1. Managing Technology and Innovation
CHAPTER 17
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2. Chapter Introduction Quote
“The imperatives of technology and organization, not the images of ideology, are what determine the shape of economic society.” John Kenneth Galbraith

3. Learning Objectives
1 List the types of processes that spur development of new technologies. 2 Describe how technologies proceed through a life cycle. 3 Discuss ways to manage technology for competitive advantage. 4 Summarize how to assess technology needs. 5 Identify alternative methods of pursuing technological innovation. 6 Define key roles in managing technology. 7 Describe the elements of an innovative organization. 8 List characteristics of successful development projects.

4. Technology and Innovation
The systematic application of scientific knowledge to a new product, process, or service
Innovation
Changes in method or technology
Positive, useful departure from previous ways of doing things
Technology may be defined as the methods, processes, systems, and skills used to transform resources into products. It is not contradictory to now say that we can view technology as the commercialization of science: the systematic application of scientific knowledge to a new product, process, or service. In this sense, technology is embedded in every product, service, and procedure used or produced. When technology is used to create a new product or service, or a new way of working, it is a form of innovation. Innovation differs from invention, or turning new ideas into realities, which may or may not add value to any organization. In the context of management, innovation is any new way of working that creates value. Innovations can be of these three fundamental types, discussed on next slide.

5. Examples of Different Types of Innovation
Product
Innovation
Process
Innovation
Business Model Innovation
4K TV with four times the resolution of HD TV (Vizio)
Virtual personal assistants (Amazon’s Alexa)
3D augmented reality for surgery (Cleveland Clinic)
Blockchain technology for financial transactions (IBM)
AI-powered chatbots service customers (Capital One)
Intrapreurship incubators and labs (Google)
Exhibit 17.1 is recreated on this slide.
Innovation is any new way of working that creates value. Innovations can be of these three fundamental types.
Product innovation is a change in the outputs (goods or services) the organization produces.
Process innovation is a change in the way outputs (goods or services) are produced.

6. Forces Driving Technological Development
1. There must be a need, or demand, for the technology.
2. Meeting the need must be theoretically possible, and the knowledge to do so must be available from basic science
3. We must be able to convert the scientific knowledge into practice in both engineering and economic terms.
4. The funding, skilled labor, time, space, and other resources needed to develop the technology must be available.
Technologies emerge, develop, and are replaced in predictable patterns. Critical forces converge to create new technologies, which then follow well-defined life-cycle patterns. The slide lists the driving forces of technological development.
5. Entrepreneurial initiative is needed to identify and pull all the necessary elements together.

7. Exhibit 17.2 Technology Life Cycle
Technological innovations typically follow a predictable pattern called the technology life cycle, shown in Exhibit 17.2 .  Early progress can be slow as competitors continually experiment with product design and operational characteristics to meet consumer needs. This stage is where the rate of product innovation tends to be highest.
Once early problems are resolved and a dominant design emerges, improvements come more from process innovations to refine the technology. At this point managers gain advantage by finding process efficiencies and lower cost. Life cycles can take decades or even centuries, as with iron- and steel-making technologies.
Jump to Appendix 1 for long description of image.

8. Exhibit 17.3 Diffusion of Technological Innovations
Like the technology life cycle, the adoption of new technology over time follows an S-shaped pattern (top line in Exhibit 17.3). The percentage of people using the technology is small in the beginning but increases dramatically as the technology succeeds and spreads through the population. Eventually the number of users peaks and levels off when the market for the technology is saturated. This pattern, first observed in 1903, has been verified with many new technologies and ideas in a wide variety of industries and settings. The adopters of a new technology fall into five groups (see the bottom line in Exhibit 17.3). Each group presents different challenges and opportunities to managers who want to market a new technology or product innovation.
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9. Diffusion of Technological Innovations
An innovation will spread quickly if it:
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 and tested easily without significant cost or commitment.
Can be observed and copied easily.
This slide explains how the shape of the diffusion curve may be influenced.

10. Social Enterprise Piramal Sarvajal Provides Clean Water via “Water ATMs”
Centralized water treatment plants are expensive and pipelines can bring water.
The Sarvajal solution was to build local water-treatment plants and then distribute the clean water through solar- powered vending machines available 24 hours a day.
Customers use their mobile phones to purchase a specific amount of water and collect it in their own containers for the relatively short trip home.
Piramal Sarvajal is a social enterprise dedicated to leveraging technology to help remedy this urgent health problem. Founded by Anand Shah in 2008, the organization currently serves 320,000 consumers every day via nearly 600 innovative “water ATMs” installed in 14 of India’s 29 states. Centralized water treatment plants are expensive and pipelines can bring water only so far, meaning the country’s more remote populations would still face the problem of carrying heavy containers over long distances to their homes. This time-consuming daily chore often falls to women and girls. The Sarvajal solution was to build local water-treatment plants and then distribute the clean water through solar-powered vending machines available 24 hours a day. Customers use their mobile phones to buy prepaid, refillable cards that allow them to purchase a specific amount of water and collect it in their own containers for the relatively short trip home.

11. Social Enterprise Questions Piramal Sarvajal Provides Clean Water via “Water ATMs”
How would you classify Sarvajal's work? Does it represent a process or product innovation (or both)?
Would you expect the technology that powers water ATMs to follow the typical S-shaped pattern of diffusion? Why or why not?
How would you classify Sarvajal’s water ATMs? Does it represent a process or product innovation (or both)?
Student answers will vary, but process, product or both make sense in this scenario. There is an overall process in water security, starting with the low-cost product that Sarvajal has developed. The product is just one part of an overall process of assisting those in low income areas avoid health issues.
Would you expect the technology that powers water ATMs to follow the typical S-shaped pattern of diffusion? Why or why not?
Student answers will vary. Students may say yes explaining that the technology will expand through India and other non-water secure areas until the needs are met by other means. Students may also say no as there is a limited and defined market, the water ATM may be the dominant technology already and the utility of the product will fall to near zero once large scale water projects are completed.

12. Advantages and Disadvantages of Technology Leadership
First-mover advantage
Little or no competition
Greater efficiency
Higher profit margins
Sustainable advantage
Reputation for innovation
Establishment of entry barriers
Occupation of best market niches
Opportunities to learn
Greater risks
Cost of technology development
Infrastructure costs
Costs of learning and eliminating defects
Possible cannibalization of existing products
Clayton Christensen coined the term disruptive innovation to describe situations in which a simple application swiftly takes over the market.
This slide recreates Exhibit 17.4

13. Technology Followership
The decision on when to adopt new technology also depends on the potential benefits of the new technology, as well as the organization’s technology skills.
Following the technology leader can save development expense.
Not all organizations are equally prepared to be technology leaders, nor would leadership benefit each organization equally. In deciding whether to be a technology leader or follower, managers consider their company’s competitive strategy, the benefits to be gained through the technology, and characteristics of their organization.
Technology followership shares a feature with technology leadership: it too can be used to support both low-cost and differentiation strategies. If the follower learns from the leader’s experience, it can avoid the costs and risks of leadership and thereby establish a low-cost position. Generic drug makers use this strategy. Followership also can support differentiation. By learning from the leader, follower can adapt the products or delivery systems to fit buyers’ needs more closely. 
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14. Assessing Technology Needs
Technology audit
Process of clarifying the key technologies on which an organization depends and identifies which technologies are most important
Categories to measure current technologies:
Emerging technologies
Pacing technologies
Key technologies
Base Technologies
A technology audit helps identify which technologies are most important. The most important thing about a new technology is its competitive value. 
One technique for measuring competitive value uses four categories:
Emerging technologies are still under development and thus are unproved. They may, however, significantly alter the rules of competition in the future.
Pacing technologies have yet to prove their full value but have the potential to alter the rules of competition. 
Key technologies have proved effective, but provide advantage because not everyone uses them.  
Base technologies are commonplace in the industry; everyone in the industry must have them.

15. Assessing External Technological Trends
Benchmarking
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
Places greater emphasis on identifying and monitoring the sources of new technologies for an industry
As with any planning, decisions about technology must balance internal capabilities (strengths and weaknesses) with external opportunities and threats. Managers can use several techniques to understand better how technology is changing within an industry.
Benchmarking
Technology benchmarking varies across industries. Competitors understandably are reluctant to share their secrets, but trading information for benchmarking purposes can prove highly valuable.
Scanning
Whereas benchmarking identifies current practices, scanning uncovers what can be done and what is being developed. In other words, benchmarking examines key and perhaps some pacing technologies, whereas scanning seeks pacing and emerging technologies—those just being introduced and still in development.

16. Framing Decisions about Technological Innovation
Considerations
Examples
Market receptiveness—assess external demand for the technology (short/long run)
Smartphones, MP3s, wearable technology, water conserving washers, HDTVs
Technological feasibility—evaluate technical barriers to progress
Deep-sea oil exploration, physical size of PC microprocessors
Economic viability—examine any cost considerations and forecast profitability
Solar fusion, fuel cells for automobiles, missile defense systems
Competence development—determine whether current capabilities are sufficient
Information technology in healthcare, digital technology in cameras
Organizational suitability—assess the fit with culture and managerial systems
Steel companies focusing on creativity and innovation
Once managers have analyzed their organization’s current technological position, they can make decisions about how to develop or exploit emerging innovations. Decision making must balance the many interrelated factors.
The table on this slide recreates Exhibit 17.5 which summarizes those considerations: market receptiveness, technological feasibility, economic viability, anticipated competence development, and organizational suitability. They all influence managerial decisions about technology innovations. A shortage of just one of them can derail an otherwise promising project.

17. Sourcing and Acquiring New Technologies
Make-or-buy decision
The question an organization asks itself about whether to acquire new technology from an outside source or develop it itself
Sources of technology: Internal development
Purchase
Contracted development
Licensing
Technology trading
Research partnerships and joint ventures
Acquisition of the owner of the technology
The question of how to acquire a new technology is essentially a make-or-buy decision. Should the organization develop the technology itself, or acquire it from an outside source? However, the decision is not as simple as that sounds; many options exist, and each has advantages and disadvantages.
Developing a new technology within the company has the great potential advantage of keeping it proprietary—exclusive to the organization. The disadvantage is that it usually requires staff and funding for an extended period. Even if the development succeeds, considerable time elapses before realizing the benefits. Managers must carefully weigh the potential benefits of proprietary technology against the cost of developing it. 

18. Exhibit 17.6 Technology Acquisition Options
If a company lacks a needed technology but wishes to acquire proprietary ownership of it, one option is to purchase the company that owns it. This transaction can take a number of forms, from outright purchase of the entire company to a minority interest sufficient to gain access to the technology.
Choosing among these alternatives becomes easier by asking these basic questions:
Is it important (and possible) in terms of competitive advantage for the technology to remain proprietary?
Are the time, skills, and resources for internal development available?
Is the technology readily available outside the company?
As Exhibit 17.6 illustrates, the answers to these questions guide the manager to the most appropriate technology acquisition options.
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19. Technology and Managerial Roles
Chief information officer (CIO)
Executive in charge of information technology strategy and development
Coordinates the technological efforts of the various business units
Identifies ways that technology can support the company’s strategy
Supervises new-technology development
Within organizations, technology traditionally has been the responsibility of vice presidents for research and development. These executives are responsible for corporate and divisional R&D laboratories; typically their jobs have a functional orientation. But increasingly executives with technology responsibilities hold the prestigious position of chief information officer (CIO), often called the chief technology officer (CTO). The CIO is a senior position at the corporate level with broad, integrative responsibilities. CIOs help ensure adequate cybersecurity measures are in place; coordinate the technological efforts of the various business units; identify ways that technology can support the company’s strategy; supervise new technology development; and assess the technological implications of major strategic initiatives such as acquisitions, new ventures, and strategic alliances. They also lead their organization’s information technology (IT) group.

20. Key Technology Roles Technical Innovator
A person who develops a new technology or has the key skills to install and operate the technology
Product champion
A person who promotes a new technology throughout the organization in an effort to obtain acceptance of and support for it
In addition to the entrepreneurs who invent new products or find new ways to deliver old products, specific key technology roles are the technical innovator, product champion, and executive champion. Technical innovator s develop the new technology or have the skills needed to install and operate it. The product champion—sometimes at some professional risk—promotes the idea searching for support and acceptance. The champion can be a high-level manager but often is not. Sponsorship comes from the executive champion, who has the status, authority, and financial resources to support the project and protect the product champion. Without this support and protection, the product champion, and thus the new technology, could not succeed. 
Executive champion
An executive who supports a new technology and protects the product champion of the innovation

21. Exhibit 17.7 Requirements for Innovation
Successful innovation is much more than a great idea. A study by the Boston Consulting Group found that lack of good ideas is hardly ever the obstacle to profitable innovation. Far more often, ideas fail to generate financial returns because the organization isn’t set up to innovate. One challenge is finding new innovations from external sources that can bring lasting value. Another is overcoming internal resistance (a "not invented here" mindset) and fear of change (discussed in the final chapter) in order to apply the new technologies to complement or enhance internal process. In contrast, Exhibit 17.7 shows that innovation has a chance to flourish when positive values are in place, when the organization integrates internal and external knowledge, and when people are encouraged to own and solve problems and to experiment continuously.
Jump to Appendix 4 for long description of image.
SOURCE: Barton, Dorothy Leonard, “The Factory as Learning Laboratory,” Sloan Management Review, 1992, p. 34.

22. Organizing for Innovation
Unleashing creativity involves encouraging creativity and celebrating failure.
Bureaucracy busting is necessary because bureaucracy is the enemy of innovation.
Celebrating well-intended efforts that flop can be vital to the innovation process. Failure, managed properly, spurs learning, growth, and future successes. Innovative companies have many balls in the air at all times, with many people trying many new ideas.
Bureaucracy is an enemy of innovation. Although bureaucracy is useful to maintain orderliness and gain efficiencies, it also can work directly against innovation. Developing radically different technologies requires a fluid and flexible (organic) structure that does not restrict thought and action.

23. Elements Essential to Innovation
Having a purpose that extends beyond being profitable.
Experimenting with new ideas and drawing on data to inform decisions
Removing obstacles throughout the company so innovation can occur.
Keeping up with changing customer expectations and new technologies.
After studying innovation in over 100 companies, global design firm Ideo concluded that the key contributor to innovation is an ability to adapt and respond to change. Ideo sees six elements as most essential, as shown in Exhibit This slide recreate Exhibit 17.8.
Collaborating across boundaries and see challenges from multiple lenses.
Implementing requires alignment of vision and implementation.
SOURCE: Schwab, K., “Ideo Studied Innovation in 100+ Companies-Here's What It Found,” Fast Codesign, March 3, 2017,

24. Technology and Human Resources
Development project
A focused organizational effort to create a new product or process via technological advances
Sociotechnical systems
An 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
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.
Development projects typically feature a special cross-functional team working together on an overall concept or idea.
Adopting a new technology may require changes in job design. Often job redesign forces people to fit into the demands of the technology to maximize operational efficiency. The sociotechnical systems approach to work redesign specifically addresses this problem. This approach redesigns tasks to jointly optimize  the social and technical efficiency of work.

25. Management in Action Elon Musk’s Space-X is Headed to Mars
SpaceX, a private company, currently carries people and supplies to the International Space Station and launches satellites into Earth’s orbit.
The SpaceX mission is to allow humans to live on other planets.
SpaceX has won NASA’s applause and praise for undertaking the $10 billion effort to support “a sustainable human presence on Mars.”
Elon Musk founded SpaceX to design, manufacture, and launch rockets and spacecraft. Its mission is simple: to allow humans to live on other planets. Despite some initial failures, SpaceX has won NASA’s applause and praise for undertaking the $10 billion effort to support “a sustainable human presence on Mars.” SpaceX, a private company, currently carries people and supplies to the International Space Station and launches satellites into Earth’s orbit, earning revenue from NASA that Musk hopes will help pay for the Mars missions. The U.S. Air Force has also contributed about $34 million to the development of the rocket.

26. Management in ActionQuestions Elon Musk’s Space-X Is Headed to Mars
Is SpaceX a prospector, a defender, or an analyzer firm? Why?
How well is Elon Musk managing the technological and economic viability of SpaceX’s Mars mission?
Is SpaceX a prospector, a defender, or an analyzer firm? Why?
SpaceX’s focus on innovation and developing of a market that currently does not exist will lead most students to argue that it is a prospector. Some students may argue for analyzer as Musk is looking for opportunities to exploit its ability his organization’s develop and deploy technology.
How well is Elon Musk managing the technological and economic viability of SpaceX’s Mars mission?
While answers will vary, the use of government-funded space station support missions to develop technology and fund further research are arguments for SpaceX’s economic viability.

27. In Review
1 List the types of processes that spur development of new technologies. 2 Describe how technologies proceed through a life cycle. 3 Discuss ways to manage technology for competitive advantage. 4 Summarize how to assess technology needs. 5 Identify alternative methods of pursuing technological innovation. 6 Define key roles in managing technology. 7 Describe the elements of an innovative organization. 8 List characteristics of successful development projects.