Managing Technology and Innovation 17 Managing Technology and Innovation McGraw-Hill/Irwin Management, 7/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives After Studying Chapter 17, You will know The processes involved in the development of new technologies How technologies proceed through a life cycle How to manage technology for competitive advantage How to assess technology needs The key factors to consider when making decisions about technological innovation The roles different people play in managing technology How to develop an innovative organization The key characteristics of successful development projects

Technology and Innovation Technology is the methods, processes, systems, and skills used to transform resources into products Innovation is a change in method or technology – a positive, useful departure from previous ways of doing things Process innovations are changes that affect the way outputs are produced Product innovations are changes n the actual outputs themselves

Technology and Innovation Managers must understand the forces driving technological developments so then can anticipate, monitor, and manage technologies more effectively There must be a need, or demand for the technology Meeting the need must be theoretically possible, and the knowledge to do so must be available from basic science We must be able to convert the scientific knowledge into practice in both engineering and economic terms The funding, skilled labor, time, space, and other resources needed to develop the technology must be available Entrepreneurial initiative is needed to identify and pull all the necessary elements together

The Technology Life Cycle The technology life cycle is a predictable pattern followed by a technological innovation, from its inception and development to market saturation and replacement

Diffusion of Technological Innovations The percentage of people using the technology is small in the beginning but increases dramatically as the technology succeeds and spreads through the population Adopters of a new technology fall into one of five groups Innovators are the first group representing approximately 2.5% of adopters Early adopters represent 13.5 % of the adopters Early majority represent 34% of the adopters Late majority represent 34% of the adopters Laggards are the final group representing 16% of the adopters

Diffusion of Technological Innovations

Diffusion of Technological Innovations The speed with which an innovation spreads depends largely on five attributes Has a great advantage over its predecessor Is compatible with existing systems, procedures, infrastructures, and ways of thinking Has less rather than greater complexity Can be tried ore tested easily without significant cost or commitment Can be observed and copied easily

Technological Innovation in a Competitive Environment Decisions about technology and innovation are very strategic and managers need to approach them in a systematic way. Two generic strategies a company can use include Low-cost leadership can drive innovation as companies try to gain cost advantages through pioneering lower-cost product designs Differentiation strategy can drive innovation as companies seek the advantages that come from having a unique product or service that customers pay a premium price for Discussions about technology life cycles and diffusion patterns may imply that technological change occurs naturally or automatically. Just the opposite; change is neither easy nor natural in organizations. In some cases, a new technology can completely change the rules of competition within an industry. Leading companies that respond ineffectively to technological opportunities can falter while new companies emerge as the dominant competitors. For example, Bill Gates’s shrewd decision to make the details of Microsoft’s operating system widely available let software writers easily develop products for it, helping Microsoft achieve its dominant position today. But industries seldom are transformed overnight. Typically, signals of a new technology’s impact are visible well in advance, leaving time for companies and people to respond. For example, almost any competitor in the telecommunications industry fully understands the potential value of cellular technology. Often the key issue is not whether to adopt a new technology but when to adopt it and how to integrate the change with the organization’s operating practices and strategies.

Technology Leadership The adage “timing is everything” is applied to many things, ranging from financial investments to telling jokes. It also applies to the development and exploitation of new technologies. Industry leaders such as Xerox, 3M, Hewlett-Packard, and Merck built and now maintain their competitive positions through early development and application of new technologies. However, technology leadership imposes costs and risks, as this table shows, and it is not the best approach for every organization.

Technology Followership Following the technology leader can support both low-cost and differentiation strategies The follower learns from the leader’s experience The follower can avoid the costs and risks of technology leadership The follower can adapt the products or delivery systems to fit buyers’ needs more closely

Technology Followership A manager’s decision on when to adopt new technology is also dependent on the potential benefits of the new technology, as well as the organization’s technology skills. As discussed earlier, technologies do not emerge in their final state; rather, they exhibit ongoing development, as seen in this figure. Such development eventually makes the technology easier to use and more adaptable to various strategies. For example, the development of high-bandwidth communication networks has enabled many more companies to work with suppliers located abroad. At the same time, complementary products and technologies may be developed and introduced that make the main technology more useful. For example, the combination of the personal computer with disk drives, printers, e-mail, and other software turned it into an essential business tool. These complementary products and technologies combine with the gradual diffusion of the technology to form a shifting competitive impact from the technology. The appropriate time for an organization to adopt technological innovations is when the costs and risks of switching to the technology are outweighed by the benefits. This point will be different for each organization, with some organizations benefiting from a leadership, early adopter role, and others from a followership role, depending on each organization’s characteristics and strategies.

Assessing Technology Needs In today’s increasingly competitive environment failure to correctly assess the technology needs of the organization can fundamentally impair the organization’s effectiveness Assessing the technology needs of the organization involves: measuring current technologies Measuring external trends affecting the industry

Measuring Current Technologies A technology audit helps clarify the key technologies on which an organization depends One technique for measuring competitive value categorizes technologies as: Emerging technologies are still under development and thus are unproved Pacing technologies have yet to prove their full value but have the potential to alter the rules of competition by providing significant advantage Key technologies have proved effective, but they also provide a strategic advantage Base technologies are those that are common place in the industry

Assessing External Technological Trends There are several techniques that managers use to better understand how technology is changing within an industry Benchmarking is the process of comparing the organization’s practices and technologies with those of other companies Scanning focuses on what can be done and what is being developed, placing a great emphasis on identifying and monitoring the sources of new technologies for an industry

Key Factors to Consider in Technology Decisions The most effective approach to technology depends not only on the technology’s potential to support the organization’s strategic needs but also on the organization’s skills and capabilities to exploit the technology successfully The organization’s competitive strategy, the technical abilities of its employees to deal with the new technology, the fit of the technology with the company’s operations, and the company’s ability to deal with the risks and ambiguities of adopting a new technology all must be timed to coincide with the dynamic forces of a developing technology

Key Factors to Consider in Technology Decisions Anticipated market receptiveness is one of the first considerations that management should make Is there an immediate application that demonstrates the value of the new technology Is there a set of applications that show the technology is the proven means to satisfy a market need Managers must also consider the feasibility of technological innovations

Key Factors to Consider in Technology Decisions Closely related to technological feasibility is economic viability Managers must consider whether there is a good financial incentive in pursuing a technology What is the anticipated competency development

Key Factors to Consider in Technology Decisions Is the organization stable enough for the new technology Prospector firms develop and exploit technological expertise are usually early adopters Defender firms tend to deepen their capability base thorough complementary technologies that extend rather than replace their current ones Analyzer firms are a hybrid that needs to stay technologically competitive but tends to allow others to demonstrate solid demand in new arenas before it responds

Sourcing and Acquiring New Technologies The primary question of how to acquire new technology is a whether the organization should make or buy the technology This is known as the make or buy decision Some of the more common options for technological development are Internal development Purchase Contracted development Licensing Technology trading Research partnerships Acquisitions

Sourcing and Acquiring New Technologies Choosing among the various alternatives can be simplified by asking the following basic questions: 1. Is it important (and possible) in terms of competitive advantage that the technology remain proprietary? 2. Are the time, skills, and resources for internal development available? 3. Is the technology readily available outside the company? This Figure illustrates, the answers to these questions guide the manager to the most appropriate technology acquisition option.

Technology and Managerial Roles Technology has traditionally been the responsibility of vice presidents for research and development Today companies are creating the position of Chief Technology Officer (CTO) Also known as a CIO Senior position at the corporate level with broad, integrative responsibilities Responsibilities include coordinating the technological efforts of various business units; supervising new-technology development; assessing the technological implications of major strategic initiatives

Technology and Managerial Roles Key roles in acquiring and developing new technologies are: The technical innovator is a person who develops a new technology or has the key skills to install and operate the technology The product champion is a person who promotes a new technology throughout the organization in an effort to obtain acceptance of and support for it The executive champion is an executive who supports a new technology and protects the product champion of the innovation

Organizing for Innovation Create an organizational culture that encourages innovation A culture that permits failure is crucial for fostering the creative thinking and risk taking required for innovation Bureaucracy is an enemy of innovation Bureaucracy is useful to maintain orderliness and gain efficiencies Developing radically different technologies requires a more fluid and flexible structure that does not restrict thought and action In Chapter 6 we introduced the concept of “learning organizations.” These are companies that excel at solving problems, seeking and finding new approaches, and sharing new knowledge with all the members of the organization. Such learning organizations are particularly well-positioned to develop useful innovations. The innovations may involve exploiting existing capabilities—to improve production speed or product quality, for example. Or the innovation may involve exploring new knowledge—seeking to develop new products or services. Both innovation processes are necessary. Innovative learning organizations to use their existing strengths to improve their operations, and improve their bottom lines that way. But they also learn to unleash people’s creative energies and capabilities to develop new products and processes that will ensure their long-term competitiveness.

Organizing for Innovation A powerful tool for managing technology and innovations is the development project A development project is a focused organizational effort to create a new product or process via technological advances Adopting a new technology typically requires changes in the way jobs are designed The sociotechnical systems approach to work redesign will redesign tasks in a manner that jointly optimizes the social and technical efficiency of work

Looking Ahead After Studying Chapter 18, You will know What it takes to be world class How to manage change effectively How to create a successful future