Technology and Innovation Strategies and Trajectories Strategies and Trajectories, Management of Technological 1 Management of Technological Innovation Lesson 4 Corporate Level Issues • Corporate Strategies for Innovation • Competitive Analysis • Threats, Technology Trajectories, and Constraints Strategies and Trajectories, Management of Technological 2 Innovation is “Creative Destruction Creative Destruction In Singapore Inc. “The new Cyber-economy has cast doubt on Singapore Inc.’s decades old formula of state-led success. Cant survive?” [A. Shameen and A. Reyes, Asiaweek, 24 March 2000, pp. 43-47.] Strategies and Trajectories, Management of Technological 3 Population Per-capita GNP (nominal) Per capita GDP (purchasing power parity), Inflation Exports State companies among top 10 listed firms Electronics as % of total exports Internet service providers Population with Net access Major private-sector electricity suppliers Rank in Global Competitiveness Report Singapore Hong Kong 3.9 mil US$21,828 6.9 mil US$24,716 US$27,740 1.5% US$115b US$21,830 -5.3% US$ 6 0 67% 6 30% 30% 159 16% 0 2 1st 3rd Strategies and Trajectories, Management of Technological 4 “What Singapore has done right” • Kept the economy broad-based • Deregulated financial services • Accelerated telecommunications liberalization • Opened up other parts of the economy • Welcomed foreign talent Strategies and Trajectories, Management of Technological 5 “And what else Singapore needs to do” • Fast-track the privatization of governmentlinked corporations • Dismantle laws that restrict entrepreneur ship • Deregulate the media • Tackle other sacred cows (e.g. money tied up in Central Provident Fund) • Build a critical mass of research-knowhow Strategies and Trajectories, Management of Technological 6 Quotes from Jerel Kwek, 21, Founder of Angel.net in SGP • “Singaporeans have never been known as risk takers.” • “You are just taught that whatever they say is right, to never question, and that everything else is wrong. That is terribly cruel, it is wrong. It is not developing people to their full potential. Our education [system] has done a tremendous disservice to our budding entrepreneurs because it pushes them into a box where they are taught not to challenge, debate or question. But the New Economy is about constantly reinventing yourself and being creative and moving to where you can charge your customer a premium. How else can you do that without breaking rules?” Strategies and Trajectories, Management of Technological 7 Profit Profit goal Gap to be filled by innovations Forecast Profit from Current operations Future years Strategies and Trajectories, Management of Technological 8 Distribution of New Products Sales Customers in Europe, USA, etc. Logistics Technical Service Strategies and Trajectories, Management of Technological 9 VALUE: Product Promotion Production Value Product & Service Perceived Value + Market & Customers Strategies and Trajectories, Management of Technological Business Value = 10 Decline Cash Flow Product Concept Sales Design Concept Fundamental Design Implemental Design + Profit Time 0 Designing Feasibility Testing Promotion Costs PreProduction Fixing Specifications [Takahashi, 1999] Strategies and Trajectories, Management of Technological 11 H 22.5 D Market Growth Rate (%) 20.0 17.5 15.0 C Growth-Share Matrix [Takahashi, 1999] 12.5 10.0 B 7.5 5.0 A 2.5 L 0 H 10x 8x 6x 4x 2x 1x 0.8x 0.6x 0.4x 0.2x 0.1x L Market Share Relative to Top-Product Other Than Your Own In the Product Group Strategies and Trajectories, Management of Technological 12 H 22.5 The diameter of each circle is proportional to the volume of sales Market Growth Rate (%) 20.0 17.5 15.0 Products, A, B, C, , Red circles: Total volume for belong to the same each product type. product group. 12.5 10.0 7.5Our Client’s Product 5.0 Competitor’s Product Line representing same Product Type A 2.5 L The Product with Top Market share is placed horizontally at 1x. 0 10x 8x 6x 4x 2x 1x 0.8x 0.6x 0.4x 0.2x 0.1x H Market Share Relative to Top-Product in Product Group L Strategies and Trajectories, Management of Technological 13 Market Growth Rate (%) H 22.5 Star 20.0 Problem Child 17.5 15.0 ? 12.5 10.0 ? 7.5 5.0 2.5 L Cash 0 Cow 10x 8x 6x Dog 4x 2x 1x 0.8x 0.6x 0.4x 0.2x 0.1x H Market Share Relative to Top-Product in Product Group L Strategies and Trajectories, Management of Technological 14 Market Growth Rate (%) H 22.5 Problem Child Star 20.0 17.5 Strategic Product 15.0 12.5 10.0 Priority Product 7.5 Supplemental Product 5.0 2.5 L Cash 0 Cow 10x 8x 6x Dog 4x 2x 1x 0.8x 0.6x 0.4x 0.2x 0.1x H Market Share Relative to Top-Product in Product Group L Strategies and Trajectories, Management of Technological 15 Semantic Differential Method In 1952, C.E. Osgood proposed that products could be positioned on a scale of 5 or 7 (centered on 0) between pairs of antonyms that put subjective ideas into words. Answers should be given rapidly, according to intuition. According to [Takahashi, 1999], sample of at least 50 provides a good average result. Strategies and Trajectories, Management of Technological 16 Extremely Rather Slightly Neutral Slightly Rather Extremely Hard Old-Fashioned Warm Soft Modern Cool Complex Simple Masculine Feminine Elderly Young Subdued Rural Glitzy Fashionable Unfamiliar Urban Trashy Classy Dark Light Lo-tech Unfashionable Hi-tec Familiar Unconventional Conservative Plain Gorgeous Strategies and Trajectories, Management of Technological 17 Product Positioning Map [Takahashi, 1999] Expensive Characteristics other than Expensive, Complex may be used. Window of Opportunity Simple Cheap Strategies and Trajectories, Management of Technological 18 Japanese Housing Styles [Takahashi, 1999] Western Contemporary Western Modern Western Eclectic Contemporary Traditional Traditional Western Western New Japanese Modern Japanese Japanese Traditional Japanese Contemporary Japanese Futuristic Experimental Japanese Strategies and Trajectories, Management of Technological 19 Corporate Policy/Strategy Creation Point of View • Innovative Product • Adaptive Product • Continuation Product Marketing (Product Life Cycle) Point of View • Strategic Product • Priority Product • Supplemental Product [Takahashi, 1999] Strategies and Trajectories, Management of Technological 20 Design Tradition at Sony [Takahashi, 1999] Star Epoch Making Design, high risk (10 items per annum) S A B Ability/Awareness Global design, Stabilize or further penetrate market (40-60 items per annum) Business Brand quality design, Maintain brand name (1000 items per annum) Strategies and Trajectories, Management of Technological 21 A S A B B Further Technological Development, Continuing Design Process Initial Progress of Innovative Product [Takahashi, 1999] Strategies and Trajectories, Management of Technological 22 Innovation Design Personnel Formation Image Media Exposure S Innovation Challenging Young Pioneering Extreme A Build on Quality &Trust Sophisticated Mature Building Up Wide B Mass Production Expanded Line & Application Vetran + Junior Maintaining Moderate SAB Design Development Formation [Takahashi, 1999] Strategies and Trajectories, Management of Technological 23 Amount Sold Supplemental Product Priority Product Strategic Product Time Introduction Growth Maturity Saturation Decline Product Life Cycle [Takahashi, 1999] Strategies and Trajectories, Management of Technological 24 S Problem Child Star Market Growth Star Strategic Product Priority Product A Supplemental Product B Cash Cow Dog Relative Market Share Strategies and Trajectories, Management of Technological 25 Corporate Technology Strategies 1. Offensive Strategy: Leadership - “First to Market” 2. Defensive Strategy: “Follow-the-Leader” 3. Imitative Strategy: “Me-Too” 4. Applications Eng. Strategy: Interstitial 5. Dependent Strategy: “Branch Plant” 6. Absorbent Strategy 7. Traditional Strategies 8. Other (Nontechnologically) Innovative Strategies Strategies and Trajectories, Management of Technological 26 Offensive Strategy: Leadership-“First to Market” • Introduce revolutionary innovations in their fields. Initiate a start of an industrial life cycle. Can reap rich rewards. Uncertainties and risks are high. • Successful examples: IBM in computers; RCA in television; Texas Instruments in semiconductors. • Failure examples: Comet airlines due to technological reasons; Concorde due to political, economic, and environmental reasons. • Companies need to have all-round excellence. • Potential technology-market synergies need to be spotted continually through active participation in nondirected research. Strategies and Trajectories, Management of Technological 27 • In close proximity to state of the art. R-tensive. • R is characterized by scarcity of precedent and low stability and predictability. • An offensive organization usually has the following characteristics: 1. Nondirective work assignments and indefinite objectives which are “broadcast” widely. 2. Continuing evaluations of results and swift perception of significant outcomes. 3. Values innovation over efficiency. • Needs to be T-tensive too and invest in a bigger way in T. • Strong need for patenting asap. Strategies and Trajectories, Management of Technological 28 • On marketing side, it is pursuing an as unmanifested but latent customer need. • Small companies can also adopt ‘offensive’ strategies. They are typically opportunistic-offensive. Their innovations are radical but not necessarily revolutionary. Such companies are usually spun-off from parent organizations, such as government, university laboratories, or large companies where the invention to be innovated was made. This pattern is particularly notable in the field of scientific instruments. EXERCISE Identify two small companies that have succeeded in adopting the technology leadership strategy. Discuss the factors and characteristics that could have led to their success. Strategies and Trajectories, Management of Technological 29 Defensive Strategy: “Follow-the-Leader” • The industrial life-cycle model suggests that relatively good profit opportunities occur in the performance-maximizing stage when the innovation is initially marketed but the dominant design has yet to emerge. Defensive strategists use this opportunity. Follow the leader with own improved version.Example: European semiconductor industry. • Higher returns at lower risks is the attraction. Strategies and Trajectories, Management of Technological 30 • Undertake some nondirected research coupled with intensive applied research. Research may duplicate that of offensive innovators so as to obtain autonomous scientific knowledge. • Must be strong in experimental development and design engineering. • Need to develop ones own patents so as to use them as bargain counters while weakening the dominant position enjoyed by the offensive counterpart. • Need to place high premium on superior technological product development, marketing intelligence and responsiveness. Strategies and Trajectories, Management of Technological 31 3. Imitative Strategy: “Me-Too” • Establishment of a dominant design stimulates, delineates and coalesces the market. Excellent opportunities then exist for incremental innovations or improvements in the dominant design, based more upon design, reliability and cost considerations than on major technological differences. • Less R-intensive and more P(production)intensive. Strategies and Trajectories, Management of Technological 32 Tertiary Development & Design Pilot/ Prototype Production New Product Development After Sales Service Full Production Marketing Test Marketing Education & Advisory Services Marketing Knowledge Reliability Engineering & Quality Control Imitative Strategy Base Strategies and Trajectories, Management of Technological 33 • Imitative technology purchase through licensing from the original primary innovator. A US primary innovator may not have presence in a country and may wish to grant license to a domestic innovator. • Imitating company typically has a truncated technological base from design engineering onwards. Compete only on design improvements and lower manufacturing costs. • More directive supervision. • Greater use of management techniques such as PERT. • Favor efficiency rather than innovativeness. Strategies and Trajectories, Management of Technological 34 4. Applications Eng. Strategy: Interstitial • A judicious analysis of primary innovators’ strengths, weaknesses, and strategies, combined with a search for unrealized applications, frequently identifies specialist niches so that incremental innovations for new markets could be developed. • Example: Control Data Corporation (CDC) was able to market computer systems tailored to users whose needs could not be satisfied by IBM computers. • Less R&D-tensive. More M(market)-tensive and sensitive to user needs. Strategies and Trajectories, Management of Technological 35 5. Dependent Strategy: “Branch Plant” • A subsidiary or a specialist department of a large firm. An MNC may want a local subsidiary to exploit off-shore an market. • Canada is largely a “branch-plant” economy. The country’s technology is based on companies that are subsidiaries of US or European parent corporations (What about Singapore?). • Technology base truncated to production and marketing. Strategies and Trajectories, Management of Technological 36 After Quality Sales Control Service Production Branch Plant Base Marketing Education & Advisory Services Strategies and Trajectories, Management of Technological 37 6. Absorbent Strategy • The licensee from a primary innovator uses the surplus cash flow and know-how to build up its own R&D capability to launch performance-maximizing and costreducing incremental innovation. • In time, the company could become and offensivedefensive innovator. • Post second war Japan used this approach to avoid the development of a ‘branch-plant’ economy. Strategies and Trajectories, Management of Technological 38 7. Traditional Strategies • Adopted by companies belonging to a mature industry: e.g. farming and wool-textile industries. • Much business activity whether of low, medium, or high technology encompasses the “harvesting” of profits from established products (or old technology) in established ‘old’ markets. • But, as US farming industry has shown, radical technological innovations can be introduced., e.g. pesticides and fertilizers for increased productiveness, and freeze drying for food processing. Strategies and Trajectories, Management of Technological 39 8. Other (Nontechnologically) Innovative Strategies • Innovations need not just be technological. • Sales of existing products can be increased by innovations in promotion, distribution, and financing. Many such innovations may be technologically cosmetic (e.g. change in packaging) but can boost sales. This approach is particularly useful in consumer expendable industries such as detergents, personal toiletries, and food. • McDonald and Benihana of Tokyo have noninnovative manufacturing and management principles (but technologically innovative in their own industries) with innovative marketing approaches in fast-food and restaurant industries. Strategies and Trajectories, Management of Technological 40 Branch Plant Applied Eng. Offensiv e Defensiv e Imitative Strategies and Capabilities Nondirected fundamental research M M N N N Applied Directed Research M M N N N Experimental Development and Design H H N L/M N Advanced Development and Design H H H H L Pilot/Prototype to Full Production M M H M M Quality Control/Product Design M M H M M Patents and Licenses H M L M N “After-Sales” Services H M H H M Education and Advisory Services H M L H M Long-Term Planning H M L H N Key: N-None, L-Low, M-Medium, H-High Strategies and Trajectories, Management of Technological 41 Exercise With the aid of the previous slide on ‘Strategies and Capabilities’ analyze ‘your’ corporation and outline a feasible technology strategy. Strategies and Trajectories, Management of Technological 42 Technology-Market Matrix Revolutionary Normal OLD NEW Generic Technological Capabilities & Products Internal Environment External Environment Generic Markets & Opportunities OLD NEW Strategies and Trajectories, Management of Technological 43 Michael Porter’s Competitive Analysis • The unit of analysis is the industry producing similar products. • The goal of the strategic analysis is “to find a position in industry where a company can best defend itself against [the] competitive forces or can influence them in its favor.” • There are five types of forces to consider: Strategies and Trajectories, Management of Technological 44 The ‘Five’ forces driving industry competition are • • • • • Relations with suppliers Relations with buyers New entrants Substitute products Rivalry amongst established firms Technological change can influence all the five forces. Strategies and Trajectories, Management of Technological 45 Analyze the following extract about computer industry from the point of view of Porter’s five forces driving industrial competition The experience over the past 30 years of the US computer industry is a spectacular example of the power of technological change to transform completely the structure and competitive conditions in an industry. In the early 1970s, the industry was dominated by a few mainframe producers, some of whom were fully vertically integrated from basic circuitry through to distribution. Barriers to entry were high, suppliers relatively weak, and customers had a limited range of choice. Strategies and Trajectories, Management of Technological 46 By the early 1990s, the industry had literally disintegrated, with independent firms most of whom are new entrants since the 1970s) competing at each stage from basic circuitry to distribution. The main destabilizing factor has been the rapid rate of technical improvement in the microprocessor—the computer on a chip. This has drastically reduced the costs of computing, thereby lowering barriers to entry to the users of microprocessors and opening of a whole range of potential applications outside mainframes (of which the personal computer is one of the most spectacular), and thereby creating a whole range of new opportunities for firms in systems and applications software. An equally spectacular revolution is presently under way following the development of e-mail, Internet and WWW. Strategies and Trajectories, Management of Technological 47 • Relations with suppliers: suppliers relatively weak • Relations with buyers: a few mainframe producers, vertically integrated from basic circuitry through to distribution, suppliers relatively weak, customers had a limited range of choice • New entrants: independent firms most of whom are new entrants since the 1970s) competing at each stage, • Substitute products: rapid rate of technical improvement in the microprocessor, a whole range of potential applications outside mainframes • Rivalry amongst established firms: lowering barriers to entry to the users of microprocessors Strategies and Trajectories, Management of Technological 48 Analyze the following extract about computer industry from the point of view of Porter’s five forces driving industrial competition The experience over the past 30 years of the US computer industry is a spectacular example of the power of technological change to transform completely the structure and competitive conditions in an industry. In the early 1970s, the industry was dominated by a few mainframe producers, some of whom were fully vertically integrated from basic circuitry through to distribution. Barriers to entry were high, suppliers relatively weak, and customers had a limited range of choice. Strategies and Trajectories, Management of Technological 49 By the early 1990s, the industry had literally disintegrated, with independent firms most of whom are new entrants since the 1970s) competing at each stage from basic circuitry to distribution. The main destabilizing factor has been the rapid rate of technical improvement in the microprocessor—the computer on a chip. This has drastically reduced the costs of computing, thereby lowering barriers to entry to the users of microprocessors and opening of a whole range of potential applications outside mainframes (of which the personal computer is one of the most spectacular), and thereby creating a whole range of new opportunities for firms in systems and applications software. An equally spectacular revolution is presently under way following the development of e-mail, Internet and WWW. Strategies and Trajectories, Management of Technological 50 Analyze threats and chose innovation trajectory Threat: Potential entrants and substitute products • Threats of new entrants can be increased through reducing economies of scale (e.g. telecommunications, publishing), and through substitute products (e.g. microcomputers, aluminum for steel cans). • They can be decreased through ‘lock-in’ to technological standards (e.g. Microsoft), and through patents and other legal protection (e.g. most major ethical drugs). Strategies and Trajectories, Management of Technological 51 Threat: Power of suppliers over buyers • This can be increased by innovations that are more essential to the firm’s inputs (e.g. microprocessors into computers) • It can be decreased by innovations that reduce technological dependence on suppliers (engineering materials) Threat: Rivalry amongst established firms • Rival firms can establish a monopoly position through innovation (e.g. Polaroid in instant photography), or destroy a monopoly position through imitation (US general Electric in brain scanners). Strategies and Trajectories, Management of Technological 52 Five Major Technological Trajectories • • • • • Supplier-dominated Scale Intensive Information-intensive Science-based Specialized suppliers Strategies and Trajectories, Management of Technological 53 Supplier-dominated Typical core sectors Agriculture, Services, Traditional manufacture Main sources of technology Suppliers, Production, Learning Main tasks of technology strategy Use technology from elsewhere to strengthen other competitive advantages Strategies and Trajectories, Management of Technological 54 Scale-intensive Typical core sectors Bulk materials, Automobiles, Civil engineering Main sources of technology Production engineering, Production learning, Design offices, Specialized suppliers Main tasks of technology strategy Incremental integration of changes in complex systems, Diffusion of base design and production practice Strategies and Trajectories, Management of Technological 55 Information-intensive Typical core sectors Finance, Retailing, Publishing, Travel Main sources of technology Software and systems departments, Specialized suppliers Main tasks of technology strategy Design and operation of complex information processing systems, Development of related products Strategies and Trajectories, Management of Technological 56 Science-based Typical core sectors Electronics, Chemicals Main sources of technology R&D, Basic Research Main tasks of technology strategy Exploit basic science, Development of related products, Obtain complementary assets, Redraw divisional boundaries Strategies and Trajectories, Management of Technological 57 Specialized Suppliers Typical core sectors Machinery, Instruments, Software Main sources of technology Design, Advanced users Main tasks of technology strategy Monitor advanced user needs Integrate new technology incrementally Strategies and Trajectories, Management of Technological 58 Organizational Innovation: A HK Example CPC/AJI (HK) LTD is a well-established food manufacturer producing a range of 120 varieties varieties of basic products and imports about 80 products from its foreign affiliates. Their products include culinary aids, convenience foods, desserts, cooking aids, bread spread dressings, snack and beverages with famous brand names such as “Bestfoods”, “Kingsford”, “Skipp”, and “Torto”. Strategies and Trajectories, Management of Technological 59 The company is applying quick changeover philosophy to enhance flexibility while having minimum inventory in their manufacturing operation. To ensure quality, the company has implemented Good Manufacturing Practice (GMP) and Hazard Analysis Critical Control Point (HACCP) together with Safety Improvement Process (SIP) which is in place for continuous improvement (Kaizen) of the working environment. The company was granted the “Gold Award - Effective Communication” by the Labor Department and of the “Productivity Award” of the HK Productivity Council. The company was recognized by the judging panel to be focusing on “customer satisfaction through excellent quality and quick response.” Strategies and Trajectories, Management of Technological 60 Exercise Identify the technological trajectory class of CPC/AJI (HK) LTD. Comment on the main sources of technology for the company. Discuss the main tasks to be considered while developing the technology strategy of the company. Strategies and Trajectories, Management of Technological 61 Exercise Using the previous five slides as appropriate, recommend and discuss an innovation strategy for any one of the following companies and, later, for ‘your’ company: • Microsoft • Wellcome supermarket • DHL • Texas Instruments • Cathay Pacific • Sony Strategies and Trajectories, Management of Technological 62 Porter’s generic technology strategies • Cost leadership • Differentiation The way the above strategies are applied in product development could be different from that in process development. Strategies and Trajectories, Management of Technological 63 Product Development Cost Leadership Lower material inputs, Ease of manufacture, Improve Logistics, Minimum features Differentiation Enhance quality, Enhance features, Enhance deliverability, Niche markets Strategies and Trajectories, Management of Technological 64 Process Development Cost Leadership Learning curve, Economies of scale, Minimize costs Differentiation Precision, Quality control, Response time, Precision, Quality control, Response time Strategies and Trajectories, Management of Technological 65 Exercise Using the previous two slides as appropriate, expand your previously recommended innovation strategy for each of the following companies: • Microsoft • Wellcome supermarket • DHL • Texas Instruments • Cathay Pacific • Sony Strategies and Trajectories, Management of Technological 66 Constraints faced by individual firms Established Product Base and Technological Competencies • Chemical companies do not diversify into electronic products and vice versa. • It is difficult for a company making traditional textiles to make computers. Firm Size • Large firms adopt ‘broad front’ strategies. • Small firms are ‘focused’. Strategies and Trajectories, Management of Technological 67 Public goodstype knowledge Other firm's proprietory knowledge New Knowledge generated jointly with other firms Endogenously generated knowledge Publications, tech. monitoring, conferences, informal contacts Licensing, knowhow agreements, mergers and acquisitions Consortia, joint ventures, strategic partnering Firm's stock of knowledge R&D, design & eng., learning by doing, marketing experience How firms can acquire knowledge Strategies and Trajectories, Management of Technological Obsolete knoweldge Forgetting by not doing 68 The Nature of Firm’s Products and Customers Compare food products, where there typically a wide range of quality and prices, with ethical drugs and passenger aeroplanes where product quality (I.e. safety) is rigidly controlled. Food firms therefore have a wider range of product innovation strategies to choose from. In contrast, drug and aircraft firms require large-scale expenditures on product development and tigorous testing. They are therefore more restricted in their innovation choices. Strategies and Trajectories, Management of Technological 69 In the 1960s, the oil company Gulf defined its distinctive competencies as producing energy, and so decided to purchase s nuclear energy firm. The venture was unsuccessful, in part because the strengths of an oil company in finding, extracting, refining and distributing oil-based products, I.e. geology and chemical processing technologies, logistics, consumer marketing, were largely irrelevant to the design, construction and sale of nuclear reactors, where the key skills are electromechanical technologies and in selling to relatively few, but often politicized electrical utilities. Strategies and Trajectories, Management of Technological 70 Exercise • What is the lesson you learn from the Gulf case study? • Why are companies engaged in nuclear energy usually politicized? • Explain the following terms with suitable examples: geology, logistics, electromechanicaal technologies, consumer marketing, Strategies and Trajectories, Management of Technological 71 Choosing an innovation strategy involves predicting the future and faith in an opinion. But, as Neils Bohr, the famous atomic scientist said, “Prediction is difficult, especially about the future.” Strategies and Trajectories, Management of Technological 72 Some predictions that have gone wrong and some opinions that were questionable: • “The war in Vietnam is going well and will succeed” (R. Mcnamara, 1963) • “I think there is a world market for about five computers.” (T. Watson, 1948) • “Gaiety is the most outstanding feature of the Soviet Union.” (Joseph Stalin, 1935) • “I cannot conceive of any vital disaster happening to this vessel.” (Captain of Titanic, 1912) Strategies and Trajectories, Management of Technological 73 Most HK firms are small • Can they innovate? • What does experience elsewhere tell about their prospects? • What are their characteristics? Strategies and Trajectories, Management of Technological 74 Assertions What the evidence shows • ‘Small firms make the most of innovation.’ • ‘Small firms make few innovations since they do little R&D.’ • ‘Small firms are much more innovative than large firms, since they account foe a higher share of innovations than of R&D.’ • ‘New firms create a lot of employment.’ • ‘It depends on the product and the technology.’ • They do lots of “informal”, “part time” and non-measured R&D, and produce a share of total innovations roughly equivalent to their output and employment • ‘Not if you include unmeasured, part time R&D.”. • ‘They also lose a lot since they have high birth and death rate.’ Strategies and Trajectories, Management of Technological 75 Characteristics of small firms • Similar objectives—to develop and combine technological and other competencies to provide goods and services that satisfy customers better than alternatives, and that are difficult to initiate; • Organizational strengths—ease of communication, speed of decision-making, degree of employee commitment and responsiveness to novelty. This is why small firms often do not need formal strategies that are used in large firms to ensure communication and co-ordination. Strategies and Trajectories, Management of Technological 76 Characteristics of small firms (continued) • Technological weaknesses—specialized range of technological competencies, inability to develop and mange complex systems, inability to find long-term and risky programs. • Different sectors—small firms make a greater contribution to innovation in certain sectors, such as machinery, instruments, and software, than in chemicals, electronics and transport. Strategies and Trajectories, Management of Technological 77 Exercise • Why are small firms usually not as effective as large firms in innovating in fields such as chemicals, electronics and transportation? • Given the information on the previous slide, what do you think is the chance of success of the Chief Executive’s vision to transform HKSAR into an innovative society? Strategies and Trajectories, Management of Technological 78