Tech innovation s8_strategy

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


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.


Operations Strategy at Wal-Mart


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


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


What are attributes of a winning strategy?

• What are attributes of a winning strategy?

• Win in the market place.

– Value

– Market

– Industry


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?


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


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


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


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


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


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


Value proposition

Type of Value proposition

• Lowest Total cost

• Best Product

• Best Service

• Best Total Solution

Examples

• Walmart, Big bazzar

• BMW,

• Airtel

• Toyota


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


Technology vs market Positioning

Radical

Off the shelf

Technology Reach

Breakthrough

Platform

Derivative

Product

Support

Entirely new benefit Improvement No change

Marketing Impact


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


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


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


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)


Strategy example

Wining Strategy

• IBM

• Apple

• Microsoft

• Nokia

• GE

• Corning

Lost Strategy

• Digital Equipment corporation

• US airways

• Enron

• Worldcom

• K-mart


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


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?


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


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


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


Explore and Exploit

• Learn

• Collaborate

• Prototype

• Strategize

• Architect

• Develop

• Deploy


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


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

Tech innovation s8_strategy

Business

semester mba technology

innovation management

value value

sound technology strategy

power of strategy innovation

winning strategy

industry computers

profitable industry