Management of Emerging Technology and Organizational Transformations - Research Paper Example

Management of Emerging Technology and Organizational Transformations Executive Summary Smart cards have become master assets in today’s globalized economies. There are as many smart card projects as millions of cards are rolled out to consumers’ world wide. This paper is based on an exploratory analysis of smart card industry characterized by ‘coopetition’ concept (M’Chirgui, 2004) where actors in the smart card industry interact with market conditions and the industry environment in a unique nature. This interaction has generated complex and intensive competitive landscape constituted in a mix of co-operation and competition. The actors cooperate on certain activities and at the same time competing on other aspects, as a result of adopting high-tech technologies by of major industry players. This kind of interaction is referred to as coopetitive strategy (M’Chirgui, 2004). Smart cards are beneficial not only through provision of avenues for secure access to buildings and computer networks but they also store information for other purposes like identification and procurement. Smart cards have embedded microchips as a unique characteristic feature that is tamper-resistant for large scale protections (Schwartz, 2004). Unfortunately, smart card technology is marred with issues that require speed and in depth analysis to address the changing trends and possibly bridge the widening gap between technological change and organizational culture. In order to remain relevant, organizations need to design desired goals flanked by effective business strategies, technology acquisition, organization and management (Andriole, 2006). Table of contents Executive Summary 1 1.0. Introduction 3 2.0. Theoretical perspectives 5 2.1. Industry Analysis 5 2.1.2. Major players in smart card industry 7 2.1.3. Major opportunities and threats 8 2.2. Current status of Smart card technology 10 2.3. Impact of smart cards 11 Conclusion 12 References 13 Appendices 14 1.0. Introduction Plastic cards consist of processor and information storage components which private and public sectors use in authentication, mobile personal information storage, identification, and authorization. Smart cards are among other classified plastic cards like barcodes, optical stripe media, contactless and magnetic stripes. However, emerging technologies in the industry have merged or combined card platforms in to multiple technologies (Barker et al., 2004). Purpose This paper has the objective of ascertaining current technical limitations and capabilities, demand requirements for integrated and individual technologies as well as exploration of major implementation impediments to smart card exploitation. Competition in organizations centers on two main paradigms, research on competitor relationships, domination theory and customer behaviour. Competitive paradigm affirms an organizations competitive advantage strategy which depends on the structure of industry environment in terms of unfolding core competences or operational structure. While a cooperative paradigm places emphasis on collaborative advantage strategy by focusing on inter-organisational cooperative agreements between industry players in order to built global networks with the aim of achieving mutual benefits (M’Chirgui, 2004). In contrast there is little evidence on how enterprises benefit through cooperation and competition simultaneously, a situation referred to as ‘coopetition’ (see Appendix 1). This scenario prevails in today’s business environment, a good example is the knowledge based industries within Information Technology domain like the banking sector and emergence of e-banking by mobile phone operators. Smart card revolution is the best means that combines both paradigms. In this paper smart card actors, market conditions and industry structure interactions points out a clear picture of cooperation and competition mix. Smart card providers cooperate in designing, implementation and deployment of smart card technology, while simultaneously engaging in competitive strategies to capture a large market segment resulting from consumption of the technology (M’Chirgui, 2004). Emergence of smart card technology is characterized by both vertical and horizontal interactions, the former being relationships of buyer-seller while the later is competition among smart card providers. Alternatively, this interaction assumes two forms, network relationships and dyadic or a simple tow-enterprise interaction. This paper examines coopetitive strategies among smart card participants by looking at how organizations competitive advantage is derived form specific assets in the firm, market know how and product positioning as well as interaction through complimentary assets through formation of alliances and collaborations with suppliers, partners, competitors, and customers (M’Chirgui, 2004). According to Chen (1997), these features defines a virtual firm as a company composed of several Business Partners that Uses Information Technology to Link/Share Assets, People, Costs, Ideas, and Resources for the purpose of producing a service or product. Thus virtual firms are opportunity-Exploiting and adaptable organizations which provide world-class excellence in their jurisdiction fields by applying technologies and competencies (Chen, 1997). Smart card industry therefore adopts a hybrid behaviour drawn from cooperation and competition attitudes. This paper is organized as follows, Section 2.0 will discuss theoretical background of Information technology, section 2.1 offers a dissection of smart card industry environment, section 2.2 reflects on current status in the smart card industry, section 2.3 gives an insight on how smart cards are affecting organization management practices and business in general, section 2.4, tackles industry findings and issues related to smart card implementation (Chen, 1997). 2.0. Theoretical perspectives Smart card technology started in Europe during 1970s but its wide application emerged during 1980. Since then smart card, industrialization has experienced fantastic growth rates. The technology began as a disposable payment card system just like calling cards used by telephone firms. At present, the technology has permeated a variety of sectors, more specifically financial services sector where it is used to withdraw or pay bills through ATM access, healthcare, transport, etc (M’Chirgui, 2004). Between 2001-04 a sponsored on-line survey by Cutter Consortium presented data suggesting that IT field is organized around five business technology layers namely, business strategy, strategic business applications, enterprise business technology architecture, technology infrastructure, and technology support. These layers are flanked by two elements, 1 Technology acquisition, and 2, Organizational management (Andriole, 2006). 2.1. Industry Analysis 2.1.1. Smart card ‘The product’ A smart card has no official definition. In the industry it is only described as a credit card-sized plastic ‘card’, that holds information in an integrated microchip. This description rules out a normal credit card, which has a single magnetic strip for storage of data in a static format as a smart card. In addition, 1.smart cards have the following features, an operating system with embedded data software that can run short programs, 2. Can be protected from external alteration or access by cryptographic security systems, and 3. Its content is open for updates and remains current even when power supply from external source is shut off (M’Chirgui, 2004). From the industry perspective, there are two smart card product lines. The first type is the memory cards with a simple chip but no processing circuitry, thus limiting its flexibility. The second type called microprocessor cards are equipped with processor chip that serves as the chips’ operational chip. The power and size of the chip determines its processing and storage capacity. The later chips are very flexible cards in terms of scope of applications. Based on physical characteristics, smart cards are categorized into two general categories, 1. Cards without contact and those with contacts. Contact smart cards have information for physical contact points on their surface which allow for setting transmission commands, status and data information, and the status of information between the card and card reader. 2. Contactless cards are modified by incorporating a high frequency radio coils or antennae embedded on it, this card becomes active when the card and the transmitter are within proximity (M’Chirgui, 2004). The smart card system operates via an extensive infrastructure of terminals and readers, software and material products in a well structured architecture. The system constitutes system operator, service provider, card issuer, and cardholder. The smart card application offers a ‘buddle’ with varied semi-sectoral and semi-functional segmentation which integrates functionalities and competences ‘valorisation’. Smart card valorization generates a variety of broad range card features to serve different applications which are often distinct and targeted for a non homogenous market. Close relationship is created between financial sectors, mobile telecommunications and others for example debit/debit card, network card, TV card, electronic purse, health card, internet card, loyalty card, etc (M’Chirgui, 2004). 2.1.2. Major players in smart card industry Demand in smart card industry is driven by providers rather than cardholders. This is a striking feature of smart card industry demand function which separates consumer or cardholder from the provider. The market of smart cards has sub-segments that differentiate its size. Actors show an elasticity demand comparable with deployed technology. Provider’s willingness to diverse smart card application to other value services is the main source of demand (M’Chirgui, 2004).The main stakeholders in smart card industry are divided in various classes, types and crafts. It is hard to find a single value chain, because each class specializes in a distinctive area. Since the industry has enormous involvement of players or partners, the main providers can be described in three levels. 1. The upstream level which consists of chip suppliers, 2. Central level which consists of complementors, producers, and operating systems. 3. Is the downstream level represented by end-user’s and services providers (see Table 2.0). Table 2.0 Table 1 shows major players in smartcard industry Vendors Microprocessor cards Memory cards Total Market share Gemplus 185 438 623 35.2 Schlumberger 152 405 557 31.5 G&D 76 112 188 10.6 Oberthur 85 28 113 6.4 Orga 53 31 84 4.7 Bull CP8 [79] [0] [79] [4.46] Incard 16 26 42 2.4 Cardintell 7 4 11 0.06 Microelectrnica Espanola 10 0 10 0.056 ID Data Systems 9 27 36 0.02 Autres 35 69 104 4.6 Total 628 1140 1768 100 % (Source: M’Chirgui, Z. (2004).The economics of smart card industry: Towards coopetitive strategies) 2.1.3. Major opportunities and threats Manufacturers of smart cards currently benefits from new emerging opportunities. These opportunities can be divided into two divisions. The first segment to profit from is related to substitution to other technologies in new markets for smart cards. Secondly, opportunities related to transitions and multi-application technologies, m-commerce, and e-transactions security. If these opportunities are introduced well into the market through an elaborate marketing policy, they can generate increase in revenues. Industrialists anticipate two events that may quintuple the industry, first is the imminent opening of Japanese and American markets, and second is the view of growth potential in ‘interactive’ applications in the services sector. Globalization in smart card industry can be traced from arrival of big names in Information Technologies like NEC, Mitsubishi, Motorola, and Sony who have exploited growth in the industry (M’Chirgui, 2004). Nevertheless, Barker et al. (2004) uncovered several threats associated with privacy and security, standardized implementation of smart cards across companies, multi-technology integration and interoperability. They examined these threats with the aim of disclosing existence of gaps in the named standards as well as presence of factors that limits country-wide application integration. Information gathered from interviews and presentations reveal that various smart card technologies are hampered by 1. Smart cards require business processes and policies that are unique to each other. 2. Cost effectiveness of emerging technologies. 3. Maturity and availability of related standards and technologies. 4. Variation in security needs from one application to the next as per sector requirements. 5. The need for interoperability across various sectors and among companies within each sector (Barker et al., 2004). Unique policies in smart card environment endure limitations and capabilities resulting from new and existing technologies. In this respect, regulations and rules for identity check/proofreading must deal with interoperability issues. Gaps discovered include, 1. Biometrics interoperability, 2. Standards employed in post-embedding printing, 3. Standards applied in smart cards to hold multiple technologies on the same card and how they co-exist, 4. Implementation of variety of options in an official standard may lead to non-interoperable solutions between card readers and cards, 5. The need to have machine-readable travel credentials and assuming common identity methods common standards, 6. There is lack of standardized assessment for optical effectiveness and diffraction of holograms grating to attain clarity (Barker et al., 2004). One major impact of smart cards as a new application initiated transitions in the industry. The emergent technology including transit applications demand higher transaction speeds. Therefore, contactless smart card technology is capable of accommodating the higher transaction speeds. This forms the backbone of a major driver for transition trends towards multi-technology cards. Thus the benefits of smart cards include enhanced privacy and security, multi-application capability, and higher transaction speeds (Barker et al., 2004). 2.2. Current status of Smart card technology Providers in smart card industry meet demand by looking for safe and secure transactions, open services and ones with free access. Customers look for smart cards with a high level of performance, better priced cards, confidential, and flexibility. To determine customer needs, large manufacturers analyze customer’s needs through consultation, then communicating the findings to their professional services for designing and setting up system solutions. Revolution in smart card technologies keeps differentiating to new products which require intense and continuous interaction between users and producers. Geographically, the Middle East, Europe and Africa remains the largest market segments for microprocessor and memory card holding 45% of the total market share. However, the Asia-pacific market indicated growth potential in 2002 by posting 33% of shipments in both microprocessor and memory markets. The Americas market has huge growth potential for microprocessors in the same period posting 21% of market value (M’Chirgui, 2004). The ever changing structure of smart card industry is characterized by constant enlargement and renewal of different application spectrums supported by exploitation of technology and commercial awareness. At times the industry is subject to competitive product-feature and price extremes driven by capability to design latest technologies as well as searching for new sources of innovation and creativity which are central in the industry. Therefore, manufacturers hope to gain competitive advantage in the industry must be undertaken through substantial application of R&D projects (see Table 2). R&D in smart card industry is the pillar which determines competitive behaviour since it identifies potential markets. In addition, R&D generates market insights on the competitive environment and any future price competitive behaviour. Competition in R&D mainly revolves around fields of security, memory storage, and operating application/system. Table 2 Shows innovation efforts in smart card R&D Smart Card Vendors % R&D / total revenues Number of persons in R&D Gemplus 10 % 1000 Schlumberger 7 % ND Giesecke & Devrient 6 % 550 (Source: M’Chirgui, Z. (2004).The economics of smart card industry: Towards coopetitive strategies) 2.3. Impact of smart cards Evaluation of smart card memory capacities, protocols, card operating systems, and functionality suggests that integrating Universal Serial Bus (USB) to smart card interfaces provides faster transaction speeds compared to previous experience. Capabilities of smart cards lie in the uniqueness of their characteristics like digital signatures, encryption, on-card biometric and on-card key generation matching (Barker et al., 2004). A number of technical challenges have emerged in the industry in regard to provision of discrete memory access via contactless interface, implementation of PKI for contactless cards, and execution of complex algorithms on dual interface cards or cards which are modified to combine contact and contactless interfaces (Barker et al., 2004). These factors are collectively called implementation issues which consider training required, possible problems and risks. Conclusion From literature and discussion of implementation issues, there is a general agreement that interoperability problems should be ironed out so as card requirements and readers bought from different competing suppliers should work interchangeably. Technology optimization and construction of its architecture if an important areas to considered increasing organizations competitive advantage. Lessons learned from this paper enhance manager’s corporate knowledge in areas with emerging technologies especially fields characterized by business technology convergence and modeling of competitive enterprise architecture. Company business-technology architecture is the linchpin among strategic applications, business strategy, technology support, and technology infrastructure. As business is enabled by technology and technology defines new business models and processes, the necessity of having enterprise business-technology architecture is growing by leaps and bounds (Andriole, 2006). References Andriole, S. J. (2006). Business Technology Education in the Early 21st Century: The Ongoing Quest for Relevance, Journal of Information Technology Education, 5. Barker, W. C., Howard, D., Grance, T. & Eyuboglu, L. (2004). Card technology developments and gap analysis interagency report. Retrieved November 8, 2009 from < http://csrc.nist.gov/publications/nistir/nistir-7056.pdf > Chen, J. (1997). VeriFone: The Transaction Automation Company. School of Business, Gonzaga University. Retrieved November 8, 2009 from < http://barney.gonzaga.edu/~chen/mbus626/cases_pres/Case-01-1-Verifone.ppt > M’Chirgui, Z. (2004).The economics of smart card industry: Towards coopetitive strategies, France. Retrieved November 7, 2009 form Schwartz, K.D. (2004). Government Executive: Managing Technology Managing Smart Cards. Appendices Appendix 1 represents the current strategies in smart card competition Coopetitive relationship Input activities output activities Cooperation Competition - Setting R&D activities - Capture the largest share of the value - Promoting standards created by the application (through - Design implementation security, cost reduction, and characteristic - Deploying smart card applications of use) Read More