Managing Technology and Innovation

1
Managing Technology and Innovation

• Customization
• Toyota is gearing itself to deliver a custom
  built car within five days of receiving the
  order.
• Dell promises delivery of a customized PC within
  a few days of receiving the order.
• Motorola delivers their made-to-order cellular
  phones the next day to customers anywhere in the
  United States.

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Managing Technology and Innovation

• Customization
• Standardization starts upstream - raw materials,
  fabricating
• Customization starts downstream - special
  features services
• Key question is how far upstream in the value
  chain can or should product/service be customized?

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Managing Technology and Innovation

• Customization
• Standardization Strategies for Enabling
  Customization
• Part Standardization By using common components
  across members of a product line, the firm
  reduces costs (due to economies of scale),
  reduces inventories (due to risk pooling),
  reduces parts proliferation, and improves the
  predictability of requirements for components.

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Managing Technology and Innovation

• Customization
• Standardization Strategies for Enabling
  Customization
• Process Standardization requires that the
  process be modular and enables the firm to store
  inventory in semi-finished form (before full
  information about demand is realized) and later
  customize the product according to requirements.
• Benetton's sweater-making process primarily
  consists of two stages knitting and dyeing. The
  original process was to dye first and then knit
  based on requirements. However, the main source
  of demand uncertainty came from the choice of
  colors that customers wanted. So in order to
  exploit that Benetton resequenced the process by
  first knitting the sweaters and then dyeing them
  after perfect demand information was obtained.

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Managing Technology and Innovation

• Customization
• Standardization Strategies for Enabling
  Customization
• Product Standardization offer large variety of
  end products, but stock only a few in inventory.
• Advertise availability of products far greater
  than actual availability on average.

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Managing Technology and Innovation

• Customization
• Standardization Strategies for Enabling
  Customization
• Product Standardization (continued)
• If customer requests product version not normally
  stocked, the manufacturer either makes the
  product after receiving the order or, downward
  substitutes (provides the customer one of the
  available models that has a superset of features
  required by the customer.)
• Downward substitution is quite common in the
  semiconductor industry where a higher
  speed/functionality chip (under appropriate
  circumstances) is marked as a lower
  speed/functionality chip when the lower-end chip
  is not available in inventory

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Managing Technology and Innovation

• Speed
• It is not enough to be fast - one also has to
  achieve a better balance of speed, low cost, high
  performance, and high quality.
• For example Rule of 10X - technology in question
  must be 10 times better than what it is
  replacing.
• More accurately, Consumers need to perceive new
  technology to be 10 times better to think it
  worth the upheaval of changing.

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Managing Technology and Innovation

• Speed
• Speed depends on the ability to
• 1. Initiate and manage change inside company
• 2. Use and provide leverage in market chains to
  initiate change in other companies.

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Managing Technology and Innovation

• Speed
• Ability to change inside the firm depends on
  ability to avoid the competence trap
• Competence trap
• firms that strive for competence within a given
  strategy can become trapped in this strategy and
  miss opportunities for strategic change

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Managing Technology and Innovation

• Speed
• Competence trap derived from routines and
  procedures successful in past
• promotion and hiring
• incentive systems
• capital budgeting
• organizational structures
• personal commitment to status quo

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Managing Technology and Innovation

• Speed
• Some methods for avoiding the competence trap
• Avoid organizing around strict product
  modules(Intels emergent product teams).
• Avoid complete dependence on existing customers
  and suppliers for new product service ideas
  (Microsofts multiple vendors of X-Box software).
• Focus new product development teams entirely on
  unserved markets (Nokias evolution into
  wireless home).

12
Managing Technology and Innovation

• Knowhow
• The critical role of CLUSTERS in global strategy
• Competition is dynamic, depends on innovation,
  search for strategic differences
• Location affects competitive advantage through
  impact on productivity and productivity growth

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Managing Technology and Innovation

• Knowhow
• The critical role of CLUSTERS in global strategy
• A Cluster is a critical mass of companies in a
  particular field in a particular location and
  include a group of companies, suppliers, firms in
  related and complementary industries,
  infrastructure providers, knowledge creators, and
  collective associations.

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Managing Technology and Innovation

• Knowhow
• The critical role of CLUSTERS in global strategy
• Clusters improve productivity by
• providing access to specialized inputs and
  information,
• facilitating complementarities among cluster
  participants,
• improving performance measurement
• improving rate and success of innovation
• lowering barriers to entry

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Managing Technology and Innovation

• Knowhow
• The critical role of CLUSTERS in global strategy
• Cluster theory and Globalization
• a firm must harness advantages of spreading
  activities across locations but also capture the
  innovation advantages of home base
• outsourcing reduces locational disadvantages, but
  limits access to cluster-associated resources
• locating in cluster may reduce overall costs

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Managing Technology and Innovation

• Knowhow
• The critical role of CLUSTERS in global strategy
• Examples of Emerging Clusters in Nanotechnology
• Northern California
• Austin, Texas
• Tsukuba, Japan
• Stirling, Scotland

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Managing Technology and Innovation

• Time Pacing Combining Speed and Knowhow
• Time Pacing
• Creating new products or services, launching new
  businesses, or entering new markets according to
  the calendar.
• Time-pacing is not (just) SPEED
• It is synchronizing SPEED and INTENSITY OF EFFORT.

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Managing Technology and Innovation

• Time Pacing Combining Speed and Knowhow
• Manage TRANSITION and RYTHM
• Transition capable of moving into new products,
  businesses, markets, acquisitions, mergers, etc.
• Rhythm in sync with cycles linked to external
  agents customers, suppliers, competitors, and
  even regulators.

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Managing Technology and Innovation

• Industry Case The race for the world VCR market
• Product development is a 100-yard dash
• Industry development transformation is a
  triathlon.
• Stages of Industry Development and Transformation
• 1. Competition for Industry Foresight and
  Intellectual Leadership
• 2. Competition to Foreshorten Migration Paths
• 3. Competition for Market Position and Market
  Share

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Managing Technology and Innovation

• Industry Case The race for the world VCR market
• Competition for Industry Foresight and
  Intellectual Leadership
• Race to commercialize VCR spanned decades, rather
  than years
• Ampex, 1959 - 1st VCR Matsushita, late 1970s -
  first mass commercialization of VHS standard VCR
• VCR was 1st major innovation in consumer
  electronics commercialized first in mass markets
  by Japanese firms, rather than U.S. or European
  companies.

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Managing Technology and Innovation

• Industry Case The race for the world VCR market
• Competition for Industry Foresight and
  Intellectual Leadership
• Philips, Sony and Matsushita (JVC) each worked
  for close to 20 years to produce VCR for home
  use.
• New Product Adoption Model - Technologies
  Learning how to make extremely precise, revolving
  video-recording heads presented major
  competence-building challenge to all comers.

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Managing Technology and Innovation

• Industry Case The race for the world VCR market
• Competition for Industry Foresight and
  Intellectual Leadership
• New Product Adoption Product Functionalities
  and Customer Segment
• Continued experimentation in marketplace with
  multiple models.
• The more rapid the pace of market
  experimentation, the quicker the learning about
  what customers really want in a product.

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Managing Technology and Innovation

• Industry Case The race for the world VCR market
• Competition for Industry Foresight and
  Intellectual Leadership
• Gain deeper understanding than competitors of
  trends and discontinuities - technological,
  demographic, regulatory, or lifestyle
• Trends and discontinuities will transform
  industry boundaries and create new competitive
  space
• New types of customer benefits, or radically new
  way of delivering existing customer benefits

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Managing Technology and Innovation

• Industry Case The race for the world VCR market
• Competition to Foreshorten Migration Paths
• Creating an industry standard
• battle between Sonys Beta, JVCs VHS, and
  Philips V2000
• winner reaps benefits of software availability,
  licensing income, and economies of scale in
  component production

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Managing Technology and Innovation

• Industry Case The race for the world VCR market
• Competition to Foreshorten Migration Paths
• Sony took early lead, 85 market share by end of
  1976
• JVC introduced 2-hour record time
• JVC co-opted licensee partnerships - Telefunken
  (Germany), Thorn (Great Britain), Thomson
  (France), RCA and GE (U.S.).
• These companies were initially sourcing
  components and finished VCRs from JVC

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Managing Technology and Innovation

• Industry Case The race for the world VCR market
• Competition to Foreshorten Migration Paths
• Influence the direction of industry development
• Race to accumulate
• necessary competencies,
• test and improve alternate product/service
  concepts,
• attract coalition partners who have critical
  complementary resources,
• construct product/service delivery
  infrastructure,
• get agreement around standards

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Managing Technology and Innovation

• Industry Case The race for the world VCR market
• Competition for Market Position and Market Share
• Wide selection of VHS brands and models, relative
  to Beta, convinced software suppliers to back VHS
  and w/in two years market battle between Beta and
  VHS was over.
• Philips launched V2000 18 months after VHS -
  D.O.A.!
• Matsushita sold several million VCRs around the
  world, continuing to reduce costs and improve
  features

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Managing Technology and Innovation

• Industry Case The race for the world VCR market
• Competition for Market Position and Market Share
• Centered around well-defined parameters of value,
  cost, price and service
• Maximize efficiency and productivity
• Craft appropriate market positioning strategy
• Building worldwide supplier network
• Preempting competitors in critical markets.

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Managing Technology and Innovation

• The Future of the VCR, DVD, etc.??
• Today, a TV set is the focal point of the average
  living room In the future, digital TVs and their
  accompanying devices will be hidden until they
  are turned on.
• Home media center have a single control unit that
  incorporates receivers, tuners, decoders, a CPU,
  and an embedded OS and an embedded camera and
  microphone for video e-mail and voice mail.
• Display innovations First step - gas plasma
  Next - streamlined displays based on
  light-emitting polymers.
• Speakers will continue to shrink in size,
  following the trend in today's satellite speaker
  systems.