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Amity Business School
Amity Business School

Strategy and the Management of Technology and Innovation

Amity Business School Strategy and the Management of Technology and Innovation
Amity Business School
Amity Business School

Overview

Issues addressed in this chapter include:

– The meaning of strategy – Continuous versus radical technology – Offensive versus defensive technology – Key MTI concerns in strategy – The strategy process – Understanding an industry and its impact – Strategic groups within an industry

Amity Business School Overview Issues addressed in this chapter include: – The meaning of strategy –
Amity Business School
Amity Business School

Strategy

• Strategy Defined

– A coordinated set of actions that fulfill the firm’s objectives, purposes, and goals. – It is not a single act in a firm.

• Without a strategy, managers have:

– No well-defined business path to follow – No roadmap to manage by

– No cohesive, reasoned action plan to produce successful performance

Amity Business School Strategy • Strategy Defined – A coordinated set of actions that fulfill the
Amity Business School
Amity Business School

Establishing the Strategy

• Strategic Planning

– The process that lays the groundwork and direction of the firm over the next several years as outlined in a formal written strategic plan.

• Strategic Management

– An ongoing process in which the organization defines:

• the nature of the businesses in which it will be active • the kind of economic and human organization it intends to be

• The nature of the contribution it intends to make to its various constituents

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Amity Business School Establishing the Strategy • Strategic Planning – The process that lays the groundwork
Amity Business School External and Internal Strategic Interactions
Amity Business School
External and Internal Strategic Interactions
Amity Business School External and Internal Strategic Interactions 5

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Amity Business School External and Internal Strategic Interactions 5
Amity Business School
Amity Business School

Types of Capabilities

• Technical Capabilities

– How the firm approaches technology

• Destroy—eliminating and replacing technology

• P

i

t

i

i

reserve—ma n a n ng

improvement

t

h

l

ti

ec no ogy; con nuous

• Develop—leaping others with new technological

capabilities

• Market Capabilities

– the ability to place the product or technology appropriately.

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Amity Business School Types of Capabilities • Technical Capabilities – How the firm approaches technology •
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Amity Business School

Competitive Advantage

• Competitive Advantage

– Something that the firm does better than any of its competitors.

– Goal: To have a sustainable competitive advantage

• Requires that the advantage:

– Must be valued by customers – Cannot be easily duplicated by competitors

Amity Business School Competitive Advantage • Competitive Advantage – Something that the firm does better than

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Amity Business School Competitive Advantage • Competitive Advantage – Something that the firm does better than
Amity Business School The S-Curve of Technological Progress
Amity Business School
The S-Curve of Technological Progress
Amity Business School The S-Curve of Technological Progress 8

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Amity Business School The S-Curve of Technological Progress 8
Amity Business School Key Activities in the Strategic Management Process
Amity Business School
Key Activities in the Strategic Management Process
Amity Business School Key Activities in the Strategic Management Process SOURCE: Adapted from UC Santa Cruz

SOURCE: Adapted from UC Santa Cruz Leadership Convocation, Kristine Hafner, Director Business Initiatives, UCOP, February 4, 1999.

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Amity Business School Key Activities in the Strategic Management Process SOURCE: Adapted from UC Santa Cruz
Amity Business School
Amity Business School

The Planning Process

1. Data gathering

  • 2. Mission generation

  • 3. Objective setting

Amity Business School The Planning Process 1. Data gathering 2. Mission generation 3. Objective setting 4.
  • 4. Strategy establishment

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Amity Business School The Planning Process 1. Data gathering 2. Mission generation 3. Objective setting 4.
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Amity Business School

Mission Statement

• A simple statement of the basic purpose or reason for a firm to exist.

– It should:

• Identify what is unique about the firm

• Identify the scope of activities it wants to pursue

• Help the firm stay focused by defining who and

what it is.

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Amity Business School Mission Statement • A simple statement of the basic purpose or reason for
Amity Business School Levels of Strategy
Amity Business School
Levels of Strategy
Amity Business School Levels of Strategy 12

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Amity Business School Levels of Strategy 12
Amity Business School
Amity Business School

Corporate Strategy

• The pattern of decisions in a company that:

– Determines and reveals the firm’s objectives, purposes, or goals – Produces the principal policies and plans for achieving those objectives, purposes, or goals – Defines:

• The range of businesses the firm is to pursue

• The kind of economic and human organization it is or

intends to be

• The nature of contribution it intends to make to its

constituencies.

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Amity Business School Corporate Strategy • The pattern of decisions in a company that: – Determines
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Amity Business School

Business Level Strategy

• Business Level Strategy

– How to operate the businesses that the firm decides to enter into.

• Porter’s model of low cost and differentiation is the

most popular business level strategy model.

• Functional Strategy

– How each functional area in a given business will operate to aid the firm’s business level strategy.

– Examples: marketing strategy, and financial strategy

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Amity Business School Business Level Strategy • Business Level Strategy – How to operate the businesses

External Envi ronment

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Amity Business School
External Envi ronment Amity Business School 15
External Envi ronment Amity Business School 15

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External Envi ronment Amity Business School 15

Porter’s Five-Force s Model Plus

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Amity Business School
Porter’s Five-Force s Model Plus Amity Business School SOURCES: “Co-opetition: Competitive and Cooperative Business Strategies for

SOURCES: “Co-opetition: Competitive and Cooperative Business Strategies for the Digital Economy,” Nalebuff B., Brandenburger A., Strategy and Leadership (1997,Vol. 2, No. 6) © Emerald Group Publishing Limited. http://www.emeraldinsight.com/sl.htm. Republished with permission, Emerald Group Publishing Limited; adapted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from COMPETITIVE STRATEGY: Techniques for Analyzing Industries and Competitors, by Michael E. Porter. Copyright © 1980, 1998 by The Free Press. All rights reserved.

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Porter’s Five-Force s Model Plus Amity Business School SOURCES: “Co-opetition: Competitive and Cooperative Business Strategies for
Amity Business School
Amity Business School

Buyers

• Factors increasing the bargaining power of a buyer:

– The larger the percentage of the industry’s output that the buyer purchases .

– The lower the cost of switching to competing brands.

– The greater the number of sellers available to the buyer.

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Amity Business School Buyers • Factors increasing the bargaining power of a buyer: – The larger
Amity Business School
Amity Business School

Suppliers

• Factors increasing the bargaining power of a supplier:

– There is high demand for supplier’s goods. – The quality and performance of supplier’s product are unique. – Customers are unable to vertically integrate backward into the supplier’s industry.

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Amity Business School Suppliers • Factors increasing the bargaining power of a supplier: – There is
Amity Business School
Amity Business School

New Entrants

• The threat of new entrants in a competitive rivalry is reduced when:

– Customers have strong brand loyalties. – Economies of scale must be achieved. – Large capital requirements are required.

– New entrants cannot gain easily gain access to distribution channels

– Industry products have proprietary protection (e.g., patents)

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Amity Business School New Entrants • The threat of new entrants in a competitive rivalry is
Amity Business School
Amity Business School

Substitutes

• The power of substitutes increases when:

– Customers have the opportunity to compare quality/performance.

– Customers’ costs for switching to competitors’ products are low

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Amity Business School Substitutes • The power of substitutes increases when: – Customers have the opportunity
Amity Business School
Amity Business School

Complementors

• The power of complementors to influence the competitive environment of an industry increases when:

– They have the ability to integrate forward/backward into the complement’s industry – There are few or no substitute complements – Buyer or supplier switching costs are high – There is relative concentration in the complement’s industry

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Amity Business School Complementors • The power of complementors to influence the competitive environment of an
Amity Business School 22 Strategic Implemen tation Process
Amity Business School
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Strategic Implemen tation Process
Amity Business School 22 Strategic Implemen tation Process
Amity Business School Technologies in the Value Chain
Amity Business School
Technologies in the Value Chain
Amity Business School Technologies in the Value Chain SOURCE: Adapted with the permission of The Free

SOURCE: Adapted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from COMPETITIVE ADVANTAGE:

Creating and Sustaining Superior Performance, by Michael E. Porter. Copyright © 1985, 1988 by Michael E. Porter. All rights reserved.

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Amity Business School Technologies in the Value Chain SOURCE: Adapted with the permission of The Free
Amity Business School Balanced Scorecard Issues
Amity Business School
Balanced Scorecard Issues
Amity Business School Balanced Scorecard Issues 24

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Amity Business School Balanced Scorecard Issues 24
Amity Business School
Amity Business School

Major Strategic Questions in MTI

• Should we create our own new technology and innovations internal to the firm?

OR

• Should we acquire technology from others through acquisition or strategic alliances?

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Amity Business School Major Strategic Questions in MTI • Should we create our own new technology
Amity Business School
Amity Business School

Managerial Guidelines

• For a firm to navigate successfully the strategic processes involved in the management of technology and innovation, it must keep certain actions in mind. These include:

1. Forget traditional organizational functions—judge

ideas, not positions.

  • 2. Know where the firm is in the life cycle of the

technology and where its competitors are.

  • 3. Be willing to assume risk if the potential long-term reward is great.

  • 4. Utilize all resources in the environment. Do not get caught by the “not invented here” syndrome.

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Amity Business School Managerial Guidelines • For a firm to navigate successfully the strategic processes involved
Amity Business School
Amity Business School

Managerial Guidelines

  • 5. Break down communication barriers. Many firms lose opportunities because of a “not shared here” approach to lessons learned.

  • 6. Keep expectations realistic. Too often, firms abandon

technologies too soon because unrealistic

expectations cannot be met.

  • 7. Establish processes for new initiative approaches to management.

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Amity Business School Managerial Guidelines 5. Break down communication barriers. Many firms lose opportunities because of
Amity Business School SOURCE: Girifalco, L. Dynamics of Technological Change.© 1991,Van Nostrand Reinhold, p. III. Reprinted
Amity Business School
SOURCE: Girifalco, L. Dynamics of Technological Change.© 1991,Van Nostrand Reinhold, p. III. Reprinted with permission of Springer
Science and Business Media.
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Characteristics of a T echnology-Driven
Cor porate Cycle
Amity Business School SOURCE: Girifalco, L. Dynamics of Technological Change.© 1991,Van Nostrand Reinhold, p. III. Reprinted
Amity Business School
Amity Business School

Key Terms

barriers to entry

buyers

capabilities

competitive advantage

complementors

continuous technology

defensive technology

disruptive technology

low-end disruption

next-generation

technologies

offensive technology

radical technology

S-curve

strategic group

strategy

sustainable competitive

advantage

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Amity Business School Key Terms • barriers to entry • buyers • capabilities • competitive advantage