CPET 575 Management Of Technology - IPFWlin/CPET575_MangOfTech/2017-Spring/1-Lectures/...CPET 575 Management Of Technology Part III. ... IBM’s Rometty pitches “high value innovation”,

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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/~lin

A Specialty Course forM.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 Firm’s Innovative Capabilities

Overview

Innovation Challenges in Established Firms

Strategic Management of Corporate Research

Managing Corporate Entrepreneurship

Conclusion

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Enactment of Technology Strategy – Developing A Firm’s Innovative Capabilities Overview

Innovation Challenges in Established Firms• New Product and New Business Development

Strategic Management of Corporate Research• The Functions of Corporate Research

• Managing Key Interfaces

• Linking Corporate Research to Corporate Development Strategy


Conclusion

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Enactment of Technology Strategy – Developing A Firm’s Innovative Capabilities Overview



Managing Corporate Entrepreneurship• 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

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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

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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

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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 Dell Example - 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/

• $67 billion Dell-EMC deal closes today, https://techcrunch.com/2016/09/07/67-billion-dell-emc-deal-becomes-official-today/

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Sourcing Technologies Intel Examples – Sourcing Technology

• Intel Acquires Yogitech for IoT Functional Safety (including Advanced Driver Assistant System (ADAD)), 20616/4/25, https://newsroom.intel.com/editorials/blog-intel-acquires-yogitech-for-iot-functional-safety/

• Yogitech, https://newsroom.intel.com/editorials/blog-intel-acquires-yogitech-for-iot-functional-safety/

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• Intel to Buy Israeli Mobileye for $15.3 Billion Deal, 2017/3/13, http://fortune.com/2017/03/13/intel-mobileye-acquisition-history/

August 2015, Intel acquired for $16.7 billion a company called Altera (FPGA)

April 2016, acquired Yogitech (Italian IoTchipmaker)

May 2016, acquired Wind River (IoT software)

July 2016, BMW, Intel, Mobileye announced they will partner to produce self-driving car for city streets by 2010 and develop the technology an open platform that can be used other automakers or ride-sharing companies

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• Intel to Buy Israeli Mobileye for $15.3 Billion Deal, 2017/3/13, http://fortune.com/2017/03/13/intel-mobileye-acquisition-history/

Nov. 2016, Krzanich announces that the company’s venture capital arm will invest $250 million over the next two years into the autonomous vehicle technology

Nov. 2016, Intel reorganizes its business to create a new division dedicated to autonomous driving (spun out of its Internet of Things business)

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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

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Autonomousstrategic

action

EXHIBIT 1 An Evolutionary Framework of the Strategy-Making Process in Established Firms

Strategic context

Inducedstrategic

action

Structuralcontext

Concept ofcorporatestrategy

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Innovation Challenges in Established Firms 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)

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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

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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

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Exploiting Innovation Opportunities in the Induced Process

Example - 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/”

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Exploiting Innovation Opportunities in the 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

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Exploiting Innovation Opportunities in the Autonomous Process

Examples

Bendix Corporation• Electronic Fuel 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

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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

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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

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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

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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/

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Strategic Management of Corporate Research 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/

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Strategic Management of Corporate Research Managing Key Interfaces

• Corporate Research – Divisional R&D Interface (Induced Process)

• Corporate Research – Business Research Interface (Autonomous Process)

Examples of Corporate Research & Development

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Strategic Management of Corporate Research 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/schneider-electric-innovation-rd.page

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Strategic Management of Corporate Research: Managing Key Interfaces

EXHIBIT 3 Linkages Among R&D Units

Closed

Open

Geographical

Closed

Closed Closed

Open

Open Open

PersonalPersonal

Tightcoupling

Nocoupling

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Strategic Management of Corporate Research Linking Corporate Research to Corporate

Development Strategy

• Assessing Technological Opportunities

• The Role of Different Levels of Corporate Research Management

• Allocating Resources to Corporate Research

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Strategic Management of Corporate Research:Managing Key Interfaces

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Linking Corporate Research to Corporate Development Strategy

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)

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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)

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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?

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Assessing Technological Opportunities: InitialScreening 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?

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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?

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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

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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

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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

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Managing Corporate Entrepreneurship 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

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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

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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

Strategicinterferences

* Domain protection issues* Synergy consideration

Administrative/Cultural frictions

NVD-Operating divisionsinterface

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 managementinterface

* 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

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EXHIBIT 6 Toward an Assessment Framework

Strategicimportance

Degree ofcontrol

Administrativelinkages

Operationalrelatedness

Efficiencyconsiderations

Operationallinkages

Organizationaldesign

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

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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?

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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?

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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 relatedProf. 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

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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.

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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

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Conclusion

Prof. Paul Lin

CPET 575 Management Of Technology - IPFWlin/CPET575_MangOfTech/2017-Spring/1-Lectures/...CPET 575 Management Of Technology Part III. ... IBM’s Rometty pitches “high value innovation”,

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