Fraunhofer IAO, Germany Developing Integrated Business and Technology Strategies

1. Fraunhofer IAO, Germany Developing Integrated Business and Technology Strategies NITM International Seminar Series A series of Seminars for Executives & Managers NITM, Dublin, September 17th, 2003 Frank Wagner & Flavius Sturm Fraunhofer Institute for Industrial Engineering

2. Agenda • Introduction • Strategic Management for SMEs “Navigating in Turbulent Times” • Business and Technology Strategies • Portfolio, Balanced Scorecards and other Tools • How Scenarios and Roadmaps can help (Cases) • Business and Technology Scouting

3. Increasing requirements for companies make new planning methods necessary Times of innovation become shorter Influence of demand groups and stakeholders increases Product diversity increases Internationalization gains more importance CompanyStrategy & Leadership Technology becomes more complex and interconnected The amount of information increases very strongly Production becomes more capital intensive R&D becomes more capital intensiv Source: Gausemeier et al.,1996

4. Wrong forecasts of reputable experts (I) It is not easy to predict the future ... !! 1897 Lord Kelvin important mathematician and inventor „The radio will have no future at all." 1901 Wilbur Right With his brother one of the most important flight pioneers „Man will not manage within the next 50 years to become airborne with a metal produced plane ." 1932 Albert Einstein Inventor of the theory of relativity; pathfinder of the nuclear energy „There is no sign at all, that we will ever be able to develop nuclear energy" Quelle: Gausemeier et al.,1996

5. Wrong forecasts of reputable experts (II) It is not easy to predict the future ... !! 1943 Thomas J. Watson Chief Executive Officer of IBM „I think there will only be a need on the world market for 5 computers." 1945 Vannevor Bush Chief Commander of the USA "I wish, the Americans would finally stop talking about the phantasm intercontinental ballistic missile " 1957 Lee de Forest Inventor of the cathode pipe „Despite all progress, man will never be able to reach the moon. 1977 Ken Olsen Chief Executive Officer of the computer manufacturer Digital „I can not see any reason at all, why an individual should have its own computer." Source: Gausemeier et al.,1996

6. Strategic technology management ... but you can try to be as sure as possible Scenario planning Strategic Foresight Strategy development Develoment of strategic options Derivation and definition of strategy

7. Agenda • Introduction • Case study scenario technique • Scenario technique • Technology Roadmapping • Case studies Technology Roadmapping and Technology Strategy

8. Case Study 1 – Scenario-Technique Company Classification: Sector: Automation & Drive Company Size: 10.000 employees Turnover: 1,2 Mio. € Type of Customers: OEM (2nd or 3rd tier) Strategy: Technology leader / pioneer

9. Structure of customer market C flexible Text B A flexible Competition- Structure Concept of production Approach for generating market & environment scenarios PHASE I PHASE 2 PHASE 3 & 4 Internal Workshops Umwelt Zulieferer / Partner Management Organisation Technologie Mitarbeiter Gesetz/ Politik Produkte / Dienst-leistungen Gesellschaft Entwicklung Kunden Kunden der Kunden Wettbewerber / Märkte Wirtschaft Creation of a company relevant environment Recording of influence factors by interviews and workshops and creation of key factors Description of future model characteristics by scenarios

10. Overview of interviewed partners Customer interviews Internal Interviews Purchasing Production Member of the board Design R&D Sales New Markets Development Distribution Europe Distribution Germany Internal Workshops Product management Branch management

11. Environment Supplier / Partner Management Organisation Employees Technology Law/ Politics Products / Services Society Development Customers Customer's clients Competition / Markets Economy Definition of force field

12. Environment Supplier / Partner Management Organisation Employees Technology Law/ Politics Products / Services Society Develop-ment Customers Customer's clients Competitioner / Markets Economy Identification of key factors (1/2) Changes within environment; customer's view Society: KF1: Worldwide population development KF2: Degree of indivdualisation Law/Politics: KF3: Work rules/ law Economy: KF4: Product life cycles KF5: Location Germany KF6: Change of economical structure KF7: Source of value adding

13. Environment Supplier / Partner Management Organisation Employees Technology Law/ Politics Products / Services Society Develop-ment Customers Customer's clients Competitioner / Markets Economy Identification of key factors (2/2) Change of market, technologies and suppliers; customer's perspective Suppliers market: KF16: Market structur constellation KF17: Entry of new competitors KF18: Competitor's service variety KF19: Market dynamics KF20: Innovation velocity Demand market: KF8: Market structure KF9: Market dynamic KF10: Branch dependence of market need KF11: Consumer behaviour KF12: Structure of value added chain KF13: Kind of competitive advantage KF14: Specificity of regional demands KF15: Rules/prinziples of collaboration Technology: KF23: Convergence of technologies KF24: Automation in Manufacturing technique KF25: Nano technology KF26: Biotechnology KF27: Substitution of technology in propulsion technology KF28: Material innovation KF29: Production engineering KF30: Importance of information and communication Supplier/Partner: KF21: Supplier's service variety KF22: Degree of supplier integration into value added chain

14. From interviews to key drivers and scenarios Creation of KF and projection Interview extract Society The increasing degree of Individualism is a visible trend recognizeable by diminishing edition numbers. This fortifies the trend towards personalized digital print. Additionally a trend towards more intensive sophisticated advertisement upcoming (Demands for optic, design, image, quality) Information are needed and demanded faster and more individualized (Results for newspapers and print industry in general) Individualisation of information demand A The demand for information is steady and mainly covered by specialiced print media B The demand for information in specific groups is covered equally by digital and print media C The increasing individualistic need for information is more and more covered by digital information

15. Umwelt Zulieferer / Partner Management Organisation Technologie Mitarbeiter Gesetz/ Politik Produkte / Dienst-leistungen Gesellschaft Entwicklung Kunden Kunden der Kunden Wettbewerber / Märkte Wirtschaft From key factors to scenarios Key factors Projection of KFs Clustering of projections Environment: KFx Demand market: KFx Supplier market: KFx Supplier/Partner: KFx Technology: KFx . . . . Time . . . . today Future horizon Source: changed after Gausemeier et al., 1996 . ... for those, several development options are conceived ... The relevant measures are taken out of the network environment of enterprises; ... ... And finally condensed to consistent scenarios .

16. Environment Supplier / Partner Management Organisation Employees Technology Law/ Politics Products / Services Society Develop-ment Customers Customer's clients Competitioner / Markets Economy Example: KF 8 Market structure From key factors to scenarios Economies change of structure leads to global multinational enterprises, which combine different industry branches and destroy SME's structures. The coalescence of different industry branches leads to a division of labor following steps in the value added chain and not to a division ordered by branches. Low wages countries take over work intensive value added chain steps while high price countries specialize on core competences in development, montage, etc.. International goods traffic will increase strongly. Some enterprises will cover the entire service spectrumwhile smalle ones will earn their money with specialized functions. Scenario 1 "Arctic" Change of structure leads to a specialized niche industry at the interfaces of the big industry sectors, which provides the connecting elements Scenario 2 "Sierra Nevada" Scenario 3 "Amazonas"

17. Scenario construction market- & environment Scenario A Arctic Structure of customer market • Homogeneous structure of customer markets • Similar customer needs • Huge, global orientated enterprises • Strong Homogenity of production concepts C flexible Text B Scenario B Sierra Nevada • Need diverse structure of • customer markets • Segment specific • customer needs • SMEs in networks • Middle variance of • production concepts A flexible flexible Production concepts Competition Structure Scenario C Amazonas • Heterogeneous structure of customer markets • Specific customer needs • Numerous small, flexible niche enterprises • Wide specificity of production concepts

18. Agenda • Introduction • Case study scenario technique • Scenario technique • Technology Roadmapping • Case studies Technology Roadmapping and Technology Strategy

19. Strategic early warning: 5 stages of scenario management scenario - preparation Scenario platform Contains the definition and analysis of the investigation object as well as the definition of the area, the scenarios are created for. 1 scenario field - analysis Key factors name relevant influence factors 2 scenario - forecast Future projections For any key factor several development possibilites in terms of future projections will be created 3 scenario - creation Scenarios Complex future images, whose occurrences are not able to be forecasted with absolute security 4 scenario - transfer Vision/Mission Strategy 5 Source: Gausemeier et al.,1996

20. Strategic early warning: scenario creation scenario field - analysis scenario - forecast scenario - creation . . . . time today Future horizon . . . . . time today Future horizon By linking the measurements of the company and the environment, the relevant influence parameters will be detected; ... ... And afterwards they are summerized to consistent scenarios. ... For these parameters several development possibilites are created... Source: Gausemeier et al.,1996

21. Design area Business Design area product Strategic early warning: Application possibilites of scenario management Objectiv planning Resource planning Future robust business vision and objectives Future robust Strategies for companies and business units Future robust visions and objectives within product management Future robust Strategies for general and specific products Design area technology Scenario-based technology assessment (TA); Technology visions Future robust technological solutions in new products Global Design area Future robust global objectives, e.g. for organizations or policy Future robust global strategy e.g. for organizations or policy Source: Gausemeier et al.,1996

22. Object planning Resource planing environment- scenario system- scenario design-area scenario Strategic early warning: forms of scenarios Typical fields of scenarios Typical design areas business scenario pure business- scenario business- system- scenario business- environment- scenario product scenario pure product- scenario product - system- scenario product - environment- scenario technology- scenario pure technology- scenario technology- system- scenario technology- environment- scenario global- scenario pure global- scenario global system- scenario global environment- scenario types of planing Source: Gausemeier et al.,1996

23. internal scenario-team external scenario-team Business management Strategic early warning: Proceeding of the workshop approach Project description problem 1.1 project plan Force field analysis scenario-platform 1.2 Creation of influence areas workshop 1 scenariofield-construction and descriptor formation 2.1 Creation of influence factors influence factor-catalog 2.2 Elaboration of key factors key factor-catalog 2.3 Source: Gausemeier et al.,1996

24. internal scenario-team external scenario-team Business management Strategic early warning: Proceeding of the workshop approach Processing key factors workshop 2 future project planning and consistency planing 3.1 Creation of future projections 3.2 Projection bundling Projection bundle catalogue 4.a Raw-scenario formation raw-scenario catalogue 4.b Future space mapping future space 4.c Source: Gausemeier et al.,1996

25. internal scenario-team external scenario-team Business management Strategic early warning: the proceeding of the workshop approach scenario-description 4.d scenarios = main field of application of scenario-software impact analysis workshop 3 scenario transfer 5.a eventual planing 5.b robust-planing future robust visions/objectives/strategies 5.c implementation controlling Source: Gausemeier et al.,1996

26. Strategic early warning: the proceeding of the scenario field analysis definition of scenario-fields sub-stage 1 Formation of impact areas The scenario field will be seperated in individual impact areas. sub-stage 2 Formation of impact factors The individual impact areas will be described by the key factors as complete as possible. sub-stage 3 development of key factors The interconnection of the influence factors will be investigated to identify the scenario typical key factors. key-factor- catalogue source: Gausemeier et al.,1996

27. Agenda • Introduction • Case study scenario technique • Scenario technique • Technology Roadmapping • Case studies Technology Roadmapping and Technology Strategy

28. Limit of new technology Limit of old technology Technology performance potential New technology R&D-effort = Status at the point of time when a change of technology is considered Substitution potential (Double-S-Curve) Capacity of technology (benfit/costs) Old technology cumulated R&D-effort Source: Krubasik (1982)

29. Technology-Roadmaps Time O3 Future O1‘‘‘ O1‘‘ O2‘ O1‘ O1 O2 Objects today • Technology Roadmaps allow a visualisation of future technological developments • Technology Roadmapping captures and bundles knowledge of experts • Leads to the derivation of concrete options of action Source: Specht et al., 2000

30. Technology-Roadmaps / Proceeding Phase 1: Definition of searching field Phase 2: Analysis of product-technology linkages Phase 3: Needs analysis and prognosis Phase 4: Potential analysis and prognosis Structuring of searching field Phase 5: Generation of Roadmap Phase 6: Analysis / Evaluation Phase 7: Action plan Source: similar in Specht et al., 2000

31. Technology-Roadmaps - Analysis of product-technology linkages Accoustics Market 1 Product 1 Function 1 Technology 1 Product 2 Function 2 Thermodynamics Technology 2 Market 2 Product 3 Function 3 Internet Technology 3 • Detailed analysis and description of market/product combinations • Analysis of product / function / technology linkages • Visualisation of results oin consistent chains

32. Technology-Roadmaps – Understanding the technology complex Manufacturing Technologies Regarded product technologies Customer requirements Pre-technologies Follow-up technologies Technology of direct competitor products Complementary technologies Substitutive technologies Source: Zahn, 1994

33. . . . today today today Future horizon Future horizon Future horizon Technology-Roadmaps – Needs and Potential analysis by scenario technique Accoustics Market 1 Product 1 Function 1 Technology 1 Function 2 Thermodynamics Product 2 Technology 2 Market 2 Function 3 Internet Product 3 Technology 3 Global scenarios Technology scenarios Product scenarios

34. P2‘ Function 1 T1‘ T2 Function 2 T3‘‘ Technology Roadmap Product Roadmap GAP! Time consitency P2‘ ?? ?? P1‘‘‘ T1‘‘ P1‘‘ T2‘ GAP! T1‘ T3‘ P2‘ P1‘ T3 T2 P1 P2 T1 P3 Function 3 T2‘ Technology-Roadmaps – Generation and Verification of Roadmaps Source: Specht et al., 2000

35. 97 99 97 00 98 01 98 01 98 98 98 98 Technology calendar Strategy Products Technology New Products Current Products Current Technology Make or Buy ? Keep or Sell ? A B D E New Technologies Product Technology Product Technology 1 98 99 Make Product Technology 2 Sell Product Technology 3 98 Buy Product Technology 4 Process Technology Process Technology 1 Process Technology 2 Sell 98 98 Buy Process Technology 3 Make Process Technology 4 Source: Tschirky/Koruna, Technologiemanagement (1998)

36. Technology-Roadmaps – Summary Advantages of Technology Roadmaps: • Integrated product and technology development and planning • Enhanced transparency of product and technology planning • Identification of gaps in medium and long term product and technology planning • Bundling of existing and new technology and market know how in a central organisation unit • Matching of expectations of R&D and marketing department Source: Specht et al., 2000

37. Agenda • Case studies Technology Roadmapping and Technology Strategy • - How companies do technology foresight • - How companies organise technology foresight • - What results do companies achieve with technology foresight

38. Case Study – Siemens Corporate Research Scenarios = pictures for the Siemens-operation areas Influencing factors Strategic vision individual Automation & control Day-to-day business • Retropolate from • Scenarios: • New markets • New customer requirements • New technologies • New business possibilites society • Extrapolate via roadmaps • Products • Technologies • Customer • requirements Information & communications policy economy Lighting environment Medical customers Power technology Transportation competition Today short-term medium term long-term Source: Austrian Research Center, 2002

39. Case Study – Organisation of early warning and strategic product and technology planning in a medium-size german high tech company CTO Head of strategic product and technology planning Strategic Planning of products and systems Business Development Scenario Management Patent Management

40. Case Study – Schindler Group Ltd. Trends within the development of sensorsystems • Integration • smart sensor systems • complex systems • wireless • digital, partly bus-compatible • Performance • high precision of measurements • high linearity • high reliability • low maintenance Signal processing Multi-sensing • Standardisation of interfaces • economies of scale • interoperability mechanical Actors electrical chemical • Miniaturisisation • smaler scales • lower energy consumption • feedback free magnetic radiation thermal • Intelligence • self-identification • self diagnosis • self calibration Trends in sensor systems: Smarter, cheaper, embedded decentrally, self-screening Source: Gassmann/Kottmann, 2002

41. Case Study – Schindler Group Ltd. Development of the sensor technique between technology-push and market-pull Technology push • Manufacturing technology • microelectronics • material technology • modularization Technology driver • System technology • communication technique • decentral intelligence • interfaces • Product technology • semi-conductor • telemetry • complex measurement • categories Market pull Dynamics high low Source: Gassmann/Kottmann, 2002

42. Case Study – Schindler Group Ltd. Cycle of Sensor technology – a strategic perspective high prototype invest motionsensor image sensor absolute encoder approach sensor accelerometer IR-image-sensor inductive sensor optimize sonic sensor (voice recognition) power sensor Strategic relevance 3D sensor Optical contactor/ Light-& IR sensor magnetic sensor observation ultrasonic detector strain gauge position sensor Chemical sensors Rust detection, etc. Image sensor (CMOS) disinvest Linear incremental encoder • Biometric senors • language identification • thumbprint contact sensor low mechanical contactor high low Stage of maturity, Resources Core Competence New Technology Source: Gassmann/Kottmann, 2002