MT150 Dynamics of Change: Impacts of Technology mot.vuse.vanderbilt/hackett

1. MT150Dynamics of Change: Impacts of Technology http://mot.vuse.vanderbilt.edu/hackett Session Nineteen: Tuesday, November 5, 2001 8:10am-9:25am Jacobs Hall Room 311

2. Agenda for Today • QUIZ • QUIZ Answers & Discussion of Readings • Research Paper Update • Readings for Next Time

3. Technology Commercialization • Technology commercialization is the “ability to move a product from concept to market quickly and efficiently…” (Nevens et al, 1990) • Technology commercialization is "the process by which new ideas [or concepts] or technologies originating from R&D are moved through multiple functional groups and transformed into new products ready for the market." (Jassawalla, A.R. and H.C. Sashittal, 1998)

4. Quiz • True or False: While there is a tendency to view commercialization as a linear, stage-based process, companies with strong commercialization capability see the process as a series of overlapping phases that involve many business functions simultaneously.

5. Research Paper Gantt Chart 12/11 & 12/13 12/18

6. Commercialization Gantt Chart

7. Quiz • True or False: Nevens et al assert that while some companies intuitively know how to bring sophisticated technology-based products to market faster and more often than competitors that treat commercialization as a purely intuitive, creative process, most companies need to develop this capability.

8. Findings • Leading companies… • Commercialized two to three times the number of new products and processes as do their competitors of comparable size. • Incorporate two to three times as many technologies in their products • Bring their products to market in less than half the time and • Compete in twice as many product and geographic markets

9. Which company, A or B, is better at commercializing technology in a market? Company A Company B Prod. A1 Proc. A3 Prod. A2 Product B T1.A.1 T.1.A3 T1.A2 T1.B T2.A1 T.2.A3 T2.A2 T3.A1 T.3.A3 T.3.A2

10. Which company, A or B, is better at commercializing technology in a market?Between 1976 and 1982, more than 90 new Canon printer models reached the market, most of them mid-range machines, and Xerox 82% share fell by half. Company A Company B Prod. A1 Proc. A3 Prod. A2 Product B T1.A.1 T.1.A3 T1.A2 T1.B T2.A1 T.2.A3 T2.A2 T3.A1 T.3.A3 T.3.A2

11. Quiz • True or False: The Nevens et al study found large differences among companies’ ability to commercialize technology, and the good companies seemed to be doing certain things that the poor companies were not.

12. Quiz • True or False: Companies that are good at commercializing technology view technology commercialization as a highly disciplined system.

13. Quiz • Which of the following is not mentioned as being applied to the commercialization process? • Establish commercialization as a top priority • Set measurable goals for ongoing improvement • Develop the necessary organizational skills • Engage in periodic team-building exercises • Encourage managers to take aggressive action. • Empower management to ensure handoffs and communication are smooth • Pay attention to process improvement

14. Quiz • True or False: The Nevens et al study found that there is only a weak association between an organization’s competitiveness and its ability to commercialize technology.

15. Quiz • True or False: Companies that are first to market with products based on advanced technologies command higher margins and gain share.

16. Quiz • True or False: Companies that spin out variants more rapidly and leverage their core technologies across more markets earn higher returns.

17. Quiz • True or False: Nevens et al identify commercialization skill as a very important competitive challenge for managers in the 1990s.

18. Quiz • Which of the following is not a change in the business environment identified by Nevens et al? • Increasing proliferation of new technologies • Speed with which new technologies render previous technologies obsolete • Marginal utility of the inflection point on the S-curve of technology adoption life cycle is moving upward and to the right • Increasing speed of diffusion of technological innovations • Growth of research consortia and international suppliers • Cost of developing base technologies is increasingly expensive • Fragmentation of markets • Higher real per capita incomes and more sophisticated consumers

19. Quiz • Nevens et al assert that companies that have the capability to manage the commercialization process focus on activities. Which of the following is not one of the four items they mentioned? • They continuously reduce new product complexity • They get products or processes to market faster • Premium pricing; hedge against short product life cycle • Volume break points in purchasing & production faster than rivals • Sidebar: Construction of DELL production facilities in Tennessee • They use newly innovated technologies in products across a wider range of markets • To recoup R&D investment must attack global markets • Leverage core technology across multiple products and markets • They introduce more products • More products with different feature mix/different version can satisfy greater number of market segments • They incorporate a greater breadth of technologies • Increasing product complexity means that Technology 1, Technology 2 and Technology 3 are all incorporated in Product A.

20. Quiz • Which of the following is not one of the measures Nevens et al identifies as important for strengthening commercialization capability? • Make commercialization capability a top-management priority • Set goals to focus the commercialization effort • Develop skills • Get managers directly involved in the commercialization process to speed actions and decisions • All of the above are mentioned by Nevens et al as important.

21. Accelerating Technology Commercialization

22. Note on Categorization of Technologies • Categorization and strategic utilization/development of technologies a la the approaches of Whelan/Teece. These scholars argue that technologies can be placed into one of the following three categories: • Critical Technologies -These technologies are internal proprietary technologies central to present competitive advantage. • Enabling Technologies -These technologies are complementary technologies, broadly available and essential to organizational effectiveness in terms of being able to meet the demands of the market. • Strategic Technologies -These technologies are a source of future competitive advantage when combined with or substituted for critical technologies.

23. Key Questions for Managers • When will the product’s price-performance ration make it competitive with existing technologies? • How far down the road is the technology, and how much money do we need to push it into the market? • Where could we go wrong? • What’s the evidence for that conclusion?

24. Arthur

25. Quiz • True or False: According to Arthur, we can think of new technologies as competing for a market of adopters.

26. Quiz • True or False: Competition between technologies usually becomes competition between bandwagons, and adoption markets display both a corresponding instability and a high degree of unpredictability.

27. Quiz • True or False: Usually technologies become more attractive the more they are adopted.

28. Quiz • Increasing returns to adoption of a technology arise from five important sources. Which of the following is not a source of increasing returns: • Learning by using • Network externalities • Short product life cycles • Scale economies in production • Informational increasing returns • Technological interrelatedness

29. Quiz • True or False: The outcome of technology adoption in a technology competition can be “path-dependent”; that is, adoption is dependent upon what happened with regard to adoptions prior to the current adoption-rejection decision.

30. Quiz • True or False: Arthur asserts that the competing technologies adoption process is a self-organizing process.

31. Quiz • In a technology competition characterized by network externalities, is lock-in necessarily permanent? • Yes • No A coordinated changeover to a superior collective choice can provide escape. Sudden release from lock in can cause the economy to lose “smoothness of motion.”

32. Quiz • True or False: The application of the AEK Strong Law to the informational increasing returns model yields circumstances under which information-increasing returns allow stable fixed points such that information increasing returns yields an eventual monopoly.

33. Quiz • Is it inevitable that one technology must eventually shut out the others when there are increasing returns to adoption? Yes No

34. Quiz • According to the Arthur article, “standard” in the technology literature means • Convention or code of practice • Dominant technology, method or code • Both A & B • Neither A nor B

35. Quiz • With standards, learning, information and production externalities are _______ important, and the main sources of increasing returns are network externalities and possibly technological interrelatedness. • More • Less

36. Additional info on grids • As you know from the course website or the research paper handout, the "grids" that you are addressing for the paper are Electricity, Transportation, Telecommunications, Entertainment/Leisure, Internet/Information and Production Grids. The concept of and importance of grids was first introduced in the lecture for Session Three. Basically, you can think of grids as "networks".  These networks are important because they link people and institutions in value creating ways through technology. • You can get a deeper understanding of the importance of grids in an economy by clicking on the following URL http://www.fantastictranscripts.com/transcription/walker00.html and reading the article. A brief snapshot of the concept of grids as introduced by the article and made relevant to the research paper is provided below. • Electricity Grid:  We are all logged on to the electricity grid. Electricity frees us from the limitations of working only sunup to sundown.  (Look at things like how much electricity is consumed annually; how stable is the power supply; what locations in Indonesia are connected to the power grid, etc.) • Highway/Railway/Airway/Sea & River Lane Transportation Grid - Whether we are hurtling down the highway or not, our consumerist lives depend the highway as a means of distribution. (The transportation grid an indication of how well physical products can be moved for purposes of commerce. Again, note which places the grid connects and general expense of distribution system). • Telecommunications Grid - How many locations are connected by the telecommunications infrastructure? (This addresses communication aspect of Communication and Coordination... are telecommunications costs expensive or moderately priced) • Entertainment & Leisure Grid - How do people spend their money to have fun? TV, Movies, pirated Video CDs? festivals? How people spend their money for leisure and how much money people have to spend on leisure are important measures of an economy's potential. • Internet & Information Delivery Grid - more detail in section III of the research paper description... Basically I am looking for how many internet users in the nation's population and reliability of internet connections...) • Major National Technology Products - This is not necessarily a grid, but knowing where the major production centers in a country are located is important because specific human resources are required for specific industries. For example, in the U.S., historically, laborers were needed in Pennsylvania to work in steel mills, blue collar workers were also needed in Michigan to manufacture automobiles. Alternatively, knowledge workers are needed in Silicon Valley to manufacture software code and other high tech products. (Knowing where and what "stuff" is made, gives an indicator of how technologically proficient a nation's manufacturing workers are). • I hope that this helps to clarify the concept of grids. Keep up the good work, and please do not hesitate to contact me if you have any more questions.

37. Readings for Next Time • Arthur, W. B. 1996. "Increasing returns and the new world of business. Harvard Business Review (July-August). pp. 100-109.   • Teece, D. J. 2001. "Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy." In R. A. Burgelman & M. A. Maidique & S. C. Wheelwright (Eds.), Strategic Management of Technology, Eighth ed.: pp.186-203. Upper Saddle River, NJ: McGraw Hill Irwin.   • White, L. J. 2000. "Network economics and public policy: a primer." Milken Institute Review: pp. 38-46.