NGN 102: CUSTOMER DRIVERS
1. MODULE OVERVIEW
This module will provide an overview of the changes that occurred in the
marketplace and the need for a different approach to satisfy new customer
needs. The changes in technology will also be incorporated in showing the
changing needs of the customer base.
The module will focus on the merging of technological innovation and new
market opportunities. The introduction of new technology into the marketplace,
as well as the alignment of resources with the core needs of the marketplace will
be covered.
2. PRESCRIBED BOOKS
BURGELMAN, R.A., CHRISTENSEN, C.C. & WHEELRIGHT, S.C. Strategic
Management of Technology & Innovation. Irwin: Boston
3. FACILITATOR
Mr. Pieter Geldenhuys
Senior Lecturer: Technology Strategy
UNISA Graduate School of Business Leadership
Director: Institute of Technology Strategy & Innovation
Cell: +27 82 335 2711
Email: pieter@itsi.org.za
4. CASE STUDIES
Case II-7: Slouching Towards Broadband
Case II-17: Charles Schwab & Co. in 1999
5. ARTICLES
See articles in text
6. WEBLINK
www.itsi.org.za
www.iamot.org
www.ieee.org
www.wired.com
www.economist.com
7. ASSESSMENT
The assessment of this module will be incorporated in the final report.
8. TOPICS
8.1. CHANGES IN THE MARKETPLACE
8.1.1 Tuition Period
17 June 2005 – 30 June 2005
Lecturing date: 23 June 2005
8.1.2 Specific Outcomes
After this section, the participant should be able to:
•
•
•
•
•
•
•
•
Understand how shareholder expectations and new markets influence the
need for a Next Generation Network
Understand the balance between customer demand for new and
innovative services, independent technology development and the
capacity of Telecommunication operators to implement Next Generation
Networks
Display a deeper knowledge of Convergence and the impact this will have
on the marketplace
Discuss the Telecommunication Marketplaces in the rest of Africa
Explain the impact on Telecommunication Environment if the trends that
were highlighted are taken into consideration
Display a deeper knowledge of the Competitor Activity and how to
respond to them
Discuss the most important challengers in the Telecommunication field
Explain the impact on Telecommunication Environment if these
competitors enter the marketplace
8.1.3 Critical Questions
Discuss the change in Telkom’s business model if bandwidth becomes
more readily available
• Discuss the changes in customer requirements once more bandwidth
becomes available
• Discuss Competitor Activity and how Telkom should respond to them
• Discuss the business models that Telkom’s competitors may embrace to
disrupt the current status quo
• Discuss the most important challengers in the Telecommunication field
• Explain the impact on Telecommunication Environment if these
competitors enter the marketplace
• Discuss the changes that Telkom will have to undergo taking into
consideration the changes in the Regulatory, Customer, Competitor and
Telecommunication spheres
8.1.4 Learning through activities
•
•
Discuss the abovementioned questions in your group and come up with
relevant answers to those questions. Provide feedback on your responses
during the scheduled classes
8.1.5 Self Assessments
You will be able to track your progress by being able to answer the following
questions:
•
•
•
•
•
•
•
Critically discuss the balance between customer demand for new and
innovative services, independent technology development and the
capacity of Telecommunication Operators to implement Next Generation
Networks
Explain how shareholder expectations and new markets influence the
need for a Next Generation Network
Explain the concept of Convergence and the impact this will have on the
marketplace
Discuss the Telecommunication Marketplaces in the rest of Africa
Explain the impact on Telecommunication Environment if the trends that
were highlighted are taken into consideration
Discuss the most important challengers in the Telecommunication field
Explain the impact on Telecommunication Environment if these
competitors enter the marketplace
8.1.6 Conclusion
This section concentrated on the changes in consumer and competitor
behaviour. The impact of Technological and Regulatory changes is also brought
into context. The section is important as it explains the fundamental changes that
can be expected in the next few years in the Telecommunication Space. The
biggest impact of these changes will be felt in the need to change the Business
Model of the incumbent Telecommunication Companies and the need to find new
revenue streams in a world of increasing bandwidth.
8.2. Technological Innovation, Strategy & Core Competences
8.2.1 Specific Outcomes
 The student must be able to integrate and align Technology Strategy with
Corporate Strategy and the focus on the Core Market
 The student must be able to develop a firm's innovative capabilities to
adapt to new market requirements
8.2.2
Critical Questions
The uppermost question in these readings is how to put technology in corporate
planning in order to focus on the core needs of the marketplace..
 Does the strategic direction of the organisation change with changes in
technology, or does the technology have to align itself with the organisation’s
goals?
 In what way do changes in the marketplace alter the strategic direction of a
company, or does the marketplace change by the pro-active implementation of
new technologies?
These questions are not easy to answer, but the prescribed text does provide
a framework that will enable the participant to understand in which instances
which one of the options becomes more pertinent.
A number of additional questions arise that are more context specific to these
readings. They are:






How can a company profit from Technological Innovation?
What are the differences between tight appropriability and weak
appropriability regimes and its implications for profitability?
How do you to put technology into corporate planning?
How are core competences defined, and how can they be used to assist in
strategic planning and in satisfying the needs of the marketplace?
Which distinctive technological competences and capabilities are necessary
to establish to maintain competitive advantage?
What is the Industry Life Cycle, and how can it be used to simplify strategic
decisions in the Technology arena to better fit in with how the market sees the
technology?


Why do a large number of companies confuse operational effectiveness with
strategy?
What is strategy?
8.2.3
Learning through activities
The most important first step is to obtain a general perspective on the integration
of technology and strategy. The first reading in the book (Integrating Technology
and Strategy) provides essential insight into a variety of technology/strategy
aspects.
It will not only discuss the integration of technology and strategy, but will also
provide an overview of innovative capability audit frameworks so that the
organisation has a good overview of its innovative capabilities.
The readings will also focus on the value of a clear and well articulated strategy.
The discussion will focus on the essence of a good strategy, and the structure
that it should and should not take. This discussion will be supplemented with
insight from a technological perspective as the participant will be shown how
technology can be incorporated in strategic planning. The profit motive in
technological innovation and the sometime counterintuitive argument behind it
will also be discussed.
One of the key learning outcome in these readings is the concept of core
competencies and core capabilities in an organisation. The section will also focus
on why core competencies are an integral part of strategic planning for an
organisation. The correct application of core competencies in an organisation can
lead to an organisation obtaining a competitive advantage in an industry, or in the
manufacturing of a sub-competent used in various products manufactured within
an industry segment. These are critical linkages in building up the necessary
resources in order to prepare for a changing marketplace.
Core competencies are becoming more and more important in the field of
Technology Management. Core competencies play a mayor role in the
establishment of new products, i.e. Phase 1,2 and 3 technologies in the Industry
Life Cycle. The average life-cycle of a typical technology is shortening drastically.
No coherent future can be planned on a typical technology that might be
replaced by another as time progresses. It is a far wiser choice to concentrate on
the establishment of core competencies, as this enables a company to react to
opportunities as they arise.
Core competencies
According to Prahalad and Hamel (1989) at least three tests can be applied to
identify core competencies.
 First, a core competence provides potential access to a wide variety of
markets. Competence in liquid crystal display screens, for example,
enables a company to participate in such diverse businesses as
calculators, miniature TV sets, monitors for laptop computers, and
automotive dashboard - which is why Casio's entry into the handheld TV
market was predictable.
 Second, a core competence should make a significant contribution to the
perceived customer benefits of the end product. Clearly, Honda's engine
expertise fills this bill.
 Finally, a core competence should be difficult for competitors to imitate.
And it will be difficult if it is a complex harmonisation of individual
technologies and production skills.
The tangible link between identified core competencies and end products is what
we call the core products-the physical embodiments of one or more core
competencies
The strategic architecture is not a forecast of specific products or specific
technologies but a broad map of the evolving linkages between customer
functionality requirements, potential technologies, and core competencies. The
strategic architecture describes the future in competence terms. Products and
systems cannot be defined with certainty for the future but that pre-empting competitors in the development of new markets requires an early start to building
core competencies. (Burgelman, 1996:74).
It is therefore critical to determine the competencies that will be required in
future, if anyone wishes to have a pertinent say in the future. It is just as
important that these competencies have to be determined for each section of an
organisation. This will provide each company with insight into which
competencies exist, as well as which competencies will be required if future
trends are analysed. The information gathered can also be used to engage in
technology transfer with international concerns. The information about core
competence requirements will have a direct effect on the skills required in order
to establish a technology based future in an organisation.
The learner will also be introduced to the Technology S-curve, and its part in
understanding Architectural Innovation. The student will also be required to
understand the complexities behind the design and implementation of technology
strategy from an evolutionary perspective.
The Industry Life Cycle
Stage 3
Segmentation &
growth
Stage 1
Incubation
Stage 2
Diversity
Stage 4
Maturity
Stage 5
Decline
The Industry Life Cycle
Before we go further into the field of Technology Management, it is essential that
you should understand the concept of the Industry life cycle. Of all the models in
the Technology Management field, this model is of the utmost importance in the
Technology Management field. A summary of the model can be viewed in Fig
1.1. It is very important that you should study the underlying characteristics of
each field in detail, as this will be essential in the evaluation of strategic
technology issues. The training ground for strategic decision making, as you are
well aware by now, are the feared case studies. The application of this relatively
simple model will greatly enhance your ability to evaluate the case studies more
effectively.
Introduction
It is important to note that there exist big confusion between the similarities and
differences of an Industry Life Cycle and a Product Life Cycle. Raymond Vernon
initially proposed the Product Life Cycle theory in the mid-1960s. Various
business academics expanded on this theory and strengthened the concept of
the Industry life cycle. In this definition the Industry Life Cycle refers to a group of
products like Laptop Computers. The term ‘Product Life Cycle’, which was used
in earlier times to define an Industry Life Cycle, runs the risk of being
misinterpreted as being connected to a specific type of product, like the Pentium
III based Laptop computers. Therefore, to use the Laptop example further, the
Pentium III Laptop's Product Life Cycle is already past the declining phase,
whereas the overall product called the laptop computer is still in the maturity
phase of the Industry Life Cycle. In this text we will refer to the Industry Life
Cycle, where the name replaces the Product Life Cycle in earlier definitions.
Technology and the Industry Life-Cycle
Technological innovation can take many forms. It may be the introduction of a
radically new product, the incremental improvement of existing products or the
improvement of manufacturing processes. The relative value of these innovations
depends upon the stage of development of the industry. It is thus important to
understand how a technology-based industry evolves in order to assess how a
company can exploit its potential and manage its technological activities. The
concept of the industrial life cycle provides a valuable framework for
understanding the innovation process. The life cycle can be conveniently divided
into five stages: incubation, technological growth and diversity, market growth
and segmentation, maturity and decline.
Stage 1 - Incubation
When a new technology or generic product type first emerges, a lot of uncertainty
arises. The technology is not known. It is unknown if it can be commercially
exploited, its performance is low, the reliability poor and the cost high. There is
no established market and there may be considerable doubt as to whether it will
satisfy a real market need. High temperature superconductivity exhibits many of
these characteristics. Progress is likely to be driven by one or a few enthusiasts.
If the technology succeeds in attracting market interest, it is likely to be
customers with specialist requirements where the performance of the technology
compensates for the low reliability and high cost. Thus the first applications of
semiconductors were in aerospace rather than in the consumer products which
were to follow later. In some cases such as composite materials the technology
may languish in this stage for many years although the underlying performance
of the technology may be rising rapidly. This stage is characterised by overoptimism accompanied by investment for a market which usually fails to develop
as quickly as anticipated, often accompanied by a high rate of insolvency
amongst the pioneers.
Stage 2 - Technological growth and diversity
The specialist applications of stage 1 establish the credibility of the technology
and attract a growing number of entrants into the industry. This causes a rapid
growth in the technology that is reflected in a rapid succession of products with a
significantly higher performance than their predecessors. Product lives are short.
There is also a diversity of technological solutions and approaches before the
main characteristics of a dominant design begin to emerge towards the end of
this stage. Thus in the early days of the motor car there were steam and petrol
engines, tiller and wheel steering, chain and shaft transmission before the main
features of the car as we know it today were determined. Many companies fail
because they are unable to keep pace with the rapid technological development
or continue with an approach which has been overtaken, as exemplified by those
who continued to support germanium rather than silicon as a semiconductor
material. It is extremely important that the key role players which might have a
large influence on the choice of a specific technology be identified and targeted
accordingly.
Thus the main characteristics of stage 2 are:
1.
2.
3.
Technology driven growth.
Short product lives.
Success associated with being first to market a product with a significantly
higher performance.
4.
High mortality of companies which:
- fail to match the performance of their competitors;
- support the wrong technological solution.
Stage 3 - Market growth and segmentation
With the emergence of a dominant design the industry enters a period of rapid
sales growth. At the same time the rate of technological growth tends to slacken.
Thus it becomes increasingly difficult to distinguish a product solely on the basis
of its technological performance. As a consequence competitive advantage is
more likely to be derived from designing products which meet the requirements
of a particular group of customers - the market segments. In so doing the role of
marketing increases and the technological emphasis is focused more on
incremental improvement aimed at clearly defined market segments. Radical
innovation is still possible but less frequent than previously.
Thus the characteristics of stage 3 are:
1.
2.
3.
4.
5.
6.
Rapid growth in the industry's sales volume.
Increasing market segmentation.
A lower rate of technological advance.
Technological innovation based more on incremental improvement.
A greater role for the marketing function in new product decisions.
A further reduction in the number of companies in the industry.
Stage 4 - Maturity
In the mature phase of the industry life cycle, the technology gets a distinctive
commodity like feel to it. This is an important aspect that if misread, leads to
many fortunes lost. As the industry matures it becomes increasingly difficult to
enhance product performance. The potential of technology has been largely
exploited as it approaches its own limit. Thus many of the product improvements
are little more than cosmetic. The products offered by competitors are difficult to
distinguish and have many of the characteristics of a commodity. Price becomes
a more important determinant in the buying decision. In this situation where it is
difficult to establish a price differential profit is closely associated with minimising
the cost of production. Thus the main contribution of technology is in process
innovation.
In this stage one often observes segmentation within the industry between the
producers for the mass market with a high emphasis on cost and smaller
producers who specialise in satisfying niche markets. This latter strategy offers
opportunity for technological innovations that add value to the product in
relatively small but high margin markets.
Price is not, however, the only contributor to gaining a competitive advantage in
this stage. Quality, responsiveness to the market, service and delivery all
become of increasing importance. Thus it is not surprising that companies in this
stage have been the first adopters of Computer Integrated Manufacturing (CIM)
which enables a mass producer to satisfy small market segments economically
as well as satisfying the other market needs noted above. This can have a
profound effect on the organisation for innovation since it demands a close
integration between product design and manufacturing.
Thus the characteristics of stage 4 are:
1.
2.
3.
4.
5.
The approach of market saturation with demands arising mostly for
replacements.
The mass market supplied by a few high volume producers.
A very low likelihood of radical product innovation.
The technological emphasis of high volume producers on process
technology.
Opportunities for smaller companies to exploit niche markets by applying
technology to design high value added products.
Stage 5 - Decline
The mature stage may last a long time. However, it is likely to be terminated
eventually by the emergence of a radically new technology which satisfies the
same market need - synthetic for natural fibres, electronic for mechanical
products, air for sea travel. History indicates that it is extremely difficult for the
market leader in the old technology to make the transition -to what is, in effect, a
new industry. Technological expertise would appear to provide the competitive
advantage rather than experience of the market. This results in innovation by
invasion' where the invader armed with the new technology displaces the former
market leader. There are a number of reasons for this related to the attitudinal
and organisational factors we shall examine later. However, there is no
inevitability about this and the role of management, both corporate and technical,
must be to seek ways of meeting the challenge.
There are some instances where the market remains but the industry contracts
due to further technological advances. A mature market consists almost entirely
of replacement sales which are highly dependent upon the in-use life of the
product. In the absence of new features which are rare in a mature market items
will only be purchased when the old one is worn out. A company which can
design a product that will last longer will gain a competitive advantage but at the
expense of reducing the size of the total market. Electric batteries and car tyres
are two industries which have suffered from this phenomenon. In this situation
there will be many losers whose only hope of survival is to diversify into new
products, markets or businesses. It is also not uncommon for the initiative for this
type of innovation to be taken by a small producer who is less vulnerable to
shrinkage in the total market.
A similar effect is noted when technological advances enable the same need to
be satisfied at lower cost (e.g. electronic components) or by using a smaller
amount of the product (e.g. 'smart drugs').
Thus if a company is to survive stage 5 it must either:
1.
2.
3.
Acquire expertise in the new technology and apply it effectively, building on
its existing market strength.
Use its existing technology to enter new markets.
Aim to dominate the replacement market through using its technology to
increase the in-use life of the product, recognising that this is likely also to
be the objective of its main competitors.
In all these cases a proactive policy is essential if timely action is to be taken.
The transition to a new technology can take decades, and is not always as clear
cut as theory suggests. More of this discussion will follow later in the study guide
and video lectures.
Discussion of the industry life-cycle
The industry life-cycle is a useful concept in aiding one's understanding of the
technological innovation process, although not all industries evolve as simply as
the cycle might suggest. It must be stressed that in discussing the role of
technology we have been considering where the greatest potential gains might
be achieved. Thus it should not be inferred that process technology has no part
to play in the early stages or that radical innovation is impossible in the later
stages. However, examination of the current position of an industry on the cycle
and where it is progressing can be of great value in determining a technological
strategy.
It can also be seen that the relative status of the functions changes as the cycle
evolves. In the first two stages the technological contribution is central to
business success and it is appropriate that the R & D director is pre-eminent
amongst his peers. The focus is firstly on marketing, and finally moves on to
finance and production. Of course, they are all important at all times but the cycle
indicates where the company is likely to gain its greatest competitive advantage.
The style and system of management will also evolve. In the early stages
entrepreneurship, informal systems and a focus on the timely introduction of new
products are more important than the minimisation of development cost. Too
much emphasis on cost control might introduce delays, which remove the
competitive advantage the product might possess if launched early. As one
progresses up the cycle cost becomes more important as do the systems by
which it is controlled. This is accompanied by a formalisation of management
systems. Thus one can conclude that there is no 'right' system for managing
technological innovation but only one that is appropriate to the needs of the time.
These considerations are of great significance in managing the innovation
process. It can be seen that in a multi-technology company it may be necessary
to adopt different management systems in its various parts. Furthermore, it is not
easy for management to accept that new innovative ventures need to be
managed in a loose informal way that runs counter to the company's formal
procedures that have been developed over the years. This, more than any other
factor, explains why so many radical innovations are introduced by new ventures
rather than the established industry leaders.
Summary
Throughout any consideration of technological innovation we are brought face to
face with a dilemma - the need to control an expensive activity while at the same
time providing an environment within which individual creativity and
entrepreneurial drive can flourish. Somehow these conflicting claims must be
reconciled. If we are to attempt to manage this activity professionally it is
necessary to derive guidelines for decision-making without losing sight of the
inherent uncertainties and risks associated with it.
Of one thing we can be certain. Formal management techniques cannot alone
guarantee success. Innovation is part science and part art. Examination of
research studies enables the identification of certain factors present in a
considerable number of successful innovations and frequently absent in failures a market orientation, relationship to corporate objectives, evaluation techniques,
good project management, creativity, an innovative environment and a project
champion. The importance of technological innovation is so critical for many
businesses that it cannot be left entirely to chance and a conscious effort must
be made to ensure the presence of the conditions for success. Management
cannot abdicate from its responsibilities merely because of the absence of
sufficient data to substantiate its decisions in advance.
Decisions then must be made. They will be better decisions if they are made with
an -understanding of the processes at work and within a conceptual framework.
The following study units will attempt to develop such a conceptual framework
based on what research evidence is available. This will not present the student
with ready-made solutions to his or her problems, but it is hoped that it will
enable him to fit together some of the pieces of this multi-dimensional jigsaw. For
it is worth repeating what has been said earlier - while we cannot ensure success
there is ample scope for improving our ability to avoid failure.
A brief summary of the Industry Life Cycle model follows:
INDUSTRY LIFE CYCLE
Stage 1 - Incubation
Technology emphasis
Market emphasis
Cost emphasis
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


Specialist


Very small
Invention
Applied research
Radical innovation
Low
High status

R&D
Organisation

Informal
Risk &
uncertainty

Very high
 New technology : The performance is low, reliability poor and cost high
 Market: not established, considerable doubt if market exists. Doubt if it is the
right time to enter the market.
 Pioneers often end up bankrupt
 Progress driven by a few individuals
INDUSTRY LIFE CYCLE
Technology emphasis

Product
performance

Speed of
development
Stage 2 - Technological growth and diversity
Market emphasis

Short product
lives

High variety
Cost
emphasis

Low
High status

R & D and
Marketing
Organisation

Informal
Risk &
uncertainty

High
 Technology attracts a larger number of entrants, rapid growth is seen, and there is rapid
succession of products
 Product lives are short, technology driven growth
 Success associated with being first to market a product with significantly higher
performance
 Diversity in technological approaches before dominant design emerges
 High morality of companies which fail to match performance of competitors or support
wrong technological solution
INDUSTRY LIFE CYCLE
Technology
emphasis
Dominant design
Fewer new designs
Market
emphasis
Rapid growth
Segmentation
Stage 3 - Market growth and segmentation
Cost emphasis
Increasing
High status
Marketing
Organisation
Formalising
 Emergence of dominant design, rapid sales growth
 Rate of technological growth slackens
 Not easy to differentiate according to technology, but must look at specific
market segment.
 Technology is aimed at incremental improvements
 Rapid growth in industry's sales volumes
Risk &
uncertainty
Low




Increasing market segmentation
Lower rate of technological advance
Greater role for marketing function in new product decisions
Further reduction in number of companies in industry segment
INDUSTRY LIFE CYCLE
Technology emphasis


Process innovation
Minor improvement
Market emphasis



Price
Promotion
Competition
Stage 4 - Maturity
Cost
emphasis

High
High status


Organ-sation

Production
Finance
Formal

Risk &
uncertainty
Medium
 Increasingly difficult to enhance product performance - improvements are
cosmetic.
 Products get commodity like characteristics.
 Price becomes important.
 Quality, responsiveness and flexibility become important strategic choices.
 Approach of market saturation with demand arising mostly for replacements
 Mass market supplied by few high volume producers
 Low likelihood of radical product innovation
 Technological emphasis of high volume producers on process technology
 Opportunities for smaller companies to exploit niche markets by applying
technology to design high value added product
INDUSTRY LIFE CYCLE
Technology emphasis

In-use life

Technological
diversification



Market
emphasis
Price
Quality
Service
Stage 5 - Decline
Cost
emphasis

Very
high
High status



Production
Finance
Marketing
Organisation

Formal
Risk &
uncertainty

High
 Technology is likely to be terminated by emergence of radically new
technology. Technological expertise would appear to provide the competitive
advantage rather that market experience.
 Companies with products that last longer will gain competitive advantage.
 Acquire expertise in new technology and apply it effectively, building on
existing market strengths (this can be done earlier in the life cycle)
 Use existing technology to enter new markets
 Aim to dominate replacement market through using technology to increase
the in-use life of the product (this is also strategy of competitors)
The Organisational Life Cycle
Introduction
A host of new products are pioneered by small, entrepreneurial companies. It is
usual that the companies grow as their products and technologies grow. It was
therefore deemed essential to include a section on Organisational Life Cycle.
Like the people who make up organisations, organisations themselves go
through life cycles. Organisations are born and, barring early decline, eventually
grow and mature. If decline is not reversed, the organisation dies. Just as you will
face new problems and challenges during different phases of your lifetime, so do
organisations. Thus, managers need a working knowledge of organisational life
cycles and the closely related topic of organisational decline. According to a pair
of experts on the subject: "A consistent pattern of development seems to occur in
organisations over time, and organisational activities and structures in one stage
are not the same as the activities and structures present at another stage. This
implies that the criteria used to evaluate an organisation's success in one stage
of development also may be different from criteria used to evaluate success at
another stage of development." These readings examines stages of the
organisational life-cycle concept and discusses the threat of organisational
decline. The correlation between the position of the technology in the industry life
cycle, seen in correlation with the position the company has on the organisational
life cycle has a profound effect on how technology is managed.
Organisational Life-Cycle Stages
Many life-cycle models have been proposed. One point of agreement among the
competing models is that organisations evolve in a predictable sequence of
identifiable stages. In one basic organisational life-cycle model, stages 1 through
3 of the model are inception, high-growth, and maturity. Changes during these
three stages can be summed up in the following rule: As organisations mature,
they tend to become larger, more formalised, and more fragmented.
Fragmentation increases because of added levels in the hierarchy, further
division of labour, and formation of political coalitions within the organisation.
Life-Cycle Timing and Type of Change
Two key features of this life-cycle model address the timing and type of changes
experienced by the organisation. Relative to timing, the duration of each phase is
highly variable, depending on a host of organisational and environmental factors.
Some organisations have short life-cycles, with abbreviated or missing stages.
For example, some organisations that form with a purpose to make a movie, and
dissolve afterwards has a life cycle of only a few months. The Roman Catholic
Church, on the other hand, has been around for nearly two millennia.
Regarding the type of change that organisations undergo from one stage to the
next researchers noted, "The very nature of the firm changes as a business
grows in size and matures. These are not changes in degree; rather, they are
fundamental changes in kind." This sort of qualitative change helps explain the
unexpected departure of founder Steve Jobs from Apple Computer maker of the
highly successful Macintosh and Aplle II computer systems.
When asking an entrepreneur by heart why he would walk away from the
company he or she founded, a typical reply would be: " If you look at the
company as it started and as it is today, I think you'll see more differences than
similarities. In the beginning, it was classically entrepreneurial; a small group of
people trying to break into a market with a new product around which they hoped
to build a company and achieve market share for the company and financial
success for themselves and their investors. Today, the company is large with
diversified, worldwide operations, with the organisational structure and
challenges of a multi- million rand company. And so the nature of the challenges
facing the company, and facing the people in it is radically different."
Entrepreneurs tend to miss the inception-stage excitement and risk as their
organisations move into the high-growth and maturity stages. Some
entrepreneurs become liabilities because they fail to grow with their
organisations. Other wisely turn the reins over to professional managers who
possess the ability and desire to manage large and complex organisations.
Managerial skills needed during one stage of the organisation's life-cycle may be
inappropriate or inadequate during a later stage.
Organisational decline
While decline is included in the model, it is not a distinct stage with predictable
sequencing. Organisational decline is a potential, rather than automatic, outcome
that can occur any time during the life-cycle. Stage 1 and stage 2 organisations
are as readily victimised by the forces of decline as mature stage 3
organisations. According to a recent study of more than 18% of businesses fail
within their first eight years of operation. (Thus, the often-heard statistic that four
out of five new businesses fail during the first five years turns out to be a myth.)
Most of the failed businesses experience decline after an extended inception
stage or an abbreviated high-growth stage. While noting "decline is almost
unavoidable unless deliberate steps are taken to prevent it," specialists on the
subject have alerted managers to 14 early-warning signs of organisational
decline:
1. Excess personnel.
2. Tolerance of incompetence.
3. Cumbersome administrative procedures.
4. Disproportionate staff power (e.g., technical staff specialists politically
overpower line managers whom they view as unsophisticated and too
conventional).
5. Replacement of substance with form (e.g., the planning process becomes
more important than the results achieved).
6. Scarcity of clear goals and decision benchmarks.
7. Fear of embarrassment and conflict (e.g., formerly successful executives may
resist new ideas for fear of revealing past mistakes).
8. Loss of effective communication.
9. Outdated organisational structure.
10. Increased scapegoating by leaders.
11. Resistance to change.
12. Low morale.
13. Special interest groups are more vocal.
14. Decreased innovation.
Managers who monitor these early warning signs of organisational decline are
better able to reorganise in a timely and effective manner.
Stopping organisational decline
The time to start doing something about organisational decline is when
everything is going right. For it is during periods of high success that the seeds of
decline are sown. Complacency is the number one threat because it breeds
overconfidence and inattentiveness.
It was found that priorities of managers shifted across the three life-cycle stages.
As the organisation matured from stage 1 to stages 2 and 3, top management's
priorities shifted as follows:
•
•
•
A strong emphasis on technical efficiency grew even stronger.
The desire for personal power and commitment from subordinates
increased significantly.
The desire for organisational integration (co-ordination and co-operation)
decreased significantly.
In a separate but related study, researchers examined the relationship between
life-cycle stages and effectiveness criteria. A later case study revealed that top
management's effectiveness criteria changed during the organisation's life cycle.
Early emphasis on flexibility, resource acquisition, and employee
development/satisfaction gave way to formalisation as the agency matured.
Formalisation criteria encompassed increased attention to factors such as goal
setting, information management, communication, control, productivity, and
efficiency.
This research reveals that different stages of the organisational life cycle are
associated with distinctly different managerial responses. It must be noted,
however, that management's priorities and effectiveness criteria in the foregoing
studies were not necessarily the right ones. Much research remains to be done
to identify specific contingencies. Still, the point remains that managers need to
be flexible and adaptive as their organisations evolve through the various lifecycle stages. As learned the hard way by many corporations: Yesterday's
formula for success can be today's formula for non-competitiveness and decline.
8.2.4. Self Assessments
You will be able to track your progress by being able to answer the following
questions:
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Define the basic concepts of the Management of Technology.
Discuss the importance of Technology Management in the business
environment of today.
Discuss the influence of the industry life cycle on various aspects relating to
the Technology management field.
Explain the differences between process innovation and product innovation
with specific emphasis on the pre-paradigmatic and paradigmatic design
phases.
Discuss the difference between weak and strong appropriability.
Discuss the importance of core competencies in an organisation;
Explain why core competencies are an integral part of strategic planning for
an organisation.
Explain the difference between operational effectiveness and strategic
planning.
Be able to identify and construct a good business strategy
The self assessment part will consist of two parts, an assessment of your
theoretical knowledge and your ability to obtain insight into various cases by
making use of the theoretical basis you received in these readings.
8.3. Technological Evolution, Disruptive Innovation & Strategic Intent
8.3.1. Specific Outcomes
 The student must be able to integrate and align Technology Strategy with
Corporate Strategy
 The student must be able to design and implement a Technology Strategy
 The student must be able to develop a firm's innovative capabilities
8.3.2 Critical Questions
1. Which technologies should be used to implement core product design
concepts and how should these technologies be embodied in products?
2. What is the difference between sustaining and disruptive innovation, and the
impact each has on corporate strategy?
3. How should technology and innovation be organized or managed?
4. Why do leading firms fail?
5. How do you mange the introduction of new technology into the marketplace?
6. Hoe do you manage new product introduction into the market when there are
competing technologies?
7. How do you meet the challenge of disruptive change?
8. How do you define you own future in a fast moving technological landscape?
8.3.3. Learning through activities
These readings are quite a long one. It will discuss a variety of issues, ranging
from technological evolution to disruptive change. A wide variety of readings and
case studies will be studied in order to form a comprehensive picture of the
design and implementation of technology strategy.
The learning material is categorized via a number of topics. These topics will
guide us through this long section.
TOPIC: CRITERIA FOR EFFECTIVE INNOVATION, THE CHANGING
CHARACTER OF INNOVATION AND ITS ROLE IN CORPORATE ADVANCE
The introduction of any new technology brings a number of pressing issues to the
fore. Questions that are of utmost importance are structured under the following
headings:
 Comparison of the technical constraints of each solution
 Comparison of enhancements offered by new technology vs. older technology
 Questions relating to market acceptance of new technology compared with
established technology
 Questions relating to market acceptance of the new technology.
Reading II-1: Management Criteria for Effective Innovation, provides a deeper
view of these issues, and makes use of a number of examples to put these
questions in context. This reading will enable the participant to understand the
relation between these core questions, and the frameworks that can be used to
manage the new technology introduction into the marketplace.
The next reading is the first reading to introduce the concept of disruptive
innovation. Leading firms in their industries fail because of the introduction of
new technologies. The question is why these leading firms allow smaller
incumbents to take over their leading position in the industry. In depth research
however indicates that these leading firms researched each of the technologies
that dethroned them long before their new competitors did. Why did they then
lose their leadership position in the marketplace?
In a majority of cases, the leading firms went through the following steps:
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Prototypes of disruptive technologies are developed internally, well before
industry adoption.
Marketers show early prototypes to lead customers of prior technology. They
reject product, marketing dept. issues pessimistic forecast.
Project to commercialise disruptive project is shelved. Company aggressively
pursue sustaining innovation.
New firms are established to commercialise disruptive architecture. They find
new markets where product’s attributes are valued.
Entrants which initially sold product only in new market improve performance
faster than initial market requires, enabling them to attack new markets.
In response to entrants’ attack, established firms belatedly introduce
disruptive product. Sales are largely to existing customers, cannibalising
sales of prior architecture products.
Reading II-4(Customer Power, Strategic Investments and the Failure of leading
firms) will provide an in depth analysis of the methodology and conclusions that
were reached when the disk drive industry were analysed. This will enable the
participant to get a view of the difficulties that established firms face when
confronting a disruptive innovation.
The differences between product and process innovation will be highlighted. This
will enable the participants to get a feeling for the type of complexity that will be
associated with each type op innovation. The determinants of success will also
be discussed, which will enable the participant to understand the more important
issues he/she will have to pay attention to when testing their innovative ideas
against the marketplace. Finally, the focus will land on customer power and why
leading firms fails in a changing technological environment.
A big question that Technology Executives ask is whether it is more prudent to
develop their own internal competences or to outsource elements of their value
added process. Reading II-5, entitled Disruption, Disintegration & Dissipation of
Differentiability provides a new angle on this decade old question, especially if
the aspect of disruptive and sustaining technology becomes part of the
argument.
TOPIC: MARKET ACCEPTANCE LIFE CYCLES, COMPETING
TECHNOLOGIES AND DISRUPTIVE INNOVATION
The participants will be introduced to the various innovation classification
frameworks. The discussion will also focus on Disruption, Disintegration &
Dissipation of Differentiability. The Market Adoption Life Cycle will also come
under scrutiny, as this will enable the participant to obtain an idea of the
challenges that might be expected in the launch of a new technology in the
marketplace. The marketplace dynamics of New Technology Introduction & the
strategic decisions required by an organisation depending on the position of
technology in the Industry Life Cycle will be highlighted. The specific actions
required by the organisation and the knowledge required to implement these
technologies will come under the spotlight.
One of the most important readings in this course is the next one, namely
Reading II-6: Crossing the chasm – and beyond. This article by Geoffrey Moore
describes the various stages that a product goes through when it is introduced to
the marketplace. It highlights the mistakes that a large number of companies
make when introducing a new product. This article will not only provide you with
background information relating to the structure of the marketplace, but also the
action steps to minimize risk.
The next reading, aptly called Reading II-7: (Competing Technologies: An
overview) does just that. It provides an overview of competing technologies.
What characteristics define the acceptance of one technological standard and
not its competitor? This reading will enable you to obtain deeper insight into the
standardisation of a technology and which issues will affect its wholesale
acceptance in the marketplace. This reading is especially relevant to a number of
brand new technologies, such as the Apple iPod and its accompanying iMusic
system. Why is it proprietary when Apple lost out to Microsoft in the desktop OS
market when it followed exactly the same approach? What is different this time
round? Read the article and discuss these issues with your fellow students.
The next reading is of critical importance. It highlights the differences between
Incremental, Modular, Architectural and Radical innovation. Each of these types
of innovations has a different strategic impact on the organisation. The next
reading, Reading II-11(Architectural Innovation: The Reconfiguration of Existing
Technologies and the Failure of Established Firms) will provide you with insight
into the various types of innovations and allow you to find out what impact each
of these innovations will have on the organisation and its strategy.
Outcome: The participant will be able to comprehend the difficulty in launching a
new technology in the marketplace, and will be better prepared to follow the
correct strategy to increase the chance of market acceptance. The participants
will be expected to use their knowledge of disruptive innovation to draw parallels
to other environments.
TOPIC: DISRUPTIVE INNOVATION Cont.
The topic of disruptive innovation will be expanded upon, and the participants will
be provided with insight into one of the most difficult management challenges,
the Innovators Dilemma. This insight will be further developed by looking at the
challenges that financial service organisations face, especially in relation to the
challenge brought to their business models by the increased utilisation of the
Internet. Reading II-14 (Meeting the challenge of Disruptive Change) will provide
you with a framework to use when confronted by sustaining or disruptive
innovation.
CASE STUDY: CASE II-17: Charles Schwab & Co. in 1999.
The Charles Schwab case study will be used to illustrate the complexity of the
change and the tenacity required to stay ahead of the curve. Read the Charles
Schwab case study and discuss its actions in confronting the threat of the
Internet. Also discuss its reaction to its main competitors E-trade and Merrill
Lynch.
TOPIC: STRATEGIC INTENT & STRATEGY AS A VECTOR
These readings will focus on the re-aligned purpose of the organisation as
technology changes the competitive landscape. The strategic intent of the
organisation will be discussed, as will the co-evolutionary lock in of organisations
in a new technological paradigm. This insight is critical in understanding the
challenges that the innovator will face in the structuring of his/her innovative idea
or solution, and will enable the participant to pro-actively prepare for the internal
challenges that might arise in the process. The focus will also fall on the changes
in business models that might pre-empt the competitors in the marketplace. This
session will focus on Strategic Intent; the creation of the future you want to be in.
The focus will also be on the thinking and methodology in getting this right.
Readings:

Reading II-13: Intraorganisational Ecology of Strategy Making and
Organizational Adaptation: Theory and Field Research.
 Reading II-15: Strategic Intent
 Reading II-16: Strategy as Vector and the Inertia of Co-evolutionary lock in
Read Reading II-16: (Strategy as Vector and the Inertia of Co-evolutionary lock
in). This reading provides an in-depth analysis of a firm’s strategy-making
process. The firm under question is Intel, under the guidance of Andy Grove.
Read this reading and draw apparels with your organisation or those you are
familiar with.
These readings will focus on the value that can be derived from the
reconfiguration of existing Product Technology in order to create new value
offerings in the marketplace. This session will be enhanced by the arguments
relating to Strategic Dissonance & the required mindset of organisations to meet
challenge of disruptive change.
Two readings, namely Reading II-12: Strategic Dissonance and Reading II-15:
Strategic Intent (already mentioned) are required reading in order to understand
the difficult nature of strategic planning in a changing technological landscape. In
Strategic Dissonance, Intel is again used as an example. The premise in the
reading is that in extremely dynamic industries, the firms alignment between
strategic intent and strategic action is not likely to last. The reading will provide
some valuable insight in answering this question. The Strategic Intent reading is
provided in order to highlight the value of a deciding your own future in a fast
changing environment.
Read the Reading entitled “Strategic Intent" in Burgelman (2004). This will further
enhance your knowledge into the field.
The first case will explain the radical changes undergone in 1995 when Bill Gates
reversed the direction of Microsoft. The second case will analyse the changes
that Amazon underwent even before it had an operation break-even point. Its
reason: To pro-actively adapt to a changing market environment.
8.3.4. Self Assessments
Seeing that this was a long section, you are requested to test your knowledge by
looking at the following questions. Answer them by returning to the prescribed
readings and by using this insight in the prescribed cases.
1. Evaluate the use of technology/product and technology portfolio matrixes.
2. Assess innovative capabilities by making use of technology audit frameworks.
3. Discuss the importance of identifying technological competence and
capabilities.
4. Analyse the importance of the technology life cycle.
5. Evaluate the reason why companies choose to sell technologies.
6. Analyse the dangers of technology transfer.
7. Discuss the difference between incremental, radical and architectural
innovations.
8. Sketch and discuss the relationship between key technological innovation
concepts.
9. Explain the causes of swings between vertical integration & stratification
10. Explain the differences between visionaries and pragmatists
11. Discuss the various markets in the technology adoption life cycle
12. Assess when a technological monopoly is inevitable.
13. Discuss the dynamic forces in firm evolution.
14. Explain the concept of a strategic inflection point.
15. Discuss the evolution of component and architectural knowledge.
16. Discuss the problems created by architectural innovation.
17. Discuss the importance of radical innovation,
18. Explain why radical innovation destroys linkages with current technology,
19. Explain in what way radical innovation destroys linkages with the
marketplace.
20. Explain what is meant by the term "strategic intent".
21. Explain how the concept of strategic intent varies from traditional strategic
planning.
22. Discuss the difference between induced and autonomous strategic
processes.
8.4. Strategy alignment & Resource system specification
8.4.1. Specific Outcomes
The student must be able to align an E-commerce Strategy (or business unit
strategy) with Corporate Strategy.
8.4.2 Critical Questions
In this section, the critical question of how to align an e-commerce strategy with
corporate strategy comes under the spotlight. The same theory can be used to
align the focus of a major project with the corporate strategy.
The most critical questions in this section are:
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When do you align corporate strategy with the e-commerce strategy and
when do you align e-commerce strategy with corporate strategy?
How are the core needs of the customer aligned with the e-commerce
strategy?
How do you build a resource system to embody and support the core benefits
of the value proposition to the customer?
8.4.3. Learning through activities
The Managing E-commerce Handbook (Botha, Bothma & Geldenhuys) will be
used in this section. Chapter 21 & 22 will be made available on the ITSI website
and in your folders.
When do you align corporate strategy with the e-commerce strategy and when
do you align e-commerce strategy with corporate strategy?
This next section will take you through a number of practical steps in order to
identify the core needs of the client, and to align the resource system with the
core benefits of the e-commerce strategy.
The first starting point is to understand the need for a different approach to
strategy. Turn to Chapter 21 and read sections 21.1 (Strategic context for
strategic planning) & 21.2 (The importance of market opportunity analysis and
strategic conversation in strategic alignment).
After this section, you will be introduced to the E-commerce Strategic Alignment
model in Chapter 21.3. This model will describe which process to go through in
order to align the e-commerce strategy with the corporate strategy.
Read the pages following the E-commerce Strategic Alignment model in Chapter
21.3. In these pages, you will be introduced to :
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Market segmentation
Core need identification
Defining an operational model
The core focus of the e-commerce project
These readings will assist you in understanding some of the core components
to use to align your e-commerce strategy.
The next section focuses on the management of e-commerce activities. In
this section you will be introduced to the concept to link the core brand with the
core value proposition. Carefully read the sections pertaining to the matching of
client behaviour wit online and offline functionality and the creation of a resource
system. The resource system map is the key link between the organisation and
the value benefits provided to the marketplace.
Also read Chapters 26 and 27. They will provide you with an overview of what
can be expected in the E-commerce environment during the next few weeks.
8.4.4. Self Assessments
Choose a company of your choice. Design an e-commerce strategy for the
company, and align the e-commerce strategy with those of the corporation, and
with the core needs of the client.
Use the following map to go through all the elements of the alignment process.
As a final step, create a Resource System map for the company.
Key
features
Blue sky
options
BRAND
Market segmentation:
SMME market chosen
CORE
FOCUS
Define market
segments within
SMME market
Align core
benefits
with brand
Success
Stories
Map customer
decision
making
process on
Channel Life
Egg model
Resource
system
Customer
Interface
Branding &
Implementation
Core Need of client
Define business
model per
market
segment
Click on coloured text in order to view associated slide/s
Evaluation
Define metrics
Performance
dashboard
8.4.5. Reflection
The E-commerce strategic alignment process is quite straight forward. The
application of this knowledge is however quite difficult. The choice of the axis of
the Customer Segmentation Map is a difficult task, without even going into the
difficulty in describing market segments within the grid. The construction of the
core focus of the company is another aspects that is easy to follow in an example
format, but very difficult to create on your own. This linkage to the Egg model and
finally the Resource Map is essential in understanding the linkage between the
value proposition of the company and the core needs of the client.
8.4.6. Conclusion
This is one of the easier theoretical sections in this module. Its application is
however quite different. A number of practice runs with these theoretical
guidelines will however enable you to get the hang of it quite quickly.