Manchester Business School MBA Elective 2003 Technology Strategy, Innovation and Performance

1. Manchester Business School MBA Elective 2003Technology Strategy,Innovation and Performance • Peter Swann’s Classes • Innovations, Standards and Dominant Designs • Innovative Pricing • Innovation and Market Demand • Innovation and Corporate Vision

2. Manchester Business School MBA Elective 2003Technology Strategy,Innovation and Performance • Session 8: • Innovation and Corporate Vision

3. Innovation and Corporate Vision • Examples of “Limited Vision” • Introduction / Motivation • Context • Definition of foresight or vision • Who needs a vision? And why? • Tactical and strategic uses • Internal and external effects • Some further questions/issues • Examples • Case Study: Virtual Reality

4. Some examples of limited vision • "I think there is a world market for maybe five computers" (Thomas Watson, Chairman of IBM, 1943) • "There is no reason why anyone would want a computer in their home." (Ken Olson, president, chair and founder, Digital Equipment Corp., 1977) • "640K ought to be enough for anybody." (Bill Gates, co-founder, Microsoft, 1981) • "I see no advantage whatsoever to the graphical user interface" (Bill Gates, co-founder, Microsoft, 1981)

5. More examples of limited vision • "Everything that can be invented has been invented" (Charles Duell, Director US Patent Office, 1899)  • "The horse is here to stay, but the automobile is only a novelty, a fad" (President of the Michigan Savings Bank, early 1900s) • "Who the hell wants to hear actors talk?" (Harry M. Warner, Warner Brothers, 1927)  • "Computers in the future may weigh no more than 1.5 tons." (Popular Mechanics, 1949)

6. Everyone is playing at vision …. • http://news.bbc.co.uk/hi/english/sci/tech/newsid_1516000/1516932.stm • http://www.intel.com/research/silicon/mooreslaw.htm • http://www.intel.com/pressroom/archive/releases/20010828corp_a.htm • http://www.oit.doe.gov/petroleum/visions.shtml • http://www.design.philips.com/vof/toc1/home.htm • http://www.csl.sony.co.jp/project/ar/ref.html • http://www.microsoft.com/PressPass/press/1997/Oct97/UK.asp • http://www.microsoft.com/PressPass/features/2000/jun00/06-08vision.asp • http://www.mbs.ac.uk/about/html/mission___vision.cfm

7. Introduction • Competing for Industry Foresight (Hamel and Prahalad): • Industry foresight helps managers answer three critical questions: • what new types of customer benefit should we seek to provide in 5, 10, or 15 years? • What new competencies will we need to build or acquire to offer those benefits to customers? • How will we need to reconfigure the customer interface over the next (few) years?

8. Motivation • Hamel and Prahalad (1994): • “Motorola dreams of a world in which telephone numbers will be assigned to people rather than places .... For this world to become reality, Motorola knows that it will have to strengthen its competencies in digital compression, flat screen displays and battery technology.” • “In the early 1970s (Apple) looked forward to a world with ‘a computer for every man woman and child’ ... The result was the Apple II, the first truly successful mass-market computer, which was introduced in 1977”

9. Motivation, continued • Hamel and Prahalad (1994): • “A variety of leaders have pronounced themselves at ease with the vision thing” • “We don’t believe that any company can get along without a well articulated point of view about tomorrow’s opportunities and challenges.” • “Any vision that is simply an extension of the CEO’s ego is dangerous” • “Industry foresight doesn’t guarantee competitive success ... All the foresight in the world, if not matched by a capacity to execute, counts for little. On the other hand, terrific executional ability, in the absence of any industry foresight, is not enough to guarantee future success.”

10. Motivation, continued • Hamel and Prahalad (1994): • “Many of IBM’s operational failures in the early 1990s could be traced to foresight problems in the 1980s.” • “Japanese auto companies realised decades ago that new and formidable competitive weapons would be needed to beat US car companies in their home market .... Twenty years later, Toyota’s foresight had become GM’s implementation nightmare.” • “Any top team that has not made a substantial invvestment in creating industry foresight will find itself at the mercy of more farsighted competitors.”

11. Motivation, continued • Hamel and Prahalad (1994): • “We meet few senior management teams ... Who understand that, unless they first win today’s battle foir intellectual leadership, they will be unlikely to win tomorrow’s battle for market leadership.” • “... Their behaviour often seems to rest on an implict assumption that the future will be, more or less, a replay of the past.”

12. Context • The relationship between rapid innovation and market structure • concentration  innovation ? • innovation  concentration? • Persistent dominance? • Incumbents accelerate rate of change to shake off entrants? • Organisational inertia? • Small “nimble” entrants are better placed to explicit opportunities offered by radical innovation

13. Context, continued

14. Context: the Role of Vision • The distinction between radical and incremental innovation (or competence enhancing / competence destroying innovation) is critical here • radical (or competence destroying) change tends to be de-concentrating • incremental (or competence enhancing) change tends to be concentrating • Vision can turn radical change into incremental change • Current vision guides the future accumulation of competencies

15. Definitions of Foresight or Vision • Corporate Vision • More than just technology and market forecasting • companies can actually play a role in shaping future markets and technologies. • Contrast with Public Foresight Exercises • e.g. Office of Science and Technology’s Foresight Programme; develops on success of programmes in other countries - notably in Japan • Who is willing to share in such an exercise? And what will they share? Is foresight a “public good”

16. Definitions of Foresight or Vision, continued • A variety of similar terms are used in the literature • Dosi: technology paradigms and trajectories • Metcalfe: strategic paradigms • Rosenberg: focussing devices • Sahal: guide posts • Georghiou: technology corridors

17. Who Needs a Vision? And Why? • Why do companies need forecasts? • Are forecasts more important in stable or rapidly changing environments? • Which companies can hope to shape future markets and technologies?

18. Who Needs a Vision? - continued • Which companies find radical change the hardest to cope with? Which companies benefit most from uncertainty reduction? • Large, mechanistic and hierarchical organisations cope with incremental change but find radical change much harder • small, organic and “flat” organisations are better at coping with radical change • Vision makes radical change incremental • The shipping analogy

19. Uses of Vision

20. Tactical Uses of Visions • Tactical and External • effects of product pre-announcements on standards races • effects of pre-announcements on rivals • Porter’s (1980) example of a “preannouncement auction” • signals • effects of preannouncements on government • deflect anti-trust criticism

21. Tactical Uses of Visions, continued • Preannouncements are a Puzzle: • Why divulge plans to competitors? • Preannouncements can help to win a standards race • Persuade consumers to defer purchase until your product is ready • Delay the build-up of a competitor’s installed base • Open to abuse: • preannounced products that don’t appear • “vapour-ware”

22. Tactical Uses of Visions • Tactical and Internal • to achieve consensus or compromise • Routines are a truce in intra-organisational strife (Nelson and Winter) • commit “warring factions” to a particular plan • it’s in the programme, it’s been announced • The Prime Minister’s announcement

23. Strategic Uses of Visions • Strategic and External • Encourage users and other producers to plan future products and production around your vision • “buy in” to an upgrade path (e.g. Intel) • especially relevant when switching costs are high • Shape/create future markets • Deter rivals from competing

24. Strategic Uses of Visions • Strategic and Internal • Reorganise company to cope with future technological, market and operational change • if vision is well understood, rapid change may still seem “incremental” • organisational structure embodies a particular vision • when events precipitate a crisis with a particular vision that calls for organisational restructuring and new routines

25. Further Questions/Issues:Whose Vision? • What happens when different factions have different visions? What happens when different companies have different visions? • Hamel and Prahalad: competing for industry foresight • Similar to a standards race between competing visions. Winning is important. • We discuss standards races in more depth next time • Companies and markets get “locked in” - at least in part - to the dominant vision (or “technological trajectory”) • When might companies make a virtue of the fact that different divisions have different visions?

26. Further Questions/Issues:What if the Vision is Wrong? • Some companies will go out of business • Crisis in vision precipitates organisational change • Would it have been better to have no vision? • Contingency planning or scenario planning as an alternative to unitary visions • Sometimes it is better to promulgate a vision that is “wrong” • e.g. It may be best to say to the outside world of competence detroying innovations that they will not happen. Don’t give them credibility.

27. Further Questions/Issues • Can visions be self-fulfilling? • How many visions can be “right”? If there is a range of visions that work, then we can say that visions are (to a limted degree) self-fulfilling • For example: was Moore’s Law self-fulfilling? • How valuable is a corporate vision? Can it be a source of long-term competitive advantage? • Hamel and Prahalad suggested yes • Kay suggests no: vision is too transitory and easy to copy; Only competencies and networks are sustainable sources of differential advantage

28. Further Questions/IssuesHow do you construct a vision? • Hamel and Prahalad stress: • More than just scenario planning • Deep insights into trends in lifestyles, technology, demographics, geopolitics • Foresight rests as much on imagination as on prediction • “Inventing the Future” (Gabor) • Foresight grows out of “childlike innocence” • Escaping the myopia of the served market • Escaping the myopia of the current product concept • Challenging price-performance assumptions

29. How do you construct a vision? continued • Hamel and Prahalad stress: • Developing a deep and boundless curiosity • Being humble enough to speculate • Valuing eclecticism • Searching for metaphors and analogies • Being a contrarian • Beyond customer-led • “customers are notoriously lacking in foresight” • Or are they? Some see customers as important innovators in their own right

30. Examples • Moore’s Law • Large Scale Integration • The Intel Microprocessor Vision • Readings • Intel • Microsoft • Others • Your Experience with Vision ? • The MBS Vision Exercise

31. Case Study:Vision and Market Development • Case of Virtual Reality Technology • Much hyped in early 1990s • But has not yet lived up to its promise in the market • Case illustrates two key facts: • Hype can damage market evolution • Problem of diffuse and incoherent vision

32. VR functionality User adaptability Technology Opportunity or Lack of Focus?

33. VR functionality User adaptability A “Thin Mist” in the Intersection

34. VR functionality User adaptability Clusters of Users and Vendors Start to Emerge

35. Coherent Foci Emerge VR functionality User adaptability

36. VR functionality User adaptability The Purist’s definition as a Focussing Device Special focus

37. Table 1 Comparison of Pre-Paradigmatic and Diffusion Stages Pre-Paradigmatic Diffusion Lack of consensus about vision; Vendor and user expectations out of line Paradigm/Vision has emerged; Vendor and user expectations in line A lot of uncertainty about definitions and ultimate potential Common language has emerged Ubiquity is confusing; Business failures play an important social role Technology can be surveyed; Wide potential of technology is helpful Few standards as paradigm doesn't exist Some standards have emerged; Competition between standards User investment is highly risky Risks seem lower to users High selling costs Selling costs declining Technology is not diffusing; Users reluctant to invest in adaptation A variety of diffusion models; Something concrete to diffuse, though technology may still evolve during diffusion process Still waiting for the "killer application" Some general-purpose components have emerged Comparison of Pre-Paradigmatic and Diffusion Phases