Managing Technology and Innovation

1. Managing Technology and Innovation Customization • Toyota is gearing itself to deliver a custom built car within five days of receiving the order. • Dell promises delivery of a customized PC within a few days of receiving the order. • Motorola delivers their made-to-order cellular phones the next day to customers anywhere in the United States.

2. Managing Technology and Innovation Customization • Standardization starts upstream - raw materials, fabricating • Customization starts downstream - special features & services • Key question is how far upstream in the value chain can or should product/service be customized?

3. Managing Technology and Innovation Customization • Standardization Strategies for Enabling Customization • Part Standardization: By using common components across members of a product line, the firm reduces costs (due to economies of scale), reduces inventories (due to risk pooling), reduces parts proliferation, and improves the predictability of requirements for components.

4. Managing Technology and Innovation Customization • Standardization Strategies for Enabling Customization • Process Standardization: requires that the process be modular and enables the firm to store inventory in semi-finished form (before full information about demand is realized) and later customize the product according to requirements. • Benetton's sweater-making process primarily consists of two stages: knitting and dyeing. The original process was to dye first and then knit based on requirements. However, the main source of demand uncertainty came from the choice of colors that customers wanted. So in order to exploit that Benetton resequenced the process by first knitting the sweaters and then dyeing them after perfect demand information was obtained.

5. Managing Technology and Innovation Customization • Standardization Strategies for Enabling Customization • Product Standardization: offer large variety of end products, but stock only a few in inventory. • Advertise availability of products far greater than actual availability on average.

6. Managing Technology and Innovation Customization • Standardization Strategies for Enabling Customization • Product Standardization (continued) • If customer requests product version not normally stocked, the manufacturer either makes the product after receiving the order or, downward substitutes (provides the customer one of the available models that has a superset of features required by the customer.) • Downward substitution is quite common in the semiconductor industry where a higher speed/functionality chip (under appropriate circumstances) is marked as a lower speed/functionality chip when the lower-end chip is not available in inventory

7. Managing Technology and Innovation Speed It is not enough to be fast - one also has to achieve a better balance of speed, low cost, high performance, and high quality. For example: Rule of 10X - technology in question must be 10 times better than what it is replacing. More accurately, Consumers need to perceive new technology to be 10 times better to think it worth the upheaval of changing.

8. Managing Technology and Innovation Speed Speed depends on the ability to: 1. Initiate and manage change inside company 2. Use and provide leverage in market chains to initiate change in other companies.

9. Managing Technology and Innovation Speed Ability to change inside the firm depends on ability to avoid the “competence trap” Competence trap: firms that strive for competence within a given strategy can become trapped in this strategy and miss opportunities for strategic change

10. Managing Technology and Innovation Speed Competence trap derived from routines and procedures successful in past: • promotion and hiring • incentive systems • capital budgeting • organizational structures • personal commitment to status quo

11. Managing Technology and Innovation Speed Some methods for avoiding the competence trap: • Avoid organizing around strict product “modules”(Intel’s emergent product teams). • Avoid complete dependence on existing customers and suppliers for new product & service ideas (Microsoft’s multiple vendors of X-Box software). • Focus new product development teams entirely on unserved markets (Nokia’s evolution into “wireless home”).

12. Managing Technology and Innovation Knowhow The critical role of CLUSTERS in global strategy • Competition is dynamic, depends on innovation, search for strategic differences • Location affects competitive advantage through impact on productivity and productivity growth

13. Managing Technology and Innovation Knowhow The critical role of CLUSTERS in global strategy • A Cluster is a critical mass of companies in a particular field in a particular location and include a group of companies, suppliers, firms in related and complementary industries, infrastructure providers, knowledge creators, and collective associations.

14. Managing Technology and Innovation Knowhow The critical role of CLUSTERS in global strategy Clusters improve productivity by • providing access to specialized inputs and information, • facilitating complementarities among cluster participants, • improving performance measurement • improving rate and success of innovation • lowering barriers to entry

15. Managing Technology and Innovation Knowhow The critical role of CLUSTERS in global strategy Cluster theory and Globalization • a firm must harness advantages of spreading activities across locations but also capture the innovation advantages of home base • outsourcing reduces locational disadvantages, but limits access to cluster-associated resources • locating in cluster may reduce overall costs

16. Managing Technology and Innovation Knowhow The critical role of CLUSTERS in global strategy • Examples of Emerging Clusters in Nanotechnology: • Northern California • Austin, Texas • Tsukuba, Japan • Stirling, Scotland

17. Managing Technology and Innovation Time Pacing: Combining Speed and Knowhow Time Pacing • Creating new products or services, launching new businesses, or entering new markets according to the calendar. • Time-pacing is not (just) SPEED ; • It is synchronizing SPEED and INTENSITY OF EFFORT.

18. Managing Technology and Innovation Time Pacing: Combining Speed and Knowhow • Manage TRANSITION and RYTHM • Transition: capable of moving into new products, businesses, markets, acquisitions, mergers, etc. • Rhythm: in sync with cycles linked to external agents – customers, suppliers, competitors, and even regulators.

19. Managing Technology and Innovation Industry Case: The race for the world VCR market Product development is a 100-yard dash; Industry development & transformation is a triathlon. Stages of Industry Development and Transformation 1. Competition for Industry Foresight and Intellectual Leadership 2. Competition to Foreshorten Migration Paths 3. Competition for Market Position and Market Share

20. Managing Technology and Innovation Industry Case: The race for the world VCR market Competition for Industry Foresight and Intellectual Leadership • Race to commercialize VCR spanned decades, rather than years • Ampex, 1959 - 1st VCR; Matsushita, late 1970’s - first mass commercialization of VHS standard VCR • VCR was 1st major innovation in consumer electronics commercialized first in mass markets by Japanese firms, rather than U.S. or European companies.

21. Managing Technology and Innovation Industry Case: The race for the world VCR market Competition for Industry Foresight and Intellectual Leadership Philips, Sony and Matsushita (JVC) each worked for close to 20 years to produce VCR for home use. New Product Adoption Model - Technologies: Learning how to make extremely precise, revolving video-recording heads presented major competence-building challenge to all comers.

22. Managing Technology and Innovation Industry Case: The race for the world VCR market Competition for Industry Foresight and Intellectual Leadership • New Product Adoption – Product Functionalities and Customer Segment • Continued experimentation in marketplace with multiple models. • The more rapid the pace of market experimentation, the quicker the learning about what customers really want in a product.

23. Managing Technology and Innovation Industry Case: The race for the world VCR market Competition for Industry Foresight and Intellectual Leadership • Gain deeper understanding than competitors of trends and discontinuities - technological, demographic, regulatory, or lifestyle • Trends and discontinuities will transform industry boundaries and create new competitive space • New types of customer benefits, or radically new way of delivering existing customer benefits

24. Managing Technology and Innovation Industry Case: The race for the world VCR market Competition to Foreshorten Migration Paths Creating an industry standard • battle between Sony’s Beta, JVC’s VHS, and Philips’ V2000 • winner reaps benefits of software availability, licensing income, and economies of scale in component production

25. Managing Technology and Innovation Industry Case: The race for the world VCR market Competition to Foreshorten Migration Paths • Sony took early lead, 85% market share by end of 1976 • JVC introduced 2-hour record time • JVC co-opted licensee partnerships - Telefunken (Germany), Thorn (Great Britain), Thomson (France), RCA and GE (U.S.). • These companies were initially sourcing components and finished VCRs from JVC

26. Managing Technology and Innovation Industry Case: The race for the world VCR market Competition to Foreshorten Migration Paths • Influence the direction of industry development • Race to accumulate • necessary competencies, • test and improve alternate product/service concepts, • attract coalition partners who have critical complementary resources, • construct product/service delivery infrastructure, • get agreement around standards

27. Managing Technology and Innovation Industry Case: The race for the world VCR market Competition for Market Position and Market Share • Wide selection of VHS brands and models, relative to Beta, convinced software suppliers to back VHS and w/in two years market battle between Beta and VHS was over. • Philips launched V2000 18 months after VHS - D.O.A.! • Matsushita sold several million VCRs around the world, continuing to reduce costs and improve features

28. Managing Technology and Innovation Industry Case: The race for the world VCR market Competition for Market Position and Market Share • Centered around well-defined parameters of value, cost, price and service • Maximize efficiency and productivity • Craft appropriate market positioning strategy • Building worldwide supplier network • Preempting competitors in critical markets.

29. Managing Technology and Innovation The Future of the VCR, DVD, etc.?? • Today, a TV set is the focal point of the average living room; In the future, digital TVs and their accompanying devices will be hidden until they are turned on. • Home media center have a single control unit that incorporates receivers, tuners, decoders, a CPU, and an embedded OS and an embedded camera and microphone for video e-mail and voice mail. • Display innovations: First step - gas plasma; Next - streamlined displays based on light-emitting polymers. • Speakers will continue to shrink in size, following the trend in today's satellite speaker systems.