17 - 1
Chapter
17
McGraw-Hill
Managing
Technology and
Innovation
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Technology And Innovation

Technology



17 - 2
the methods, processes, systems, and skills used to transform
resources into products
systematic application of scientific knowledge to a new
product, process, or service
Innovation



a change in technology
process innovations - changes that affect the methods of
producing outputs
product innovations - changes in the actual outputs
themselves
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Technology And Innovation

17 - 3
The technology life cycle

a predictable pattern followed by a technological innovation
starting from its inception and development to market
saturation and replacement






McGraw-Hill
cycle begins with the recognition that applied science can satisfy
a need
knowledge and ideas brought together, culminating in a
technological innovation
rate of product innovation tends to be highest in early years
dominant design emerges when early problems are solved
technology reaches upper limits of performance capabilities
the technology remains in mature stage until it is replaced
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
The Technology Life Cycle
Performance
Theoretical
maximum
17 - 4
Development slows
as a limit is approached
Emergence of a
dominant design
Early
problems
Time
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Technology And Innovation (cont)

17 - 5
Diffusion of technological innovations


spread in the use of new technology over time follows an Sshaped pattern
adopters of new technology fall into five groups


innovators - adventurous
early adopters - critical to the success of a new technology


early majority - take longer to decide to use something new


McGraw-Hill
typically not the leaders
late majority - approach innovation with great caution


include well-respected opinion leaders
adopt out of economic necessity or increasing social pressure
laggards - isolated and highly conservative
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Technology Dissemination Pattern
And Adopter Categories
17 - 6
100
90
Cumulative
S-shaped curve
Percentage of adopters
80
70
60
50
Early
adopters
13.5%
Bell-shaped
frequency curve
40
30
20
Innovators
2.5%
Early
majority
34%
Late
majority
34%
Laggards
16%
10
McGraw-Hill
Time
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Technological Innovation In A
Competitive Environment

Decisions about technology and innovation are very
strategic and need to be approached in a systematic way

technological innovations can support either:





17 - 7
low-cost leadership strategy
differentiation strategy
new technology can completely change the rules of
competition within an industry
key issue is not whether to adopt a new technology but when
to adopt it
Technology leadership imposes costs and risks

not the best approach for every organization
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Advantages And Disadvantages Of
Technology Leadership
Advantages
•First mover advantage
•Little or no competition
•Greater efficiency
•Higher profit margin
•Sustainable advantage
•Reputation for innovation
•Establishment of entry barriers
•Occupying of best market niches
•Opportunities to learn
McGraw-Hill
17 - 8
Disadvantages
•Greater risks
•Cost of technology development
•Costs of market development and
customer education
•Infrastructure costs
•Costs of learning and eliminating
defects
•Possible cannibalization of
existing products
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Technological Innovation In A
Competitive Environment (cont.)

17 - 9
Technology followership



deciding to be a leader or follower depends on how a company
positions itself to compete, the benefits gained through the use
of a technology, and the characteristics of the organization
can be used to support low-cost and differentiation strategies
adoption timing is dependent on the organization’s strategic
needs and technology skills as well as the benefits of the new
technology


McGraw-Hill
development of technology over time makes it easier to use
complementary products and technologies may be developed
that may make the technology easier to use
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Assessing Technology Needs

17 - 10
Measuring current technologies


technology audit - process of clarifying the key technologies
upon which an organization depends
most important dimension of a new technology is its
competitive value

emerging technologies - still under development and unproven


pacing technologies - yet to prove full value



have potential to alter the rules of competition
key technologies - proven effective and offer strategic advantage
base technologies - are commonplace in the industry

McGraw-Hill
may alter rules of competition in the future
offer little competitive advantage
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Assessing Technology Needs (cont.)

17 - 11
Assessing external technological trends

several techniques used to better understand how technology is
changing within an industry

benchmarking - process of comparing the organization’s
technologies with those of other companies



scanning - focus is what can be done and what is being
developed


McGraw-Hill
important to consider practices of overseas competitors
focus is what is currently being done
emphasizes identifying and monitoring the sources of new
technologies in an industry
extent of scanning determined by the importance of staying at the
cutting edge of technology
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
17 - 12
Framing Decisions About
Technological Innovation

Anticipated market receptiveness



Technological feasibility



in the short run, there should be an immediate application that
demonstrates the value of the new technology
in the long run, a set of applications must show the technology
is the proven means to satisfy a market need
visions can stay unrealized for a long time
technical obstacles may represent barriers to progress
Economic viability

must be a good financial incentive for the new technology

McGraw-Hill
development results in costs
patents help to recoup the costs
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Framing Decisions About
Technological Innovation (cont.)

Anticipated competency development



17 - 13
technological innovations are the tangible product of
intangible knowledge and capabilities that make up the
organization’s core competencies
firm’s must have (or develop) the internal competencies
needed to execute their technology strategy
Organizational suitability

assess the fit of technological innovation with the
organization’s culture and managerial systems


McGraw-Hill

proactive” technology-push” innovators
defender - have a more circumspect posture toward innovation
analyzer - allow others to prove the viability of the technology
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Framing Decisions About
Technological Innovation (cont.)
17 - 14
Considerations
Examples
Market Receptiveness - Assess external
demand for the technology.
Cell phones, MP3, personal digital
assistants (PDAs), HDTV, etc.
Technological Feasibility - Evaluate
technical barriers to progress.
Deep-sea oil exploration, physical size
of PC microprocessors
Economic Viability - Examine any cost
considerations and forecast profitability.
Solar fusion, fuel cell for automobiles,
missile defense system
Competency Development - Determine
if current competencies are sufficient.
Information technology in hospitals,
digital technology in cameras
Organizational Suitability - Assess the
fit with culture and managed systems.
Steel companies focusing on creativity
and innovation
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Sourcing And Acquiring New
Technologies

17 - 15
Each industry usually has specific sources for most of its
new technologies


in many industries, however, the primary sources of new
technology are the organizations that use the technology
make-or-buy decision

the question an organization asks itself about whether to acquire
new technology from an outside source or develop it itself
Internal development - potentially advantageous to keep the
technology proprietary
 Purchase - most technology is available in products or
processes that can be openly purchased

McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Sourcing And Acquiring New
Technologies (cont.)

17 - 16
Contracted development - contract development to an
outside source

e.g., other companies, independent research laboratories
Licensing - when technology is not easily purchased, may
be able to license it for a fee
 Technology trading - may be used between rival companies



becoming increasingly common because of the high cost of
developing advanced technologies independently
Research partnerships - each member enters the partnership
with different skills or resources needed for successful newtechnology development
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Sourcing And Acquiring New
Technologies (cont.)

Joint venture - have greater permanence


17 - 17
outcomes result in entirely new companies
Acquisition of an owner of the technology


outright purchase of the company that owns the technology
acquiring a minority interest to gain access to the technology
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Technology Acquisition Options
Yes
Yes
Available skills
and resources
Important to
remain
proprietary
Internal
development
Acquisition of the technology
owner
No Exclusive research contract
Yes
No
Available for
sale
No
McGraw-Hill
17 - 18
Purchase
License
Trade
Joint venture
Research partnership
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Technology And Managerial Roles

17 - 19
Chief Technology Officer (CTO)






executive in charge of technology strategy and development
senior position at the corporate level with broad, integrative
responsibilities
coordinates technological efforts of the business units
acts as a voice for technology
supervises new-technology development
assesses the technological implications of strategic initiatives
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Technology And Managerial Roles
(cont.)

17 - 20
A variety of critical roles in developing new technology




entrepreneur - invents ways to produce old products to exploit
new technologies
technical innovator - person who develops a new technology
or has the key skills to install and operate the technology
product champion - person who promotes a new technology
throughout the organization in an effort to obtain acceptance
and support for it
executive champion - an executive who supports a new
technology and protects the product champion of the
innovation
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Unleashing Creativity: 3M’s Rules
For An Innovative Culture
17 - 21
Set goals for innovation
Commit to research and development
Inspire intrapreneurship
Facilitate, don’t obstruct
Focus on the customer
Tolerate failure
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Innovation

17 - 22
Bureaucracy busting


bureaucracy is an enemy of innovation
establish special temporary project structures that are isolated
from the rest of the organization



“skunkworks” allowed to operate under different rules
angura - “underground research” policy that allows Japanese
scientists to pursue projects about which only their immediate
supervisor knows
cross-functional teams - solve problems and create innovative
solutions

McGraw-Hill
are flat structures that create an environment that encourages
collaboration and creativity
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Innovation (cont.)

17 - 23
Implementing development projects

development project - focused organizational effort to create a
new product or process via technological advances

fall into one of four categories




McGraw-Hill
research or advanced development projects - designed to invent
new science for application in a specific project
breakthrough development projects - designed to create the first
generation of a product or process
platform development projects - establish the basic architecture for a
whole set of follow-on projects
derivative development projects- designed to provide incremental
improvements to an existing product or process
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Innovation (cont.)

17 - 24
Implementing development projects (cont.)

development project (cont.)



typically relies on a special cross-functional team
typically conducted under intense time and budget pressures
development projects have multiple benefits



to achieve their fullest benefit, development projects should:



McGraw-Hill
cultivate skills and knowledge that can be used for future endeavors
organizational learning - important criterion for evaluating the
success of the project

build on core competencies
have a guiding vision about what must be accomplished
have a committed team
instill a philosophy of continuous improvement
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Innovation (cont.)

17 - 25
Technology, job design, and human resources


adopting a new technology typically requires changes in the
way jobs are designed
sociotechnical systems - approach to job design that attempts
to redesign tasks to optimize operation of a new technology
while preserving employees’ interpersonal relationships and
other human aspects of the work

managerial choices on how to apply a new technology



used to limit the tasks and responsibilities of workers
used to achieve great accomplishments and improve the quality of
workers’ lives
consider technology’s effect on human resource systems
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Compensation Practices In Traditional
And Advanced Manufacturing Firms
Type of
Compensation
Practice
Traditional factory
17 - 26
Integrated manufacturing
Performance
contingent
Focus on individual incentives
reflects division of labor and
separation of stages and functions.
Extensive use of group incentives
to encourage teamwork, cooperation,
and joint problem solving.
Job
contingent
Use of hourly wage assumes that
the differences in employee contribution are captured in job classifications and that performance is
largely determined by the
production system.
Use of salary assumes that employees’ contributions transcend the
job per se to substantially affect
output. The distinctions between
classes of employment are
diminished.
Person
contingent
Seniority pay rewards experience
as a surrogate for knowledge and
skill in a stable environment and
rewards loyalty to reduce
uncertainty within the system.
Skill-based pay rewards continuous
learning and the value-added
derived from increased flexibility
in a dynamic environment
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.