TECHNOLOGY MANAGEMENT Krsto Pandza - Technology Management TECHNOLOGY MANAGEMENT Strategic Perspectives on Technology Innovation

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. Krsto Pandza - Technology Management

The structure for the week 1 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. Krsto Pandza - Technology Management

Concepts and constructs Novel ways of creating and adding value Artefacts and knowledge by which human capacity is extended Innovation Major intended and emergent initiatives involving utilization of resources to enhance the performance V A L U E Strategy Technology Entrepreneurship How opportunities to create value are identified, evaluated and exploited Krsto Pandza - Technology Management

TECHNOLOGY DYNAMICS AND COMPETITIVE ADVANTAGE Krsto Pandza - Technology Management TECHNOLOGY DYNAMICS AND COMPETITIVE ADVANTAGE Day 1

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. 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 Krsto Pandza - Technology Management

Defining technology 2 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 Krsto Pandza - Technology Management

Defining technology management 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. Krsto Pandza - Technology Management

Defining technology strategy 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 Krsto Pandza - Technology Management

Defining innovation 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. Krsto Pandza - Technology Management

Defining strategy (SMJ, 2007, Vol. 28, pp. 935 – 955) ….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 Krsto Pandza - Technology Management

Defining resources and capabilities …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 firm’s ability to integrate, build, and reconfigure internal resources and capabilities to address rapidly changing environment. Krsto Pandza - Technology Management

Creative destruction and economic growth - 1 Competitive advantage arises from a firm’s 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. Krsto Pandza - Technology Management

Creative destruction and economic growth - 2 Creative destruction implies that the isolating mechanisms that protect a firm’s 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 D’Aveni, 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. Krsto Pandza - Technology Management

Dimensions of innovations System level Steam power, ICT “revolution”, Bio-technology New generations e.g. MP3 Vs CD New versions of motor car, aeroplane, TV Advanced materials to improve component performance New component for existing systems Improvements to component Component level Incremental (doing what we do better) (new to the enterprise) Radical (new to the world) 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 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 Krsto Pandza - Technology Management

Utterbank-Abernathy Dynamic Model of Technology Innovation Incremental innovation Process innovation Economy of scope Specific phase Learning standardisation dominat design Transitional phase Fluid phase Technological and market uncertainties custom design experiments in the market niches no process innovation Krsto Pandza - Technology Management

Handerson and Clark model of innovation Core concepts Reinforced Overturned Incremental innovations Modular Innovation Unchanged Linkages between core concepts and components Incremantal innovation: minor changes in exsisting product, reinforce the dominat design; ESTABLISHED COMPANIES Radical innovations: different set of engineering and scientific knowledge Modular: analogen telefon in digitalen Architectual innovation: portable DVD player. Architectural Innovation Radical Innovation Changed 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 Krsto Pandza - Technology Management

Moore’s law - trajectory Krsto Pandza - Technology Management

Technology roadmap; High-k 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. 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. Krsto Pandza - Technology Management

Disruptive Technologies - Christensen Measure of key performance attribute A B C Company improvement trajectory D Costumer demand trajectory Time 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 Krsto Pandza - Technology Management

Disruptive innovation in health Specialist care performance Primary care/ Nurse practitionrs Self care – pharmacy, diagnosis and treatment time Krsto Pandza - Technology Management

Costs in health Krsto Pandza - Technology Management

Innovation Krsto Pandza - Technology Management

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, Dell’s 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; Krsto Pandza - Technology Management

Disruptive Technologies - Christensen Application in market B Application in market A Disruptive technology: new market niche small market small companies Performance as defined in application A Performance as defined in application B Technology 2 Technology 1 Time or engineering efforts Krsto Pandza - Technology Management

Disruptive Technologies - Christensen Application in market B Niche, small market Application in market A Disruptive technology takes over the larger established market New entrants dominates Performance as defined in application A Performance as defined in application B Technology 2 Old company playing catch-up Technology 1 Time or engineering efforts Krsto Pandza - Technology Management

Science-technology cycle Krsto Pandza - Technology Management

Cumulative adoption patterns (Examples for some media products) Krsto Pandza - Technology Management

Cumulative adoption patterns (Examples for Several Durables) Krsto Pandza - Technology Management

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, 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. 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. Krsto Pandza - Technology Management

STRATEGIC ANALYSIS OF TECHNOLOGY Krsto Pandza - Technology Management STRATEGIC ANALYSIS OF TECHNOLOGY Day 1

Learning objectives Understand appropriateness of tools for technology forecasting. Applying: Scenario planning Technology roadmapping Designing a technology roadmap. Krsto Pandza - Technology Management

Amara’s law in technology forecasting We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. Under predict change Over predict change Krsto Pandza - Technology Management

Technology forecasting 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 today’s 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. Krsto Pandza - Technology Management

Technology forecasting 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) Krsto Pandza - Technology Management

Nanomaterial forecasts SALES $ billions $3,000 $2,000 $1,000 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Nanomaterials Nanointermediates Nano-enabled products Source Lux research Krsto Pandza - Technology Management

Technology foresight on energy-related applications in nanoscience Krsto Pandza - Technology Management

PESTEL Environmental: Economic: Legal: Environmental protection laws Waste disposal Energy consumption Legal: Competition law Employment law Health and safety Product safety 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 Political: Government stability Taxation policy Foreign trade regulations Social welfare policies Krsto Pandza - Technology Management

PESTEL framework Trends Impact Uncertainty 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? 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 Krsto Pandza - Technology Management

Innovations in 20th 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 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? Krsto Pandza - Technology Management

Genomics – the realisation? Krsto Pandza - Technology Management Diagnostics

Drug Delivery Krsto Pandza - Technology Management “Nano Injector with Red Cells”, ©Copyright 2002 Coneyl Jay. Krsto Pandza - Technology Management

PESTEL example Environmental: Economic: Legal: 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 Legal: Legal implications of genomics Social: Aging population Patient and physician expectations Ethical implication Lifestyle changes e-pharmacies Technology: Genomics Biotechnology Supply chain technology ICT nanotechnology Political: Reduced value of IP in medicine (public ownership) Role of non-for-profit programmes Social welfare policies Krsto Pandza - Technology Management

Analysis of PASTLE framework Factor Importance Uncertainty Ageing Population Medium – increasing health burden None – well documented Increasing consumer and Health Awareness Medium – in terms of customer expectations Low – Internet led Increased access to information Medium Low – development in this technology well trended Smart Tags and Adv SCM High Low Adv materials Yes – new products Genomics and diagnostics MEMS, nanotech New competitors Industry consolidation Green chemistry and biotech Funding and pricing Access to medicines 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 Krsto Pandza - Technology Management

Scenario planning 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 organization’s business model and its future environment, overcoming corporate blind-spots, and enhancing strategic flexibility Krsto Pandza - Technology Management

Developing Scenarios 1. 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 Scenario C Scenario D Schwartz, 1991 Krsto Pandza - Technology Management

Key steps in scenario planning process 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 Krsto Pandza - Technology Management

Key steps in scenario planning process High Low Potential impact Uncertainty Krsto Pandza - Technology Management

Key steps in scenario planning process 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 Krsto Pandza - Technology Management

Select the scenario logic – a case from FutMan project Concerted Focus Europe Sustainable Times Integration of SD relevant policies Individual Collective Public values and consumer attitudes Global Economy Local Standards Loose Krsto Pandza - Technology Management

Futures of the scenarios Krsto Pandza - Technology Management

Scenario logic – a case pharmaceutical industry Health funding significant Good old days My Health.com Technology adoption high Technology adoption limited Funding and pricing Technology adoption Health.for. all Health.net Health funding limited Krsto Pandza - Technology Management

The resulting four scenarios 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. Krsto Pandza - Technology Management

Scenario 1; “my.Healthcare.com” 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. Krsto Pandza - Technology Management

Technology roadmapping 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. Krsto Pandza - Technology Management

The roadmap architecture and process 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. Krsto Pandza - Technology Management

Generic roadmap architecture Time scale Business environment Political, economical, social, technological, legal, environment Business strategy Vision, aspirations, objectives, performance Products Products, product generations Technology competency, R&D capability, operational capabilities, new product development, supply chain Capability/ technology Resources Financial, human Present 5 year 10 year 15 year Krsto Pandza - Technology Management

Health Care Trends – to 2020? Business environment analysed Krsto Pandza - Technology Management

Supply Chain and Processing Capabilities to 2020 Krsto Pandza - Technology Management

Science driven map for cell on a chip Time scale Societal embedding Regulation, new roles and responsibilities, reliability Point of care diagnostic products, markets Application area Integrated platform Portable and with disposable chips, monitoring and diagnosing Multianalyte research tool, demonstration model, detection possibilities Experimental platform conductivity detection Microchip fabrication Scientific research Present 5 year 10 year 15 year Krsto Pandza - Technology Management

Specific technical challenges in the biochip sector; science-driven roadmaps Krsto Pandza - Technology Management

Technology roadmap; High-k metal product roadmap Krsto Pandza - Technology Management

The Future….? Clayton Christensen Peter Schwartz Robert Phaal et al Krsto Pandza - Technology Management

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

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

Project ManVis – Delphi study Krsto Pandza - Technology Management

Structure of the Delphi project Krsto Pandza - Technology Management

ManVis goals Krsto Pandza - Technology Management

Partners Krsto Pandza - Technology Management

Example of the survey Krsto Pandza - Technology Management

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

Bass Model Limitations Cannot use to estimate diffusion in the first year of a product’s 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