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Learn the principle involved in formulating and implementing a technology strategy for short term and long term win.
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ATOA Scientific Technologies Engineering Simulation For Innovation
Technology and Innovation Management: S8 Technology Strategy Raj C Thiagarajan, PhD
To
SIBM SIII MBA Students
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
What is Technology Strategy?
• Technology aspects related to business objective of wealth creation
• Objective= Maximize Value
• Value = Benefit – Cost
• Strategy to create
– Customer Value
– Shareholder Value
– (Wealth) creation
Technology Strategy
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Strategic Planning
• Corporate Strategy refer to Firms positioning in terms of
– responsiveness,
– cost leadership and
– product differentiation
• Corporate strategy <=> Technology, Operations, Finance, Marketing strategy
• A sound technology strategy is critical for Success
• key to operational superiority,
competitive edge.
• Technology strategy will have
an effect on all aspects
of the organization.
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Operations Strategy at Wal-Mart
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
TIM Strategy Components
How will we create value? • Customer experience • Technology evolution • Market Dynamics • Organizing for innovation
How will we capture value?
• Competitive advantage • Technology portfolio Management • NPI leadership
How will we deliver value?
• Execution of successful strategy • Strategic Decision Making
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Invention Innovation
Product Strategy Market Strategy
@ the hand of the
Customer
Process Innovation
Product Innovation
Technology Strategy and Innovation
Strategy Flow
Firms Short and Long Term
Success
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
What are attributes of a winning strategy?
• What are attributes of a winning strategy?
• Win in the market place.
– Value
– Market
– Industry
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Dreaded Delta
• Incremental
– Line extension
– New range
– Short term
– Industry turbulence
– Future incompetence
Source: R. E Johnston, J. D Bate, The power of strategy innovation, American Management Association, New York, 2003.
©ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management 9
Market opportunity
Firms Potential for winning
• Geography attractiveness (Political , economic)
• Strong Industry basics (size, growth, profit, comp..)
• Winning Trajectory (Growth, technology trends)
Objectively attractive market
• Possible product / service for creating customer value
• Do you have a competitive edge
• How to or can gain to deliver value?
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Technology investment Analysis
• Where you want to in next five years?
• Portfolio grid matrix
• Boston box
• Investment opportunity
High Market Growth Rate
Low
? PROBLEM (Convert to star)
STAR (Invest)
DOG (Liquidate)
CASH COW (milk them)
Low high Market Share
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Attractiveness
• Economic
– Potential to invest
• Revenue
• Cost to serve
• Fit
– Ability to serve
• Firms strategy
• Position
High Economic Attractiveness? Low
Develop capability
Target Segment
Avoid Improve Value
Low Fit: Ability to serve High
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Match the Industry
• Industry to profit level
– Easier to make money in profitable industry
– Changes in profitability may indicate changing industry dynamics
– Profitability varies with in a industry
0
5
10
15
20
25
30
Industry1
Industry2
Industry3
Industry4
Industry5
Profit
Profit
Industry Profit
Auto and CV Manufacturing 5
Computers and office machines 4
Petroleum production 1
Pharmaceuticals 2
Soft drinks 3
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Match the Industry
Industry growth level
• Easier to grow in large and high growth industry
• Revenue growth even without market share gain
• Market share is relatively easier
• Higher growth is typically associated with higher profitability.
-4
0
4
8
12
16
Industry1
Industry2
Industry3
Industry4
Industry5
Growth
Growth
Industry Growth
Auto and CV Manufacturing 4
Computers and office machines 5
Petroleum production 1
Pharmaceuticals 3
Soft drinks 2
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
You
Barrier to Entry
Buyers
Substitutes Suppliers
Industry Rivalry
Industrial Value Drivers
Porter’s five forces
• Buyer power
• Supplier power
• Entry opportunities
• Substitute possibilities
• Competitor rivalry
Bargaining power of suppliers
Threat of substitutes
Bargaining power of Buyers
Threat of new players
Competitive landscape
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
How to add Value
• Value = Benefit – Cost
• Decrease cost
• Increase benefit
• What you provide
• How you provide
Value = Benefits - Cost
Products Best Product
Product innovation
Price, Reliability
Services Best Services
Expertise Customer Understanding
Hassle free Ease of doing business
Best Total Solution
Lowest Cost Total Solution
©ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management 16
Value proposition
Type of Value proposition
• Lowest Total cost
• Best Product
• Best Service
• Best Total Solution
Examples
• Walmart, Big bazzar
• BMW,
• Airtel
• Toyota
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Value Proposition
Best Total solution
Best Product
Lowest Total solution
Rule Solve the clients broader problem
Self destructive success with breakthroughs
Variety kills efficiency
DNA, Value, COH
Empowered front end Customer Centre
Flexible structure Decisive Risk oriented
Hierarchical Structured procedures
Metrics Customer retention Customer profitability
Time to market Vitality , profit
Unit cost, Cost experience Product line profitability
Business model vs Value Proposition
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Technology vs market Positioning
Radical
Off the shelf
Technology Reach
Breakthrough
Platform
Derivative
Product
Support
Entirely new benefit Improvement No change
Marketing Impact
©ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management 19
Strategic Planning vs Innovation Process
Strategic Planning Process
• Analytical
• Numbers-driven
• Company-centric
• Logical/linear
• Today to tomorrow
• Extend current value
• Fit the business model
Strategy Innovation Process
• Creative
• Insights-driven
• Market-centric
• Heuristic/iterative
• Tomorrow to today
• Create new value
• Create a new business model
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Innovative Technology Strategy
• Strategy innovation is a process of applying innovative thinking to the entire business model of a company.
• Create Value for the Customer and firm efficiently.
• Change the rules of the game
– Cricket: Test -> 1 Day –> T20
• Competitive advantage
• Size does not matter
• Deliver Value to the customer better
• For: Technology Roadmap, Product pipeline, Financial Success
©ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management 21
Strategy example Product
Kodak
• Film/Silver halide
• R&D Focus form silver halide to Hybrids
• CD, online +++
• Dominant force in Digital photography
Polaroid
• Instant photography
• Patented Technology
• Ignored the disruptive technology
• Filed for bankruptcy
Digital imaging
©ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management 22
Strategy Example Service
Compaq
• Traditional Supply chain
• Low customer pull
• Fixed product specification or configurations.
• Specialized distribution channels/ intermediaries
• Produce first sell later
• Relative high inventory at various stages.
Dell
• Virtual Integration
• High customer pull
• Very high product customization
• Direct fulfillment - no intermediaries
• Production only after order
• Very low finished goods inventory (costs)
©ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management 23
Strategy example
Wining Strategy
• IBM
• Apple
• Microsoft
• Nokia
• GE
• Corning
Lost Strategy
• Digital Equipment corporation
• US airways
• Enron
• Worldcom
• K-mart
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Market Rewards Innovation
24
• Share Price Growth over the five years range (2002- 2007)
• Innovation Premium vs Key competition
Industry Segment
Innovation Premium
Share price growth
Key Competitor
Share price growth (%)
Automobile Toyota 150% GM -35%
Computers Apple 700% Dell -10%
FMCG P&G 65% CP 15%
Soft drinks Pepsi 30% Coke 5%
Source: R Jonash et.al, Balanced Scorecard Report, Harvard Business Review,, Vol 9, No 2, March-April 2007
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Balanced Score Card
25
• The Balanced Scorecard is a management system used to focus and prioritize management energy toward achieving both short and long term organizational.
• Strategic plan into action
• ‘Balances’ short and long term needs
• Are we learning and innovating in business critical areas?
• How are core processes performing?
• How do we look in eyes of our customers?
• How are we doing at managing costs and making margins?
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Balanced Score Card
26
• Links strategy and vision with
– objectives for business performance
– measures of each objective
– target values for measures
– specific initiatives to improve and innovate
Objectives Measures Targets Initiatives
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Technology Investments
Growth & Innovation Process
Sourcing & Collaboration
NPI
The Innovative Company
The Brand Value
The Link
27
Financial
Customer
Internal
Process
Learning
and
Growth
Innovation premium
Growth from new and existing
Improved Cost and Efficiency
Features & functionality
Price Ease of Use Service Reliability
Build innovation competencies
and skills
Develop innovation
leaders
Develop cross functional
teams
Create a culture of
innovation
Launch Programs
Identify new partnerships
Commercialization
Ideation
Development
Leverage existing
partnerships
Establish Process
Collect Intelligence and generate insights
After R Jonash et.al, Balanced Scorecard Report, Harvard Business Review,, Vol 9, No 2, March-April 2007
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
You
Barrier to Entry
Buyers
Substitutes
Suppliers
Industry Rivalry
Globalization
Digitization
Sustainability
Industrial Value Drivers
Porter’s five forces
• Buyer power
• Supplier power
• Entry opportunities
• Substitute possibilities
• Competitor rivalry
• ++
• Globalization
• Digitization
• Sustainability
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Explore and Exploit
• Learn
• Collaborate
• Prototype
• Strategize
• Architect
• Develop
• Deploy
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
Successful firms:
• Get the strategy “right”
• Create real value through linking technologies to customer & consumer needs
• Capture the value through a deep understanding of potential business models and competitive realities
• Organized for successful value creation.
• Manage successfully for both short term and long term success of the firm
ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management
References
• R. E Johnston, J. D Bate, THE POWER STRATEGY INNOVATION, American Management Association, New York, 2003.
• Managing Technology and Innovation for Competitive Advantage – V.K. Narayanan – Chapter 8
• R Jonash et.al, Balanced Scorecard Report, Harvard Business Review,, Vol 9, No 2, March-April 2007
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