Learning objectives for the module Develop understanding of: The role technology dynamics play in creating economic growth of societies and competitive advantage of firms. Different types of technology innovation. Appropriateness of different analytical tools for forecasting and analysing technological change. Trade-offs between exploration and exploitation. Science and technology-driven entrepreneurial process. Social nature of shaping technological trajectories. 2 Krsto Pandza - Technology Management
The structure for the week 1 Krsto Pandza - Technology Management 3 DAY 1: Technology dynamics, competitive advantage and Strategic analysis of technology. DAY 2. Managing technology innovation in open environment (Kodak and Intel case studies). DAY 3: Corporate entrepreneurship and technology commercialization. DAY 4: Presentations and wrap-up.
Concepts and constructs Krsto Pandza - Technology Management 4 Innovation Strategy Technology Entrepreneurship V A L U E Artefacts and knowledge by which human capacity is extended Novel ways of creating and adding value How opportunities to create value are identified, evaluated and exploited Major intended and emergent initiatives involving utilization of resources to enhance the performance
TECHNOLOGY DYNAMICS AND COMPETITIVE ADVANTAGE Day 1 5 Krsto Pandza - Technology Management
Learning objectives Understand the dynamics of technology progression. Identify technology innovation as an engine of economical growth. Define different types of innovation and discontinuities in technology development. Discuss the influence of technological change for competitive advantage of firms. 6 Krsto Pandza - Technology Management
Defining technology 1 Technology is artificial as opposite to natural It is created/manufactured by humans Technology may be regarded as simply the way things are done It is a set of practices Relevant in the context of use A set of processes, tools, methods, procedures and equipment to produce goods or service 7 Krsto Pandza - Technology Management
Defining technology 2 Krsto Pandza - Technology Management 8 Any tool or technique, any product or process, any physical equipment or method of doing or making by which human activity is extended Enhance transformation power of humans Extend human capacity Technology refers to the organisation of people and artefacts for acheiving specific goals
Defining technology management Krsto Pandza - Technology Management 9 Technology management addresses the effective identification, selection, acquisition, development, exploitation and protection of technologies needed to create and sustain competitive advantage of firms and wider social wellbeing.
Defining technology strategy Krsto Pandza - Technology Management 10 Technology strategy is the total pattern of decisions, that a firm takes to obtaining and using technology to achieve a new competitive advantage, or to sustain an existing technology-oriented competitive advantage against erosion. Uncertain technological change IP management Different mechanisms for assessing market needs
Defining innovation Krsto Pandza - Technology Management 11 Invention, creation of novel ideas that demand allocation of resources. Innovation, process by which invention is transformed into products and/or services that add value to customers.
Defining strategy (SMJ, 2007, Vol. 28, pp. 935 – 955) Krsto Pandza - Technology Management 12 ….the major intended and emergent initiatives Strategy, innovation, acquisition, investment, operations, diversification, learning, activity… …taken by managers on behalf of owners Top, incentives, board, director, CEO, agency, ownership …involving utilization of resources Stock, capability, assets, technology, competency, financial, product, ties, slack, knowledge ….to enhance the performance Growth, advantage, returns, decline, dominance, …of firms Firm, business, company, corporate, multibusiness, SBU, subsidiary …in their external environment Industry, competition, market, enviroment, contingency, uncertainty, threats, risk
Defining resources and capabilities Krsto Pandza - Technology Management 13 …when firms have resorces/capabilities that are valuable, rare, inimitable, and nonsubstitutable, they can acheive sustainable competitive advantage by implementing value creating strategies that cannot be easily duplicated by competing firms. Resources are firm-specific assets that are difficult if not impossible to imitate. Capabilities are those combination of resources and processes that together underpin competitive advantage for a specific firm competing in a particular product/service market. A capability is conceptualised as collectively held and action oriented knowledge that enables firms to get things done. Dynamic capabilities are defined as the firms ability to integrate, build, and reconfigure internal resources and capabilities to address rapidly changing environment.
Creative destruction and economic growth - 1 Krsto Pandza - Technology Management 14 Competitive advantage arises from a firms entrepreneurial ability to exploit market shocks and discontinuities. Joseph Schumpeter used the term creative destruction to new sources of competitive advantages displacing the established ones. Schumpeter considered static efficiency - allocative efficiency at a point in time - to be less important than dynamic efficiency. Society benefits much more from competition between new products, new technologies and new forms of organization than from price competition.
Creative destruction and economic growth - 2 Krsto Pandza - Technology Management 15 Creative destruction implies that the isolating mechanisms that protect a firms competitive advantage will not be permanent. The life expectancy of a competitive advantage shrinks as technology and tastes change rapidly. During the period of quiet firms that posses superior products and technology earn economic profits Entrepreneurs who exploit the opportunities created by the shocks enjoy economic profits during the next period of quiet Firms are said to enter a state of hypercompetition state when competitive advantages can only be sustained for very short periods. According to Richard DAveni, several industries are in this state and firms in these industries can sustain their economic profits only by continually seeking new sources of competitive advantage.
Dimensions of innovations Incremental (doing what we do better) Radical (new to the world)(new to the enterprise) Component level System level Improvements to component New component for existing systems Advanced materials to improve component performance New versions of motor car, aeroplane, TV New generations e.g. MP3 Vs CD Steam power, ICT revolution, Bio-technology 16 Krsto Pandza - Technology Management
Incremental Vs Radical Incremental innovation Continuations of existing products, methods or practices Minor improvements made with existing methods and technology Evolutionary as opposed to revolutionary Radical innovation Totally new products or services Considerable change in basic technologies and methods Revolutionary ideas that can create new markets 17 Krsto Pandza - Technology Management
Dynamics of product and process innovation New products offering improvements in functional characteristics, technical abilities, ease of use, or other dimensions (incremental or radical) New techniques of producing goods or services Improve the effectiveness or efficiency of production processes. Facilitate the discovery of underlying scientific properties of technological domains 18 Krsto Pandza - Technology Management
Utterbank-Abernathy Dynamic Model of Technology Innovation Fluid phase Transitional phase Specific phase Technological and market uncertainties custom design experiments in the market niches no process innovation Learning standardisation dominat design Incremental innovation Process innovation Economy of scope 19 Krsto Pandza - Technology Management
Handerson and Clark model of innovation Changed Unchanged Core concepts Incremental innovations Modular Innovation Architectural Innovation Radical Innovation ReinforcedOverturned Linkages between core concepts and components 20 Krsto Pandza - Technology Management
Tushman-Anderson Dynamic Model of Technology Innovation Technologies evolve through periods of incremental change punctuated by technological breakthroughs that eater enhance or destroy the competences of established companies Competence-destroying discontinuities will be initiated by new entrants Competence-enhancing discontinuities will be initiated by existing firms 21 Krsto Pandza - Technology Management
Tushman-Anderson Dynamic Model of Technology Innovation A technological discontinuity will not itself become a dominant design. First versions of the new technology do not become industry standards (despite first-mover advantage). The highest the complexity of innovation the bigger is the influence of nontechnical factors in establishing a dominant design. 24 Krsto Pandza - Technology Management
Disruptive Technologies – What are they? They create new markets by introducing a new kind of product or service. The new product or service from the new technology costs less than existing product or services from the old technology. Initially, the products perform worse than existing products when judged by the performance metrics that mainstream existing customers value. Eventually the performance catches up and address the needs of mainstream customers. 25 Krsto Pandza - Technology Management
Disruptive Technologies - Christensen Incumbents fail because they spend to much time listening to and meeting the needs of their existing mainstream customers who, initially, have no use for products from the disruptive technology Measure of key performance attribute Time A B C D Costumer demand trajectory Company improvement trajectory 26 Krsto Pandza - Technology Management
Disruptive innovation in health Krsto Pandza - Technology Management 27 Primary care/ Nurse practitionrs Specialist care Self care – pharmacy, diagnosis and treatment performance time
Costs in health Krsto Pandza - Technology Management 28
Mechanisms of disruptive technology Disruptive innovations introduce a new value proposition: Low-end disruption: attracts low-end customers initially, moves into more upscale markets over time as the technology improves; Examples: discount retail stores, low budged airlines, Dells supply chain Overshot customers; customers who stop paying for further improvements. New-market disruption: occur when existing products limit the number of potential consumers. Examples: Kodak camera, Bell telephone, Sony transistor radio, Xerox photocopier, Apple personal computer, eBay online market place. converts previous non-customers into new customers, thereby creating a new market; 30 Krsto Pandza - Technology Management
Disruptive Technologies - Christensen Time or engineering efforts Performance as defined in application A Performance as defined in application B Technology 1 Technology 2 Application in market A Application in market B Disruptive technology: new market niche small market small companies 31 Krsto Pandza - Technology Management
Disruptive Technologies - Christensen Time or engineering efforts Technology 1 Technology 2 Application in market A Application in market B Niche, small market Performance as defined in application A Disruptive technology takes over the larger established market New entrants dominates Old company playing catch-up Performance as defined in application B 32 Krsto Pandza - Technology Management
Cumulative adoption patterns (Examples for some media products) Krsto Pandza - Technology Management 34
Cumulative adoption patterns (Examples for Several Durables) Krsto Pandza - Technology Management 35
Organizational (management) innovation A company ability to affect fundamental changes in its own internal way of working. Create or alter business structures, practices and capabilities: Lean manufacturing, total quality management, Activity based costing, economic value added, Matrix organization, ambidextrous structures, Outsourcing, supply chain management, strategic alliances, Corporate venturing, scenario planning, 36 Krsto Pandza - Technology Management
Business model (strategy) innovation Change in the way business is done in terms of capturing value, create new architecture of revenues. Innovations aimed at social needs and issues, Open innovation, Internet enabled businesses. 37 Krsto Pandza - Technology Management
Open innovation paradigm Multiple points of entry and exit Not all smart people work for us External R&D can create significant value Internal R&D is needed to claim some portion of that value External and internal ideas as well as external or internal paths to market. 38 Krsto Pandza - Technology Management
STRATEGIC ANALYSIS OF TECHNOLOGY Day 1 39 Krsto Pandza - Technology Management
Learning objectives Understand appropriateness of tools for technology forecasting. Applying: Scenario planning Technology roadmapping Designing a technology roadmap. 40 Krsto Pandza - Technology Management
Amaras law in technology forecasting Krsto Pandza - Technology Management 41 We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. Over predict change Under predict change
Technology forecasting Krsto Pandza - Technology Management 42 The future cannot be predicted. There are many different possible alternative futures. Instead of predicting what the future will be, analysts engage in structured and thoughtful speculation about future possibilities. This helps people prepare for whatever future comes. Successful forecasts demand for: familiarity with science relevant to technology being examined detailed knowledge of todays related products and R&D results market intelligence leap of imagination understanding that eliminate too radical or too conservative estimations willingness to present and defend the resulting ideas.
Technology forecasting Krsto Pandza - Technology Management 43 Gather as much data as the analysis warrants Analyze the data in multiple ways Use judgement and imagination within existing frameworks Long-term forecasts (synthesise a broader vision) Mid-term forecasts (projects possible pathways of development) Near-term forecast (market research, forecasting demand for a particular product)
Technology foresight on energy-related applications in nanoscience Krsto Pandza - Technology Management 45
PESTEL 46 Krsto Pandza - Technology Management Legal: Competition law Employment law Health and safety Product safety Political: Government stability Taxation policy Foreign trade regulations Social welfare policies Environmental: Environmental protection laws Waste disposal Energy consumption Economic: Business cycles GNP trends Money supply Inflation Unemployment Disposable income Social: Population demographic Income distribution Social mobility Lifestyle changes Attitudes to work and leisure Consumerism Safety Levels of education Technology: Government spending on research Industry focus on technological effort New discoveries /developments Speed of technology transfer Rates of obsolescence
PESTEL framework TrendsImpactUncertainty Political Economic Social Technological Environmental Legal Positive, negative, neutral Opportunities, Threats High, medium, low What environmental factors are affecting the organisation? Which of these are the most important at the present? Which of these will be important in the future? How uncertain are these trends? 47 Krsto Pandza - Technology Management
Industry Background for pharma Post-War Golden Era Major companies grew from National and Regional UK- Boots, Fisons, Beechams, Glaxo, Wellcome, ICI (Zeneca) France - Roussel, Rhone-Poulenc, Sanofi Germany and Switzerland - Ciba, Sandoz, Hoescht, Roche, E Merck USA - Merck, SKF, Squibb, BM, Pfizer, AHP Relatively small number of truly global companies until 1980s Global companies created organically on back of block buster products Then in 1990s, start of Merger and Acquisition activity Seek to increase market share, make Cost Savings More recently R&D synergies 48 Krsto Pandza - Technology Management
Innovations in 20 th Century Life saving: anti-infectives (penicillins, anti-virals) and oncology products Life sustaining: hypertension, HIV, diabetes Medicines reducing need for surgery: anti-ulcerants, lipid lowering Quality of life: anti-depressants, asthma Vaccines: MMR, polio, influenza, cancers Human Genome Project Nanotechnology Information Science
Recent industry challenges ….. In past five years major changes have taken place in Pharma industry environment: R&D Productivity Generics Pricing and Cost Regulatory activity Customer expectations Social and Political Agendas Competition and M&A
Emerging industry challenges ….. In the next decade further challenges will emerge… Science and Technology Governance and Regulation Increasing need to demonstrate value Challenge to value of IP Changing customers and expectations Increasing demand for customisation Competition - Collaboration 51 Krsto Pandza - Technology Management
Key Technology Trends Biotechnology - Genetics / Genomics Materials and Nanotechnology Information Technology Ethical, Legal, Societal Issues How and where might these impact pharmaceuticals? 52 Krsto Pandza - Technology Management
PESTEL example Legal: Legal implications of genomics Political: Reduced value of IP in medicine (public ownership) Role of non-for-profit programmes Social welfare policies Environmental: Patient safety Impact of genetically modified organism Green chemistry and biotech Economic: Increase in costs for governments Funding of health Budged deficits Emerging and developing economies Social: Aging population Patient and physician expectations Ethical implication Lifestyle changes e-pharmacies Technology: Genomics Biotechnology Supply chain technology ICT nanotechnology 55 Krsto Pandza - Technology Management
Analysis of PASTLE framework FactorImportanceUncertainty Ageing PopulationMedium – increasing health burden None – well documented Increasing consumer and Health Awareness Medium – in terms of customer expectations Low – Internet led Increased access to information MediumLow – development in this technology well trended Smart Tags and Adv SCMHighLow Adv materials Yes – new products Medium Genomics and diagnosticsHighMedium MEMS, nanotechHigh New competitorsMediumLow Industry consolidationMediumLow Green chemistry and biotechMedium Funding and pricingHigh Access to medicines High 56 Krsto Pandza - Technology Management
Pharmaceutical Industry Present to 2020 Societal Technological Environmental Economic Political Ageing Population Increasing Consumer and Health/Safety Awareness Increased Access to Information and Communications Smart Tags and Advanced Supply Chain Management Genomics and Diagnostics Advanced Materials, Dispensing and Dosing Technologies Funding and Pricing Pressures / Customer Model Access to Medicines Reduced Value of Intellectual Property Changing Regulatory Demands Rise of New Competitors - S Asia generics, Biotech Further Industry Consolidation Green - Sustainability New Technologies - MEMS, nanotech, AI 57 Krsto Pandza - Technology Management
Scenario planning Krsto Pandza - Technology Management 58 When the business environment has high levels of uncertainty arising from complexity and/or rapid change it may prove impossible to develop a single view of future developments. Scenarios are detailed and plausible views of how the business environment of a firm might develop in the future based on groupings of key environmental influences and drivers of change about which there is a high level of uncertainty. Use of speculation and human judgement in an attempt to gain fresh insights and bound future uncertainties Directed toward stretching decision makers thinking about their organizations business model and its future environment, overcoming corporate blind-spots, and enhancing strategic flexibility
Schwartz, Identify focal issue or decision - focus and relevance 2. Key forces in the local environment - factors for success and failure 3. Driving forces - macro-environmental forces that influence factors 4. Rank by importance and uncertainty - importance to focal issue 5. Selecting the scenario logics - define axes for scenario directions 6. Fleshing out the scenarios - include key forces 7. Implications - consider focal issue for each scenario 8. Selection of leading indicators and signposts - track reality vs. scenarios Scenario dimension 2 Scenario dimension 1 Scenario A & implications Scenario B & implications Scenario C & implications Scenario D & implications Developing Scenarios 59 Krsto Pandza - Technology Management
Key steps in scenario planning process Krsto Pandza - Technology Management 60 Isolate the decision – identify what is the fundamental issue to be addressed Isolate the driving forces – determine which driving forces are critical in influencing the change in the environment Rank the driving forces by importance and uncertainty – The most critical driving forces will be those that are both very important and highly uncertain
Key steps in scenario planning process Krsto Pandza - Technology Management 61 High Low Potential impact Uncertainty
Key steps in scenario planning process Krsto Pandza - Technology Management 62 Select the scenario logic – determine the two or three most important underlying questions that will make a diference in the decision. Crossing two major questions in a matrix gives four possible scenarios Flesh out the scenarios – using the driving forces and trends, see how they affect the scenarios Play out the implications – return to the original question and examine it in the light of the scenarios that have been built
Select the scenario logic – a case from FutMan project Krsto Pandza - Technology Management 63 Loose Concerted Collective Public values and consumer attitudes Focus Europe Sustainable Times Global Economy Local Standards Individual Integration of SD relevant policies
Futures of the scenarios Krsto Pandza - Technology Management 64
Scenario logic – a case pharmaceutical industry Krsto Pandza - Technology Management 65 Health funding limited Health funding significant Technology adoption high Technology adoption Good old days My Health.com Health.for. all Health.net Technology adoption limited Funding and pricing
The resulting four scenarios Krsto Pandza - Technology Management 66 My.Healthcare.com – where there is adequate funding to permit technologically advanced and highly personalised medicine to become routine in major markets. Pharmaceutical companies extend their product service offering to deliver advanced and personalised treatments. Health.Net – where funding is limited but where some personalisation of treatment is provided together with extensive use of generic products. Results in fundamental changes to product delivery model, with the emergence of new providers of treatments and service. Pharma companies become tier 1 suppliers of branded technology for others to integrate into a product. Health.for.All – where funding and technology adoption is limited and there is increasing rejection of intellectual property protection for life saving medicines. The current business model is rejected. UN/WHO or similar drive the emergence of not-for-profit supply organisations for developing countries. Good old days – where there is adequate funding but technology adoption is limited. However this scenario was not considered plausible because it is considered unlikely that high levels of funding and pricing flexibility will be available for essentially older treatments technologies.
Scenario 1; my.Healthcare.com Krsto Pandza - Technology Management 67 6:23 AM, 13 October 2019… You are feeling ill. You go over to your pC, plug your HealthCard in to the HealthPort and type in your PIN. PCHealth starts and via a simple dialog prompts for symptoms. It then runs a check on your health records and via Internet looks for similar symptoms locally. Its preliminary diagnosis is not clear, so PCHealth asks you to get a Diagnostic stick. You pull the stick from the pack, break off the end and spit on it. You then close the tube and connect it to HealthPort. Two minutes later PCHealth confirms as case of micoplasma pneumoniae infection (…must have been that last business trip), it updates your records, identifies the preferred medicine (taking account of your genotype and health records). It then sends information to your personal Physician (who will check up on you in a time difined according to illness) and to WorldPharma Co. You will take delivery of the medicine, a new treatment monitor and replacement diagnostic sticks within 4 hours. The new monitor will allow you to check the drug is performing. Your platinum credit card is Automatically biled by WorldPharma Co.
Technology roadmapping Krsto Pandza - Technology Management 68 Technology roadmapping represents a powerful technique for supporting technology management and planning, especially for exploring and communicating the dynamic linkages between technology, organizational capabilities, strategy and changing environment. Technology roadmap consists of different application levels: Sector/industry Company/business (technology development to be linked with business planning) Product Science Technology roadmapping enables to align these analytical levels.
The roadmap architecture and process Krsto Pandza - Technology Management 69 The roadmap architecture is composed of two key dimensions: Timeframes (typically the horizontal axis) which may include the present, short-, medium-and long term perspectives. Layers and sub-layers (typically the vertical axis), represented by a system-based hierarchical taxonomy which allows different levels of detail to be addressed. Linkages (technology push, market pull). Process of developing a roadmap is more important as the roadmap itself.
Generic roadmap architecture Krsto Pandza - Technology Management 70 Business environment Business strategy Products Capability/ technology Resources Time scale Present5 year10 year 15 year Political, economical, social, technological, legal, environment Vision, aspirations, objectives, performance Products, product generations Technology competency, R&D capability, operational capabilities, new product development, supply chain Financial, human
Health Care Trends – to 2020? Business environment analysed 71 Krsto Pandza - Technology Management
Supply Chain and Processing Capabilities to 2020 Krsto Pandza - Technology Management 72
Science driven map for cell on a chip Krsto Pandza - Technology Management 73 Societal embedding Application area Integrated platform Experimental platform Scientific research Time scale Present5 year10 year 15 year Regulation, new roles and responsibilities, reliability Point of care diagnostic products, markets Portable and with disposable chips, monitoring and diagnosing Multianalyte research tool, demonstration model, detection possibilities conductivity detection Microchip fabrication
Specific technical challenges in the biochip sector; science-driven roadmaps Krsto Pandza - Technology Management 74
The Future….? Clayton Christensen Peter Schwartz Robert Phaal et al 76 Krsto Pandza - Technology Management
77 The Delphi Technique An important tool to use to identify potential technological trends that might impact the development of new products and services It is a repetitive process. The same experts are asked the same questions at least two times. Feedback on the previous round is provided in order to enable experts to change their estimations. It is a structured process. The information flow is co-ordinated by researchers. There is no direct information flow among experts. The experts give estimations, judgments or opinions. The anonymity of experts is maintained throughout the process. The survey is designed to enable the statistical presentation of final results. Krsto Pandza - Technology Management
78 The Delphi Technique Major Weaknesses Sensitive to the precision of the questions asked Sensitive to variance in the expertise of the respondents Validity of the technique is limited by the intervention of unexpected events that the experts do not incorporate into their analyses Krsto Pandza - Technology Management
Example of the survey Krsto Pandza - Technology Management 83
84 The Bass Model A quantitative tool for forecasting the diffusion of new technology products that many companies use Based on the size of the market, the rate of adoption by innovators and imitators, and the proportion of adopters in the previous time period Can be modified to include a variety of factors that affect the diffusion of new technology products Most accurate at predicting the diffusion of consumer durables Krsto Pandza - Technology Management
85 Bass Model Limitations Cannot use to estimate diffusion in the first year of a products life Accuracy of predictions depends on the accuracy of assessments of size of the potential market Assumes that the diffusion of a technology product depends only demand-side factors Accuracy is much lower when competing technologies are being introduced Further away in time from the initial adoption point the accuracy declines Krsto Pandza - Technology Management