TECHNOLOGY& ORGANIZATION IN BUSINESS ENVIRONMENT

1. Micro & macro environment2. Technology-external force and

internal resource3. Resource and marketing management

approaches 4. Competency and Value-chain models5. Integrative organization models

BUSINESS ENVIRONMENT: Micro and macro

Organization

Government

Interest groups

Customers

Banks

Local Community

Associations

Competitors Suppliers

Employees/Trade unions

Shareholders

MicroenvironmentPoliticalLegal

EconomicSocio-cultural

Technological

Ecological

Macroenvironment

Technology: external force

• Technology-key factor of influence at two levels

• At the MACRO level: one of the relevant factors – T, within PEST

• At the MICRO level: actors in the close-direct firm environment establish technological influence

Tehnology: internal resource

• Tehnology- one of the key resources built into the internal capabilities and competencies, as the base of operations performed in creating and delivering new value for the customer in the form of products/services that satisfy their needs – generate sound business results (sales/revenue/profits/profitability/market share)

Key Competencies Model

Final productsA B C D E F G H I J K L

Business 1 Business 2

Business 3

Business 4

Key product 1 Key product 2Competency 1 Competency 2 Competency 3 Competency 4

TECHNOLOGY(resources: human, material, energy, etc.)

MACRO-ENVIRONMENT P E S T E

Political/legal: laws, regulations in different spheres – economy, politics, environment, IPR, trade, techn. transfer)

Economic: economic performance (GDP, Income, inflation) economic policy measures - taxes, interest rates, exchange rate, trade relations, economic strategy

MACRO-ENVIRONMENT P E S T E

Socio-cultural: demographic, cultural heritage, ethnicity, customs, norms, values, beliefs

Technological: R%D investments as % of GDP, R&D expenditures, IPR, Patents, Infrastructure (ICT)

Ecology: Env. Safety rules, application of principles and standards at all levels; ecological indicators (water, soil, air - atmosphere)

MICRO-ENVIRONMENT- main actors

- Suppliers,

- Clients,

- Competitors,

- Agencies (state),

- Associations, groups, individuals,

- Banks,

- Other market actors.

T- technological influence

• Main trends in the technological environment

- Globalization

- Time compression

- Technological integration.

Technology-external force and internal resource

• Technology – as external force represents Opportunities and Threats (SWOT)

• Technology- as internal resource represents Strengths and Weaknesses (SWOT)

• DEVELOPMENT of organization /firm/ : harmonizing, searchnig for fit between internal and external influences

SWOT- interplay of external and internal factors

• Strengths and Weaknesses – INTERNAL factors

• Opportunities and Threats - EXTERNAL factors

• Technologies as internal resource (S or W)

• Technologies as external force (O or T)

INTERNAL FACTORS

• Resources, capabilities, competencies as KEY DIMENSIONS OF ORGANIZATION

• Basic attributes:

1. Value

2. Availability (rareness)

3. Imitability

4. Organization

Key Competencies

• If resource/competence is valuable, rare, difficult to imitate and organization is ready to exploit it- it is STRATEGIC and are KEY for competitiveness

• Important issue: DURABILITY and SUSTAINABILITY of key competencies contributing to COMPETITIVE ADVANTAGE IN THE LONG RUN - IMITABILITY

Imitability: transparency, transferrability, easy replication

• Imitability: reverse-engineering, employing staff capable of transferring engineering

Transparency: relationship between resources and capabilities – Gillette had succeeded in non-transparent products – hard to copy even when desaggregatged into parts (Sensor, Mach 3);

Transferrability: how easy it is for competitors to obtain resources, capabilities and competencies

Imitability: transferrability, replication - examples

Procter&Gamble – brand management difficult to transfer, or

Wal-Mart – low cost distribution system; resource management as unique capabilities difficult to replicate and transfer

RESOURCE AND MARKETING APPROACHES & STRATEGIES

1. RESOURCE – INTERNAL – INTERNAL TOWARDS EXTERNAL approach puts stress on internal strengths – competitiveness based on internal factors – resources, capabilities, competencies;

2. MARKETING – EXTERNAL – EXTERNAL TOWARDS INTERNAL approach puts stress on external factors: market, vendors, competitors AS THE DOMINANT FORCES TO AFFECT COMPETITIVENESS

Mission, goals, strategy

• Development determined by MGS• Mission – reasons for existence of organization

– “raison d’etre”• Goals – final effects – results of planned

activites determining what and when• Strategy – longterm development plan, master

plan, for managing opportunities and threats in accordance with strengths and weaknesses (external/internal fit), way to fulfill mission and goals.

Corporate Strategy

Business (Competitive)Strategy

Functional Strategy – Technology Strategy

Corporate, Business and Technology Strategy Hierarchy

EXT.

MACRO

ENVI

R.

EXT.

MI CRO

ENVI

R.

INTERNAL ENVIRONMENT

The resource based view of the firm (RBV) is an

influential theoretical framework for understanding how

competitive advantage within firms is achieved and how

that might be sustained over time.

Penrose (1959)

Wernerfelt (1984)

Prahalad and Hamel (1990)

Barney (1991)

Nelson (1991)

Teece, Pisano and Schuen (1997)

Winter (2003)

Ray, Barney & Muhanna (2004).

The resource-based view of the firm (RBV)

RBV focuses on the internal activities of the firmand so complements the traditional emphasis on structureand positioning.

It assumes:• that firms can be conceptualised as bundles of resources;• that these resources are variously and differently distributed;• resource differences persist over time.

Certain resources that are:ValuableRareInimitableNon-substitutable

VRIN attributes

The resource-based view of thefirm (RBV) (Continued)

Intellectualassets

Physicalassets

Culturalassets

Firm’s capabilities:

DesignPurchasingManufacturingFinanceDistributionCustomer relationships

Firm’s capabilities

We often know more than we can tell . . .

Have you ever tried explaining to someone in words how to tie a shoelace?

Tacit knowledge

A Resource-Based View

• The creation of sustainable competitive advantage (SCA) depends on resources and capabilities

Resources

• Resources fall into three major categories:1. Tangible: include plant and equipment, raw

materials, and financial reporting systems 2. Intangible: include trade secrets and relationships

with customers 3. Human: include employees’ knowledge, skills and

abilities • Resources are not a complete explanation for

competitive advantage• Different companies transform resources into

products and services in different ways

Capabilities

• The knowledge or skills about how to undertake a particular activity

• Capabilities can be found in all parts of a company, such as in the skills, knowledge, and ability that employees have accumulated over time in the process of doing their job

• Other capabilities reside in an organization’s processes, such as those for product development, production, purchasing, supply chain management, and marketing

• Competitive advantage occurs only when efforts to transform resources into products are valuable, rare, non-substitutable, difficult to imitate, and durable; otherwise, it will not be superior to that of other firms

Core Competencies

• Capabilities are core competencies if they are used to generate value across a wide range of firm activities

• Core competencies are often created through the coordination of different activities or technologies

• Core competencies allow firms to expand successfully into new product markets

Core Rigidities

• The inability to do new things in areas outside of the firm’s core competencies

• Often limit the way in which people can work together or solve problems, and what activities they believe are acceptable and unacceptable

Strategic Dissonance

• Strategic dissonance occurs when what managers want to accomplish and what companies are doing are misaligned

• It indicates the need to change strategy• Companies are most successful in responding to

strategic dissonance by:– Evaluating Information on the Misalignment– Gathering Information from Frontline Employees– Devoting Organizational Resources to the New

Direction

Key Competencies Model

End productsA B C D E F G H I J K L

Business 1 Business 2

Business 3

Business 4

Key (core) product 1 Key (core) product 2Competency 1 Competency 2 Competency 3 Competency 4

TECHNOLOGY(resources: human, material, energy, etc.)

Resources Capabilities Competencies Core productsEnd Products-Goods/Service mix

Distinctive (core) competences model

Core competencies

Coreproducts

Businessunits

EndproductsEnd

products

Endproducts

Businessunits

Core competencies

Source: Reprinted by permission of Harvard Business Review. Adapted from ‘The Core Competence of the Corporation’, by G. Hamel and C.K. Prahalad, (1990). Copyright © 1990 by the Harvard Business School Corporation; all rights reserved

Negligibleprofits

Long-termprofits

Noprofits

Short-termprofits

Imitability

Extent of coreness

Non-core Core

Low

High

Turning technology into profits

Value chain model

The Value Chain• A description of the activities that are used to produce and deliver a

product to customers • Examining the value chain will help with technology strategy in

several ways:1. Helps to determine where most of the value creation lies in an industry 2. Determine whether it makes sense to focus on a different stage of the

value chain if the locus of value creation in an industry changes 3. Offers insight into whether new or established firms will be more

effective at innovation 4. Suggests how companies can create competitive advantage at

different stages of the value chain5. Helps with decisions about ownership of different parts of the value

chain

Value Chain Model

R D MFG MKTG Sales DIST

Industry and organization value chain model

• Overall industry value chain model defines all the value added operations, e.g. from raw material extraction to final product sales, aftersales service and product EoL;

• Organization value chain model identifies the value added operations in the organization - often present a part of the overall industry VC, rarely they are the same (example of FORD in the 1960-ies)

Automobile Steel Parts Industry Value chain model - VCM

R&D/ new automobile

design

Destroying dangerous

waste

Recycle of steel parts

Sevice/Maintanance

Sales & Distribution

Assemble automobile

Produce chassis & automobile

parts

Steelproducts

Produce steel

Extract ironore

Refine ore Produce iron

The Value Chain in Mobile Phones

Value chain in organization

• Depending on the new value created distinction is made between primary and secondary operations

• Different character of operations in different organizations

• Difference between production of goods and providing services as new value

Organizations manufacturing of goods

• Primary operations: supply(procurement), mfctg operations, distribution, marketing, aftersales services

• Secondary operations: HRM, Finance Management, R&D

Banks

• Primary operations: financial operations-credits, loans, private accounts, salaries, etc.

• Secondary operations: HRM, R&D

R&D organizations

• Primary operations: R&D, IPR Management, Licencing to other firms, Consultancy

• Secondary: HRM, Financial Mngmnt, Marketing

VALUE CHAIN FOR MFNG GOODS ORGANIZATION

Secondary Finance and planningoperations HRM

Technology management & development

Procurement

Input ProductPrimaryoperations Supply Operations Distribution Marketing Postsale services T E C H N O L O G Y

.

Established firms or new entrants

*Competency based competitiveness*Innovativeness of established firms vs. new

entrants*Competency destroying or competency

enhancing innovations*The adverse effect of accumulated knowledge

and competence in introducing innovation – the problem of ‘unlearning’ – sometimes it is better to ‘build new than repair existing’

Regimes of Creative Destruction and Creative Accumulation

• Some industries operate through:– Dynamics of creative destruction: entrepreneurs

enter with new firms, challenge established firms on the basis of new ideas, disrupt the old ways of production, organization, and distribution, and replace the old firms

– Dynamics of creative accumulation: entrepreneurs enter, challenge established firms on the basis of their new ideas. However, established firms defend their old ways of production, organization and distribution, and the new firms tend to fail

Capital Intensity

• Established firms are better than new firms at innovation in capital-intensive industries because new firms need to finance innovation through external capital markets

Advertising Intensity

• Established firms are better than new firms at innovation in advertising-intensive industries because advertising is subject to economies of scale and takes time to have an effect

Effect of Advertising on Sales

Concentration

• New firms are worse than established firms at innovation in concentrated industries because concentrated industries provide firms with market power

Average Size of Firms

• New firms are better than established firms at innovation in industries where the average size of firms is small because the disadvantages of being a small start-up firm are minimal

Average Firm Size by Industry over Time

Integrative organizational models

They are used for:a) Differentiating between organizations;b) Comparing different organizations;c) Drawing conclusions on the best practice, andd) Introducing and managing change, realizing change projects, e.g. Reengineering, TQM

Change Management

• Constant Change is the dominant management paradigm• Authors Hammer and Champy have postulated in 1993. godine in

their book Corporate Reengineering that «change has become predominant and constant. It has become the normal state».

• Change management projects have not always been succeful. • According to empirical studies, as high as two thirds of the change

projects in practice result with failure. • One of the leading consultancies, Bain&Co, cites that it is estimated

that the general rate of failure of projects of change is around 70 percent.

(Bernard Burnes, Managing Change Prentice Hall, 2009)

Change Management• Evidence is found that the Organizational Culture Change Projects

in the largest European, Asian and American companies have been a failure in 90 percent of cases;

• The projects of introducing New Technology have been unsuccessful in 40-70 percent of cases having in mind the revolutionary changes in the 80-ies related to micro-electronics, IT & computer expansion and computer supported processes in majority of organizational domains;

• Introducing Total Quality Management (TQM) into comapnies in the USA in 1970-ies had a very low success rate, 90 percent of the comapnies reported failure. Data for Europe are somewhat better in the 1980-ies and 1990-ies, about 70 percent of the projects failed..

• Concerning Business Process reengineering, BPR, it is estimated that the rate of failure of projects is extremely high, about 80 percent have failed in contast to the expectations when it has been reported at the beginning that this was «the biggest business innovation in the 1990-ies».

Three integrative models 1) The “Seven S” model 2) Business Integration Model-BIM

3) Descriptive Reengineering Model

Three integrative models 1) The “Seven S” model 2) Business Integration Model-BIM

3) Descriptive Reengineering Model

The McKinsey model – Model “Seven S” was developed in the 1970-ies1. Strategy: path – master plan of action leading to advantage over competitors;2. Structure: represented by organizational chart following the division of tasks and liability;3. Systems: input-output flows and processes showing all the operations performed in organization

4. Style: meaning management style, the way managers influence behaviour of employees; 5. Staff: human resources, employees in organization;6. Skills: abilities, competencie, capabilities and potentials of the organization as a whole and not as mere sum of individual capabilities and skills;7. Shared values: values that are dominant in an organization, accepted by the majority and are a part of organizational climate.

Skills

StaffShared values

Style

Strategy

Structure

Systems

Soft dimensions

Hard dimensions

Business Integration Model- BIM

People

Strategy

Businessprocesses

Technology

4 dimensions

Strategy – identification of competitive, market strategy at different levels: corporate, business, technological (functional) strategiesPeople- comprise organizational structure, structure and job content, HRM, style and organizational cultureTechnology- key technologies, telecommunication, webs, information and expert systemsBusiness processes – identification of processes, input/output, labour/material/information flows, performance measurement and control

Strategy – identification of competitive, market strategy at different levels: corporate, business, technological (functional) strategiesPeople- comprise organizational structure, structure and job content, HRM, style and organizational cultureTechnology- key technologies, telecommunication, webs, information and expert systemsBusiness processes – identification of processes, input/output, labour/material/information flows, performance measurement and control

Descriptive reengineering model culture processes structuretechnologyCulture- shared valued, experience and objectives that dominate the organization over timeProcesses- sequence of activities that lead to the fulfillment of the needs of external and internal users/customers/clientsStructure- internal communication, liability and trust given to individuals/teamsTechnology- key technology, ICT

Comparative review of models: American, Japanese, European

Management

Comparative review of models: American, Japanese, European

Management

Japanese company:

* Employs key persons for lifetime (i.e. until they retire at about sixty years of age);* Rotates amployees through different jobs and functions;* The progress of employees in organization is slow, primarily related to their age, not according to the system of contribution/merits;* Appoints liability (responsibility) to group, rarely to individuals as a tradition of Japanese culture.

Japanese management:

* Treats employees as complete idividuals/personalities;

* Building trust that enables decision making by consensus, "bottom-up";

* Employees` performance is controlled in subtle and indirect way.

Japanese management:

* Treats employees as complete idividuals/personalities;

* Building trust that enables decision making by consensus, "bottom-up";

* Employees` performance is controlled in subtle and indirect way.

Bureaucratic model (Max Weber) is related to American mangement practice:* Employment agreements last only as long as the person gives his contribution and shows performance results;* Specialization and rotation reserved just for those that advance along the managerial hierarchy;* Little concern about the complete personality;* Quick feedback and progress;* Explicite and formal control system;* Individual responsibility – which is also a strong cultural tradition in USA;* Individual decision making “top-down".

New model - Theory Z – today in American companies – combines the attributes of Japanese and American model:* Lifetime employment;* Slower progress rates for employees;* More implicite, less formal system of control;* More conmcern for the complete personality;* More multifunctional rotations and emphasis on flexibility;* Introducing participation and decisions by consensus;* Still emphasis on individual responsibility as key attainment.

American management- main attributes:

1. Competition and customer satisfaction;

2.profit orientation – the importance of stockholders (shareholders) and financial performance short-term;

3. Individualism (self-fulfillment, mobility);

4. professionalsm (professional managers, formalisation of procedures).

American management- main attributes:

1. Competition and customer satisfaction;

2.profit orientation – the importance of stockholders (shareholders) and financial performance short-term;

3. Individualism (self-fulfillment, mobility);

4. professionalsm (professional managers, formalisation of procedures).

Management in Japan- main attributes: 1. longterm/strategic orientation – techn ological competitiveness;

2. Integrativeness – the strong bondage, loyality of employees to the company;

3. consensus (advances in group performance, communication);

4. Quality concern – responding to customer needs, 100% products/service quality.

Management in Japan- main attributes: 1. longterm/strategic orientation – techn ological competitiveness;

2. Integrativeness – the strong bondage, loyality of employees to the company;

3. consensus (advances in group performance, communication);

4. Quality concern – responding to customer needs, 100% products/service quality.

Management in Europe :

1. Orientation on HR (significance of self-fulfillment, employee satisfaction, equal rights and social protection, etc.)2. Negotiation realized externally and internally with stakeholders. 3. Diversification- international business operations. 4. Managing conflicts and contradictories (opposites): balancing extreme approaches – the sub-types are Latin, Anglosaxon, German practices.

Management in Europe :

1. Orientation on HR (significance of self-fulfillment, employee satisfaction, equal rights and social protection, etc.)2. Negotiation realized externally and internally with stakeholders. 3. Diversification- international business operations. 4. Managing conflicts and contradictories (opposites): balancing extreme approaches – the sub-types are Latin, Anglosaxon, German practices.

Organisational Characterised by

requirement

1 Growth orientation A commitment to long-term growth rather thanshort-term profit.

2 Vigilance The ability of the organisation to be aware ofits threats and opportunities.

3 Commitment to The willingness to invest in the long-term technology development of technology.

4 Assemble knowledge The ability to assemble knowledge into business opportunities.

5 Acceptance of risks The willingness to include risky opportunities ina balanced portfolio.

Organisational characteristics thatfacilitate the innovation process

Organisational Characterised byrequirement

6 Cross-functional Mutual respect amongst individuals and a cooperation willingness to work together across functions.

7 Receptivity The ability to be aware of, to identify and to take effective advantage of externally developed technology.

8 ‘Slack’ An ability to manage the innovation dilemma and provide room for creativity.

9 Adaptability A readiness to accept change.

10 Diverse range of skills A combination of specialisation and diversity of knowledge and skills.

Organisational characteristics thatfacilitate the innovation process (Continued)

• Technical innovator• Technical/commercial scanner• Gatekeeper• Product champion• Project leader• Sponsor

Key individual roles within theinnovation process

The organisation’sreputation for innovation

Attraction ofcreative people

Organisationalencouragement ofcreativity and innovation

Development ofinnovative products

A willingness withinthe organisation toaccept new ideas

Motivates peoplewithin the organisationand reduces frustration

High morale andretention of creative people

Propagating a virtuous cycle of innovation

Innovative firm

Factor conditions

Institutional setting

Suppliers andsupportingindustries

Customers

FinancingR&D

Educational and othersocietal effects

Competitionregulator

Purchaser

Information anddecision centre,political stability

Macroeconomicconditions

Infrastructure

Environment andsafety regulator

The role of the state in innovation

• Financing R&D (via universities, defence, R&D, etc)• Government can become a “lead user”• Information centre and political stability• Provide economic stability• Provide complementary assets• Act as regulator• Educator

Facilitating innovation through government actions

EXTERNAL INPUTS:societal needs;competitors;supplier partnerships;distributors;customers;strategic alliances.

EXTERNAL INPUTS:scientific and technological development;competitors;suppliers;customers;university departments

Organisation and business strategy

Mar

ketin

g

EXTERNAL INPUTS:macro factors; diversificationcompetition; costs and input prices;profit; political influencesgrowth;

organisation’s knowledge base

accumulates knowledge

over time

Research and technology

New productsSource: Trott, 1998

Innovation management framework

1. Introduction: The importance of technology

2. Technology as an asset

3. Resource-based view of the firm

4. Tacit knowledge

5. Competencies

6. Core competencies

7. Turning technology into profits

8. Technology life cycles & S-curves

9. The degree of innovativeness

Technology- External vs. Internal factor

Rate of Technologicalprogress

Amount of effort

Single-processorcomputer

Multi-processorcomputerSpeed of light

Communication bottlenecks

Technology life cycles andS-curves: Supercomputer

Technology development effort required?

• Leader/offensive• Fast follower/defensive• Cost minimisation/imitative• Market segmentation specialist/traditional

The degree of innovativeness

Product Pioneer(s) Imitator/later entrant(s)

35mm Cameras Leica (1925)Contrax (1932)Exacta (1936)

Canon (1934)Nikon (1946)Nikon SLR (1959)

CAT Scanners (Computer Axial Tomography)

EMI (1972) Pfizer (1974)Technicare (1975)GE (1976)Johnson and Johnson (1978)

Ballpoint pens Reynolds (1945)Eversharp (1946)

Parker “Jotter” (1954)Bic (1960)

MRI (Magnetic Resonance Imaging)

Fonar (1978) Johnson & Johnson’s Technicare (1981)General Electric (1982)

Personal Computers MITS Altair 8800 (1975)Apple II (1977)Radio Shack (1977)

IBM-PC (1981)Compaq (1982)Dell (1984)Gateway (1985)

VCRs Ampex (1956)CBS-EVR (1970)Sony U-matic (1971)Catrivision (1972)Sony Betamax (1975)

JVC-VHS (1976)RCA Selectra Vision (1977) made by Matsushita

Word-processing software

Wordstar (1979) WordPerfect (1982)Microsoft Word (1983)

Throughout the twentieth century ‘late entrants’ have been surpassing pioneers

NATO member

60 million population

Straddles 2 continents

Europe and Turkey

Europe

Asia

Istanbul

Mediterranean

Black Sea

The Bosphorus from Space

Its strategic geographical location cannot be overstated.

The Bosphorus links the Black Seato the Mediterranean

Turkey next to Europe

A long heritage of commerce and culture

Significantly and strategically located

Large population of 60 million

Yet the economy has failed to develop in the twentieth century!

Unlike Korea, Taiwan, Malaysia?

What went wrong?

1750–1900: Industrial revolution

1900–1980: National economic development

1980–2000s: Articulation into world economy

Economic history of Turkey

• A weak business system

• Short-termism

• Corruption

• Lack of long-term investment

Missing factors in the Turkish economy