Part I: Laying the Foundation

Chapter 1. Management of Technology and

Innovation: An Overview

Chapter 2. Strategy Process and the

Management of Technology and Innovation
 Chapter 1

Management of Technology and

Innovation: An Overview
Introduction to the Concepts of Technology
 There are a number of different ways to define
technology.
 Some conceive technology as patents, licenses,
trademark,
 some conceive it as techniques, advertising,
management, manufacturing while some conceive it
in term of products, tools, equipment or machinery.
 Still for others it is the collection of production
possibilities, techniques, methods and processes
by which resources are actually transformed by
humans to meet their wants.
3
4
 Definitions of Technology……
 Technology is:
 The processes used to change inputs into outputs
 The application of knowledge to perform work
 The theoretical and practical knowledge, skills, and
artifacts that can be used to develop products as
well as their production and delivery system
 The technical means people use to improve their
surroundings
 The application of science, especially to industrial
or commercial objectives; the entire body of
methods and materials used to achieve such
objectives 5
 Origin of the word technology
 The word technology is a combination of two
Greek words, techne and logos.
 Techne means art, craft, or skill.
 Logos means “to speak of”.
 Some have since taken the word logos to imply the
practical application of techne.
 This range of definitions demonstrate that a variety
of different perspectives on technology exist.
 A few of the major definitions of technology include
the following:
6
Comparison of Definitions
 Although there is wide variety in the prior
definitions of technology, there are also some
common elements in each of the definitions.
 Each definition implies that:
 There is a process involved in technology,
 Change is an outcome of technology, and
 Technology involves a systematic approach to
deliver the desired outcomes (improvements,
objectives, and outputs).

7
 Some authors still define technology by
integrating these various definitions:

 Technology is the practical implementation

of learning and knowledge by individuals
and organizations to aid human endeavor.

 It is the knowledge, products, processes, tools,

and systems used in the creation of goods or in
the provision of services.
8
Science Vs Technology
 Whereas science is concerned with how and
why things happen, technology focuses on
making things happen.
 Technology refers to the theoretical and
practical knowledge, skills, and artifacts that
can be used to develop products and
services as well as their production and
delivery system.

9
Invention vs Technology
 An invention is an idea, a sketch or model
for a new or improved device, product,
process or system.
 It has not yet entered to economic system,
and most inventions never do so.
Innovation vs Technology
 Innovation is defined simply as new ideas
that work.
 An innovation is accomplished only with
the first commercial transaction involving the
new product, process, system or device.
 It is part of the economic system.
 Innovation means transforming an invention
into product or service that will be sold on the
market and provide return for the investor.
Knowledge vs Technology
 Knowledge is reflected in inventions, utility
models, designs, and in data forms.
 Technology is the systematic knowledge for
product manufacture and service provision.
 Knowledge is also shown in industrial plants,
design, installation, operation, and
maintenance of equipment, management of
industrial & commercial corporations, and the
technical skill & experience of experts for
those activities.
12
 Shortly, three standards should be met in
explaining the relationship between knowledge
and technology.
 First, knowledge must be systematic. This
means that it must be organized in terms of
providing solutions to problems.
 Second, knowledge must exist in certain places
like in someone’s head or in documents, and
must be able to be presented, so no matter what
it means it must be able to be transferred from
one person to another.
 Third, it must have purpose-orientation, so that it
can be utilized for useful purposes in industry,
farming, and commercial fields.
13
14
 Forms of Technology
 Within the scope of technology management, the term
technology has two fundamentally different forms:
 Product technologies are those that deploy scientific or
engineering principles to assure a specific technological
impact, e.g., optics, electronics, nuclear physics,
aerodynamics, etc, deal with a specific effect and determine
how an effect occurs.
 Process technologies, on the other hand, deploy the
effects of existing product technologies to enable and/or
optimize the occurrence of the technological impact.
 R&D process technologies are used to perform R&D activities and
may include technologies such as microscopy, nanotechnology
and atomic absorption technology.
 Typical production process technologies include galvanizing,
soldering and surface mounted technology (SMT). 15
Importance of Technology and Innovation
 The impact of technology on business is seldom
one-dimensional, but rather, new technology causes
a cascading effect within firms.
 For a firm to make a profit in this environment, it must
be more efficient….. one of the key ways is through
technology.
 Thus, the use of technology in one domain typically
leads to greater need for changes in technology in
other areas.
Importance to the Society

 The impact of technology is not simply on individual

firms.
 It also has broader societal impact both positive and
negative.
 Technology allows many job activities to be done as
easily in one part of the world as another. Thus,
technology has encouraged and permitted the
outsourcing of jobs to these lower cost environments to
a degree not seen before.
The Concept of Management of Technology
 Management of technology links engineering,
science, and management disciplines
 to plan, to develop, to implement and to control
technological capabilities to shape and accomplish the
strategic and operational goals of an organization.
 Managing technology implies managing the
systems that enable the creation, acquisition, and
exploitation of technology.
 It is assuming responsibility for creating,
acquiring, and spinning out technology to aid
human endeavor and satisfy customers’ needs.
18
 It includes all technological activities related to
management of technology development,
through management of innovation, technology
transfer, R&D activities and operational ones
including managing a specific technology
system, processes and operations as the form
of implemented technology.
 Management of technology can be considered
at two levels:
 managing at the macro-level of countries or
 at the micro-level of companies.
19
 At the macro-level
 It is concerned with the setting and implementation
of policies to deal with technological development
and utilization, and the impact of technology on
society, organizations, individuals and nature.
 It aims to stimulate innovation, create economic
growth, and to foster responsible use of technology
for the benefit of humankind.
 It focuses on the analysis of how a socio-technical
system of interconnected elements changes over
time, whether by emergence or through design,
and how such changes can be leveraged to
generate value in a sustainable way. 20
 At the micro-level of the firm
 It is concerned with the planning, development,
and implementation of technological capabilities to
shape and accomplish the operational and
strategic objectives of an organization.
 It focuses on the development of operational
capabilities such as manufacturing, distribution,
and field services
 It involves managing technology as external force
and internal factor of the firm
 meaning that both the innovative and technological
infrastructure and the technology and innovative
capacities of the firm are taken into account. 21
Systems view of Managing Technology
 Defining Innovation
 Innovation is the process of using knowledge to solve
a problem
 Innovation can be defined as “the process whereby
new and improved products, processes, materials,
and services are developed and transferred to a
plant and/or market where they are appropriate.”
 It is important to note that from this definition there
are different types of innovations.
 Technological Innovation is the use of knowledge
to apply tools, materials, processes and techniques
to come up with new solutions to problems
Definition of Management of Innovation

 The management of innovation can be define as

 a comprehensive approach to managerial problem
solving and action based on an understanding of the
linkages among innovation streams, organizational
teams, and organization evolution.
 It is about implementation—managing politics, control,
and individual resistance to change.
 The manager is an architect/ engineer,
politician/network builder, and artist/scientist.
Cyclical Innovation Process Model
Structuring the Examination of MTI
 Strategy Perspective
 Strategic management is a firm’s effort to analyze its
environment and its own strengths and weaknesses
and then consciously choose the competitive path it
wants to follow.
 The firm will seek to build up its strengths and
address its weaknesses.
 The strategic perspective is typically segmented into
three distinct steps: planning, implementation, and
evaluation and control.
 These steps are process activities that the firm
must develop.
 Making Strategic Decisions
 The organization must make key decisions as it
begins to examine technology and innovation.
 The key element in these decisions is whether
those processes are focused internally or
externally.
 For example, if a firm chooses to purchase
technology, it must focus on issues such as the
integration of the technology and the nature of the
firm that produced the technology.
 In contrast, if the focus is on the creation of
technology, then how the firm encourages
innovation internally through structure and
compensation becomes more important.
Why Technology Strategy?

A technology strategy is the approach that a

firm takes to obtaining and using technology
to achieve a new competitive advantage, or
to defend an existing technology-oriented
competitive advantage against erosion
Technology Strategy Differs from
Overall Business Strategy
1. Higher uncertainty
2. More use of intellectual property
3. Sometimes results are new to the world
4. Create strategies and dynamics that are
different
5. Require different organizations
6. Use different decision making tools
7. Opens up new opportunities
8. Face different strategic issues
Large Vs. Small Firms

 Many aspects are the same

 Some differences:
 The way of protecting intellectual property
 R&D intensity
 Approach to generating competitive advantage
 Chapter 2

Strategic Process and the

Management of Technology and
Innovation (MTI)
 The Strategic Process
 The firms’ strategic efforts are the actions that help
direct where the firm is going….These actions should
fit together to move the firm in a consistent
direction.
 To be successful, the strategy of the firm and its
management of technology should be intertwined.
 This technological position may rely on technology
that is developed internally or is purchased from
outside entities, but firm success does not happen
by chance.
 Concerns such as what and where are the markets
for the firm’s technologies, and what is the right
strategy to compete in that market are critical.
 What is Strategy?
 Strategy is a coordinated set of actions that
fulfill a firm’s objectives, purposes, and goals.
 Frequently, individuals confuse strategy with
strategic planning.
 Strategic planning is the process that lays the
groundwork and direction of the firm over the
next several years.
 Typically, strategic planning efforts produce a
formal written strategic plan.
 However, strategy is more than the
document that results from such planning efforts
or the planning effort itself.
 Strategic Management
 Strategic management is an ongoing process
through which the organization defines the nature of
the businesses in which the firm will be active, the
kind of economic and human organization it intends
to be, and the nature of the contribution it intends to
make to its various constituents.
 In establishing a strategy in a technology-focused
firm, that firms’ technology is not a minor issue.
 Technology is not a passive component of a firm….
 instead, it is a critical part of a firm’s strategic success that
should be planned, actively chosen, and constantly
evaluated and adjusted as necessary.
Centrality of MTI in Strategic Management
 Strategic management’s benefit is critical because it helps the
entire organization move toward consistent goals.
 Technology affects the strategic process in multiple places.
 Internally, technology affects the organizational structure,
people, processes, procedures, and systems.
 Additionally, external environmental factors, such as
politics, rate of innovation, laws, and public policy, all
influence the interaction of people, processes, and
structures.
 These external environmental factors also impact key
stakeholders such as customers, competitors, and
investors.
 Thus, a business clearly does not create its strategy in
isolation.
Internal and External Strategic Interactions
 Integrating MTI and Strategy
 Capabilities are skills that a firm develops…these
capabilities are the building blocks for the firm’s
strategy.
 Firms are similar to their competitors in most areas
detailed in the above figure.
 However, to be successful, there should be five or six
capabilities the firm develops and maintains that are
superior to its competitors.
 It is at the level of capabilities that the firm’s
integration of technology with strategic concerns should
begin.
 The capabilities of a firm can be classified as either
technical or market.
 Technical Capabilities
 Technical capabilities address how the firm approaches
technology it already has or wishes to have in the future.
 The firm’s approach to these capabilities can be classified
in one of three ways: destroy, preserve, or develop.
 Destroying is concerned with eliminating certain
technological capabilities in the organization and
replacing them with others.
 Developing new technology capabilities can give a firm a
competitive leap over others in the industry by changing the
playing field.
 These capabilities can be purchased externally or developed
internally. Many firms pursue new technology capabilities
to maintain or enhance their competitive position.
 Market Capabilities
 The firm must not only have direct technical
capabilities; it must also have market-relevant skills
that indirectly impact the technology of the
firm.
 Engineers may develop tremendous new products but
may have ignored issues such as how to distribute those
products.
 The firm’s various proficiencies must be consistent
and intertwined with its technological capabilities…
 the firm’s capabilities, including technology, provide the
firm with its competitive advantage.
 The goal is that the competitive advantage be sustainable by
the business over a significant period of time. Thus, the goal
is a sustainable competitive advantage.
Continuous versus Radical Technology
 Technology development can be classified as either
a continuous or radical.
 An example of continuous technology
development is the personal computer.
 It seems personal computers become lighter
and more mobile every year.
 They are viewed as continuous improvements
because there are no major changes that occur
at one time.
 This progression is designed to change an existing
technology but not to change its functionality…the
innovation is aimed at improving performance,
function, and/or quality at a lower cost.
 On the other hand, radical technology development
causes a dramatic change in the way things are done.
 The initial introduction of computers altered the way
information was processed and stored in organizations and
by individuals.
 The automobile was a radical technology when introduced…
it provided an extreme change in modes of transportation.
 No longer were individuals dependent on horses, nor
were they limited to where the railroads went.
 More recently, the smart phone has changed the way we
communicate and work.
 For example, iPhones and BlackBerries are widely
changing many industries by speeding complex
information to other locations
 These radical technologies established a new functionality
and a new way of doing things in business and society.
 Next Generation Technologies
 Between continuous and radical technologies, a third type of
technology development exists that is not often recognized.
 Continuous and radical technologies can be viewed as the
ends of a continuum.
 In between on this continuum are next-generation
technologies.
 These changes in technology and their impact on society are
more than the small step experienced in continuous
change, but they are not revolutionary either.
 For example, the personal computer is a next-generation
technology from the mainframe computer, made possible
by the radical innovation known as the silicon chip.
 Before the silicon chip, computers used tubes for
connectivity and then wires and contacts.
 Maturing Process of Technology
 A tool often used to examine where technological change
is going is the S-curve.
 Initially, innovation in a domain occurs and new products and
processes are introduced as firms seek to translate that
innovation to the market place…
 however, typically, no single product that uses the technology in a
particular way is dominant.
 It will take time for a dominant design that uses the technology
in a product or process to emerge.
 Over time, the amount of product innovation in this domain decreases
as the process innovations associated with that product improves
 The use of the technology still continues though so the top of
the S declines slowly in the S-curve.
The S-Curve of Technological Progress
 Technology Life Cycle
 The technology life cycle in the S-curve has four
phases: embryonic, growth, maturity, and aging.
 The embryonic phase includes the invention and
application of the invention through innovation.
 Improvement in the uses and the processes directly
related to the technology mark the growth phase.
 During the maturity phase, firms that have done a good
job of managing the first two phases can enjoy high
profitability.
 In the aging phase, there is a decline in the utility of the
technology.
 The technology may be rejuvenated and a modification
of the S-curve will take place, or the product or
process may become obsolete.
Shifting S-curve example
Offensive versus Defensive Technology
 A firm can employ technology in either an offensive or
defensive manner.
 The firm uses an offensive technology in a way that is
not being used by competitors so that it gains a
competitive advantage.
  Alternatively, a firm can have a defensive technology
and obtain technology that others already employ.
 The firm making the purchase in this situation feels it must
employ that technology to be competitive.
 This use of technology will not give the firm an
advantage, but it allows the business to match its
competitors.
 Another defensive use of technology can occur when
a firm acquires or employs a particular technology to
block its use by others.
 The Strategic Process in MTI
 From the previous discussions, it is clear that
technology should permeate the strategic process
of a firm.
 But what exactly is that process? The strategic
process of a firm can be broken down into three
principal activities.
 In practice, a well-managed firm performs these
activities simultaneously and continuously.
 The three components are:
1. Planning
2. Implementation
3. Evaluation and control
Key Activities in the Strategic Management Process
 Planning
 Planning is the systematic gathering of information that leads
to the generation of feasible alternatives for the firm,
selection of the most appropriate action among the
alternatives, and ultimately to the setting of direction for the
firm.
 Activities in the planning process include
1. Data gathering
2. Mission generation
3. Objective setting
4. Strategy establishment
 During strategic planning, the firm gathers extensive information
on the external environment and about its internal
capabilities.
 This information gathering process is critical because it
helps establish the foundations on which the firm bases its
plans.
 The information gathered is critical to the firm so we shall
spend more time on the types of information to gather after
briefly discussing mission, objectives, and strategy.
 From the information generated, the firm sets its mission.

 The mission of a firm is a simple statement of the basic

purpose or reason for existing.
  Once the broad mission is set, the firm builds on that
mission to establish measurable objectives and performance
targets that will help it fulfill its mission.
 These objectives and targets state in specific terms what is
to be accomplished in a given time period.
 The time period over which objectives and targets may
extend can be as long as five years.
Levels of Strategy
Information Gathering as Part of Planning
 As noted, information gathering is a critical part of the
planning process.
 Due to its critical role, more time is spent on this aspect of
strategic planning than on other aspects.
 The planning effort requires that the firm understand its
internal capabilities and the opportunities that exist in the
external environment.
  Internal Analysis The internal capabilities are the
easier of the two to understand.
 The internal environment focuses on the internal operations
and resources of the firm.
 There are many internal resources that can create a
competitive advantage such as a firm’s creativity, culture, and
ability to integrate business units that are purchased.
External Environment
 Financial Analysis
 A financial analysis examines the income statement
and balance sheet of the firm to understand how it is
performing.
 In examining the firm’s performance in its environment,
the firm should compare its productivity to other firms in
its strategic group and to industry norms.
 The most common financial analysis is based on ratio
comparisons.
 These ratios can be classified in a number of ways, but
the most common areas of interest in determining the
relative performance of the organization are profitability,
liquidity, efficiency, and other ratios.
 There are some basics of financial analysis that should
be recognized prior to examining the specifics of financial
analysis.
 External Analysis
 Once the financial analysis of the firm is complete, there
is a need to also gather information on the firm’s external
competitive environment.
  The various elements of the external environment include
the economic, social, cultural, technology, and political
(legal) factors.
 The goal in gathering data is to understand the industry’s
evolution to date, resources available in the industry,
competitors, and the general environment that impacts
firm success.
 In addition, the firm is looking for possible future trends
and opportunities.
 The first step in the external analysis is defining the
industry in which a firm operates.
 Porter’s Industry Model
 Once a firm’s industry is defined, then broad information on that
industry should be gathered.
 This information includes general data on trends and the nature
of the competition in the industry.
 A useful tool for gathering and organizing much of this
information in an industry is Michael Porter’s five forces analysis.
 This model builds on industrial organization economics to analyze
how various parties influence an industry.
 The model seeks to understand how five forces in an industry
(buyers, suppliers, new entrants, substitutes, and rivalry) impact
each other, not how they impact an individual firm.
 A sixth force, complementors, is now widely used when examining
technology-focused concerns.
 The forces in this model are analyzed in terms of which are
powerful…. which can lead to an economic benefit for the firms
in this industry?
Porter’s Five Forces Model
 Strategic Groups
 Another useful tool for gathering information in the
planning process is to analyze firms within their
strategic groups.
 A firm does not compete directly against all firms
in its industry.
 A strategic group is a group of firms that compete
in a similar manner (i.e., customer, product,
geography).
 There can be a number of ways to divide a given
industry into strategic groups…the firm should do
so in a way that provides information on the firms
with which it competes most directly.
 This information can then help the firm identify a gap
in the marketplace that it fills or wants to fill.
 Implementation
 After the strategic planning (information gathering,
mission generation, objective setting, and strategy
selection), the firm must implement the plans.
 Once the firm has gathered information; identified a
gap in the market; and developed a mission, goals,
and strategy to be successful in that market, it will
ultimately need to implement its strategy.
 Activities in a firm are not isolated from each other.
 The actions in one area have implications for
employees in other sections of the business.
 The implementation of the strategy requires the firm
to conduct activities that are consistent with the given
strategy.
 The true impact of a strategy comes from the
firm setting a clear direction and taking actions
that are consistent with that strategy.
 The firm’s common implementation concerns
include:
 Structure
 Employee hiring and relations
 Decision making
 Communication
 Culture
 Employee incentives
 If a firm develops a strategy that employs a
given technology, it needs to have people who
understand that technology.
Strategy Implementation Process
 Evaluation and Control
 As noted earlier, the strategic process is circular.
 Once the strategy is implemented, the firm must make sure
that its strategy is working…the goals and objectives are
met…If they are not met, then adjustments are required.
 This process is referred to as evaluation (comparison of
actual outcomes with expected outcomes) and control
(adjustments, as needed).
 The firm must determine why it is not meeting its goals and
objectives and either change what it is doing or change what
it wants to accomplish.
 Determining if the goals are not met is a straightforward
evaluation process.
 The control process is more difficult and frequently requires
revisiting the planning process…The feedback must be given
to the appropriate areas in the firm and changes pursued.
 Tools of Evaluation
 A number of evaluation tools have been identified
previously:
 The five-forces analysis, the strategic group
identification, and the value chain all provide guidance
for issues that may need to be monitored by a given
firm.
 For example, the number of substitutes for the products
of an industry may change over time. Such a change can
affect the attractiveness of that industry.
 Periodically, a company should evaluate how the
forces in the industry are evolving and how its
positioning is affected.
 Another tool that has recently grown in popularity, which
may be helpful to students in such monitoring, is the
Balanced Scorecard (BSC) approach.
 Components of BSC
 The basis for this evaluation technique is that financial
returns give an incomplete picture of the performance and
prospects of a firm.
 Kaplan and Norton, the developers of BSC, identified
four key perspectives to be analyzed: financial,
customer, (internal business) process, and learning and
(innovation) growth.
The Next Steps to Integrate MTI and Strategy
 The next chapters address planning, implementation, and
evaluation and control issues for the two major strategic
approaches to bringing about major change in an organization:
 internal innovation and the acquisition of technology.

 The nature of innovation requires a more internal approach

for the organization.
 The acquisition of technology through various methods of
strategic alliance requires more analysis of external factors
and the balancing of costs and benefits in a different way.
 The major questions, then, for the organization trying to
strategically manage its technology become:
1. Should we create our own new technology and innovations
internal to the firm?
2. Or should we acquire technology from others through
acquisitions or strategic alliances?
End of Part I