Technology and Innovation Management Strategy

Technology and Innovation
Management:
S8
Technology Strategy
Raj C Thiagarajan, PhD
To
SIBM SIII MBA Students

ATOA Scientific Technologies
Engineering Simulation For Innovation

What is Technology Strategy?
• Technology aspects related to
business objective of wealth
creation
• Objective= Maximize Value
• Value = Benefit – Cost
Technology
Strategy
• Strategy to create
– Customer Value
– Shareholder Value
– (Wealth) creation

ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management

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


Strategy Flow
@ the hand
Product Process
Invention Innovation of the
Innovation Innovation
Customer

Product Strategy Market Strategy

Technology Strategy
and Innovation

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.


Market opportunity

Firms Potential for winning Objectively attractive market
• Geography attractiveness • Possible product / service
(Political , economic) for creating customer value

• Strong Industry basics (size, • Do you have a competitive
growth, profit, comp..) edge

• Winning Trajectory (Growth, • How to or can gain to
technology trends) deliver value?

©ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management 9

Technology investment Analysis
• Where you want to in next five years?

• Portfolio grid matrix
High ? PROBLEM STAR
(Convert to (Invest)
• Boston box star)
Market
Growth
• Investment opportunity Rate DOG CASH COW
(Liquidate) (milk them)

Low
Low high
Market Share


Attractiveness
• Economic
– Potential to invest
High Develop Target
• Revenue capability Segment
• Cost to serve
Economic
• Fit Attractiveness
?
– Ability to serve Avoid Improve
Value
• Firms strategy
• Position Low
Low Fit: Ability to serve High


Profit
30
Match the Industry 25
Profit

20
• Industry to profit level
15
– Easier to make money in
profitable industry 10

5
– Changes in profitability 0
may indicate changing Industry Industry Industry Industry Industry
industry dynamics 1 2 3 4 5

Industry Profit
– Profitability varies with in Auto and CV Manufacturing 5
a industry Computers and office machines 4
Petroleum production 1
Pharmaceuticals 2
Soft drinks 3

Growth
16
Match the Industry Growth
12
Industry growth level
• Easier to grow in large 8
and high growth
industry 4

• Revenue growth even
0
without market share Industry Industry Industry Industry Industry
gain 1 2 3 4 5
-4
• Market share is
relatively easier
Industry Growth
• Higher growth is Auto and CV Manufacturing 4
typically associated with Computers and office machines 5
higher profitability. Petroleum production 1
Pharmaceuticals 3
Soft drinks 2

Industrial Value Drivers
Porter’s five forces
• Buyer power Barrier to Threat of
Entry new players
• Supplier power
• Entry opportunities
Industry
Buyers
• Substitute Rivalry

possibilities
• Competitor rivalry
Competitive
landscape
You Bargaining
power of
Buyers

Suppliers Substitutes

Bargaining Threat of
power of substitutes
suppliers


How to add Value
• Value = Benefit – Cost
Value = Benefits - Cost
• Decrease cost 
Product Price,
• Increase benefit  Products innovation Reliability
Best Product

• What you provide
• How you provide Expertise Hassle free
Services Customer Ease of doing
Best Services Understanding business

Best Total Lowest Cost
Solution Total Solution


Value proposition

Type of Value proposition Examples
• Lowest Total cost • Walmart, Big bazzar

• Best Product • BMW,

• Best Service • Airtel

• Best Total Solution • Toyota


Business model vs Value Proposition
Value Best Total Best Lowest Total
Proposition solution Product solution
Rule Solve the Self destructive Variety kills
clients broader success with efficiency
problem breakthroughs

DNA, Value, Empowered Flexible structure Hierarchical
COH front end Decisive Structured
Customer Risk oriented procedures
Centre
Metrics Customer Time to market Unit cost, Cost
retention Vitality , profit experience
Customer Product line
profitability profitability


Technology vs market Positioning
Marketing Impact
Entirely new
benefit Improvement No change

Radical Breakthrough

Platform
Technology
Reach
Derivative

Product
Off the shelf
Support


Strategic Planning vs Innovation Process

Strategic Planning Process Strategy Innovation Process
• Analytical • Creative
• Numbers-driven • Insights-driven
• Company-centric • Market-centric
• Logical/linear • Heuristic/iterative
• Today to tomorrow • Tomorrow to today
• Extend current value • Create new value
• Fit the business model • 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 Polaroid
• Film/Silver halide • Instant photography
Digital imaging

• R&D Focus form silver • Patented Technology
halide to Hybrids

• CD, online +++ • Ignored the disruptive
technology
• Dominant force in Digital
photography • Filed for bankruptcy


Strategy Example
Service

Compaq Dell
• Traditional Supply chain • Virtual Integration
• Low customer pull • High customer pull
• Fixed product specification • Very high product
or configurations. customization
• Specialized distribution • Direct fulfillment - no
channels/ intermediaries intermediaries
• Produce first sell later • Production only after order
• Relative high inventory at • Very low finished goods
various stages. inventory (costs)


Strategy example

Wining Strategy Lost Strategy
• IBM • Digital Equipment corporation
• Apple • US airways
• Microsoft • Enron
• Nokia • Worldcom
• GE • K-mart
• Corning


Market Rewards Innovation
Industry Innovation Share price Key Share price
Segment Premium growth Competitor growth (%)

Automobile Toyota 150% GM -35%

Computers Apple 700% Dell -10%

FMCG P&G 65% CP 15%

Soft drinks Pepsi 30% Coke 5%

• Share Price Growth over the five years range (2002- 2007)
• Innovation Premium vs Key competition

Source: R Jonash et.al, Balanced Scorecard Report, Harvard Business Review,, Vol 9, No 2, March-April 2007

ATOA Scientific Technologies Pvt Ltd | SIBM , III Semester MBA| Technology and Innovation Management 24

Balanced Score Card
• 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
• Links strategy and
vision with
– objectives for
business
performance
– measures of each
objective
– target values for
measures
– specific initiatives
to improve and Objectives Measures Targets Initiatives
innovate


Technology Investments
The Link Innovation
premium
Growth from Improved Cost
Financial new and existing and Efficiency

The Brand Value
Customer Features &
Price Ease of Use Service Reliability
functionality

Growth & Innovation NPI Sourcing &
Process Commercialization Collaboration
Leverage
Launch existing
Internal Programs Development partnerships

Process Establish
Ideation
Identify new
partnerships
Process

Collect Intelligence and generate insights

Learning The Innovative Company
and Build innovation
competencies
Develop
innovation
Develop
cross functional
Create a
culture of
and skills leaders teams innovation
Growth After R Jonash et.al, Balanced Scorecard Report, Harvard Business Review,, Vol 9, No 2, March-April 2007

Industrial Value Drivers
Porter’s five forces
• Buyer power Barrier to
Entry

• Supplier power Sustainability Buyers

• Entry opportunities
• Substitute possibilities
• Competitor rivalry
Digitization
You Substitutes

• ++
• Globalization Globalization Suppliers

Industry
• Digitization Rivalry

• 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


Technology and Innovation Management Strategy

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