful new-
technology development
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 17 - 17
Sourcing And Acquiring New
Technologies (cont.)
Joint venture - have greater permanence
outcomes result in entirely new companies
Acquisition of an owner of the technology
outrightpurchase of the company that owns the technology
acquiring a minority interest to gain access to the technology

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Technology Acquisition Options

Yes
Internal
development
Available skills
Yes and resources Acquisition of the technology
owner
Important to No Exclusive research contract
remain
proprietary Yes Purchase
License
No Trade
Available for
sale
Joint venture
No Research partnership

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 17 - 19
Technology And Managerial Roles

Chief Technology Officer (CTO)

executive in charge of technology strategy and development
senior position at the corporate level with broad, integrative

responsibilities
coordinates technological efforts of the business units

acts as a voice for technology

supervises new-technology development

assesses the technological implications of strategic initiatives

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 17 - 20
Technology And Managerial Roles
(cont.)
A variety of critical roles in developing new technology
entrepreneur - invents ways to produce old products to exploit
new technologies
technical innovator - person who develops a new technology

or has the key skills to install and operate the technology

product champion - person who promotes a new technology

throughout the organization in an effort to obtain acceptance

and support for it
executive champion - an executive who supports a new

technology and protects the product champion of the

innovation
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 17 - 21
Unleashing Creativity: 3Ms Rules
For An Innovative Culture
Set goals for innovation

Commit to research and development

Inspire intrapreneurship

Facilitate, dont obstruct

Focus on the customer

Tolerate failure
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 17 - 22
Organizing For Innovation

Bureaucracy busting
bureaucracy is an enemy of innovation
establish special temporary project structures that are isolated from

the rest of the organization

skunkworks allowed to operate under different rules
angura - underground research policy that allows Japanese
scientists to pursue projects about which only their immediate
supervisor knows
cross-functional teams - solve problems and create innovative

solutions
are flat structures that create an environment that encourages
collaboration and creativity
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 17 - 23
Organizing For Innovation (cont.)

Implementing development projects

development project - focused organizational effort to create a
new product or process via technological advances
fall into one of four categories
research or advanced development projects - designed to invent
new science for application in a specific project
breakthrough development projects - designed to create the first
generation of a product or process
platform development projects - establish the basic architecture for a
whole set of follow-on projects
derivative development projects- designed to provide incremental
improvements to an existing product or process

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 17 - 24
Organizing For Innovation (cont.)

Implementing development projects (cont.)

development project (cont.)
typically relies on a special cross-functional team
typically conducted under intense time and budget pressures

development projects have multiple benefits

cultivate skills and knowledge that can be used for future endeavors
organizational learning - important criterion for evaluating the success of
the project
to achieve their fullest benefit, development projects should:
build on core competencies
have a guiding vision about what must be accomplished
have a committed team
instill a philosophy of continuous improvement
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 17 - 25
Organizing For Innovation (cont.)

Technology, job design, and human resources

adopting a new technology typically requires changes in the way
jobs are designed
sociotechnical systems - approach to job design that attempts to

redesign tasks to optimize operation of a new technology while

preserving employees interpersonal relationships and other
human aspects of the work
managerial choices on how to apply a new technology
used to limit the tasks and responsibilities of workers
used to achieve great accomplishments and improve the quality of
workers lives
consider technologys effect on human resource systems
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Compensation Practices In Traditional
And Advanced Manufacturing Firms
Type of
Compensation Traditional factory
Practice
Performance Focus on individual incentives
contingent reflects division of labor and
separation of stages and functions.
Job Use of hourly wage assumes that
contingent the differences in employee con-
tribution are captured in job classi-
fications and that performance is
largely determined by the
production system.
Person Seniority pay rewards experience
contingent as a surrogate for knowledge and
skill in a stable environment and
rewards loyalty to reduce
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17 - 26
Integrated manufacturing
Extensive use of group incentives
to encourage teamwork, cooperation,
and joint problem solving.
Use of salary assumes that em-
ployees contributions transcend the
job per se to substantially affect
output. The distinctions between
classes of employment are
diminished.
Skill-based pay rewards continuous
learning and the value-added
derived from increased flexibility
in a dynamic environment