Corporate Level Strategy

workkinkajouBiotechnology

Dec 5, 2012 (4 years and 8 months ago)

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Strategic Management/
Business Policy

Power Point Set #7:

Technology Strategy


Innovation Funnel

The Development of Technology: From
Knowledge Generation to Diffusion
The Development of Technology: From
Knowledge Generation to Diffusion
Basic
Knowledge
Invention
Innovation
Diffusion
IMITATION
ADOPTION
Supply side
Demand
s
ide
The Development of Technology: Lags Between
Knowledge Generation and Commercialization
The Development of Technology: Lags Between
Knowledge Generation and Commercialization
BASIC FIRST PRODUCT IMITATION
KNOWLEDGE PATENTS LAUNCH
Xerography
late 19th and 1940 1958
1974
early 20th
centuries
Jet Engines
17th
--
early 1930 1957
1959
20th centuries
Fuzzy logic
1960’s 1981 1987
1988
controllers
Approp
r
ia
tion
of Value
:
-
How are the
Benefits
f
rom
Innovation Distributed?
Approp
r
ia
tion
of Value
:
-
How are the
Benefits
f
rom
Innovation Distributed?
Customers
Suppliers
Imitators and
other
“followers”
Innovator
The Profitability of Innovation
The Profitability of Innovation

Legal protection

Complementary
resources

Imitability
of the
technology

Lead time
Profits
from
Innovation
Value of the
innovation
Innovator

s
ability to
appropriate the
value of the
innovation
Legal Protection of In
tellectual
Property
Legal Protection of In
tellectual
Property

Patents

exclusive rights to a new product,
process, substance or design.

Copyright
s

exclusive rights to artistic, dramatic,
and musical works.

Trademarks

exclusive rights to words, symbols
or other marks to distinguish goods
and services
; trademarks are
registered with
the
Patent Office.

Trade Secrets

protection of chemical formulae,
recipes, and industrial processes.
Also,
private
contracts between firms and between a firm and
its
iemployees
can restrict
the
transfer of technology and know how.
Complementary Resources
Complementary Resources
Bargaining power of owners of complementary
resources depends upon whether complementary
resources are
generic
or
specialized
.
M
anufacturing
Distribution
Service
Complementary
technologies
Other
Other
Marketing
Finance
Core
technological
know
-
how
U.S. Managers’ Perceptions of the Effectiveness of
Different Mechanisms for Protecting Innovation
U.S. Managers’ Perceptions of the Effectiveness of
Different Mechanisms for Protecting Innovation
Processes Products
Patents to prevent duplication
3.52
4.33
Patents to secure royalty income
3.31
3.75
Secrecy
4.31
3.57
Lead time
5.11
5.41
Moving quickly down the learning
5.02
5.09
curve
Sales or service efforts
4.55
5.59
1 = not at all effective
7 = very effective
Source
:
Levin,
Klevorick
, Nelson & Winter.
Brookings Papers on Economic Activity
, 1987.
The Technology Transfer Process

Research

Disclosure

IP Decision

IP Protection

Commercialization Strategy

Licensing

$29.5

billion

6,375 patent


applications

13,039

disclosures

4,362

licenses

454 new companies

3,764 issued

patents

Source: AUTM
Licensing Survey:
FY 2000

Risk &
Return
Competing
Resources
Examples
Licensing
Outsourcing
certain
functions
Strategic
Alliance
Joint
Venture
Internal
Commercialization
Small risk, but
limited returns
also (unless
patent position
very strong
Limits
investment, but
dependence on
suppliers &
partners
Benefits of
flexibility;
risks of
informal
structure
Shares
investment &
risk. Risk of
partner
conflict &
culture clash
Biggest risks &
benefits.
Allows complete
control
Few
Allows outside
resources &
capabilities
To be accessed
Permits pooling of the
resources/capabilities of
more than one firm
Substantial
resource
requirements
Konica
licensing its
digital
camera to
HP
Pixar’s movies (e.g.
“Toy Story”)
marketed &
distributed by
Disney.
Apple and
Sharp build
the
“Newton”
PDA
Microsoft
and NBC
formed
MSNBC
TI’s
development of
Digital Signal
Processing
Chips
Alternative Strategies for Exploiting Innovation
Alternative Strategies for Exploiting Innovation
The Comparative Success of Leaders and
Followers
The Comparative Success of Leaders and
Followers
PRODUCT
INNOVATOR
FOLLOWER
WINNER
Jet Airliners
De Havilland (Comet)
Boeing (707)
Follower
Float glass
Pilkington
Corning
Leader
X
-
Ray Scanner
EMI
General Electric
Follower
Office P.C.
Xerox
IBM
Follower
VCRs
Ampex/Sony
Matsushita
Follower
Diet Cola
R.C. Cola
Coca Cola
Follower
Instant Cameras
Polaroid
Kodak
Leader
Pocket Calculator
Bowmar
Texas Instruments
Follower
Microwave Oven
Raytheon
Samsung
Follower
Plain Paper Copiers
Xerox
Canon
Not clear
Fiber Optic Cable
Corning
many companies
Leader
Video Games Players
Atari
Nintendo/Sega
/Sony
Followers
Disposable Diapers
Proctor & Gamble
Kimberly
-
Clark
Leader
Web browser
Netscape
Microsoft
Follower
PDA
Psion
, Apple
Palm
Follower
MP3 music players
Diamond Multimedia
Sony (&others)
Followers
Uncertainty
& Risk Management
in Tech
-
based
Industries
Uncertainty
& Risk Management
in Tech
-
based
Industries
Sources of
uncertainty
Technological
uncertainty
Selection process for standards and
dominant designs emerge is complex
and
diifficult
to predict, e.g. future of 3G
Customer acceptance and adoption rates
of innovations notoriously difficult to
predict, e.g. PC, Xerox copier, Walkman
Market
uncertainty
S
trategies
f
or
managing risk
Cooperating
with lead users
early identification of customer requirements

assistance in new product development
Flexibilility

keep options open

use speed of response to adapt
quickly to new information

learn from mistakes
Limiting risk exposure

avoid major capital commitments
(e.g. lease don’t buy)

outsource

alliances to access other firms’
resources & capabilities

keep debt low
The Emergence of Standards
The Emergence of Standards

Emergence of a dominant design paradigm

Model T in autos

IBM 360 in mainframes

Douglas DC3 in passenger aircraft

Emergence of technical standards

Emerge in industries where there are
network
extremities

Entrenchment of the dominant designs and technical
standards

Learning effects: incremental improvement of the
dominant design

Switching costs

Need for coordinated action by multiple players
Sources of Network Externalities
Sources of Network Externalities

User linkages,
e.g.

Telephone systems

only value of telephone is connection to
other users

Video game consoles

same platform allows users to
exchange games and play interactively

On
-
line auction

value of auction depends on number of
buyers and sellers participating
Also
,
social identification

listening to same music, watching
same TV shows, wearing same clothes in order to conform

Availability of complementary products,
e.g.

Most PC applications software written for Windows, not Mac.

In economy autos, easier to get parts and repair for a Ford
Focus than for a
Maruti
or Proton

E
conomizing
on switching costs,
e.g.

In suites of office software, users of Microsoft Office more
likely to avoid switching costs that users of Lotus
SmartSuite
when they move jobs
Companies that Own Technical
Standards
Companies that Own Technical
Standards
COMPANY
PRODUCT CATEGORY
STANDARD
Microsoft
P
C
operating systems
Windows
Intel
PC microprocessors
*86 series
Matsushita
Videocassette recorders
VHS system
Iomega
High capacity PC disk drives
Zip drives
Intuit
Software for on
-
line financial
transactions
Quicken
AMR
Computerized airline
reservation
s system
Sabre
Rockwell
/
3Com
56K modems
V90
Qualcomm
Digital wireless
telecom signals
CDMA
Adobe Systems
Common file format for
creatin
g
and viewing documents
Acrobat
Competing for Standards:
Value Appropriation vs. Market Acceptance
Competing for Standards:
Value Appropriation vs. Market Acceptance
Maximize
value
appropriation
Maximize
market
acceptance
LOOSE
TIGHT
VHS
IBM
-
PC
Mac
Betamax
The Conditions for Creativity
:
“Operating” and “Innovating”
Organizations
The Conditions for Creativity
:
“Operating” and “Innovating”
Organizations


Operating Organization

Innovating Organization

Structure

Bureaucratic. Specialization and
division of labor.

Hierarchical
control

Flat organization without
hierarchical control. Task
-
oriented
project teams.

Processes

Operating units controlled and
coor
dinated by top management
which undertakes strategic
planning, capital allocation and
operational planning.

Processes directed toward
generation, selection, funding and
development of ideas. Strategic
planning flexible, financial and
operating controls loo
se.

Reward
Systems

Financial compensation, promotion
up the hierarchy, power and status
symbols.

Autonomy, recognition, equity
participation in new ventures

People

Recruitment and selection based
upon the needs of the organization
structure for specific
skills:
functional and staff specialists,
general managers, and operatives.


Key need is for idea generators
which combine required technical
knowledge with creative
personality traits. Managers must
act as sponsors and orchestrators.


Strategy Implementation:
Invention to Innovation
Strategy Implementation:
Invention to Innovation

While invention depends upon creativity, successful
innovation requires integrating new knowledge with
multiple business functions.

Need to link R&D departments with other functions (the
problem of Xerox’s PARC)

The role of cross
-
functional new product development
teams as vehicles for integration

The role of product champions
--
in achieving integration
and counteracting organizational inertia.
Omaha

Telemarketing

Hotel Reservations

Credit Card Processing

Wisconsin / Iowa / Illinois

Agricultural Equipment

Detroit

Auto Equipment

and Parts

Rochester

Imaging Equipment

Western Massachusetts

Polymers

Boston

Mutual Funds

Medical Devices

Mgmt. Consulting

Biotechnology

Software and


Networking

Venture Capital

Hartford

Insurance

Providence

Jewelry

Marine Equipment

New York City

Financial Services

Advertising

Publishing

Multimedia

Pennsylvania / New Jersey

Pharmaceuticals

North Carolina

Household Furniture

Synthetic Fibers

Hosiery

Dalton, Georgia

Carpets

South Florida

Health Technology
Computers

Nashville / Louisville

Hospital Management

Baton Rouge /

New Orleans

Specialty Foods

Southeast Texas /
Louisiana

Chemicals

Dallas

Real Estate
Development

Wichita

Light Aircraft

Farm Equipment

Los Angeles Area

Defense Aerospace

Entertainment

Silicon Valley

Microelectronics

Biotechnology

Venture Capital

Cleveland / Louisville

Paints & Coatings

Pittsburgh

Advanced Materials

Energy

West Michigan

Office and Institutional

Furniture

Michigan

Clocks

San Diego

Golf Equipment

Biotech/Pharma

Minneapolis

Cardio
-
vascular

Equipment

and Services

Warsaw, Indiana

Orthopedic Devices

Colorado

Computer Integrated Systems / Programming

Engineering Services

Mining / Oil and Gas Exploration

Las Vegas

Amusement /
Casinos

Small Airlines

Oregon

Electrical Measuring
Equipment

Woodworking Equipment

Logging / Lumber Supplies


Seattle

Aircraft Equipment and Design

Software

Coffee Retailers

Boise

Information Tech

Farm Machinery

Geographical Distribution of Clusters

Source: Adapted from Professor Michael E. Porter, Harvard Business School