Competitive Technology and Business Strategy 1.Models: technology-push, market- pull and...

Competitive Technology and Business Strategy

1. Models: technology-push, market-pull and strategy-pull

2. Models: base/key/emerging technology

3. Models: stable, flexible and turbulent tehcnology

Technology and Business StrategyTechnology and Business Strategy

1. Technology strategy is harmonized with business and corporate strategy;

2. Tehnology strategy defines the continuous process of generating, evaluating and assessment, selection and choice of technological options;

3. It identifies the Strategic Technological Area of a firm based on external and internal factors analysis

Strategic profiles of firms:1. Firms engaged in strategic planning. The ultimate goal is the development of competitive strengths within a given corporate business portfolio.2. Firms with strong financial control. The ultimate goal is to achieve highest possible results in terms of financial indicators.3. Firms with clear strategic control. A combination of competitive and financial ambitions meaning investments in strategically sound and progitable businesses.

Factors influencing Business Strategy

Consumer groups

Consumer needs

Alternative technologies

Two general business/technology strategies:1. Reactive strategy: when firms respond to consumer needs and actions of competitors, and

2. Proactive strategy: when firms enforce change in the environment by anticipating the needs of consumers.

There are many subdivisions and more detailed presentations of strategy.

Reactive strategy Strategic options:

Responsive

Imitative/Fast follower

Late entrant

Defensive

(1)Responsive strategy is oriented at quick response of a firm to the explicite needs of consumers by products/services provided. Involves focus on product/service innovation.

(2) Imitative strategy/Fast follower is oriented at quick response to the action of competitors who have introduced newproduct/service by copying, imitating its output.

(3) Late entrant is a strategy base on imitation with effort to further develop/innovate of the competitors` products and services.

(4) Defensive strategy is again an answer to the action of competitors with efforts focused at innovating own products/service as response to their new output.

Proactive strategyStrategic options:

R&D based

Entrepreneurial strategy

Purchasing strategy

Marketing strategy

(1) R&D based (Internal development) oriented at intramural R&D with innovation offensively introduced with pioneer strategy in market penetration.(2) Entrepreneurial strategy oriented at introducing innovation with high risk, new on the market innovation but not necessarily new to the world.(3) Purchasing strategy, focused at buying new technology product/service and process already developed involving smaller risk, its a pure strategfy of horizontal technology transfer with different options (equipment purchasing, licencing, joint ventures, etc).(4) Marketing strategy oriented at high involvement of strategic marketing initiatives at aggresive product/service innovation.

Science and

technology base

Needs of

the marketdevelopments

Technological

Creation of new knowledge

dominated by universities and

large science-based organisations

Technology development-

dominated by organisationsthe consumption of products

Consumers express their

needs and wants through

Conceptual framework

Tehnological strategy - models

1. Technology-push

2. Market pull

3. Strategy pull

1. Technology push based on classical approaches

postulating the primary role of R&D in the process of technological innovation in firms.

R&D Production Marketing Market need

2. Market Pull developed with the rising sense of the significance of customers and market needs

R&D ProductionMarketingMarket need

Is it necessary to question market need at the end of the cycle?Why yes or why no?

3. Strategy Pull focused at strategy and strategic management mission, goals

R&D Production Marketing Market needStrategy

Strategy (corporate, business, technology) derived from strategic analysis (external OT and internal SW)

Technology strategy – options:

1. Exploitation of existing technology – no change in technology;

2. Innovation of existing technology (internal/ext. sources - incremental innovation)

3. Technology substitution (external/internal sources);

4. Radically new technology and competence (radical innovation – external and/or internal sources).

Incremental (evolutive) vs. Radical (disruptive) Innovation

Why disruptive innovations are hard to market?

• Fear, uncertainty & doubt (FUD)• No established solutions• No existing infrastructure to support• High risk buying decision

Source: G. Moore, 1993

Technology adoption life cycle


High Tech Marketing model


3 phases of High Tech Marketing


User needs understanding…

• “There is no reason anyone would want a computer in their home.”

Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977

• This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.

Western Union internal memo, 1876.

Commercializing technology & user needs (1)

Alignment withAlignment withcurrent marketcurrent market

MarketMarketcreationcreation

Source: D. Leonard-Barton, 1994

Need know:

improvedsolution

Need know:new

solution

Need anticipate

d:new

solution

Need uncertain:solution evolves





Uncertainty & RiskLow High

Difficulty of communicating product conceptLow High





Surveys,

Focus groups

Living withcustomers

Users asdevelopers,Customer

s as partners

Scenarios of future

Traditional Market

Research

Marketintuitio

n

Leadusers

IndustryExperts,Trend

exploration

Emphatic design

Great ideas vs great products (1)

Source: Fortune, 2000

Great ideas vs great products

(2)

Source: Fortune, 2000

Complementary Innovation and Assets

Complementary assets• Innovation consists of some technical knowledge• Knowledge & know how are partly codified, partly

tacit• Commercialization of innovation requires the know-

how to be utilized in conjunction with other capabilities or assets:– new drug: dissemination of information to doctors,

pharmacy…– new computer hardware – operating systems &

application software– distribution, service…

Source: Teece, 1986

Complementary assets

Source: Teece, 1986

Standards

• Networked environment– products made by various companies must be

compatible to be of value to the customers• Trains• Faxes• Surfing on the Internet

• Supporting a standard with a new product may be risky…– all based on wide acceptance of the standard– may wait to reduce risk fast-follower strategy

Standards and Innovation Commercialization

Standards• Diffusion of a product designed to a particular

standard is often contingent upon the availability of complementary products – VHS vs Beta

• Example: 56K modems– different standards first adopted by Rockwell & 3 Com– Wait & see attitudes of software suppliers, suppliers of

complementary goods, modems purchasers sales suffered

– more collaborative attitude later, common standards

Standards

• In some industries, different standards can co-exist and share the market:– TV: NTSC, PAL, SECAM– Electrical standards: North America; !10 V, Europe:

220 V– Railroad gauges in Europe– Digital wireless in USA: TDMA, CDMA & GSM

• Implications: product development & manufacturing more complex and costly – lack of economies of scale

Standards & High-tech markets (1)

• Sharing of the marketplace is NOT the norm for standards in those markets

• Competition between standards will often lead to a situation where the winner “takes all”– Wintel vs Mac

• “Network effects” & positive feedback for high-tech products

Standards & High-tech markets (2)

• Example: fax machine– Valueless by itself– 2 fax machines communicating with each other have

value– Value increases according to Metcalfe’s law:

• Value of the network grows at the square of the number of participants in the network

• As use of a particular standard increases, products based on that standard can communicate with more products based on the same standard…

Standard wars

• Internet browsers:– Microsoft & Netscape

• Audio & Video software on Internet:– Microsoft & RealNetworks

• Rewritable DVD:– DVD-R: 230 companies including Apple, AOL/Time

Warner, Hitachi, LG, Matsushita, Pioneer…– DVD+R: Dell, HP, MCC/Verbatim, Philips,

Ricoh, Sony, Thomson & Yamaha

Types of standard wars

Revolution Revolution versusversus

EvolutionEvolution

Rival technologyRival technology

Compatible Incompatible

Com

pati

ble

Inco

mp

ati

ble

RivalRivalRevolutionsRevolutions

RivalRivalEvolutionsEvolutions

Evolution Evolution versusversus

RevolutionRevolution

You

r te

ch

nolo

gy

You

r te

ch

nolo

gy

Source: Shapiro, Varian, CMR 1999

De facto standard advantage (1)

• The company who has control on the de facto standard is generally pushed into a dominant competitive advantage, i.e.“gorilla”

• Competitive advantage is expressed in 4 dimensions:– getting more customers

– keeping more customers

– driving costs down

– keeping profits up


• Getting more customers– top company attracts most attention: better press

coverage, better shelf space, more interest form customers

– attracts new customers

– has ability to sell more than competitors reinforces its position

– Ex: PC software developers have to be Microsoft Windows compatible


• Keeping more customers– Barriers to entry are high - competitors need to match

offer from “gorilla”

– Switching costs – high practical & financial costs for customers to switch to another product

– driving costs down

– keeping profits up


• Driving costs down– Gorilla has often advantages linked to economies of

scale

– Can also control the element in the Value Chain that adds most value with low cost – core competency


• Keeping profits up– Gorilla’s products often viewed as bringing more value

as a whole (products + services fulfilling customer needs). Companies supplying complementary products put first their resources behind a product complementing the market leader

– More and better products come out in support of the gorilla’s offer…

Standards in the computer industry 1999-2000

Date Participants ObjectiveJan 1999 Adaptec, Compaq, HP,

IBMTo create a new input/output standard

April 1999 Dictaphone, eDigital, IBM, Intel, Norcom Electronics, Olympus & Philips

To develop a standard for the way voice commands and information are transmitted & received by mobile devices

Oct 1999 Compaq, HP, IBM, Intel & Microsoft

To develop security standards for hardware & software used in e-commerce

Feb 2000 3Com, Cisco, Extreme Networks, Intel, Nortel, Sun, World Wide Packets

To develop standards & technology for 10-gigabit Ethernet networks

Source: Technoweb

Standards – key things to remember

• Control over installed base of users

• Intellectual property rights

• Ability to innovate

• First-mover advantage

• Manufacturing capabilities

• Strengths in complements

• Brand name & reputation

Technology Portfolio

Technology Portfolio

• The list of technologies that are available in the firm

• Not necessarily the technology that are in exploitation

• Technologies that the firm are entitled to use (developed within the firm or acquired/purchased by different modes of horizontal technology transfer)

• Technology portfolio management – at the core of corporate strategy (multi/single-business; focused/diversified-related/unrelated)

STRATEGIC TECHNOLOGY DIMENSIONS: (Arthur D. Little model):

1) Base technology – mostly present in the core operations of the firm, generating the biggest part of revenue, but competitive capacity declining, not decisive;

2) Key technology- strongest competitive force, rising percent in revenue, perspective of becoming base;

3) Emerging technology- tecnology in early stages, marginally contributing to revenue, still being developed with the prospect of becoming key.

STRATEGIC TECHNOLOGY DIMENSIONS: (Arthur D. Little model):

1) Base technology – mostly present in the core operations of the firm, generating the biggest part of revenue, but competitive capacity declining, not decisive;

2) Key technology- strongest competitive force, rising percent in revenue, perspective of becoming base;

3) Emerging technology- tecnology in early stages, marginally contributing to revenue, still being developed with the prospect of becoming key.

Comparison of Technology Porfolio of two firms in relation to Technology Life Cycle (TLC)

Comparison of Technology Porfolio of two firms in relation to Technology Life Cycle (TLC)

Sales

Time

Firm A

Firm B

Technology portfolioTechnology portfolio

Competitive potential

Degreeof competence

Significant

Medium

Weak

Low Medium High

Technology portfolio structure

It is necessary to ,,nurture”, maintain and enhance the tehnology portfolio, similar to gardens : Old trees are to be cut and the garden should be kept with gardening, watering, and new trees to be planted. For firms it is the necessity to reconsider the content of the technology portfolio in relation to the basic business character of base, key and emerging technologies.

It is necessary to ,,nurture”, maintain and enhance the tehnology portfolio, similar to gardens : Old trees are to be cut and the garden should be kept with gardening, watering, and new trees to be planted. For firms it is the necessity to reconsider the content of the technology portfolio in relation to the basic business character of base, key and emerging technologies.

Technology portfolio structure

• It is necessary to ,,nurture”, maintain and enhance the tehnology portfolio, similar to gardens :

• Old trees are to be cut and the garden should be kept growing with gardening, watering, and new trees to be planted and old trees to be uprooted.

• For firms it is the necessity to reconsider the content of the technology portfolio in relation to the basic business character of base, key and emerging technologies.

Technology and Market Portfolio Analysis

A B

C

D

B

A

D C

Technology matrix

CTP

RTD

CTP- Current technology positionRTD – Rate of technology development

Market matrix

MS

GPMS – Market shareGP – Growth potential

Strong

Weak

High Low

High

High

Low

Low

Managerial ImplicationDifferent forms of arrangements are appropriate under different technology and

market condition. When the technology and market are familiar to the firm, internal development is encouraged. When either one is new or unfamiliar, joint

venture or acquisition is an alternative. When neither the technology nor the market is familiar to a firm, acquisition, venture capital, or educational

acquisitions are needed.

MARKET

(T-M) Matrix

Appropriate form of Collaborative Arrangement

New and Unfamiliar

New but Familiar

Existing

Joint venture

Venture capital

Venture nurturing

Educational acquisition

Venture capital

Venture nurturing


Internal market development

Acquisition

Internal venture

Acquisition

Licensing

Venture capital

Venture nurturing


Internal development

(or acquisition)

Internal venture

Acquisition

Licensing

“New style” joint venture

Existing New but Familiar

New and Unfamiliar

TECHNOLOGY

Technology and Business

• Stable technology: the product, process and demand LC-s are harmonized

• Flexible/Fertile technology: the demand LC and process LC are harmonized with many product/service LCs are generated

• Turbulent technology: within the demand LC, there is a need to generate numerous technology LCs (process and product).

The Demand LC - phases

1. Emergence (E) - the unstable period of initiation of a new industry/technology/products/services, rivalry and competition is strong with many players trying to obtain leader position

2. Intensive growth (IG) – the players that have survived exploit and enjoy the yields of their initial superiority.

3. Growth slowdown (GS) – period when the signs of saturation begin to emerge and supply rises above demand.

4. Maturity (M) – when saturation is reached and significant capacity surplus exists.

5. Decline (D) – demand falls to lower levels, ot to zero level.

Stable Technology

Demand/Sales

Time

E

IG

GSM D

DemandProcess

Product

Flexible/Fertile Technology

Demand/Sales

Time

E

IG

GSM D

DemandProcess

Product

P1

P2

P3

P4

Turbulent Technology

Demand/Sales

Time

E

IG

GSM D

Demand

TechnologyT1

T2

T3

Competitive Technology and Business Strategy 1.Models: technology-push, market- pull and...

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