1. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 1 Fraunhofer IAO, Germany Developing Integrated Business and Technology Strategies NITM International Seminar Series A series of Seminars for Executives & Managers NITM, Dublin, September 17th, 2003 Frank Wagner & Flavius Sturm Fraunhofer Institute for Industrial Engineering

2. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 2 Agenda Introduction Strategic Management for SMEs “Navigating in Turbulent Times” Business and Technology Strategies Portfolio, Balanced Scorecards and other Tools How Scenarios and Roadmaps can help (Cases) Business and Technology Scouting

3. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 3 Linking Business & Technology Integrated Strategy Development Examples

4. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 4 Linking Business & Technology

5. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 5 Network Strategy Corporate Strategy Business Strategy / Technology Strategy Strategic Management framework: Business & Technology Strategy

6. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 6 business 2 Prod/Serv 1 Prod/Serv 2 - - Core product 2 business 1 Core product 1 Core competence 1 Core competence 2 Core competence 3 Prod/Serv 3 Prod/Serv 4 Business & Technology – From core competences to products

7. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 7 What are Technologies? Technologies: Bundling of scientific-technical and application-oriented knowledge in respect to possible problem solutions. Technologies therefore represent a specific knowledge base for potential products and processes Source: Peiffer, 1992, p.36 Product Technologies - are incorporated in products and become part of them. Process Technologies -are used to develop, produce, or market products -support the achievement of the company goals - are not incorporated in products and do not become part of them

8. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 8 There are different kinds of Technology Pacing Technologies -Technologies that have the potential to change the entire basis of competition but have not yet been embodied in a product or process. -These technologies often develop into key technologies Key Technologies -Technologies that are most critical to competitive success because they offer the opportunity for meaningful process or product differentiation -These technologies yield competitive advantage Base Technologies -Technologies that, although necessary and essential to practice well, offer little potential for competitive advantage -These technologies are typically widespread and shared Source: Roussel, Saad, Erickson; Third Generation R&D; 1991

9. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 9 Parameter Timing Technology Source Technology Utilisation Field of Application Options Performance Technology Leader PioneerEarly Follower Technological Presence Late Follower Obtain Licences Contract Research Acquisition Self-UtilisationIssue Licences Technology selling Used Technology Unused Technology New Technology ( Source: Brodbeck, 1999) Strategic Dimensions of Technology Management

10. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 10 External Procurement Internal R&D Pay for licenses Buy Components Buy Technology Buy Patent Acquire a business Joint Research, Joint Venture Contract Research Sources of Technology (Source: Brodbeck, 1999) Sources of Technology

11. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 11 External Internal Licence to other Industry Licence to competitor Licence to supplier/customer Shared utilisation in alliances Shared utilisation in Joint-Venture Sell patent Sell technology Launch Spin-off business Utilisation of Technologies (Source: Specht, 1996) Utilisation of Technology

12. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 12 cumulated R&D-effort Capacity of technology (benfit/costs) Source: Krubasik (1982) Limit of new technology Limit of old technology R&D-effort performance Technology potential New technology Old technology = Status at the point of time when a change of technology is considered Problem with Technologies: Substitution potential (Double-S-Curve)

13. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 13 Very few companies are able to retain dominance in the Fortune 500 (Neely, 1998). These companies introduce sustainable innovations and continually improve their products and processes, but they get caught unaware by newcomers who have introduced disruptive innovations, capturing and transforming traditional markets (Christensen, 1997) 03 Time Product Perfromance Progress due to sustaining technologies Performance demanded at the low end of the market Performance demanded at the high end of the market Progress due to sustaining technologies Disruptive Technological Innovation The problem: Disruptive Technologies

14. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 14 Examples of disruptive technologies 05 Digital photography has eroded the profits and viability of companies like Polaroid and Kodak. Digital video recorders (DVRs) — which require no tape medium, allow ads to be skipped, and allow TV shows to be transmitted via the Internet — threaten the business models of pay-for-view TV programming.

15. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 15 The problem with disruptions: cause for a new business cycle - Business Cycles traditional and disruptive Source: Cosier & Hughes, 2001

16. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 16 Metaphor for understanding Technology Development - Cambrian Explosion (Exploration vs. Exploitation) “In the Cambrian period, some 500 million years ago, a burst of biological creativity took place. Over a relatively brief period of time, a vast diversity of fundamentally different life forms appeared. The way in which technology evolves is strikingly similar to the Cambrian explosion. Diverse forms branch out bushily at the beginning, then the rate of branching declines, extinction sets in, and, like today's phyla, only a few major alternative forms persist at the end”. Source: Kaufmann, 1995

17. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 17 Why the Need for an Integrated Business & Technology Strategy? Technology Lifecycles and Growth opportunities Current Situation Product/ Technology Lifecycles Searching for innovative technologies, searching for new growth opportunities! Time Potential / Age ? For a good business & technology strategy it is crucial to identify the current maturity level of the technologies applied.

18. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 18 Classical Options for Business Development: Ansoff‘s Classic Matrix Existing Market New Market Existing Product New Product Market Penetration Product Development Market Development Diversification Why the Need for an Integrated Business & Technology Strategy? Classical Business Strategy Options Source: Ansoff,...

19. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 19 Product New Technology Technological Product Substitution High Technology Ansoff‘s EXTENDED Matrix – for Technology Intensive Environments Why the Need for an Integrated Business & Technology Strategy? Dealing with disruptive new technologies Source:... Existing Market New Market Existing Product New Product Market Penetration Product Development Market Development Diversification

20. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 20 Even without technological innovation in an expanding market customers will enter the market place without product knowledge The company must not only learn about the new customer but also educate the customer about the product The less the customer knows about the product the more difficult the task is for the marketer. The customer is often not only unfamiliar with the product but also with its underlying technology. The company will have to educate the customer about the technology before the customer can be shown the benefits of the new product Why the Need for an Integrated Business & Technology Strategy? New Issues in Technology-Intensive Contexts

21. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 21 Needs existing emerging existing emerging Current business potential Future business potential Technologies Source: CCSO, 1998 Integrated Business & Technology Strategy Linking emerging needs with emerging technologies

22. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 22 Source: Day et al., 2001 Linking emerging needs with emerging technologies - Example

23. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 23 Disruptive Innovation – Ofita Spanish Market Leader in Office Furniture 05 GENIUS - THE INTELLIGENT PLATFORM – disrupting the office furniture market concept of platform, basing the product on adaptability, easy and simple transformations of the work stations, always using the same parts

24. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 24 Disruptive Innovation – Networked Home Appliances – Smart Kitchen New technologies disrupting business models New strategic alliances New value proposition New pricing strategy New customer segments New competitors

25. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 25 Linking Business & Technology Integrated Strategy Development

26. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 26 Necessitiy to actively search for technological synergies between different applications Up to now new technology investment decisions have not been linked sufficiently with future market demand and the customer needs Base Technologies Product & Process Technologies Technology Market A Market B Market... Segment A.1 Segment A.2 Segment B.1 Segment B.2 Etc. etc. Markets & Applications... Market Cost Efficiency Solution Functionalities and Performance Criteria Quality Performance... Technology Push Market Pull Integrated Business & Technology Strategy - considerations

27. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 27 Business AnalysisInnovation AnalysisTechnology Analysis Search field Generation SWOT- Analysis Innovation Strategy Technology StrategyBusiness Strategy Formulation of Strategic Programm for Business Units Formulation of Strategic Programm for Technology Development Units Business- portfolio Technology Portfolio Innovation Portfolio Business ListTechnology List Source: Bürgel et al., 1996 Strategy Development: Strategic Analysis for integrated Technology and Market Planning

28. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 28 Pulll back Selection Investment Attractivity of Technology Strength of resources Indicators on requirements Indicators on potential Potential for further development Extend of technological Further development performance increase Compatibility positive or negative influences on already used technologies Broadness of application Dispersion of technical further development fields of application Strength of Know-How Financial strength State of Know-How Budget Stability of Know-Hows Continuity of budgets Technical qualitative degree of mastery Quality (economic+techn.) of own solution compared to competition Potentials Further development potentials in personnel, financial and legal resources Speed of action Speed to market compared to competition Source: Pfeiffer et al., 1991 Strategy Development: Technology Portfolio Development for the Evaluation of Alternative Solutions (Example)

29. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 29 External Analysis CompetitorsStakeholdersCustomers Scenario Development Scenario I Scenario II Scenario III Markets Environ- ment Customers Society Competitors Gap Analysis & Options Development Business Today Internal Analysis - Technologies - Markets - Products - Competencies Technology Delphi Study Continuous Technology Scouting Process Technology Assessment Chances & Risks External Technology Roadmaps Technology Portfolios Technology Strategy Internal Technology Roadmaps x x x xx Project Portfolios Make & Buy Integrated Business & Technology Strategy Development PROCESS

30. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 30 Assessment of current markets, products, competencies and technologies Scenarios for the future of the business context Strategic Gaps and Options for business development.. Integrated Business & Technology Strategy - Typical RESULTS (1/2)

31. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 31 Strategic Technology Roadmaps for promising technology fields A robust and integrated Technology & Business Strategy Continuous Technology Scouting Process and instrumentation Szenario- feld GFK Absatz Werkstoffe Energieverbrauch Globalität Technologieauswahl T1 T2 T3 T4 Kriterien Portfolio Szenario Kosten Summe InnovationConcept / projects / Integrated Business & Technology Strategy - Typical RESULTS (2/2)

32. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 32 Linking Business & Technology Integrated Strategy Development Examples

33. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 33 Pneumatic handling of micro parts New production technologies New services Medical- technology as new market Evaluation criteria - available and necessary competences of the company - Integration of different disciplines - Activities of competitors - Maturity of technology - Substitution of technology - Necessary R&D-Budget - Time to market Market potentialChanging Environment - customers demand lighter and smaller devices - reduced available space for components - weight reduction of parts and modules - convergence of technologies  Micro- and Nanotechnology as future technology in automation (EXAMPLE) Holistic evaluation of innovation opportunities and risks Technology Orientation: Assessing new technologies

34. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 34 Impact of changing environment on pneumatics Direct impact on pneumatics Pneumatics can be used for new applications  micro actuators in medicine technology  micro-fluidic subsystems with pneumatic drives for biotech and gene analysis applications New valves and drives can be developed using new production technologies Indirect impact on pneumatics part sizes in the automobile industry have drastically decreased engineering industry demands small autonomous subsystems tool machines demand higher precision  new handling devices are needed  standard pneumatics can not be used for these applications Investment in Micro-Technologies will:  open great potential new markets  avoid the risk of loosing important markets High market potential Market demands lighter, smaller and integrated devices and parts Trend towards Micro Technologies

35. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 35 medium high low medium high Integrated Technology Strategy in Micro Technologies high market potential early state in technology lifecycle medium to high ‘time to market’ high acceptance of Micro Technology overall enhancement of competitive position Technology attractivity Technology position of the company medium relevant R&D competencies few activities of the competitors high R&D budget available technological leader on the market Strong Investment  Medium  High

36. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 36 Today short-term medium term long-term Day-to- day business Extrapolate via roadmaps Products Technologies Customer requirements Retropolate from Scenarios:  New markets  New customer requirements  New technologies  New business possibilites Automation & control Information & communications Lighting Medical Power Transportation individual society policy economy environment customers technology competition Strategic vision Scenarios = pictures for the Siemens-operation areas Influencing factors Source: Austrian Research Center, 2002 Strategy Orientation: Bridging the gaps between today and the future

37. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 37 Portfolio Management: Market Attractiveness/Probability of Success medium low 507510025 high Probability of Success (%) Project b Project h Project g Project f Project e Project d Project c Project a Potential Profit Project costs 1 Mio $

38. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 38 Portfolio Management: Market/Technology Project Portfolio new for known for new fortotally newknown for totally new Project costs 1 Mio $ Technology Project b Project h Project g Project f Project e Project d Project c Project a Market

39. © Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 39