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PAR T T H R E E

Obtaining Technology: External Strategy

Chapter

Obtaining
Technology:
Evaluation
and Control
PowerPoint Presentation by Charlie Cook
The University of West Alabama
2007 Thomson/South-Western. All rights reserved.

Overview
Issues addressed in this chapter include:
Examining alliance/acquisition capabilities
Performing due diligence prior to obtaining the

technology
Negotiating the deal
Integrating the new technology into the existing

systems and structures


Ongoing evaluation and control of the process of

obtaining and blending external technology


Developing metrics

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FIGURE 8.1

Questions to Address for Evaluation and


Control

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Evaluation and Control


Five places that evaluation and control happen
in an externally focused process:
1. Examining alliance/acquisition capabilities of the firm
2. Performing due diligence prior to obtaining the

technology
3. Negotiating the deal
4. Integrating the new technology into the existing

systems and structures


5. Ongoing evaluation and control of the processes to

obtain and blend external technology


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FIGURE 8.2

Differences to Look for to Obtain Technology


Externally

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Due Diligence: Evaluating Future


Partners or Takeover Candidates
Nonfinancial concerns in the evaluation of the
potential partner or merger/acquisition target:
Value creation potential of the target
Assessment of the targets portfolio of technologies
Business integrationtargets commitment to the

success of the merger


Value of the technology assets of both partners
Support of innovation practices of the blended firm

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Rules for the Conduct of Due Diligence


1. Objectivity should be maintained.
2. Suspicion about the analyses provided by
others as well as your own is healthy.
3. The upside and the downside of the potential
external activity, whether it is an alliance or a
merger/acquisition, should be reviewed.
4. Keep the process quiet as long as possible,
but do not rush because you are worried about
potential leaks.
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Due Diligence Checklists


Key characteristics that should be part of due
diligence checklists:
Clarity of objectives
Comparison (Benchmark)
Competitive understanding
Customization
Continuity

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FIGURE 8.3

IT Areas to Examine

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FIGURE 8.4

Needed
Process
Reviews

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Negotiation of the Deal


Questions to be answered during the negotiation
phase:
Where is the value creation for each organization and

for the combined organization or alliance activity?


What are the short-term and long-term objectives for
each partner, and will the joining of forces help each
reach those objectives?
Who knows what in each organization?
How will the joint venture, alliance, or merger be
governed?
How will the alliance or joint venture be terminated if
either party becomes dissatisfied?

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FIGURE 8.5

Evaluation Factors during Deal


Negotiations

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Integration
Critical issues that must be resolved during the
integration process:
Setting clear, common objectives and definitions of

success
Adopting an appropriate governance model with clear
decision-making criteria determined
Establishing a clear plan for integration and evolution
of the plan if needed
Developing clear metrics to track and measure
success and areas that need attention

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Evaluation of Integration
Financial
Financial
Systems
Systems

Systems
Systems
Compatibility
Compatibility

Focus
Focusof
of
Evaluation
Evaluation

Core
CoreBusiness
Business
Applications
Applications

Networked
Networked
Operating
Operating
Environments
Environments

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Ongoing Evaluation and Control


Questions relevant for ongoing evaluation and
control process in the acquisition of technology:
Current Status: Where are we compared with where

we wanted to be?
Future Concerns: What lies ahead that can affect us

either positively or negatively?


Future Direction: Where are we going in the future if

we continue on the current path? Is it where we


thought we were going when we decided to obtain the
technology externally?

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FIGURE 8.6

Key Areas and Their Measurement

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Metrics
Metrics
Measures that the organization uses for evaluation

and control

Strategic Alliance Control Issues as Metrics:


Clarity of partners motives for the alliance
Capabilities of partners to deliver desired results
Depth of partners managerial resources
Fit of the partners development processes
Degree of acceptance of the alliance by key players

in each organization
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Gap Analysis
Financial
Financial
Fitness
Fitness

Relationship
Relationship
Fitness
Fitness

Gap
Gap
Analysis
Analysis

Strategic
StrategicFitness
Fitness

Operational
Operational
Fitness
Fitness

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Building Blocks for Relationship


Fitness
Integration and trust among the human resources at all
levels of the organization.
There must be concern for other things besides the
numbers.
Oversight of technology must be flexible to promote idea
generation.
Oversight of technology must be tight to prevent
runaway projects and divergence along prealliance
organizational lines.
Opportunity knocks. It is the responsibility of
management to be ready.
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Managerial Guidelines
Points to remember when designing and
implementing the evaluation and control system
for obtaining technology from external sources:
1. Productivity drops as energy and resources are used.
2. There will be feelings of loss among the employees.
3. Try to avoid the conqueror outcomes.
4. It is unlikely the new entity will display the best of

both firms.
5. Be sure that subtle aspects are not overlooked when

blending functions and operations.

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Managerial Guidelines (contd)


Points to remember when designing and
implementing the evaluation and control system
for obtaining technology from external sources:
6. Do not assume everyone will understand the

strategic value of obtaining external technology.


7. Acquisitions and new ways of doing things do not

just blend in naturally.

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Key Terms
benchmark
financial fitness
gap analysis
inertia of success
Likert scale
metrics
operational fitness
relationship fitness
strategic fitness
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