CPET 575 Management Of Technology - IPFWlin/CPET575_MangOfTech/2015Fall/... · 5th edition, 2009, McGraw-Hill, ... • The Managerial Challenge Posed by Autonomous Strategic Action

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CPET 575 Management Of Technology

Part III.

Enactment of Technology Strategy –Developing A

Firm’s Innovative Capabilities

References:1. Robert A. Burgelman, Clayton M. Christensen, and Steven C.

Wheelwright, Strategic Management of Technology and Innovation, 5th edition, 2009, McGraw-Hill, pp. 703-717

Paul I-Hai Lin, Professor

http://www.etcs.ipfw.edu/~linA Specialty Course for

M.S. Technology - IT and Advanced Computer Applications

Purdue University Fort Wayne Campus

Prof. Paul Lin

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Enactment of Technology Strategy – Developing A


Overview

Innovation Challenges in Established Firms

Strategic Management of Corporate Research

Managing Corporate Entrepreneurship

Conclusion

Prof. Paul Lin

http://www.etcs.ipfw.edu/~lin

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Overview


• New Product and New Business Development


• The Functions of Corporate Research

• Managing Key Interfaces

• Linking Corporate Research to Corporate Development Strategy


Conclusion

Prof. Paul Lin

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Overview




• The Managerial Challenge Posed by Autonomous Strategic

Action

• The Use of New Venture Divisions

• A Framework for Assessing Internal Entrepreneurial Initiatives

• Design Alternative for Corporate Entrepreneurship

• Choosing Design Alternatives

• Implementing Design Alternatives

Conclusion

Prof. Paul Lin

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Review of Part II

Part II. Design and Implementation of Technology

Strategy: An Evolution Perspective

Technology == Resources, likes financial and human

resources

Managing technology is a basic business function.

Technological competencies and capabilities were

views as the foundation of technology strategy.

The evolution of technology strategy was examined

in the context of a matrix generative selective forces

that shape innovation processes within the firm,

within an industry, and in a broader system

encompassing multiple industries or major

segments within an industry

Prof. Paul Lin

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Part II: Review

Fundamental Business Strategy Decisions1) Which distinct technological competences and

capabilities are necessary to establish and maintain competitive advantages?

2) Which technologies should be used to implement core product design concepts and how should these technologies be embodied in products?

3) What should be the investment level in technology development?

4) How should various technologies be sourced –internally or externally?

5) When and how should new technology be introduced to the market?

6) How should technology innovation be organized and managed?

CPET 575 Management of Technology, Prof. Paul I-Hai Lin

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Overview – Technology Strategy Making

Technology Strategy: a function of the quantity and quality

of technical capabilities and competences

Experience: obtained from enacting technology strategy

feeds back to technological capability and technology

strategy

CPET 575 Management of Technology, Prof. Paul I-Hai Lin

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Part III: Enactment of Technology Strategy: Developing the Firm’s Innovative Capabilities

Examining:

• How a firm’s innovative activities reflect its

technology strategy?

• How the enactment of technology strategy serves

to further develop its innovative capabilities?

Technology Strategy Enactment: (three Key Tasks)

• A. Sourcing technology (on a continuous basis)

• B. Development of new products and new

businesses (new markets for new technologies)

• C. Internal Corporate Venturing

Prof. Paul Lin

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Part III: Overview Technology Strategy <=> Innovative Activities <=>

Innovative Capabilities

Technology strategy is enacted through the

performance of a sequence of key tasks in order to

stay ahead of competitors:

• Technology Sourcing (on a continuous basis)

Many Firms: Licensing agreements, R&D with other firms,

Consortia, Strategic alliance, Joint ventures, Acquisitions,

etc.

High-Tech Firms: Must source their new technology internally

through investment in R&D

• Corporate Innovation Challenges

New product and new business development

• Technology Support

Marketing and Sales

Train Users, Field Services?Prof. Paul Lin

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Sourcing Technologies

Examples – Sourcing Technology

• Dell’s $67 billion acquisition of EMC (Vmware),

http://blogs.wsj.com/moneybeat/2015/10/13/dells-emc-deal-

forces-tech-titans-into-high-stakes-poker-ma-showdown/

“Mr. Ives… predicting that EMC and Dell will have a tough

time integrating and saying he has ‘serious doubts about the

long-term success of a Dell/EMC (and Vmware) merger.’ ”

• EMC | Cloud Computing, Data Storage, IT Security and Big

Data, www.emc.com

• VMware Virtualization for Desktop & Servers, Applications,

http://www.vmware.com/

Prof. Paul Lin

http://blogs.wsj.com/moneybeat/2015/10/13/dells-emc-deal-forces-tech-titans-into-high-stakes-poker-ma-showdown/

http://www.emc.com/

http://www.vmware.com/

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New Product and New Business Development

• Induced Strategic Action

Exploiting Innovation Opportunities in the Induced

Process

• Autonomous Strategic Action

Exploiting Innovation Opportunities in the Autonomous

Process

A Balancing Act

Related Ideas

Prof. Paul Lin

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Autonomous

strategic

action

EXHIBIT 1 An Evolutionary Framework of the

Strategy-Making Process in Established Firms

Strategic

context

Induced

strategic

action

Structural

context

Concept of

corporate

strategy

Prof. Paul Lin

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The Evolutionary Process Model of Strategy Making, Exhibit 1

• Induced strategic process Incremental and architectural innovations

New product development

• Autonomous strategic process R&D, Radical Innovations

Induced Strategic Action

• Familiar external environments

• Corporate strategy (Top down) Reflects top management’s belief about the basis of the

firm’s past and current success

Beliefs => Firm’s views => Distinctive (core) competences

Product-market domains for successful competition

Prof. Paul Lin

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Structural Context (Large Established firms)

• Serves to select strategic initiatives (corporate

strategy, organizational learning)

• Encompasses:

Administrative mechanism (resource allocation

rules)

Cultural mechanism (rules of expected behavior)

Prof. Paul Lin

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Autonomous Strategic Action

• Outside the scope of the current corporate strategy

and opens up new environmental niches

• Not derived from “strategic planning”

• Guided by management teams – strategic recognition

(Bottom – UP)

Middle-level managers

• Formulating a broader strategy for the initiatives of

internal entrepreneurs and acting as organizational

champions to convince top management to support

Senior & top management

Prof. Paul Lin

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Exploiting Innovation Opportunities in the

Induced Process

Innovations Associated with

• Incremental or architectural innovations

• Not necessarily small innovation

• Initially not large

Management of Technology

• Short to Medium term

Managing incremental and architectural innovation

• Longer term

Managing disruptive innovations

To meet this challenge

• Firms must develop strong but flexible product and process

development capabilities

Prof. Paul Lin

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Induced ProcessExample - Boeing

Developing a new air frame for the next generation

air craft – incremental

• Well understood in the context of firm’s corporate strategy

• How about: “the new Boeing 787 Dreamliner, unparalleled

fuel efficiency and range flexibility,

http://www.boeing.com/commercial/787/”

Prof. Paul Lin

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Autonomous Process

Innovations Associated with

• Radical Innovations

• Emerge somewhat unexpectedly from the firm’s R&D investment (corporate research)

• Initially not large

Innovation Challenges

• Important for a firm’s long-term survival and development

• Exploit growth opportunities in marginally related (or even unrelated) areas of business

To meet the innovation challenge associated with the autonomous process

• Firms must develop a capability to manage internal entrepreneurship

Prof. Paul Lin

http://www.boeing.com/commercial/787/

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Autonomous ProcessExamples

Bendix Corporation

• Electronic Field Injection (EFI) invented by Bendix in the

automotive supply industry

• $100 million-plus segment

Apple - find and exploit growth opportunities in

marginally related (or even unrelated) areas of

business

• Corporate Governance, http://investor.apple.com/corporate-

governance.cfm

Apple’s Systemic Approach to Innovation, http://www.innovarsity.com/coach/bp_innovation_strategies_apple.html

• Innovative products, Innovative business model

Prof. Paul Lin

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A Balancing Act

• Two innovation challenges

Innovation challenges associated with the

Autonomous Process

Innovation challenges associated with the Induced

Process

• Different management approaches

• Address challenges

Sequentially

Simultaneously

Prof. Paul Lin

http://investor.apple.com/corporate-governance.cfm

http://www.innovarsity.com/coach/bp_innovation_strategies_apple.html

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Related Ideas

Innovation Management

• Exploration

• Exploitation

Autonomous strategy process

• Unexpected

• Lower cost, initially

Results of exploration => New exploitation

opportunities

Examples

• Intel’s new microprocessor development

Incremental

Development cost – hundreds of millions of dollars

Prof. Paul Lin

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R&D funding => Technology areas => Highest ROI

How tightly R&D projects are linked to business

objectives in the promising areas of technology

Strategic Management

• The Functions of Corporate Research

• Making Key Interfaces

• Linking Corporate Research to Corporate Development

Strategy

Prof. Paul Lin

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R&D Funding

Examples

Open Innovations

IBM’s Rometty pitches “high value innovation”,

reinvention, $4 billion more into growth business,

2015/2/26, http://www.zdnet.com/article/ibms-rometty-pitches-high-

value-innovation-reinvention-4-billion-more-into-growth-businesses/

Prof. Paul Lin

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Corporate Research

• Helps meet the innovation challenges associated with the

Induced and Autonomous Strategic Processes

The Functions of Corporate Research – Exhibit 2

• Support of Existing Business (Induced Process)

• New Strategic Direction (Autonomous Process)

• Effectively Using the Output of Corporate Research

Examples – Sourcing Technology

• Dell’s $67 billion acquisition of EMC (Vmware),

http://blogs.wsj.com/moneybeat/2015/10/13/dells-emc-deal-

forces-tech-titans-into-high-stakes-poker-ma-showdown/

Prof. Paul Lin

http://www.zdnet.com/article/ibms-rometty-pitches-high-value-innovation-reinvention-4-billion-more-into-growth-businesses/

http://blogs.wsj.com/moneybeat/2015/10/13/dells-emc-deal-forces-tech-titans-into-high-stakes-poker-ma-showdown/

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Recruiting for all divisions,

from corporate research to

operations

EXHIBIT 2 The Functions of Corporate Research

Innovation

by:

Improving and

strengthening

understanding of

technologies in use

Corporate

service by:

New strategic

directions

Source: R. S. Rosenbloom and A. M. Kantrow, “The Nurturing of Corporate Research,” Harvard

Business Review, January-February 1982. pp. 115-123.

Support of existing

business

Intelligence

Identifying product and

process improvement

Discoveries and

developing new

technologies

Human resources

Technology transfer

Diversifying to

new applications

and markets

Diversifying to

entirely new

business

Opening

windows on new

science and

technology

Recruiting new

kinds of skills

Identifying acquisition

candidates with

needed technological

expertise

Developing new processes for

established products

Assessing threats and

opportunities

Recruiting talented people with

high potential

The research charter must be specified.

The research charter represents the shared understanding of the mission that research is expected to fulfill.

Prof. Paul Lin

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Managing Key Interfaces

• Corporate Research – Divisional R&D Interface

(Induced Process)

• Corporate Research – Business Research Interface

(Autonomous Process)

Examples of Corporate Research & Development

Prof. Paul Lin

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Examples of Corporate Research & Development

• Intel Labs,

http://www.intel.com/content/www/us/en/research/intel-

research.html

• IBM Research, http://www.research.ibm.com/

• Microsoft Research, http://research.microsoft.com/en-us/

• GE R&D, https://www.ge.com/about-us/research

• GM Design & Technology,

http://www.gm.com/vision/design_technology.html

• Schneider Electric Innovation and R&D,

http://www2.schneider-

electric.com/sites/corporate/en/group/profile/innovation/schneide

r-electric-innovation-rd.page

Prof. Paul Lin

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Strategic Management of Corporate Research:

Managing Key InterfacesEXHIBIT 3 Linkages Among R&D Units

Closed

OpenAd

min

istr

ative

Geographical

Closed

Closed Closed

Open

Open Open

PersonalPersonal

Tight

coupling

No

coupling

Prof. Paul Lin

http://www.intel.com/content/www/us/en/research/intel-research.html

http://www.research.ibm.com/

http://research.microsoft.com/en-us/

https://www.ge.com/about-us/research

http://www.gm.com/vision/design_technology.html

http://www2.schneider-electric.com/sites/corporate/en/group/profile/innovation/schneider-electric-innovation-rd.page

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Linking Corporate Research to Corporate

Development Strategy

• Assessing Technological Opportunities

• The Role of Different Levels of Corporate Research

Management

• Allocating Resources to Corporate Research

Prof. Paul Lin

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Strategic Management of Corporate Research:

Managing Key InterfacesEXHIBIT 4 Systematic Differences Between Business and R&D People

Work environment

R&D People

Source: Burgelman and Sayles, Inside Corporate Innovation (New York Free Press, 1986)

Business research people

Well defined; existence of research

tradition; clearly described positions1. Structure

2. Methods

3. Database

4. Work and time pressures

Professional Orientations

Quality of personnel

Personal interests

Science and codified

Systematic and objective

Mostly internal; how long

does it take?

5. Operating assumptions

6. Goals

7. Performance criteria

Serenpidity

“New” ideas; can it be improved?

Quality of investigation

8. Educational background

9.Experience

10. Career objectives

Ph.D.

Deep and focused

Become venture manager? Become venture manager?

Broad and diverse

Master’s

Quantity of results

“Big” ideas; does it work?

Planning

Mostly external; how long do

we have?

Unsystematic and largely subjective

Ad hoc and uncodified

ill defined; no real research tradition;

positions less clearly defined

Prof. Paul Lin

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Assessing Technological Opportunities: Five

Dimensions of Uncertainty

1. Usefulness of innovation cannot be immediately

appreciated (example: Laser invention at Bell Lab,

1958, http://www.bell-labs.com/history/laser/ no

possible relevance to the telephone industry)

2. The impact of innovation often depends on

improvements in complementary inventions (ex:

Laser in telecomm and Fiberoptics)

3. Major innovations often constitute entirely new

technological systems, but it is difficult to

conceptualize such systems (ex: telephone =>

primarily a business instrument)

Prof. Paul Lin

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Assessing Technological Opportunities: Five

Dimensions of Uncertainty

4. Major innovations often originated from an attempt

to solve very specific problems and leads to

unanticipated uses (ex: steam engine => pumping

water out of flooded mines)

5. The ultimate impact of innovations depends on the

ability to effectively link them to specific categories

of human needs (ex: David Sarnoff, who linked the

wireless communication to extended human needs)

Prof. Paul Lin

http://www.bell-labs.com/history/laser/

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Assessing Technological Opportunities: Initial

Screening Questions

Assessing Technological Opportunities: Next Level

Screening Questions

Need

• Qualitative Judgment

• Quantitative Analysis

Easier to predict technical dimensions of opportunities

Nature of market for the innovation?

Prof. Paul Lin

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Assessing Technological Opportunities: Initial

Screening Questions [George Pake, former VP of

Cooperate Research at Xerox]

• Are first-class researchers available to pursue them?

• Is major investment likely to yield major advances?

• How many years will take before we see successful

results?

• How many failures and successes have others had in

this areas?

Prof. Paul Lin

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Assessing Technological Opportunities: Next Level

Screening Questions [George Pake, former VP of

Cooperate Research at Xerox]

• Can the expert technology be obtained from vendors

or through acquisition?

• What costs would be incurred to displacing an

existing research program to implement the new

proposal?

• Is there enough hope that a successful results can be

transferred downstream?

• Will the necessary capital be available?

Prof. Paul Lin

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The Role of Different Levels of Corporate Research

Management

• Technicians, Technologist, Engineers

• Bench scientist

• Group leaders

• R&D managers

• Director of corporate R&D

Prof. Paul Lin

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The Managerial Challenges Posed by Autonomous

Strategic Action

The Use of New Venture Divisions

A Framework for Assessing Internal Entrepreneurial

Initiatives

Design Alternatives for Corporate Entrepreneurship

Choosing Design Alternatives

Implementing Design Alternatives

Prof. Paul Lin

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Managing Corporate Entrepreneurship The Managerial Challenges Posed by Autonomous

Strategic Action

• Technology-based internal entrepreneurship activity –

emerges spontaneously

• Examples

1966, Mechanical-based Calculators => Electronic

Calculator, unfavorable market research forecast,

William Hewlett personally championed the project

• Mechanical Calculator,

http://en.wikipedia.org/wiki/Mechanical_calculator

1970’s, SAP company

• 42-year history, http://global.sap.com/corporate-en/our-

company/history/index.epx

Prof. Paul Lin

http://en.wikipedia.org/wiki/Mechanical_calculator

http://global.sap.com/corporate-en/our-company/history/index.epx

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The Managerial Challenges Posed by Autonomous

Strategic Action

• Examples

1980, Sam H. Eletr, a manager in Hewlett-Packards lab,

tried to persuade HP’s new product people to get into

biotechnology; Sam Elter quit HP to start his own

business (Venture $5.2 Million) to make Gene machines,

which make DNA, the basic material of the generic code

Prof. Paul Lin

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The Use of New Venture Divisions (NVD)

• NVD – Operating Division Interface Problems

• NVD – Corporate Management Interface Problems

Exhibit 5 Interface Problems Involving the NVD

Prof. Paul Lin

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Prof. Paul Lin

* Circumvention of corporate rules

and regulations

* Inadequate measurement and

reward systems

* Resistance to institutionalization

EXHIBIT 5 Interface Problems Involving the NVD

Strategic

interferences

* Domain protection issues

* Synergy consideration

Administrative/

Cultural frictions

NVD-Operating divisions

interface

Source: Adapted from R. A. Burgelman, “Managing the New Venture Division: Research Findings and Implications for Strategic Management,” Strategic Management Journal, January-March 1985.

NVD-corporate management

interface

* Rigidities resulting from

management system

* Personal transfer issues

* Lack of diversification strategy

* Limits to rate of strategic change

that can be absorbed

* Effects on corporate image

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A Framework for Assessing Internal

Entrepreneurial Initiatives

• Assessing Strategic Importance

• Assessing Operational Relatedness

Exhibit 6 Toward an Assessment Framework

Prof. Paul Lin

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EXHIBIT 6 Toward an Assessment Framework

Strategic

importance

Degree of

control

Administrative

linkages

Operational

relatedness

Efficiency

considerations

Operational

linkages

Organizational

design

alternatives

(networking)

(authority)

Key dimensions and their implications

Source: R. A. Burgelman, “Managing Corporate Entrepreneurship: New Structures for

Implementing Technological Innovation,” Technology in Society (December 1985), pp. 91-103

Prof. Paul Lin

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Assessing Strategic Importance

Critical Issues to be Addressed:

• How does this initiative maintain the firm’s capability to

move in areas where major current or potential competitors

might move?

• How does this help the firm determine where to go?

• How does it help the firm create new defensible niches?

• How does it help mobilize the organization?

• To what extend could it put the firms at risk?

• When should the firm get out of it if it does not seem to

work?

• What is missing in the analysis?

Prof. Paul Lin

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Assessing Operational Relatedness

Critical Issues and Questions to be Addressed:

• What key capabilities are required to make this project

successful?

• Where, how, and when will the firm get them if it doesn’t

have them yet, and at what cost?

• Who else might be able to do this, perhaps better?

• How will these new capabilities affect the capabilities

currently employed in the firm’s mainstream business?

• What other areas may possibly require successful

innovative efforts if the firm move toward with this project?

• What is missing in the analysis?

Prof. Paul Lin

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Design Alternatives for Corporate

Entrepreneurship

• Determine Administrative Linkages

Strategic importance: Very important, Uncertain, Not

important

Strong: Exert control over?

Spin-off?

• Determining Operational Linkages

Maximized synergies, maximized cost of transactions?

Operational relatedness

• Unrelated

• Partly related

• Strongly related

Prof. Paul Lin

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Choosing Design Alternatives

Exhibit 7: Nine Design Alternatives

1. Direct Integration

2. New Product Department

3. Special Business Units

4. Micro New Venture Department

5. New Venture Division (NVD)

6. Independent Business Units

7. Nurturing plus Contracting

8. Contracting

9. Complete Spin-Off

Prof. Paul Lin

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EXHIBIT 7 Organization Designs for Corporate Entrepreneurship

3

Special

business

units

1

Direct

integration

2

New product

development

4

Micro new

venture

department

5

New

venture

division

6

Independent

business

units

7

Nurturing

and

contracting

8

Contracting

9

Complete

Spin-off

Very

importantUncertain

Not

important

Unrelated

Partly

related

Strongly

related

Strategic importance

Ope

ratio

nal r

elat

edne

ss

Source: R. A. Burgelman, “Designs for Corporate Entrepreneurship in

Established Firms,” California Management Review (Spring 1984),

pp. 154-166.

Prof. Paul Lin

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Three Major Issues and Potential Problems1. Corporate management and the internal entrepreneur should

view the assessment framework as a tool for clarity—at a

particular moment—their community of interests and

independencies and to structure a non-zero sum game

2. Corporate management must establish measurement and

reward systems capable of accommodating the incentive

requirements of different designs

3. As the development process unfolds, new information may

modify the perceived strategic importance and operational

relatedness, which may require a renegotiation of the

organization design. The organization design framework

must thus be used dynamically, with ventures potentially

moving from one type of arrangement to another.

Prof. Paul Lin

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Three Major Issues and Potential Problems

(continue)

• Stability of relationship

• Appropriate benefits from the entrepreneurial

endeavors

• Provide the entrepreneur with opportunity to be

more successful

• Policies

• Protect proprietary corporate capabilities and skills,

intellectual property, etc

Prof. Paul Lin

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Conclusion

Prof. Paul Lin

Documents

CPET 575 Management Of Technology - IPFWlin/CPET575_MangOfTech/2015Fall/... · 5th edition, 2009, McGraw-Hill, ... • The Managerial Challenge Posed by Autonomous Strategic Action