CH 7

 Technology alone cannot deliver victory; technology, however, coupled with a

market opportunity and the necessary organisational skills to deliver the product
to the market, will help significantly.
 Technology + market opportunity + market opportunity = success
 The ability of firms to identify technological opportunities + exploit them is
one of the most fundamental features that determines successful from
unsuccessful firms.

 The technology capability of the firm frequently dictates what is possible

and what can or cannot be achieved in a given time frame.
 In other words, a firm’s opportunities are constrained by its current position
and current knowledge base, i.e. it is path-dependent.
 For example, many firms may marvel at the huge profits generated by
Apple’s iPhone, but few firms are in a position to develop a similar or
superior product.
 Only those operating in related industries will be in a position to respond
and, even then, the possible entrants will be limited to those who have prior
knowledge of the related fields of technology, determined by its range of
research projects.
 Acquiring knowledge about technology takes time, involves people and
experiments and requires learning.
Dynamic Capabilities
 To exploit technological opportunities, a firm needs to be on the ‘technology
escalator’.
 firms cannot move easily from one path of knowledge and learning to
another.
 The choices available to the firm in terms of future direction are dependent
on its own capabilities, that is, the firm’s level of technology, skills
developed, intellectual property, managerial processes and its routines.
 Furthermore, the choices made by any firm must take place in a changing
environment, characterised by changing levels of technology, changing
market conditions and changing societal demands.
 Teece and Pisano (1994) refer to this concept as the dynamic capabilities of
firms.
 Technological and scientific knowledge evolves as a result of research
and development (R&D), as well as more practical activities such as
learning-by-doing or learning-by-using.
 R&D is very much a search process, in which the knowledge that a
researcher already possesses influences the nature of the search effort.
 In particular, R&D often takes the form of a local search process, in
which incremental pieces of knowledge are added to what already exists,
for example because researchers look for improvements to existing
knowledge.
 Technological change is cumulative and path-dependant, influenced by
the prevailing technological paradigm and the evolution of technological
trajectories. Thus technological change can get ‘stuck’ or ‘locked-in’
within one trajectory, which would potentially lead to sub-optimal
results.
 For example, when the market is reinforced by network externalities
among previous adopters, the development of a new technology, even if
superior, can be irrelevant to the system which prevails. Thus it is
important to consider the factors that determine when a technology will
lock-in into a trajectory, how a technology may break-out of a lock-in,
and how competing technologies may co-exist in a balance.
 Another factor leading to potential “ lock-in” is potential social
obstacles to technological change particularly if it is discontinuous (i.e. if
it leads to the emergence of a new technological paradigm). Such
changes face social obstacles because, beyond shifts in underlying
knowledge, the transition to a new technology also entails changes in
user and managerial practices, organizational structures, industrial
networks and regulations, as well as a cultural adaptation to the logic of
the new technologies involved. These impose diverse benefits and costs
on different actors in the innovation system.
 http://www.innovationpolicyplatform.org/www.innovationpolicyplatform
.org/content/technological-trajectories/index.html

Dynamic Competence-Based Theory Of The Firm

 sees both the external and internal environments as Dynamic
 the External Environment is constantly changing as different players
manoeuvre themselves and
 a company’s Internal Environment is also evolving.
 a company’s ability to compete in the future is dependent on its past activities.
absorptive capacity
 They see R&D expenditure as an investment in an organisation’s absorptive
capacity.
 an organisation’s ability to evaluate and utilise external knowledge is related to
its prior knowledge and expertise and that this prior knowledge is, in turn,
driven by prior R&D investment.
 Core Capabilities: a set of competencies that the organisation is capable of
doing confidently.
 Dynamic Organisational Routines are very often those activities that are not
easily identifiable and may be dominated by tacit knowledge.
 organisations build up a body of knowledge and skills through internal
organisational processes (Experience and learning-by-doing).
 In addition to these internal organisational processes, the external linkages
that a company has developed over time and the investment in this network of
relationships (generated from its past activities) form a Distinctive Competitive
Capability.
 Moreover, this can be transformed into competitive advantage when added to
additional distinctive capabilities, such as technological ability and
marketing knowledge

Dynamic competences enable innovation

- Some firms have dynamic capabilities that relate to the innovation of the way
innovation is pursued.
- These are highly creative ‘Reconfigurations’ of thinking and methods for
innovating.
- Examples would include: Dyson’s development of the bagless vacuum cleaner.
- It shows what happens when a disruptive technology emerges. This can be
applied to any industry sector.
- For illustration, we will select the domestic air fan sector. This is a mature
technology, hence here are many firms producing low price fans (low
quality use on figure).
- There is another large group of firms producing medium quality use
products. Typically, these use the same technology but have quieter motors
and the materials used may be of a higher quality.
- There is also a ‘high quality use’ sector of firms providing air fans to more
demanding customers who have specific requirements, such as very low
noise or very light weight or high performance needs.
- Finally, there is a sector of the industry that produces fans required in the
most demanding uses. These firms may use different technologies.
- Usually, the volumes are low and the product specifications are high.

 This industry was stable and mature and had been using the same
technology for almost 100 years.
 Over time, this technology, which has required enormous investment in new
technologies, could yet disrupt the whole industry.
 - Technology in itself does not mean success; firms must be able to convert
intellect, knowledge and technology into things that customers want.
- This ability is referred to as a firm’s competencies: the ability to use its
assets to perform value-creating activities.
- This frequently means integrating several assets, such as: product
technology and distribution; product technology and marketing effort; and
distribution and marketing.
S-Curve

- the rate of technological advance is dependent on the amount of effort put into
the development of the technology.
- Under normal circumstances, however, technological progress starts off slowly,
then increases rapidly and, finally, diminishes as the physical limits of the
technology are approached.
- This is diagrammatically referred to as an S-curve.
- Slow progress at the start equates to a horizontal line,
- rapid progress as knowledge is acquired equates to a vertical line and
- slow progress towards the end equates to a horizontal line.
- It is usually at this point (horizontal line) that a new technology replaces the
existing one; indeed, it is necessary, if advances are to continue.
- knowledge base of an organisation is not simply the sum of individuals’
knowledge bases.
 - Over time, the knowledge, skills and processes will form part of the
organisation’s routines, which it is able to perform repeatedly.
- Individuals may leave the organisation and take their understanding to other
organisations.
- But, even if large groups of people leave, it is likely that understanding will have
been shared with others in the organisation and it will have been recorded in
designs or production planning records for use by others.

- Organisational knowledge represents internal systems, routines, shared

understanding and practices.
- Organisational knowledge represents internal systems, routines, shared
understanding and practices sum total of the individual knowledge bases within
it. because knowledge is also embedded in social and organisational
relationships
- an organisation’s knowledge base is made up of several dimensions.
5 dimensions

- The implementation of an innovation strategy usually is achieved through

the management of technology.
- Many decisions regarding the choice of innovation strategy will depend on
the technology position of the firm with respect to its competitors.
- This will be based largely on the heritage of the organisation.
- In addition, the resource implications also need to be considered.
- For example, a manufacturer of electric lawnmowers wishing to adopt an
innovation leadership strategy would require a high level of competence in
existing technologies, such as electric motors, blade technology and
injection moulding, relative to the competition, as well as an awareness of
the application of new technologies, such as new lightweight materials and
alternative power supplies.
- Adopting a follower strategy, in contrast, would require more emphasis on
development engineering and manufacture.