TECHNOLOGY MANAGEMENT 1: THE BASICS CP Beukman FIPENZ Engineering Management Programme University of Canterbury Issue 5.2 October 2000.

TECHNOLOGY TECHNOLOGY MANAGEMENT 1: MANAGEMENT 1: THE BASICSTHE BASICS

CP Beukman FIPENZCP Beukman FIPENZ

Engineering Management ProgrammeEngineering Management Programme

University of CanterburyUniversity of Canterbury

Issue 5.2 October 2000Issue 5.2 October 2000

The industrialist who rejects the aid of The industrialist who rejects the aid of science is about to be weighed in the science is about to be weighed in the balance.balance.

He will then be found wanting, and his He will then be found wanting, and his business will soon pass to other hands. business will soon pass to other hands.

The wise investor will avoid him and his The wise investor will avoid him and his companies.companies.

- - Arthur Dehon LittleArthur Dehon Little The Handwriting on the The Handwriting on the

WallWall

ScopeScope

Topics covering:Topics covering:

• Philosophical backgroundPhilosophical background

• Definition of technologyDefinition of technology

• InnovationInnovation

• Technology analysisTechnology analysis

• Technology ForecastingTechnology Forecasting

• Technology transferTechnology transfer

Growth accrues in the absence of Growth accrues in the absence of

weakness - not in the presence of weakness - not in the presence of

strength.strength.

- John L Walley- John L Walley

CEO - Canterbury Manufacturers’ CEO - Canterbury Manufacturers’ AssociationAssociation

New wealthNew wealth

NewNew wealth is either: wealth is either:

1. Grown - farming1. Grown - farming

2. Found - mining, fishing, hunting2. Found - mining, fishing, hunting

3. 3. Created by Created by adding valueadding value– invention, manufacturing, intellectual effortinvention, manufacturing, intellectual effort

Forty Year Trend In Wool Price

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Wool Price Clean Real cents

SpeculationSpeculation

Speculation does not add value & Speculation does not add value & wealth in the long runwealth in the long run• remember the crash of 1987?remember the crash of 1987?• Share value is a perception that can Share value is a perception that can

overheatoverheat

Accountants record wealthAccountants record wealth

Lawyers (re)distribute wealthLawyers (re)distribute wealth

Employment profilesEmployment profiles

Lawyers/10,000 popLawyers/10,000 pop• USA 60USA 60• NZ 40NZ 40• Germany 10Germany 10• Japan 3Japan 3

Accountants/10,000 Accountants/10,000 • Australia 110Australia 110• NZ 100NZ 100• Germany 15Germany 15• Japan 3Japan 3

Engineers/10,000 popEngineers/10,000 pop• Sweden 310Sweden 310• Japan 220Japan 220• IsraelIsrael 135 135• USA USA 85 85• NZ 15NZ 15

““Management” thinkingManagement” thinking

What has developed, in the business community, as What has developed, in the business community, as

in academia, is a preoccupation with a false and in academia, is a preoccupation with a false and

shallow concept of the professional manager, a shallow concept of the professional manager, a

“pseudo professional” really - an individual “pseudo professional” really - an individual

having no special expertise in any particular having no special expertise in any particular

industry or technology who nevertheless can step industry or technology who nevertheless can step

into an unfamiliar company and run it successfully into an unfamiliar company and run it successfully

through strict application of financial controls, through strict application of financial controls,

portfolio concepts, and a market driven strategy.portfolio concepts, and a market driven strategy.

Hayes, R.H. and W.J. AbernathyHayes, R.H. and W.J. Abernathy

Managing Our Way into Economic Managing Our Way into Economic DeclineDecline

HBRHBR

July-August 1980July-August 1980

The Failure of Economic The Failure of Economic Theory : 1Theory : 1

Production is a process of combination Production is a process of combination

rather than transformation of inputsrather than transformation of inputs

• rational response to price (or preference) rational response to price (or preference)

shifts in allocating capital and setting shifts in allocating capital and setting

optimal capital-labour ratiooptimal capital-labour ratio

The Failure of Economic The Failure of Economic Theory: 2Theory: 2

An equilibrium rather than a An equilibrium rather than a

dynamic systemdynamic system

• technology changes the nature of the technology changes the nature of the

equilibrium - very rapidlyequilibrium - very rapidly

The Failure of Economic The Failure of Economic Theory: 3Theory: 3

Assumption of reversibilityAssumption of reversibility

• the skill base can be expanded and the skill base can be expanded and

contracted to match the marketcontracted to match the market

• no recognition is given to accumulated no recognition is given to accumulated

knowledge and scarcity /sourcing of skills in knowledge and scarcity /sourcing of skills in

times of growthtimes of growth

To what extent does To what extent does technology contribute to technology contribute to economic growth?economic growth?

Re-investment of profitsRe-investment of profits• rapid obsolescence from competitive rapid obsolescence from competitive

pressurespressures• innovation and growthinnovation and growth

Paradigm shiftParadigm shift• the costs of major changes are risingthe costs of major changes are rising

Measurement problemsMeasurement problems• what are we measuring with classic indices? what are we measuring with classic indices?

(like GDP which even (like GDP which even includesincludes cost of crime!) cost of crime!)

Agriculture’s share of exports

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19751980198519901995 est

%

Ref: OECD Economies at a glance - 1996CHART 4

Sources of Economic Sources of Economic Growth - towards 2000+Growth - towards 2000+

LABOUR27%

CAPITAL24%

TECHNOLOGY49%

The need for changeThe need for change

There is a need for a major change There is a need for a major change

throughout the economy towards throughout the economy towards

more investment in productive more investment in productive

enterprise and away from enterprise and away from

speculative investment in property.speculative investment in property.

Economic attributes of Economic attributes of TechnologyTechnology

Technology makes labour & capital Technology makes labour & capital

more productive.more productive.

What should you invest in?What should you invest in?

Economic attributes of Economic attributes of TechnologyTechnology

Technology makes labour & capital Technology makes labour & capital more productive.more productive.

What should you invest in?What should you invest in?• that which stays in the countrythat which stays in the country

= people= people

= infrastructure= infrastructure

= a climate which stimulates R&D and = a climate which stimulates R&D and technology developmenttechnology development

Which are the future Which are the future issues?issues?

ElectronicsElectronics SoftwareSoftware ComputersComputers RoboticsRobotics MaterialsMaterials BiotechBiotech

– Source Prof Lester Thurow, MIT, March 2000Source Prof Lester Thurow, MIT, March 2000

New Zealand’s productivity growthcompared

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1960 - 19731979 - 1993

Ref: OECD Economies at a glance - 1996

% per annum

CHART 3

Wage and skill differentials inmanufacturing

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High wageMedium WageLow wage

OECD = 100

Ref: OECD Economies at a glance - 1996CHART 5

To really grow we need:To really grow we need:

EntrepreneursEntrepreneurs

TechnologyTechnology

Pathways to marketsPathways to markets

Venture capitalVenture capital

The saving grace?The saving grace?

We need to get off the sheep’s We need to get off the sheep’s back/stop relying on digging holes back/stop relying on digging holes and think…….and think…….

TECHNOLOGYTECHNOLOGY

TECHNOLOGYTECHNOLOGY

DefinitionsDefinitions

So, what is technology?So, what is technology?

We use the term every day.We use the term every day.

But first, let us think about business….But first, let us think about business….

– Ratbert slideRatbert slide

But first….But first….

So, what is the primary So, what is the primary activity of a businessactivity of a business

??

So, what are businesses So, what are businesses there for?there for?

Distinguish between business outcomes Distinguish between business outcomes and the cause of the outcomesand the cause of the outcomes

We produce a product or serviceWe produce a product or service

To do this (successfully) we need what is To do this (successfully) we need what is called called Competitive Capability or a Competitive Capability or a Distinctive CompetenceDistinctive Competence

– Wizard of Id slideWizard of Id slide

Distinctive CompetenceDistinctive Competence

A distinctive competence is something A distinctive competence is something

a firm does especially well in a firm does especially well in

comparison to rival companiescomparison to rival companies– Thompson & Strickland (1990)Thompson & Strickland (1990)

Competitive advantage Competitive advantage – PorterPorter

Competence “resources”Competence “resources”

Knowledge, skills & experienceKnowledge, skills & experience

Systems & proceduresSystems & procedures

ExperienceExperience

Values & cultureValues & culture

Tangible assetsTangible assets

Change potentialChange potential

Strategic resourcesStrategic resources

Resources which are/could be a source Resources which are/could be a source

of advantage.of advantage.

To be truly strategic a resource must be:To be truly strategic a resource must be:

• valuablevaluable

• sustainablesustainable

• versatileversatile

Strategic Strategic capabilities/competenciescapabilities/competencies

Activities which are important to the Activities which are important to the

business, offer a performance business, offer a performance

advantage over competitors and advantage over competitors and

which are built around the firm’s which are built around the firm’s

strategic resources.strategic resources.

Discussion - McDonald’s Discussion - McDonald’s Corp.Corp.

Imagine the McDonald’s corporation at a Imagine the McDonald’s corporation at a

time when top management is trying to time when top management is trying to

decide how to diversify. Three decide how to diversify. Three

businesses have made the shortlist:businesses have made the shortlist:

1. Frozen foods1. Frozen foods

2. Theme parks2. Theme parks

3. Photo processing3. Photo processing

Which business will allow Which business will allow

McDonald’s to maximise the value McDonald’s to maximise the value

of its core competencies?of its core competencies?

McDonald’s core McDonald’s core competenciescompetencies

Picking good real estate locationsPicking good real estate locations providing family entertainmentproviding family entertainment providing quick serviceproviding quick service providing consistency in product offeringproviding consistency in product offering having an excellent distribution networkhaving an excellent distribution network having knowledge of the food businesshaving knowledge of the food business having knowledge of food retailinghaving knowledge of food retailing having good supplier relationshipshaving good supplier relationships


Note that diversification may “force” the Note that diversification may “force” the breakup of the set of core competencies.breakup of the set of core competencies.

Do not deny the existence of synergiesDo not deny the existence of synergies A core competence in isolation may not be A core competence in isolation may not be

as valuable as it is when coupled with other as valuable as it is when coupled with other competencies.competencies.

All these fit & balance & support one anotherAll these fit & balance & support one another They fit the requirements of the fast-food They fit the requirements of the fast-food

marketmarket


The very act of unbundling McDonald’s The very act of unbundling McDonald’s

core competencies so as to apply them in core competencies so as to apply them in

different markets, actually destroys their different markets, actually destroys their

fitness and may also weaken the value of fitness and may also weaken the value of

the individual competencies.the individual competencies.

What makes McDonald’s successful is not What makes McDonald’s successful is not

the individual competencies, but the the individual competencies, but the

uniqueness of their combination.uniqueness of their combination.

Strategic Strategic capabilities/competenciescapabilities/competencies

To be of real strategic value, a resource To be of real strategic value, a resource

must be:must be:

ValuableValuable

SustainableSustainable

VersatileVersatile

Value of a resourceValue of a resource

What is its effect on the organisation’s What is its effect on the organisation’s costs and/or revenues?costs and/or revenues?

What is its effect on the organisation’s What is its effect on the organisation’s ability to defuse threats and/or ability to defuse threats and/or capitalise on opportunities?capitalise on opportunities?

Do competitors already have it?Do competitors already have it? What level of performance does it offer What level of performance does it offer

compared to competitors?compared to competitors?

Sustainability of a Sustainability of a resourceresource

Can competitors recognise it?Can competitors recognise it?

How long would it take to imitate?How long would it take to imitate?

How costly would it be to imitate?How costly would it be to imitate?

Without investment of time or money Without investment of time or money

how quickly does its value decline?how quickly does its value decline?

Can its advantages be substituted?Can its advantages be substituted?

Versatality of a resourceVersatality of a resource

How deeply is it tied to its surroundings?How deeply is it tied to its surroundings?

How well is it understood?How well is it understood?

Could it be used in other parts of the Could it be used in other parts of the

business?business?

Could it be used in other markets? Could it be used in other markets?

Competitive AdvantageCompetitive Advantage

Competitive advantage is at the heart of a Competitive advantage is at the heart of a

firm’s performance in competitive marketsfirm’s performance in competitive markets

It grows fundamentally out of the It grows fundamentally out of the value a value a

firm is able to create for its customersfirm is able to create for its customers

through the application of the strategies through the application of the strategies

of the firmof the firm

Competitive Advantage Competitive Advantage (cont…)(cont…)

A firm gains competitive advantage A firm gains competitive advantage

when its position gives it an edge when its position gives it an edge

in coping with competitive forces in coping with competitive forces

and in attracting customersand in attracting customers

CORE COMPETENCE

&ABILITIES

CORE COMPETENCE

&ABILITIES

CREATE

CORE COMPETENCE

&ABILITIES

CREATE

PRODUCTS AND

SERVICES

CORE COMPETENCE

&ABILITIES

CREATE

PRODUCTS AND

SERVICES

WHICH THE MARKET BUYS AND PAYS FOR

Words on capabilityWords on capability

Capability =Capability =

COMPETENCE =COMPETENCE =

++

CAPACITY =CAPACITY =

SKILL & KNOWLEDGE+

EXPERIENCE

ASSETS+

RESOURCES

Where does the Core Where does the Core Competence come from?Competence come from?

Recap - what is core competence?Recap - what is core competence?

A set of abilitiesA set of abilities• it goes beyond just the technical abilityit goes beyond just the technical ability

• management abilitymanagement ability

• marketing abilitymarketing ability

• ability to forecastability to forecast

• etcetc

CORE COMPETENCE

&ABILITIES

CREATE

PRODUCTS AND

SERVICES


FEED-IN

?

What builds competency What builds competency and abilities?and abilities?

The building blocks of The building blocks of competency and abilitiescompetency and abilities

TECHNOLOGY:TECHNOLOGY:• The complex of knowledge and skills The complex of knowledge and skills

that people may employ to create, that people may employ to create, use, maintain and dispose of items of use, maintain and dispose of items of utilityutility

CORE COMPETENCE

&ABILITIES

CREATE

PRODUCTS AND

SERVICES


FEED-IN

SKILL, KNOWLEDGE (KNOW-HOW)

Technology is created Technology is created capabilitycapability

It is manifested in artifacts, the It is manifested in artifacts, the

purpose of which is to augment purpose of which is to augment

human abilityhuman ability


CreatedCreated

• Technology is not a free gift of nature:Technology is not a free gift of nature:

• It does not come about by itselfIt does not come about by itself

• It is the product of deliberate actionIt is the product of deliberate action

• If technology is to be employed as a If technology is to be employed as a

resource, it has to be cultivated, resource, it has to be cultivated,

nurtured and supported.nurtured and supported.


CapabilityCapability

• This concept refers to a particular This concept refers to a particular

type of handiness, namely that of type of handiness, namely that of

manipulating aspects of the physical manipulating aspects of the physical

world.world.


ArtifactsArtifacts

• This is the generic term for all devices, This is the generic term for all devices,

tools, instruments, or machines.tools, instruments, or machines.

• Artefacts are the repositories of capability.Artefacts are the repositories of capability.

• They are to the study of technology what They are to the study of technology what

organisms are to the study of biology.organisms are to the study of biology.


AugmentAugment

This concept is used to convey how This concept is used to convey how

technology:technology:

• on the one hand enhances ability such as on the one hand enhances ability such as

adding instrumentation to human activity,adding instrumentation to human activity,

• on the other hand replaces human ability, on the other hand replaces human ability,

by substituting it with competent artifactsby substituting it with competent artifacts

TECHNOLOGY AND TECHNOLOGY AND HISTORYHISTORY

Overhead slideOverhead slide

Technology growth in Technology growth in history: 1history: 1

FireFire ToolsTools Metallurgy (bronze, iron)Metallurgy (bronze, iron) ArrowsArrows StirrupsStirrups GunpowderGunpowder PrintingPrinting Tacking against the windTacking against the wind Sextant & chronometerSextant & chronometer

Technology growth in Technology growth in history: 2history: 2 Spinning by machineSpinning by machine Steam power Steam power (pumps - mine dewatering, locomotive, (pumps - mine dewatering, locomotive,

stationary engines and changes in work & urbanisation)stationary engines and changes in work & urbanisation) Internal combustion engine - motor carsInternal combustion engine - motor cars ElectricityElectricity TelephoneTelephone FlightFlight AntibioticsAntibiotics TransistorTransistor ComputerComputer

Largest contribution of the Largest contribution of the milennium?milennium?

What technology has contributed the What technology has contributed the

most towards “civilisation” over most towards “civilisation” over

the last 1000 years?the last 1000 years?

Largest contributions of Largest contributions of the last milennium?the last milennium?

Waterborne sewage = WCWaterborne sewage = WC

Electricity distributionElectricity distribution

??

Technological abilityTechnological ability

Ability to learnAbility to learn

Ability to operateAbility to operate

Ability to upgradeAbility to upgrade

Ability to designAbility to design

Ability to create the whole systemAbility to create the whole system

Ability to manage the processAbility to manage the process

Learning ability:Learning ability:Bloom’s TaxonomyBloom’s Taxonomy

1. To Know1. To Know• be aware of somethingbe aware of something

• take notetake note

2. To Understand2. To Understand• form an understanding of function, structure, form an understanding of function, structure,

etc.etc.

3. To Apply3. To Apply• in a similar or related situationin a similar or related situation

Learning ability:Learning ability:Bloom’s Taxonomy Bloom’s Taxonomy (cont...)(cont...)

4. To Analyse4. To Analyse• distinguish elements and componentsdistinguish elements and components• explain principlesexplain principles

5. To Synthesize5. To Synthesize• combine new or other componentscombine new or other components• new applicationnew application

6. To Evaluate6. To Evaluate• distinguish applicability, acceptabilitydistinguish applicability, acceptability• new conceptsnew concepts

Learning ability:Learning ability:Bloom’s Taxonomy Bloom’s Taxonomy (cont...)(cont...)

1. To Know1. To Know

2. To Understand2. To Understand

3. To Apply3. To Apply

4. To Analyse4. To Analyse

5. To Synthesize5. To Synthesize

6. To Evaluate6. To Evaluate

IncreasingAbility

Ability checklistAbility checklist

Formulate requirementFormulate requirement Develop specificationsDevelop specifications DesignDesign Develop modelsDevelop models ProduceProduce Test & evaluateTest & evaluate Manage the processManage the process Provide servicesProvide services

• DocumentationDocumentation• Design reviewsDesign reviews

Train participantsTrain participants Use the productUse the product Support the productSupport the product Improve the productImprove the product Repeat the processRepeat the process

• maintain capabilitymaintain capability• career planningcareer planning• retrainingretraining

System abilitySystem ability

Define the needDefine the need Translate need and allocate requirements Translate need and allocate requirements

- - • the ability to specifythe ability to specify

Translate specifications into productsTranslate specifications into products• designdesign• manufacturemanufacture

Develop the design via optimisationDevelop the design via optimisation Test and evaluate result Test and evaluate result

System ability (cont…)System ability (cont…)

Operate the system effectivelyOperate the system effectively

Support and maintain the system Support and maintain the system

effectively at all levels effectively at all levels

Technology-related Technology-related ConceptsConcepts

Fundamental researchFundamental research

Research and Research and development (R&D)development (R&D)

Tooling upTooling up

Industrial EngineeringIndustrial Engineering

Diffusion, marketingDiffusion, marketing

Technology transferTechnology transfer

ManagementManagement

Skills & trainingSkills & training

Co-operation, Co-operation, networkingnetworking

Intellectual PropertyIntellectual Property

Implications of the role of Implications of the role of R&D in the SMER&D in the SME

1. Restructuring1. Restructuring

• ““Lean and mean” leaves little resources for Lean and mean” leaves little resources for

R&DR&D

• Lost/losing cumulative investment in Lost/losing cumulative investment in

knowledgeknowledge

• Value of past knowledge not recognisedValue of past knowledge not recognised

• Financial institutions do not invest in Financial institutions do not invest in

intangibles (knowledge)intangibles (knowledge)

Implications of the role of Implications of the role of R&D in the SME (cont)R&D in the SME (cont)

2. Inability to absorb mistakes2. Inability to absorb mistakes

• Corollary of “lean and mean”Corollary of “lean and mean”

• Short-term focusShort-term focus

• Risk-averse focusRisk-averse focus

• Mistakes are inevitable consequences Mistakes are inevitable consequences

of embarking on a technology pathof embarking on a technology path

Implications of the role of Implications of the role of R&D in the SME (cont)R&D in the SME (cont)

3. Recognise the source of innovation3. Recognise the source of innovation

• Perceptions of the innovation process Perceptions of the innovation process

is woefully simplistic and inadequateis woefully simplistic and inadequate

• Five stages or generations of models Five stages or generations of models

for the innovation process (for the innovation process (see latersee later))

MANAGEMENTOF

TECHNOLOGY

SYSTEMS THINKING

BUSINESSSTRATEGY

LEAD&

MANAGEPEOPLE

TECHNOLOGYANALYSIS

SCIENCE&

ENGINEERING

In summary:

Aspects of TechnologyManagementRequired

So, what is innovation?So, what is innovation?

See following modelSee following model

CORE COMPETENCE

&ABILITIES

CREATE

PRODUCTS AND

SERVICES


SELECTIVEFLOW

TECHNOLOGY:SKILL, KNOWLEDGE

(KNOW-HOW)

SELECTIVE FLOW INNOVATION

CORE COMPETENCE

&ABILITIES

CREATE

PRODUCTS AND

SERVICES


SELECTIVEFLOW

TECHNOLOGY:SKILL, KNOWLEDGE

(KNOW-HOW)

SELECTIVE FLOW INNOVATION

CHANGEPROCESS

TECHNOLOGY MANAGEMENT 1: THE BASICS CP Beukman FIPENZ Engineering Management Programme University of Canterbury Issue 5.2 October 2000.

Documents

wealth slide

b engineers10

b production

b accountants10

farming b

wall slide

speculation b speculation

scope b topics