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Technology, Structure, Strategy & Innovation Salvatore Sciascia 16/05/2003
Defining “TECHNOLOGY” • … we are referring either to a practical application of science to address a particular product or manufacturing need, or to an area of specialized expertise … the practical application of science. (A.D. Little) • … it´s a specific process that produces a specificproduct … a manufacturing process … as a way a company does business or attempts a task. (McKinsey)
WHAT IS TECHNOLOGY? COMPANY (Robbins, 1990)
WHERE IS TECHNOLOGY? INFRASTRUCTURE SUPPORT HRM MARGIN TECNOLOGY DEVELOPMENT PROCUREMENT INBOUND LOGISTIC OPERATIONS OUTBOUND LOGISTIC MARKETING & SALES MARGIN PRIMARY SERVICES
Organizational Structure • The tasks that each of the unit composing the organization must carry out (roles) • The liasons established between such units (hierarchies and coordination mechanisms)
WOODWARD (60s) Hypothesis: There is a best organizational/technology fit that leads to optimal efficiency!
THOMPSON’S TECHNOLOGY CLASSIFICATION Sequential interdependence Pooledinterdependence Reciprocal interdependence
T.P. client client THOMPSON’S types of technology coordination mechanisms • A:Long-Linked Technology: moderate complexity and formalization (planning and scheduling) • B:Mediating Technology: low complexity and high level of formalization (rules and procedures) • C:Intensive Technology: high complexity and low level of formalization (mutual adjustment)
Common elements • Routineness as common denominator • Complexity (-) • Formalization (+) • Centralization (+/-) • Conflicting empirical results, since companies adopts several technologies at the same time. SMEs as fertile field of research!
3 theoretical perspectives on the relationship S-T T is a vital part of the S planning process T as input to S (Resource Based Strategy) S influences the T choices
Technological Learning Average Unit Cost Accumulated Production (~ time)
The technological choice 1. Selection 2. Acquisition 3. Exploitation (Dussauge 1992)
1. Selection: the Familiarity matrix New & unfamiliar New but familiar Current Markets Technologies Current New but fam. New and unfam.
1. Success Rate of Innovations 30% 10% New & unfamiliar New but familiar Current Markets 40% 90% 30% Technologies Current New but fam. New and unfam.
1. Selection: the Risk matrix High Medium Low Business Exposure Technical Uncertainty Low Medium High (A.D.Little, 1981)
1. Selection: the Impact/Success matrix Potential competitive impact Probability of Success
2. Acquisition: means (1) Internal development Strategic Autonomy Acquisition External R&D contracts Joint Venture Licences Time
2. Acquisition: means (2) Joint Venture Internal Vent. Educational Acquisition Spin off Sell New & unfamiliar New but familiar Current Markets I.D Acquisition I.D Licensing Acquisition Educational Acquisition Internal development I.D Licensing Acquisition Joint Venture Internal Vent. Technologies Current New but fam. New and unfam. (Roberts and Berry, 1985)
3. Exploitation Internal or External • External exploitation in case of: • protection (patent) • barriers to entry / exchange of technologies • imposition of it as a standard
Formulating a technological strategy Business growth potential Market position Technological capabilities
The BCG matrix Market Share (relative) High Low High Low ? STAR QUESTION MARK Maintain the position Invest heavily or abandon Business Growth $ CASH COW ! DOG Abandon Exploit (deploy, licence…)
If mkt position and technology diverge, in high growth context… G G M T M T Compensate to your weaknesses through “alliances”
If mkt posistion and technology diverge, in low growth context… Minimize investments in order to generate the largest possible CF G G T M T M Abandon the business redeploying your capabilities
PHISICAL CAPITAL Industries and Investments in Technology CAPACITY driven (textile, metals, basic chemicals, paper…) CUTOMER driven (households durables, food…) KNOWLEDGE driven (software, electrical equipment…) CUSTOMER RELATIONSHIP R&D
The concept of dominant design • The design that wins the allegians of the marketplace, the one that competitors must adere to if they hope to command significant market following. • It arises as result of an interplay between technical, market and cultural choices. Utterback (1994)
Empirical evidence (1) Number of Firms Ex. Studies: Car and Type writing industries Time
Empirical evidence (2) Number of Firms Fall of Unit Price Raise of Entry Cost Time
Empirical evidence (3) Number of Firms Focus on Process Innovation Lower Innovation pace Focus on Product Innovation Higher Innovation pace Time
Empirical evidence (4) Number of Firms JAP USA Time
How does it occur? • Collateral assets (mkt channels, brand image, customer swithcing costs) (IBM) • Industry regulation (RCA) • Strategic maneuvering (JVC) • Communication
Long-term winners “have beaten their competitors through [focused] innovation and dynamism” Michael Porter
The role of Innovation Performance Time Resource Investments
A definition Innovation is the creation and transformation of knowledge into new products, processes, or services that meet market needs
Il processo di innovazione The innovation process Invention Creativity Practises Knowledge Innovation Diffusion
The innovation process Il processo di innovazione COMPANIES Invention Creativity Practises Knowledge Innovation UNIVERSITIES & RES. CENTERS Diffusion MARKET
The Discipline of Innovation • “Innovation is work rather then genius” • “Innovation rarely springs from a flash of inspiration. It arises from a cold-eyed analysis of the sources of opportunities” • “Effective innovation is simple and starts small”. • (Drucker, 1985)