Technology Management - Case Study Example

Part 1: The challenges of introducing new products based upon new technologies, and the methods that can be used to manage the process. In order to understand the challenges related to the introduction of new products based upon new technologies it is necessary to understand the rules of the relevant process, which is part of a wider framework known as technology management. At the same time, the models and the rules of the introduction of new products in modern firms should be discussed for understanding the difficulties that the introduction of new products in modern organizations would have to face. Also, the methods used for managing the particular process are usually depended on the organizational environment, internal and external. The theories that are related to the strategic decision making process and the organizational structure and culture, could be important for realizing the challenges that such initiatives would have to face, either in the short or the long term. Technology Management Process – overview and types The technology management process can have a series of forms. In any case, every technology management process needs to be based on Strategy (Figure 1 below). Strategy, as the key element of the technology management process is supported by certain activities, such as identification, selection, acquisition, exploitation and protection (Figure 1). Figure 1 – Technology management process (source: Lecture Notes) Among the activities supporting the technology management process, particular emphasis should be given to exploitation; the specific activity reflects the methods used for converting the technologies into products that would have many chances to succeed in the global market (Lecture Notes). Supporting exploitation activities can highly benefit modern firms since exploitation is related to important benefits, such as the realization of the value of knowledge in the development of daily business operations and the increase of the involvement of technology in the implementation of business plans (Lecture Notes). In any case, the technology management strategies used in organizations are not standardized. Rather, they can be differentiated according to the organizational culture, the resources available and the targets set in regard to the relevant project. Figure 2 – Soft and hard business models, as related to the development of business strategies (Connell 2006, Lecture Notes) In addition, the technology management strategy introduced in each organization needs to be aligned with the organization’s existing strategies, as based on organizational culture and vision. For example, in businesses where innovation and initiatives are not particularly supported, the efforts for implementing a technology management process could face barriers and delays; this is the case of hard companies, as described in the model presented in Figure 2. On the other hand, firms operating globally tend to follow a hard business model, aiming to secure their profits in markets worldwide; indeed, in the context of hard business models risks are low since standardized strategies and processes are preferred (Minshall 2006). In this context, it could be expected that businesses based on soft business models, where R&D and innovation are more welcomed, would be able to develop more effective technology management practices. However, such case does not exist, mostly because of the following fact: large firms are more capable in investing high amounts on their operations; this means that large firms could secure the continuous update of the technology involved in their daily activities, whereas small and medium size firms, those based on soft business models, do not have such potential (Minshall 2006). Technology Management Process – terms of success It is derived that the success of technology management processes can be related mostly to the size of the firm and not so much on other characteristics of the organization, such as the organizational culture. Indeed, the need for keeping profitability high can lead large firms to support costly technology management plans, even if such practices are in opposition with these firms’ culture (Gill et al. 2007). The role of the funds availability in the success of business strategies is revealed through the funding gap model. The particular model is based on the following rule: the amounts required for covering current business needs or future business plans may not be available in cash for a particular period of time; this period is usually described with the term funding gap (Gill et al. 2007). Introduction of new products based on new technologies – overview of challenges When introducing a new product in the market a firm has to face a critical challenge: will the particular product be welcomed by customers in the target market or not? (Nguyen and Katarzyniak 2008). The specific problem is quite common among HiTech firms (Nguyen and Katarzyniak 2008). The success of these firms is depended on their ability to keep their technology updated on a continuous basis (Nguyen and Katarzyniak 2008). However, the cost of following the trends of technology has been significantly increased for firms in all industries (Monczka 2000). In addition, technology has become an important factor for the increase of a firm’s customer base (Ciampi 2009); reference is made, in particular, to the Internet and its involvement in the promotion of products and services of all types (Ciampi 2009). In regard to the above trend the role of social media has been critical (Ciampi 2009). Another requirement that a firm should meet when trying to enter a new product in the market is the following one: the characteristics of the product should be aligned with the local social and cultural trends, otherwise its prospects for success would be limited (Leontiades 1987). In practice, it has been proved that the entrance of new products in the market can result to challenges that may be difficult to be predicted in advance. Such challenges are: a) Market and Customer needs: managers cannot capture the actual needs of customers or the market trends (Lecture Notes); for example, the time to enter the market is critical for any new product (Lecture Notes); attempting to introduce in the market a new product at a time period when the demand for this product is low will eliminate the chances for any benefit (Lecture Notes); b) Management of Technology: the potentials of the firms’ employees to manage technology are limited, meaning that the skills required are not available (Lecture Notes), c) Capture the Value: there is no ability to secure the Intellectual Property related to new products; such phenomenon exists either because of the ‘weak appropriability or the poor access to complementary assets’ (Lecture Notes). Introduction of new products based on new technologies – methods and challenges involved The introduction of new products in the market would have more chances to be successful if a carefully designed strategy is used. A good Standard Project Management Discipline is considered as most suitable for such initiatives. This strategy is described in Figure 2a below. Figure 2a – Project Management Model for the introduction of new products (source: Lecture Notes) The above Model is based on five phases, which are described in Figure 2b below. Each of these phases needs to be fully completed before proceeding to the next phase. Figure 2b – Product Creation Process (source: Lecture Notes) Using the above process can increase the chances of successful entrance of new products in the market. The only issue that could appear is the following: the individuals who will participate in this process should be appropriately skilled so that failures are avoided, as possible. The Process presented above should be made fully understood if analyzing its elements. At a first level, it is necessary for the project to be clearly defined; this task is completed using a project charter (Lecture Notes). Then, the risks and the experiments also need to be defined; only disciplined experiments should be used (Lecture Notes). The Performance Engine, as part of the above Process, reflects the groups of individuals that will participate in the project; these groups should be carefully chosen according to the skills/ experience that the project requires (Lecture Notes). The management of the Process should be based on carefully planned actions, ensuring that the project will be closely monitored. Two frameworks that could be possibly used for managing the Process are presented in Figures 2c and 2d below. Figure 2c – A framework for managing the Process (Lecture Notes) Figure 2d - A framework for managing the Process (Lecture Notes) The last part of the project for developing a new product would be the control of the Fuzzy Front End (Figure 2b). The term Fuzzy Front End is used for showing ‘the time period between the time point that a project should have started and the time point that the project actually started’ (Don Reinertsen, Lecture Notes). Fuzzy Front End can affect the success of a project referring to the entrance of a new product in the market. The interaction between the Fuzzy Front End and the Product Launch are made clear in Figure 2e below. Figure 2e – Fuzzy Front End and Product Launch (source: Lecture Notes) In any case, the introduction of new products to the market can increase a firm’s competitiveness, especially if these products have unique characteristics (Shavinina 2003); firms can develop such products only if they emphasize on innovation and R&D (Shavinina 2003) Managers who are involved in such projects, i.e. projects related to the introduction in the market of new products, should take into consideration the following detail: a product can be considered as new not only if it enters the market for the first time but also if it enters a foreign market for the first time (Leontiades 1987). In this context, the entry of a product in a new market could be planned as follows: a) managers who have to complete this task, i.e. to design and develop the plan related to the entry of a product in a new market, have primarily to check which market worldwide has similar characteristics with the market in which the product already exists (Leontiades 1987); b) at the next level, the new product would be available in different forms; certain of these forms should be similar to local products, so that the resistance of the local consumers to the new product to be avoided, as possible (Leontiades 1987); c) the experiences from the marketing of this product to other markets worldwide should be used (Leontiades 1987). According to Viardot (2004) the entrance of a new product in the market needs to be appropriately prepared. Emphasis should be given on the introduction, simultaneously, in the market of products that could act as complements to the key product (Viardot 2004). Reference could be made as an example to the following case: the success of Apple in the modern market has been related to the firm’s efforts to support its core product with other, complementary products that could increase the performance of the firm’s core product (Viardot 2004, p.172). When the firm’s key product, Apple computer entered the market, the simultaneous promotion by the firm of ‘critical software and of the jet laser printer’ (Viardot 2004, p.172) helped the firm to secure the success of its new product. It should be noted that the strategy used for entering a new product in the market can vary, incorporating different phases, according to the targets set and the managers’ perceptions. Sood, James and Tellis (2009) had developed a Functional Regression model in order to check whether the potentials of a new product to succeed in a new market can be predicted. This model is presented in Figure 3 below. The model is based on the combination of three different techniques that can help to predict market penetration. It is not explained whether the sequence of the model’s phases is strict or whether changes can be made on the structure of the model according to the characteristics of the product and the market conditions. Figure 3 – Functional Regression model for estimating the future performance of a new product in a particular market (source: Sood, James and Tellis 2009, p.38) In addition, before developing the above activity, i.e. before attempting to predict the future success of a new product it would be necessary to evaluate, in general, the potentials of the new product in regard to the target market. Such evaluation could be made using a model as the one presented below, in Figure 4. Figure 4 – Process for evaluating a new product (source: Ozer 1999, p.78) Quite often, the development of a new product faces delays that could not be predicted. In this case, attempting to introduce the product in the market would take a long period of time, a fact that could increase the cost involved and limit the chances for profits. In fact, such problem could lead to the elimination of any benefit in regard to the particular product. Such case is described in the study of Clark and Wheelwright (1994). The researchers refer to the example of a well known manufacturer of medical equipment, named as ‘Medical Technologies Inc., not its real name’ (Clark and Wheelwright 1994, p.333); the firm had invented a machine that could perform simultaneously ‘extensive monitoring functions and data analysis’ (Clark and Wheelwright 1994, p.333). Initially, the device was welcomed by the global market. However, ‘during the assembly of one of the machine’s reproduction models two of the components were found incompatible’ (Clark and Wheelwright 1994, p.334). The cooperation between the suppliers of these products was proved quite problematic leading to severe delays to the release of the final product in the market (Clark and Wheelwright 1994). The expected benefits from the invention of this, unique, product were significantly reduced. It was proved that the firm had not planned carefully the introduction of the new product in the market. The above case shows that detailed planning is a prerequisite for the development of a successful strategy for introducing a new product in the market. At this point, the following question could be set: apart from the use of strategic planning, in its traditional form, which other method would be available to firms that are interested in introducing a new product in the market? A potential solution, quite effective, would be that presented in the study of Khosrow-Pour (2003). The above researcher notes that in order to increase their market competitiveness many organizations are transformed to E-enterprises (Khosrow-Pour 2003). The key characteristic of such enterprises (see Figure 5) is the following: ‘all operations, including the production and the delivery of the product parts, are developed digitally’ (Khosrow-Pour 2003, p.420). An advantage of this approach is the following one: since all business activities are based on digital functions it is easier to identify failures in their early phase or, even, to predict these failures (Khosrow-Pour 2003). Figure 5 – An example of e-business model, business objective: provision of news (source: Gordjin 2003, p.2) Part 2: A comparison of ‘open innovation’ and ‘closed innovation’ in the context of the commercialization of new technologies Promoting innovation is of critical importance for modern firms. In fact, it is mostly through innovation that firms in all industries can secure their competitiveness. Different approaches have been used by firms to promote innovation. An indicative strategy for supporting innovation is presented in Figure 6 below. Figure 6 – The Innovation Funnel (source: Goffin and Mitchell 2005, Lecture Notes) Open and closed innovation – description and analysis Two, quite popular, approaches for promoting innovation are the ‘open innovation’ and the ‘closed innovation’ frameworks. For evaluating the strengths and weaknesses of the two approaches, the ‘open innovation’ and the ‘closed innovation’, in regard specifically to the commercialization of new products it is necessary to refer primarily to the characteristics of these approaches, as described in the literature. According to Leon et al. (2008) open innovation reflects ‘the cooperation between firms for promoting innovation’ (Leon et al. 2008, p.345). As for the closed innovation, this framework denotes the lack of sharing between firms of plans related to innovation (Leon et al. 2008). This means that in firms supporting closed innovation the promotion of innovation is developed using the following strategy: ‘R&D plans are developed only within the boundaries of the firm’ (Leon et al. 2008, p.345). Using this strategy a firm can secure the safety, i.e. secrecy, of its achievements in regard to innovation (Leon et al. 2008), a fact that is critical in industries where competition is extremely high. From a similar point of view, Chesbrough et al (2008) notes that open innovation reflects ‘an antithesis to the traditional vertical integration model where internal R&D activities result to internally developed products’ (Chesbrough et al. 2008, p.1). In fact, open innovation is based on ‘extensive inflows and outflows of knowledge’ (Chesbrough et al. 2008, p.1) so that delays in the promotion of innovation are avoided. From this point of view, open innovation can be characterized as more advantageous, compared to the closed innovation approach. Indeed, being able to respond fast to changing market trends is critical for firms in order to keep their competitiveness towards their rivals. Delays in developing innovative products would lead to the elimination of the expected benefits since at the moment when new products would enter the market substitute products could already exist. Because of its benefits, open innovation is often preferred by firms of all sizes. In fact, even large organizations that used to emphasize on closed innovation seem to change their criteria in choosing a strategy for promoting innovation. Of course, the value of closed innovation cannot be doubted. For firms that are new to the market the closed innovation approach may be more appropriate contributing in the increase of firm’s independency. As noted in the study of Whittaker and Cole (2006) the closed innovation approach is based on the view that ‘successful innovation requires control’ (Whittaker and Cole 2006, p.133). Control, as related to innovation, needs to be involved in all phases of the production process, from ‘the generation of the idea up to the distribution of the finished product in the market’ (Whittaker and Cole 2006, p.133). Control has also to refer to the provision of support to customers and to the funding of any required task solely by the firm (Whittaker and Cole 2006). In other words, in the context of the closed innovation the participation of third parties in activities related to the development of new products is not accepted; such practice could limit the chances for growth especially of firms operating in highly competitive industries. In regard specifically to the open innovation approach, the following fact should be highlighted: open innovation, as a business strategy, cannot be successfully implemented unless certain requirements are met. Figure 7 – Metrics of open innovation (source: Lecture Notes) These requirements are revealed through the Figure 7 above. In Figure 7 the four metrics for measuring open innovation are presented. These metrics refer to the four approaches that a firm supporting open innovation would employ. In practice, open innovation is more effective from closed innovation. Indeed, using popular brands for promoting innovation can reduce significantly the cost and the time involved (Peters et al. 2012). Trying to promote innovation using only’ internal development’ (Peters et al 2012, p.172) can increase the risks in regard to the funds invested and the time spent. In case of a failure in regard to the performance of a new product, the consequences on the firm can be limited if an open innovation approach has been used (Peters et al. 2012). On the contrary, if the strategy used has been based on closed innovation the effects of the failure can be severe at the level that for a specific period of time the firm’s units have been used exclusively for developing a product that, at the end, was not welcomed by consumers. Open and closed innovation in regard to the commercialization of new technologies When having to deal with projects that focus on the commercialization of new technologies firms tend to use different approaches according to their support to open or closed innovation. More specifically, in firms promoting open innovation employees are urged to take initiatives for responding to the demands of the tasks assigned to them, a practice that has been characterized as ‘go-getting’ (Herzog 2011, p.162). In these firms employees are expected to take any measure required for securing the successful commercialization of new technologies (Herzog 2011); the use of extensive advertising or the extensive research on the similar practices of other firms worldwide are examples of such practices. Chesbrough (2006) refers to the case of Xerox in order to show the potential benefits of closed innovation. According to the above researcher, the success of Xerox has been related to the firm’s efforts to promote innovation within its boundaries, avoiding the cooperation with other firms (Chesbrough 2006). This strategy had affected the firm’s practices in regard to all its operations. For example, the products of Xerox were delivered only by the firm’s employees (Chesbrough 2006); the cooperation with sales agencies or representatives has been avoided. In opposition, IBM has used an open innovation approach; the firm’s products could be acquired by ‘thousands of retail stores across USA’ (Chesbrough 2006, p.80). The issue of commercialization of new technologies can be quite complex. In practice it has been proved that firms’ decisions on the commercialization of new technologies are depended on the approaches that these firms use for promoting innovation. More specifically, firms that support the open innovation approach are not depended, not solely, on their own ideas for achieving innovation (Herzog 2011). Instead, these firms accept the view that ‘ideas and technologies from the external environment’ (Herzog 2011, p.190) are necessary for the development of innovative products. In other words, firms supporting open innovation are highly likely to accept the external technology commercialization, compared to the firms based on closed innovation that would reject any such initiative. The continuous update of the legal framework related to patents has reduced the risks for firms that are involved in such projects. Figure 8 – Revenues from patent licensing (source: Koruna 2001, p.8) In Figure 8 above, the global revenues from licensing patenting are presented. It is clear that the interest on patents has been significantly increased worldwide, a fact indicating the trend for adopting external technology commercialization in order to promote innovation. As the Patent Process manager of IBM, G.Markovits notes, ‘it is quite difficult for a firm to shorten the time required for developing innovative products without using the ideas of its competitors’ (Koruna 2011, p.10). The success of IBM, according to G.Markovits, has been highly related to the firm’s practice to employ external technology for developing innovative products (Koruna 2011). It should be noted that external technology commercialization, as promoted through the open innovation approach, has been related to a series of important benefits for the firms that are involved in such projects. One of the most critical benefits of external technology commercialization is the exchange of knowledge between firms. In other words, external technology commercialization promotes learning (Koruna 2011). In this way, it is easier for the R&D projects of a firm to be continuously updated, being aligned with the most recent market trends and the advances of technology (Koruna 2001). This phenomenon is described in Figure 9 below. Figure 9 – Learning as related to the external technology commercialization (source: Koruna 2001, p.15) Even if the external technology commercialization is highly important in promoting innovation and learning, the success of the particular strategy is not guaranteed. As noted in the study of Koruna (2011), external technology commercialization can actually enhance innovation and learning only if employees in the firms involved are willing and able to support the relevant plans. If this requirement is not met then the value of an external technology commercialization project can be diminished. The specific issue is also explored in the study of Herzog (2011). The above researcher has tried to identify the terms of success of external technology commercialization plans. It seems that the success of these plans is depended on the ability of ‘open innovation units to recognize and understand knowledge’ (Herzog 2011, p.190). At this point, the following fact should be highlighted: the ability of firms to support external technology commercialization is related not only to their existing resources but also to their culture and vision. This means that the increase of a firm’s resources cannot guarantee its performance in regard to external technology commercialization. Instead, appropriate update of the firm’s structure and culture should be developed in advance, i.e. before engaging in an external technology commercialization project. Reference can be made, as an example, to the technology roadmapping approach (Figure 10) Figure 10 – Technology roadmapping approach (source: Phaal et al. 2001, p.4) Of course, as all business strategies, the Technology roadmapping approach is not free from risks. In fact, it has been proved that the adoption of this strategy is related to a series of challenges, as analytically presented in Figure 11 below. Figure 11 – Challenges related to the Technology Roadmapping approach (source: Phaal et al. 2001, p.4) The Technology roadmapping approach, as presented in Figure 10, is a strategy based on the following idea: the technology of each organization should be aligned ‘with the business strategy and the market opportunities’ (Phaal et al. 2001, p.4). In this way, the appropriateness of technology for the achievement of organizational goals can be secured (Phaal et al. 2001, p.4). The above approach could also increase the chances for success of external technology commercialization plans. Indeed, firms that have already incorporated the Technology Roadmapping approach would be more capable in managing effectively a plan related to external technology commercialization. References Chesbrough, H., Vanhaverbeke, W. and West, J. (2008). Open Innovation:Researching a New Paradigm: Researching a New Paradigm. Oxford: Oxford University Press. Chesbrough, H. (2006). Open Innovation: The New Imperative for Creating And Profiting from Technology. New York: Harvard Business Press. Ciampi, F. (2009). Emerging Issues and Challenges in Business & Economics: Selected Contributions from the 8th Global Conference. Firenze: Firenze University Press. Clark, K. and Wheelwright, C. (1994). The product development challenge: competing through speed, quality, and creativity. Harvard: Harvard Business Press. Connell, D. “Secrets” of the world’s largest seed capital fund. 2006, CBR – http://www.cbr.cam.ac.uk/pdf/SBIR%20Full%20Report.pdf Gill, D., T.H.W. Minshall, C. Pickering and M.Rigby (2007). Funding Technology: Britain Forty Years On. Cambridge, St John’s Innovation Centre and Institute for Manufacturing. Goffin, K. and Mitchell, R. (2005) Innovation Management: Strategy and implementation using the pentathlon framework. Oxford: Palgrave Macmillan. Gordijn, J. (2003). "Business Models & the Mobile Industry: Concepts, Metrics, Visualization & Cases" Why visualization of e-business models matters. 16th Bled Electronic Commerce Conference eTransformation Bled, Slovenia, June 9 - 11, 2003. Available at http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.13.8321&rep=rep1&type=pdf Herzog, P. (2011). Open and Closed Innovation: Different Cultures for Different Strategies. New York: Springer. Khosrow-Pour, M. (2003). 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