Competitive Technology and Business Strategy 1.Models: technology-push, market- pull and...
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Transcript of Competitive Technology and Business Strategy 1.Models: technology-push, market- pull and...
Competitive Technology and Business Strategy
1. Models: technology-push, market-pull and strategy-pull
2. Models: base/key/emerging technology
3. Models: stable, flexible and turbulent tehcnology
Technology and Business StrategyTechnology and Business Strategy
1. Technology strategy is harmonized with business and corporate strategy;
2. Tehnology strategy defines the continuous process of generating, evaluating and assessment, selection and choice of technological options;
3. It identifies the Strategic Technological Area of a firm based on external and internal factors analysis
Strategic profiles of firms:1. Firms engaged in strategic planning. The ultimate goal is the development of competitive strengths within a given corporate business portfolio.2. Firms with strong financial control. The ultimate goal is to achieve highest possible results in terms of financial indicators.3. Firms with clear strategic control. A combination of competitive and financial ambitions meaning investments in strategically sound and progitable businesses.
Factors influencing Business Strategy
Consumer groups
Consumer needs
Alternative technologies
Two general business/technology strategies:1. Reactive strategy: when firms respond to consumer needs and actions of competitors, and
2. Proactive strategy: when firms enforce change in the environment by anticipating the needs of consumers.
There are many subdivisions and more detailed presentations of strategy.
Reactive strategy Strategic options:
Responsive
Imitative/Fast follower
Late entrant
Defensive
(1)Responsive strategy is oriented at quick response of a firm to the explicite needs of consumers by products/services provided. Involves focus on product/service innovation.
(2) Imitative strategy/Fast follower is oriented at quick response to the action of competitors who have introduced newproduct/service by copying, imitating its output.
(3) Late entrant is a strategy base on imitation with effort to further develop/innovate of the competitors` products and services.
(4) Defensive strategy is again an answer to the action of competitors with efforts focused at innovating own products/service as response to their new output.
Proactive strategyStrategic options:
R&D based
Entrepreneurial strategy
Purchasing strategy
Marketing strategy
(1) R&D based (Internal development) oriented at intramural R&D with innovation offensively introduced with pioneer strategy in market penetration.(2) Entrepreneurial strategy oriented at introducing innovation with high risk, new on the market innovation but not necessarily new to the world.(3) Purchasing strategy, focused at buying new technology product/service and process already developed involving smaller risk, its a pure strategfy of horizontal technology transfer with different options (equipment purchasing, licencing, joint ventures, etc).(4) Marketing strategy oriented at high involvement of strategic marketing initiatives at aggresive product/service innovation.
Science and
technology base
Needs of
the marketdevelopments
Technological
Creation of new knowledge
dominated by universities and
large science-based organisations
Technology development-
dominated by organisationsthe consumption of products
Consumers express their
needs and wants through
Conceptual framework
Tehnological strategy - models
1. Technology-push
2. Market pull
3. Strategy pull
1. Technology push based on classical approaches
postulating the primary role of R&D in the process of technological innovation in firms.
R&D Production Marketing Market need
2. Market Pull developed with the rising sense of the significance of customers and market needs
R&D ProductionMarketingMarket need
Is it necessary to question market need at the end of the cycle?Why yes or why no?
3. Strategy Pull focused at strategy and strategic management mission, goals
R&D Production Marketing Market needStrategy
Strategy (corporate, business, technology) derived from strategic analysis (external OT and internal SW)
Technology strategy – options:
1. Exploitation of existing technology – no change in technology;
2. Innovation of existing technology (internal/ext. sources - incremental innovation)
3. Technology substitution (external/internal sources);
4. Radically new technology and competence (radical innovation – external and/or internal sources).
Incremental (evolutive) vs. Radical (disruptive) Innovation
Why disruptive innovations are hard to market?
• Fear, uncertainty & doubt (FUD)• No established solutions• No existing infrastructure to support• High risk buying decision
Source: G. Moore, 1993
Technology adoption life cycle
Source: G. Moore, 1993
High Tech Marketing model
Source: G. Moore, 1993
3 phases of High Tech Marketing
Source: G. Moore, 1993
User needs understanding…
• “There is no reason anyone would want a computer in their home.”
Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977
• This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.
Western Union internal memo, 1876.
Commercializing technology & user needs (1)
Alignment withAlignment withcurrent marketcurrent market
MarketMarketcreationcreation
Source: D. Leonard-Barton, 1994
Need know:
improvedsolution
Need know:new
solution
Need anticipate
d:new
solution
Need uncertain:solution evolves
Commercializing technology & user needs (2)
Alignment withAlignment withcurrent marketcurrent market
MarketMarketcreationcreation
Source: D. Leonard-Barton, 1994
Uncertainty & RiskLow High
Difficulty of communicating product conceptLow High
Commercializing technology & user needs (3)
Alignment withAlignment withcurrent marketcurrent market
MarketMarketcreationcreation
Source: D. Leonard-Barton, 1994
Surveys,
Focus groups
Living withcustomers
Users asdevelopers,Customer
s as partners
Scenarios of future
Traditional Market
Research
Marketintuitio
n
Leadusers
IndustryExperts,Trend
exploration
Emphatic design
Great ideas vs great products (1)
Source: Fortune, 2000
Great ideas vs great products
(2)
Source: Fortune, 2000
Complementary Innovation and Assets
Complementary assets• Innovation consists of some technical knowledge• Knowledge & know how are partly codified, partly
tacit• Commercialization of innovation requires the know-
how to be utilized in conjunction with other capabilities or assets:– new drug: dissemination of information to doctors,
pharmacy…– new computer hardware – operating systems &
application software– distribution, service…
Source: Teece, 1986
Complementary assets
Source: Teece, 1986
Standards
• Networked environment– products made by various companies must be
compatible to be of value to the customers• Trains• Faxes• Surfing on the Internet
• Supporting a standard with a new product may be risky…– all based on wide acceptance of the standard– may wait to reduce risk fast-follower strategy
Standards and Innovation Commercialization
Standards• Diffusion of a product designed to a particular
standard is often contingent upon the availability of complementary products – VHS vs Beta
• Example: 56K modems– different standards first adopted by Rockwell & 3 Com– Wait & see attitudes of software suppliers, suppliers of
complementary goods, modems purchasers sales suffered
– more collaborative attitude later, common standards
Standards
• In some industries, different standards can co-exist and share the market:– TV: NTSC, PAL, SECAM– Electrical standards: North America; !10 V, Europe:
220 V– Railroad gauges in Europe– Digital wireless in USA: TDMA, CDMA & GSM
• Implications: product development & manufacturing more complex and costly – lack of economies of scale
Standards & High-tech markets (1)
• Sharing of the marketplace is NOT the norm for standards in those markets
• Competition between standards will often lead to a situation where the winner “takes all”– Wintel vs Mac
• “Network effects” & positive feedback for high-tech products
Standards & High-tech markets (2)
• Example: fax machine– Valueless by itself– 2 fax machines communicating with each other have
value– Value increases according to Metcalfe’s law:
• Value of the network grows at the square of the number of participants in the network
• As use of a particular standard increases, products based on that standard can communicate with more products based on the same standard…
Standard wars
• Internet browsers:– Microsoft & Netscape
• Audio & Video software on Internet:– Microsoft & RealNetworks
• Rewritable DVD:– DVD-R: 230 companies including Apple, AOL/Time
Warner, Hitachi, LG, Matsushita, Pioneer…– DVD+R: Dell, HP, MCC/Verbatim, Philips,
Ricoh, Sony, Thomson & Yamaha
Types of standard wars
Revolution Revolution versusversus
EvolutionEvolution
Rival technologyRival technology
Compatible Incompatible
Com
pati
ble
Inco
mp
ati
ble
RivalRivalRevolutionsRevolutions
RivalRivalEvolutionsEvolutions
Evolution Evolution versusversus
RevolutionRevolution
You
r te
ch
nolo
gy
You
r te
ch
nolo
gy
Source: Shapiro, Varian, CMR 1999
De facto standard advantage (1)
• The company who has control on the de facto standard is generally pushed into a dominant competitive advantage, i.e.“gorilla”
• Competitive advantage is expressed in 4 dimensions:– getting more customers
– keeping more customers
– driving costs down
– keeping profits up
De facto standard advantage (2)
• Getting more customers– top company attracts most attention: better press
coverage, better shelf space, more interest form customers
– attracts new customers
– has ability to sell more than competitors reinforces its position
– Ex: PC software developers have to be Microsoft Windows compatible
De facto standard advantage (3)
• Keeping more customers– Barriers to entry are high - competitors need to match
offer from “gorilla”
– Switching costs – high practical & financial costs for customers to switch to another product
– driving costs down
– keeping profits up
De facto standard advantage (4)
• Driving costs down– Gorilla has often advantages linked to economies of
scale
– Can also control the element in the Value Chain that adds most value with low cost – core competency
De facto standard advantage (5)
• Keeping profits up– Gorilla’s products often viewed as bringing more value
as a whole (products + services fulfilling customer needs). Companies supplying complementary products put first their resources behind a product complementing the market leader
– More and better products come out in support of the gorilla’s offer…
Standards in the computer industry 1999-2000
Date Participants ObjectiveJan 1999 Adaptec, Compaq, HP,
IBMTo create a new input/output standard
April 1999 Dictaphone, eDigital, IBM, Intel, Norcom Electronics, Olympus & Philips
To develop a standard for the way voice commands and information are transmitted & received by mobile devices
Oct 1999 Compaq, HP, IBM, Intel & Microsoft
To develop security standards for hardware & software used in e-commerce
Feb 2000 3Com, Cisco, Extreme Networks, Intel, Nortel, Sun, World Wide Packets
To develop standards & technology for 10-gigabit Ethernet networks
Source: Technoweb
Standards – key things to remember
• Control over installed base of users
• Intellectual property rights
• Ability to innovate
• First-mover advantage
• Manufacturing capabilities
• Strengths in complements
• Brand name & reputation
Technology Portfolio
Technology Portfolio
• The list of technologies that are available in the firm
• Not necessarily the technology that are in exploitation
• Technologies that the firm are entitled to use (developed within the firm or acquired/purchased by different modes of horizontal technology transfer)
• Technology portfolio management – at the core of corporate strategy (multi/single-business; focused/diversified-related/unrelated)
STRATEGIC TECHNOLOGY DIMENSIONS: (Arthur D. Little model):
1) Base technology – mostly present in the core operations of the firm, generating the biggest part of revenue, but competitive capacity declining, not decisive;
2) Key technology- strongest competitive force, rising percent in revenue, perspective of becoming base;
3) Emerging technology- tecnology in early stages, marginally contributing to revenue, still being developed with the prospect of becoming key.
STRATEGIC TECHNOLOGY DIMENSIONS: (Arthur D. Little model):
1) Base technology – mostly present in the core operations of the firm, generating the biggest part of revenue, but competitive capacity declining, not decisive;
2) Key technology- strongest competitive force, rising percent in revenue, perspective of becoming base;
3) Emerging technology- tecnology in early stages, marginally contributing to revenue, still being developed with the prospect of becoming key.
Comparison of Technology Porfolio of two firms in relation to Technology Life Cycle (TLC)
Comparison of Technology Porfolio of two firms in relation to Technology Life Cycle (TLC)
Sales
Time
Firm A
Firm B
Technology portfolioTechnology portfolio
Competitive potential
Degreeof competence
Significant
Medium
Weak
Low Medium High
Technology portfolio structure
It is necessary to ,,nurture”, maintain and enhance the tehnology portfolio, similar to gardens : Old trees are to be cut and the garden should be kept with gardening, watering, and new trees to be planted. For firms it is the necessity to reconsider the content of the technology portfolio in relation to the basic business character of base, key and emerging technologies.
It is necessary to ,,nurture”, maintain and enhance the tehnology portfolio, similar to gardens : Old trees are to be cut and the garden should be kept with gardening, watering, and new trees to be planted. For firms it is the necessity to reconsider the content of the technology portfolio in relation to the basic business character of base, key and emerging technologies.
Technology portfolio structure
• It is necessary to ,,nurture”, maintain and enhance the tehnology portfolio, similar to gardens :
• Old trees are to be cut and the garden should be kept growing with gardening, watering, and new trees to be planted and old trees to be uprooted.
• For firms it is the necessity to reconsider the content of the technology portfolio in relation to the basic business character of base, key and emerging technologies.
Technology and Market Portfolio Analysis
A B
C
D
B
A
D C
Technology matrix
CTP
RTD
CTP- Current technology positionRTD – Rate of technology development
Market matrix
MS
GPMS – Market shareGP – Growth potential
Strong
Weak
High Low
High
High
Low
Low
Managerial ImplicationDifferent forms of arrangements are appropriate under different technology and
market condition. When the technology and market are familiar to the firm, internal development is encouraged. When either one is new or unfamiliar, joint
venture or acquisition is an alternative. When neither the technology nor the market is familiar to a firm, acquisition, venture capital, or educational
acquisitions are needed.
MARKET
(T-M) Matrix
Appropriate form of Collaborative Arrangement
New and Unfamiliar
New but Familiar
Existing
Joint venture
Venture capital
Venture nurturing
Educational acquisition
Venture capital
Venture nurturing
Educational acquisition
Internal market development
Acquisition
Internal venture
Acquisition
Licensing
Venture capital
Venture nurturing
Educational acquisition
Internal development
(or acquisition)
Internal venture
Acquisition
Licensing
“New style” joint venture
Existing New but Familiar
New and Unfamiliar
TECHNOLOGY
Technology and Business
• Stable technology: the product, process and demand LC-s are harmonized
• Flexible/Fertile technology: the demand LC and process LC are harmonized with many product/service LCs are generated
• Turbulent technology: within the demand LC, there is a need to generate numerous technology LCs (process and product).
The Demand LC - phases
1. Emergence (E) - the unstable period of initiation of a new industry/technology/products/services, rivalry and competition is strong with many players trying to obtain leader position
2. Intensive growth (IG) – the players that have survived exploit and enjoy the yields of their initial superiority.
3. Growth slowdown (GS) – period when the signs of saturation begin to emerge and supply rises above demand.
4. Maturity (M) – when saturation is reached and significant capacity surplus exists.
5. Decline (D) – demand falls to lower levels, ot to zero level.
Stable Technology
Demand/Sales
Time
E
IG
GSM D
DemandProcess
Product
Flexible/Fertile Technology
Demand/Sales
Time
E
IG
GSM D
DemandProcess
Product
P1
P2
P3
P4
Turbulent Technology
Demand/Sales
Time
E
IG
GSM D
Demand
TechnologyT1
T2
T3