Micro-economics of Innovation
III
Design and Implementation of
Technology Strategy
Burgelman and Rosenbloom (1989)
Technology Strategy 1
• What distinctive technological competences and capabilities are
necessary to establish and maintain competitive advantage?
• Which technologies should be used to implement core product
design concepts and how should these technologies be embodied in
products?
• What should be the investment level in technology development?
• How should various technologies be sourced – internally or
externally?
• When and how should new technologies be introduced to the
market?
• How should technology and innovation be organized and managed?
Source: Burgleman and Rosenbloom (1989)
Technology Strategy 2
Technological capabilities, Technology strategy
and Experience – interact with one another.
Exhibit 1 shows the linkages among technical
competencies and capabilities, technology
strategy, and experience.
Technology strategy is a function of the quantity
and quality of technical capabilities and
competencies.
Experience obtained from enacting technology
strategy feeds back to technical capabilities and
technology strategy (Burgleman and
Rosenbloom, 1989).
Technological Competence &
Capability 1
• Overtime organizations develop distinctive competences
that are closely associated with their ability to cope with
environmental demands.
• These distinctive competences are the combines
workplace (technological) and organizational knowledge
and skills that together are most salient in determining
the ability of an organization to survive.
• In general a firm’s distinctive competence involves the
differentiated skills, complementary assets, and routines
used to create sustainable competitive advantage.
• Distinctive competences can some times become a
‘competence trap’ or ‘core rigidity’.
Technological Competence &
Capability 2
• The collective learning in the organization, especially
how to coordinate diverse production skills and integrate
multiple streams of technologies, is defined as ‘core
competencies’.
• Core competence emphasizes technological and
production expertise at specific points along the value
chain, whereas capabilities are more broadly based,
encompassing the entire value chain.
• Capability is a set of business processes that are
strategically understood. The key is to connect them to
real customer needs.
• Technological competences and capabilities are
complementary concepts and value chain analysis is
useful for examination of their relationship.
Substance of Technology Strategy
• Technology strategy can be discussed in terms of four
dimensions:
• 1) the deployment of technology in the firm’s productmarket strategy to position itself in terms of
differentiation (perceived value or quality) and delivered
cost and to gain technology-based competitive
advantage;
• 2) the use of technology, more broadly, in the various
activities comprised by the firm’s value chain;
• 3) the firm’s resource commitment to various areas of
technology; and
• 4) the firm’s use of organization design and management
techniques to manage the technology function.
Technology Strategy Substance
• 1) Competitive Strategy Stance:
• Technology Choice; Technology Leadership;
Technology Entry Timing; Technology Licensing.
• 2) Value Chain Stance:
• Scope of Technology Strategy.
• 3)Resource Commitment Stance:
• Depth of Technology Strategy.
• 4) Management Stance:
• Organizational Fit.
Competitive Strategy Stance 1
• From a competitive strategy point of view,
technology can be used defensively to
sustain achieved advantage in product
differentiation or cost.
• On the other hand, technology strategy
can be used offensively as an instrument
to create new advantage in established
lines of business or to develop new
products and markets.
Competitive Strategy Stance 2
• Technology Choice:
• The distinction between design concepts and their
physical implementation and the distinction between
components and architecture in product design and
development are useful to establish a framework for
technology choice.
• For example, a room fan is a system for moving air in a
room. Its major components include the blade, the motor
that drives it, the blade guard, the control system, and
the mechanical housing.
• A component is defined as ‘a physically distinct portion of
the product that embodies a core design concept and
performs a well-defined function.
Competitive Strategy Stance 3
• Technology Choice:
• Core design concepts correspond to the various
functions that the product design needs to embody so
that manufactured product will be able to serve the
purposes of its user (e.g. the need for fan to move
corresponds to a core design concept).
• Core design concepts can be implemented in various
ways to become components (e.g. the movement of the
fan could be achieved through manual or electrical
power).
• Each of these implementations, in turn, refers to an
underlying technological knowledge base (e.g. an
electrical fan would require knowledge of electrical and
mechanical engineering).
Competitive Strategy Stance 3
• Technology Choice:
• Each of the core concepts of a product entails
technology choices.
• In addition to components, a product also has an
architecture that determines how its components fit and
work together. DD makes the architecture stable.
• Technology choices require careful assessment of
technical as well as market factors and identify an array
of targets for technology development.
• The relative irreversibility of investments in technology
makes technology choice and targets for development
an especially salient dimension of the TS.
Competitive Strategy Stance 4
• Technology Leadership:
• Often refers to timing (relative to rivals) of commercial
use of new technology (product-market) strategy.
• A broader definition views technological leadership in
terms of relative advantage in the command of a body of
technological competencies and capabilities.
• Leadership results from commitment to ‘pioneering’ role
in the development of a technology rather than a more
passive ‘monitoring’ role.
• Technology leaders, thus, have the capacity to be first
movers but may choose not to do so.
Competitive Strategy Stance 5
• Technology Leadership:
• A firm’s competitive advantage is more likely to arise from the
unique aspects of its TS than from characteristics it shares with
others.
• The capabilities-based strategies of such firms cannot easily be
classified simply in terms of differentiation or cost leadership; they
combine both.
• Thinking strategically about technology means raising the question
of how a particular technical competence or capability may affect a
firm’s future degrees of freedom and its control over its fate.
• This involves identifying and tracking key technical parameters,
considering the impact on speed and flexibility of product and
process development as technologies move through their life cycles.
Competitive Strategy Stance 6
• Technology Licensing:
• Companies may not be able to fully exploit their technologies by
themselves alone:
• 1) Not all technologies generated by a firm’s R&D fit into its lines of
business and corporate strategy.
• 2) Firms may consider licensing their technologies to maximize
returns on R&D investments, as patent periods are limited.
Licensing is a useful tool to prevent competitors from coming up with
alternative technologies.
• 3) Smaller firms may lack resources and complementary assets.
• 4) Local government regulations may require licensing to local firms.
• 5) Anti-trust legislation requirements.
• Technology-rich companies should therefore consider developing a
special capability for marketing their technologies beyond
embodiment in their own products.
Value Chain Stance
• Technology pervades the whole value chain rather than
just in products and services and so its competitive use
in all the value chain activities is important.
• TS in relation to the value chain defines its scope – the
set of technological capabilities that the firm decides to
develop internally (core vs. peripheral). Peripheral now
may become core later.
• Broader set of core technologies places a firm in a better
position in relation to its competitors. But, resources
need to be used efficiently.
• It is important to limit the scope of TS to the set of
technologies considered by the firm to have a material
impact on its competitive advantage.
• Keep entry of new technologies in mind.
Resource Commitment Stance
• The third dimension of TS concerns the intensity of its
resource commitment to technology.
• Resource commitments determine the depth of the firm’s
TS: its strength within the various core technologies,
expressed in terms of the number of technological
options that the firm has available.
• Depth of is likely to be correlated with the firm’s capacity
to anticipate technology developments in particular areas
early on.
• Greater depth may provide increased flexibility and
ability to respond to new demands from curomers/users.
Management Stance
• TS encompasses a management stance: the choice of a
management approach and organization design that are
consistent with the stances taken on the other
substantive dimensions.
• Firms that can organize themselves to meet the
organizational requirements flowing from their
competitive, value chain and resource commitment
stances are more likely to have an effective TS.
• Example: Central R&D (for science-based technology
leader) vs. decentralized R&D to major businesses
(exploiting existing technologies).
Evolutionary Forces Shaping TS 1
• An evolutionary process perspective raises the
question of how a firm’s TS actually comes
about and changes over time.
• Evolutionary theory applied to social systems
focuses on variation-selection-retention
mechanisms for explaining dynamic behavior
over time.
• TS is shaped by the ‘generative forces’ of the
firm’s ‘strategic action’ and the ‘evolution of
technology’ and by the ‘integrative or selective
forces’ of the firm’s ‘organizational context’ and
the ‘industry context’.
Technology Evolution
• A firm’s technical capabilities are affected in significant ways by the
evolution of the broader areas of technology of which they are part
and that evolve largely independently of the firm:
• 1) evolution of technologies along S-curve trajectories;
• 2) interplay between product and process technology development
within design configurations over the course of a particular
technological trajectory;
• 3) emergence of new technologies and their trajectories (S-curves);
• 4) competence-enhancing or –destroying consequences of new
technologies;
• 5) dematurity: renewed technological innovation in the context of
well-established markets, high production volumes, and wellestablished organizational arrangements; and
• 6) organizational determinants of technological change.
Industry Context
• 1) the industry structure and its major forces (Porter’s diamond), all
of which can be affected by technology and visa versa;
• 2) the appropriability regime associated with a technological
innovation;
• 3) the complementary assets needed to commercialize a new
technology;
• 4) emergence of dominant designs;
• 5) increasing returns to adoption for particular technologies;
• 6) emergence of industry standards;
• 7) social system aspects of industry development;
• 8) competitive effects of interplay of social systems characteristics
and technological change.
• These various factor and their interplays affect the likely distribution
of profits generated by a technological innovation among the
different parties involved as well as the strategic choices of the
optimal boundaries of the innovating firm.
Strategic Action 1
• A firm’s strategy captures organizational learning about
the basis of its past and current success.
• Strategic action is largely induced by prevailing strategy.
• Induced strategic action is likely to manifest a degree of
inertia relative to the cumulative changes in the external
environment.
• Established firms when confronted with the threat of
radically new technologies, are likely to increase their
efforts to improve existing technology rather than
switching to new technology.
• Inertial forces associated with a firm’s distinctive
competence impede adaptation to changes in the basis
of competition as a product moves from specialty to
commodity.
Strategic Action 2
• Firms also exhibit some amount of ‘autonomous
strategic action’ aimed at getting the firm into new areas
of business.
• These initiatives are often rooted in technology
development efforts. For example, in the course of their
work technical people may serendipitously discover
results that provide the basis for redirection or
replacement of major technologies of the firm.
• The existence of a corporate R&D capability often
provides a ground for the emergence of such new
technical possibilities that extend beyond the scope of
the firm’s corporate strategy.
Organizational Context 1
• Industry context exerts strong external selection
pressures on the incumbent firms and their strategies.
• Organizational context allows firms (to some extent) to
substitute internal for external selection. Organizational
context serves as an internal selection environment.
• It affects the capacity of the firm to deal with challenges:
• 1) the ability to exploit opportunities associated with the
current strategy (induced process);
• 2) the ability to take advantage of opportunities that
emerge spontaneously outside the scope of the current
strategy (autonomous process;
• 3) the ability to balance challenges 1 & 2 at different
times in the firm’s development.
Organizational Context 2
• Organizational context takes shape over time
and reflects the administrative approaches and
dominant culture of the firm.
• Product architecture becomes reflected in
organization structure and culture and greatly
affects communication channels and filters.
• This, in turn, makes it difficult for organizations
to adapt to architectural innovations that change
the way in which the components of a product
are linked together but leave in tact the core
design concepts.
Applying the Framework 1
• Disruptive technologies often emerge first in incumbent
firms in their engagement in ‘autonomous strategic
action’.
• The existing ‘organizational context’, however, is usually
not receptive to these initiatives. The existing sales force
lacks interest and experience.
• The existing customers also may show lack of interest in
deviating from the existing dimensions of technology
(trajectory).
• Initially, the ‘industry context’ represented by existing
customers and the ‘organizational context’ reinforce
each other in resisting the new technology.
Applying the Framework 2
• In the face of organizational rejection, the initiators of the new
technology leave the incumbent firm and start their own to pursue
the technological opportunity.
• The new firm will have to find new customers who are interested in
the improvements offered by the new technology along different
dimensions.
• As new users adopt the technology, ‘technological evolution’ is likely
to lead to improvements along the technology’s other dimensions
(e.g. price/performance).
• As a result, the new technology may become attractive to customers
of the old technology. This may precipitate a major shift in the
market (industry context) and propel new companies to prominence
in the industry.
• The performance of the old technology also continues to advance
(technological evolution) but in ways that exceed performance levels
valued by the old customers, thereby becoming irrelevant.
Experience Through Enactment
• Experience is viewed in terms of actually
performing the different tasks involved in
carrying out the strategy.
• Experience provides feedback concerning the
quantity and quality of the firm’s technical
competences and capabilities and the
effectiveness of its strategy.
• Enactment of several key tasks: 1) internal and
external technology sourcing; 2) deploying
technology in product and process development;
and 3) using technology in technical support
activities.
Technology Sourcing
• Internal sourcing: Each firm’s TS finds partial expression in the way
it funds, structures and directs the R&D activities, whose mission is
to create new pathways for technology.
• In-house R&D also determines the ‘absorptive capacity’ of the firm.
• External sourcing: Many technologies used in the value chain are
outside the capabilities of the firm. So, technologies need to be
sourced externally through alliances or licensing.
• Continuous concern with improvement in all aspects of value chain
could guard the firm against quirky moves in external sourcing.
• One requirement is a continuous concern for gaining as much
learning as possible from the relationship in terms of capabilities and
skills rather than being concerned solely with price.
Product and Process
Development
• The level of resources committed, the way they are
deployed, and how they are directed in product and
process development.
• How does the organization strike a balance between
letting technology drive product development and
allowing product development and/or market
development to drive technology?
• Three potential benefits associated with product and
process development: 1) market position; 2) resource
utilization; and 3) organizational renewal and
enhancement. Most firms fail to derive these benefits
due to lack of a development strategy that integrates TS
with product-market strategy.
Technical Spupport
• The function, commonly known as ‘field service’,
creates the interface between the firm’s
technical function and the user of its products or
services.
• Experience in use provides important feedback
to enhance the firm’s technological capabilities.
• Expert knowledge from product developers can
enhance the effectiveness of field operations,
while feedback from the field informs future
development.
• Two-way flows of information are relevant.
Enactment & Substance of TS
• Enactment reveals the substance of TS.
• Exhibit 3 presents a framework for mapping the
interactions among the components of substance and
enactment in TS making.
• Two aspects of TS:1) the substance of TS should be
comprehensive. TS, as it is enacted through the various
tasks of acquisition, development and technical support
should address the four substantive dimensions and do
so in ways that are consistent across the dimensions.
• 2) TS should be integrated. Each of the key tasks should
be informed by the positions taken on the four
substantive dimensions in ways that create consistency
across the various tasks.