notes - Home [PDF]

MBA (DISTANCE MODE)

DBA 1732 MANGING

TECHNOLOGY

CHANGE

III SEMESTER COURSE MATERIAL

Centre for Distance Education Anna University Chennai Chennai – 600 025

Author Prof. S. Ramanathan Visiting Professor Anna University Chennai Chennai - 600 025

Reviewer Dr. Hansa Lysander Manohar Professor Department of Business Administration St. Marys School of Management Studies Chennai - 600 119

Editorial Board Dr.T.V.Geetha

Dr.H.Peeru Mohamed

Professor Department of Computer Science and Engineering Anna University Chennai Chennai - 600 025

Professor Department of Management Studies Anna University Chennai Chennai - 600 025

Dr.C. Chellappan

Dr.A.Kannan

Professor Department of Computer Science and Engineering Anna University Chennai Chennai - 600 025

Professor Department of Computer Science and Engineering Anna University Chennai Chennai - 600 025

Copyrights Reserved (For Private Circulation only) ii

iii

ACKNOWLEDGEMENT The author has drawn inputs from several sources for the preparation of this course material, to meet the requirements of the syllabus. The author gratefully acknowledges the following sources: • • • • • • • • • • • • • • • • • •

Webs of Innovation, Alexander Loudon, FT. Com. The innovation Equation, Jacquline Byrd & Paul Lockwood Brown Jossey Bass, Petiffer. Competitive Innovation Management, James A Christiansen, Macmillan Business Innovation – Harnessing creativity for business growth, Consultant Editor: Adam Jolly, Kogan Page. Creating Break through products, Jonathan Cagan & Craig. M. Vogel, Financial Times – Prentice Hall – NJ. Innovation Management and New product Development, Paul Trott, Financial Times – Prentice Hall. Management of Technology, Trarek Khalil, McGrew Hill Managing Technology and Innovation for competitive advantage, V.K. Narayanan, Pearson Education. Management of Technology and Innovation, Vijay Kumar Khurana, Ane Book India Managing Technological Change, Carol Joyce Haddad, Sage Publications. Managing Strategic Innovation and Change, Michael C. Tushman & Philip Anderson, Oxford University press. Handbook of technology management, Sza Konyi, Viva Books. Strategic Management of Technological innovation, Melissa A Schilling, Tata McGraw Hill. The Act of Innovation, Tan Kelley, Profile Books. Innovation Management, Shlomo Maifal and D.V.R. Seshadan, Response Book. Managing Innovation, Joe Tidd, John Bessant and Keith Pavitt, Jon Wiley and San Sans Ltd. Innovation and Entrepreneurship, Peter F Drucker, Harper Business.

Inspite of at most care taken to prepare the list of references any omission in the list is only accidental and not purposeful. S.Ramanathan Author

v

DBA 1732 MANAGING TECHNOLOGY CHANGE

UNIT I TECHNOLOGY AND INNOVATION Interface between technology and innovation - Technology changes and macro, micro issues- Technology track in select industries. UNIT II VENTURING TECHNOLOGY Technology Road mapping (TRM) - Internal and external technology venturing - Technology pioneering and competitive advantages - Phases of Technology transition. UNIT III TECHNOLOGY CYCLE Technology cycle and understanding technologies change - Responding to technological changes - Adoption of technology - Overcoming resistance - different approaches. UNIT IV CREATIVITY AND TECHNOLOGY Creativity techniques - Classification and description – Innovation process – Nurturing innovation - R & D management within the firm – Multi-criteria considerations. UNIT V TECHNOLOGY CHANGE Technology change and Business Srategy – Organisational issues – Entrepreneurs opportunities and Technology changes – Technolgy change and productivity. REFERENCES 1. Managing Strategic Innovation and Change : A Collection of Readings, edited by Michael Tushman and Philip Anderson (the second edition, 2004)Robbert Szakonyl, 2006 – Handbook of Technology Management – viva books private, limited. 2. Managing technology for competitive advantage: Intergrating technological and organizational development from strategy to action Twiss B & Goodridge, M.Pitman 1989. 3. Technology Transfer: Making the most of Your Intellectual Property By, SULLIVAN N. Cambridge University Press 1995. 4. A Innovation Management, Strategies, Implementation and Profit by Afuah Oxford University Press 2nd edition. 2003. 5. Mastering The Dynamics of Innovation by UTTERBACK, J. Harvard Business School Press 1994.

vii

CONTENT UNIT I TECHNOLOGY AND INNOVATION 1.1. 1.2. 1.3.

1.4. 1.5.

1.6.

INTRODUCTION LEARNING OBJECTIVES TECHNOLOGY AND INNOVATION 1.3.1. Definition of Technology 1.3.2. Attributes of Technology 1.3.3. Definition and Meaning for Innovation 1.3.4. Creativity and Innovation 1.3.5. Invention and Innovation 1.3.6. R&D and Innovation 1.3.7. Change in organisations due to innovation 1.3.8. Types of Innovation 1.3.9 Disruptive and sustained technology 1.3.10 Innovation for growth and profit DISRUPTIVE INNOVATION 1.4.1. Factors that affect disruptive innovation DESIGN AND INNOVATION 1.5.1 Form of Technology Change 1.5.2. Product Innovation and Process innovation 1.5.3. Punctuated Equilibrium TECHNOLOGY CHANGE IN SOME INDUSTRIES

1 2 3 3 3 3 4 4 5 5 6 8 9 11 12 15 19 21 22 23

UNIT II VENTURING TECHNOLOGY 2.1. 2.2.

INTRODUCTION LEARNING OBJECTIVES

33 34

2.3.

USES AND BENEFITS OF TECHNOLOGY ROAD MAPPING

35

ix

2.4.

2.5 2.6

2.7 2.8 2.9

2.3.1. Technology Road mapping 2.3.2. Technology roadmap 2.3.3. Types of Technology Roadmaps PLANNING AND BUSINESS DEVELOPMENT CONTEXT FOR TECHNOLOGY ROAD MAPPING 2.4.1 Knowledge and skills required for technology 2.4.2. Technology road mapping process TECHNOLOGY ROADMAP – AN ILLUSTRATION LINKING TECHNOLOGY PIONEERING AND COMPETITIVE ADVANTAGE 2.6.1 Production Costs and Advanced Manufacturing Hardware Technology 2.6.2 Labor Cost

36 36 37

2.6.3 Materials Costs FINACING A START-UP VENTURE CAPITAL PROCESS 2.81 Financial projects in large firms TECHNOLOGY VENTURING 2.9.1 Angel Investors 2.9.2. Venture capital 2.9.3. Corporate Venture capital

53 60 63 65 66 66 66 67

39 40 40 48 50 51 52

UNIT III TECHNOLOGY CYCLE 3.1. 3.2. 3.3.

3.4. 3.5.

INTRODUCTION LEARNING OBJECTIVES TECHNOLOGY CYCLES 3.3.1. Characterizing the technology cycles 3.3.2. Pioneers of Discontinuous and Dominant designs 3.3.3. The technology cycle – another approach APPROACH TO TECHNOLOGY ADOPTION MEASURING CHANGE READINESS

x

69 70 71 73 74 77 83 91

UNIT IV CREATIVITY AND TECHNOLOGY 4.1. 4.2. 4.3.

4.4.

4.5.

4.6.

INTRODUCTION LEARNING OBJECTIVES CREATIVITY TECHNOLOGIES 4.3.1. Classification of creativity techniques 4.3.2. Description of creativity techniques DEVELOPING AN R&D STRATEGY AND STRENGTHENING R&D ADMINISTRATION 4.4.1. Developing R&D strategy 4.4.2. Strengthening R&D administration TYPES OF INNOVATION 4.5.1. Product innovation versus process innovation 4.5.2. Radical innovation versus incremental innovation 4.5.3. Competence enhancing innovation and competition destroying innovation 4.5.4. Architectural versus component innovation 4.5.5. Technology S-curves 4.5.6. Diffusion of innovation and adopter categories 4.5.7. Stages in technology cycles ORGANISATION CULTURE AND INNOVATION 4.6.1. Modes of innovation 4.6.2. Innovation as a management process 4.6.3. A frame work for management of innovation 4.6.4. Waves of innovation – an overview 4.6.5. Facilitation for innovation process 4.6.6. Industrial firms are different – a classification

xi

103 103 103 103 104 116 116 120 125 125 126 127 128 130 135 138 140 149 153 154 161 164 165

UNIT V TECHNOLOGY CHANGE 5.1. 5.2. 5.3.

5.4.

5.5. 5.6. 5.7.

INTRODUCTION LEARNING OBJECTIVES CRITERIA FOR ORGANISATIONAL CHANGE 5.3.1. Implication for change management 5.3.2. Motivating constructing behaviour 5.3.3. Managing the transition IMPACT OF TECHNOLOGICAL CHANGE ON ORGANISATIONAL PRODUCTIVITY 5.4.1. Management of new technology in relation to organisational productivity 5.4.2. Resistance to change 5.4.3. Building culture for change CHANGE MANAGEMENT STRATEGIES EFFECT OF TECHNOLOGICAL CHANGE ON THE SKILL REQUIREMENTS OF THE WORK FORCE INNOVATION AND ENTREPRENEURSHIP

xii

173 174 174 177 180 183 185 187 189 186 192 195 197

MANAGING TECHNOLOGY CHANGE

NOTES

UNIT I

TECHNOLOGY AND INNOVATION 1.1 INTRODUCTION It is not the strongest of the species who survive, not the most intelligent, but those who are the most adaptive to change. - Charles Darwin The future of business lies in technology. Management of Technology (MOT) links management with engineering and science to help organisations meet the challenge of fast changing technology. It is an integration of technology and management. “If management is about getting other people to do what you want, technology management is about getting people and technology working together to do what you want”. The two words “management” and “technology” carry many different meanings. The combination of these two words present additional complexities. The word “technology” usually conjures up many different images and generally refers to what has been described as ‘high tech’ industries. Technology cannot be limited to high tech industries such as computers, chips, super conductivity, genetic engineering and robotics. Technology is the means for accomplishing a task – it includes whatever is needed to convert resources into products or services. It is the body of scientific and engineering knowledge to be applied in the design of products and processes or in the search of new knowledge.

1

ANNA UNIVERSITY CHENNAI

DBA 1732

Management of Technology involves many issues such as

NOTES • • • • • • • • • • •

The process of innovation in the firm The strategic management of R & D The reduction of new product development times The effective use of information system and technologies The effect of new technologies on strategies of the firm Moving into new technologies timing and choice Internal technology venturing Strategic alliances for technology acquisition and product development High tech marketing Risk management of technological projects Development of new competencies

This subject, “Managing Technology Change” has two perpectives: 1)

How to innovate changes in technology? This is for exploring new techniques.

2)

How an organisation can manage changes arising from technology changes?

This is exploiting or implementation of new technologies and managing the consequential changes. In this unit, we can see how technology and innovation are related or how innovation as a process results in technology change. We will also discuss about technology change and the macro & micro issues involved. 1.2. LEARNING OBJECTIVES i) ii) iii) iv) v)

To know the definitions of technology and innovation To know the types of innovation To understood the environment needed for innovation To understood the macro and micro issues involved To track the technology changes in some industries 2

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

1.3. TECHNOLOGY AND INNOVATION:

NOTES

1.3.1. Definition for Technology: The dictionary meaning for technology is “the application of scientific knowledge for practical purposes” or “ the branch of knowledge concerned with applied sciences”. 1.3.2. Attributes of Technology: i) What does the technological entity do? -Function ii) How does it do? -Principle of organisation iii) How well does it do? -Level of performance iv) How does it look like? -structure v) What is it made of from? -Material vi) How big it is? -Size 1.3.3. Definition and meaning for Innovation: “Innovation is evolutionary and is a response to an unsolved problem and unexploited opportunity” - Praveen Gupta “Innovation is the effort to create purposeful, focused change in an enterprise’s economic or social potential” − Peter Drucker 3

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

“We innovate, when a new project, technology, business model or service actually changes society.” -IBM “Innovation is applied creativity”. “Innovation is the carrying out of new combinations”. 1.3.4. Creativity and Innovation: At this point, we have to make a distinction between creativity and innovation. It can be said that creativity results in innovation. In other words, creativity is idea phase and innovation is action phase. “The underlying element in all innovation is creativity” According to American Heritage Dictionary (1994) “Innovation is the act of introducing something new”. In this definition, the word “new” relates to creativity and the term “act of introducing’ relates to innovation. One author has noted:Innovation = Creativity x Risk Taking CREATIVE: Involving the use of the imagination or original ideas in order to create something. INNOVATIVE: Introducing new methods or ideas or products. In this unit, the focus is on innovation and technology 1.3.5. Invention and Innovation: The distinction between invention and innovation is very similar to the distinction between creativity and innovation. While invention is a creation of new product or service or process, innovation is the introduction of new product or service or process into the market place. Invention may have economic or non economic motives. Innovation has always economic motives. Invention precedes innovation or innovation follows invention. 4

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

An invention is based on a new idea that is turned into some kind of conceptual model that demonstrates the feasibility of that idea. Innovation is concerned with the development and implementation of new systems, products or services and is typically based on invention.

NOTES

1.3.6. R & D and innovation: Innovation is broader than R & D. R & D is more an organizational effort either at macro level (national) or at micro level (enterprise). Innovation can also come from customer or vendor. The above discussions make it clear that creativity, invention and R & D are all different dimensions of same type of activities, all leading to innovation. 1.3.7. Change in organisations due to innovation: The next sep to innovation is taking the new product or service or process to manufacturing and then to markets. This shift or transaction is the commercial use of innovation. The changes due to adoption of innovation embraces all the functional units of an organisation. The anticipated changes are discussed below: i) Changes due to innovation - production department: ¾ Change in Machinery ¾ Change in process ¾ New inspection norms ¾ Training Employees ¾ Change in tools ii) Changes due to innovation - Marketing Deparment: ¾ Changes in Product mix ¾ Changes in Marketing strategies ¾ Changes in sales force ¾ Changes in market segments ¾ Changes in packaging

5

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

iii) Changes due to innovation - HR Department: ¾ Changes in HR Planning ¾ Changes in productivity norms ¾ Changes in compensation packages ¾ Changes in training programs iv) Changes due to innovation – Finance department: ¾ ¾ ¾

Financial commitments to buy new machinery Disposal of old machinery Changes in working capital requirements

1.3.8. Types of Innovations: Depending upon the impact they make, innovations can be broadly classified as: i) Incremental Innovation ii) Modular Innovation iii) Architectural Innovation iv) Radical Innovation 1.3.8.1. Incremental Innovation: These are small but important improvements in a product, process or service. Such innovations are associated with enhanced customer satisfaction. Example: Intel Pentium III to Pentium IV LAN to WAN MIS to DSS These innovations are evolutionary in nature. 1.3.8.2. Modular Innovation: These innovation do not alter the overall product structure, but change can occur in the component technology. 6

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Example:

NOTES

Change in a car engine technology will not change any other features. 1.3.8.3. Architectural Innovation: These innovations take existing technologies and link new technologies in novel ways; they are built not on new technological break through but on integrating competencies, i.e. Change of product structure with no important effect on component subsystems. Example: ¾ ¾ ¾ ¾

Change of shape of a car with no change in engine. Honda’s smaller motor cycles. Disk drive technology from mainframe to PC. Canon’s smaller copiers.

1.3.8.4. Radical Innovation: These innovations are revolutionary in nature. Railroads, electricity, computers, internet can be termed as break through innovations. Railroads changed the way in which goods and people were transported. Electricity totally changed the way people lived and used equipments. Computer changed the way in which organisations worked. Internet changed the way in which people communicate, acquire knowledge and do business. “One of the single biggest breakthrough innovations to shape our world has been the printing press. It took civilization from the realm of handwritten books that took priests 20 years to write to printed paperbacks that are sold on the footpath. And one man was largely responsible for this. Johannes Guttenberg put together a printing press in 1440”. - Manu Parashar According to him, Content of information is knowledge; Process of innovation is combination of knowledge.

7

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Guttenberg’s printing process was not entirely invented from scratch. He actually combined different types of knowledge that he had seen or heard of over the years. He had seen the block printed Chinese play cards or paper money in Europe and got the idea of movable block printing from them. Guttenberg was a goldsmith, a metal worker but also had the soul of an artist. Radical innovations are also known as break through innovations and discontinuous innovations. Example: ™ ™ ™

Digital imaging (Polaroid) Quartz movements (Watches) Radial tyres

Incremental, modular, stretchers and radical innovations require fundamentally different organizational structures. To drive streams of innovations, contrasting structures must reside within a single business unit. Management challenge is to build into a single organisation, multiple internally consistent organizational structures. These will build capabilities to simultaneously explore and exploit. Exploitation of knowledge extends existing knowledge resulting in predictable, positive returns. In contrast, exploration is inherently experimental and often inconsistent with previous knowledge. 1.3.9. Disruptive and sustained technology: These two terminologies were coined by Harward Business School professor, Clayton M. Christensen. A disruptive technology is one that unexpectedly displaces an established technology. He described that in contrast to disruptive technology, sustained technology relies on incremental improvements to an already existing technology. This is the result of incremental innovation. He explains that disruptive technology lacks refinement, has often performance problems because it is new, appeals to a limited audience. Large corporations are designed to work with sustaining technology. This is the result of incremental innovation. They excel at knowing their market, staying close to the customer and having mechanism in place to develop existing technology. 8

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

1.3.10. Innovation for growth and profit:

NOTES

Companies that excel at innovation are also far more profitable than companies that do not. Boston Consulting Groups interviewed hundreds of senior executives to rank companies by their innovations. The top twenty companies always almost lead their respective industries in return on equity, total return to investors and profit margins. The link between successful innovations and profit is self evident. Innovation is one of the best ways to build market share. And, in turn, market share is directly related to return on investment. TABLE - 1 The top 20 innovation companies in the world and their growth and profitability Company

% of executives who chose this company

Profitability measures

1. Apple

14.8

201.4% total return to investors (TRI) in 2004, highest for any firm its size

2. 3M

11.8

28.8% return on shareholders’ equity (RoE), 2nd highest in its industry

3. Microsoft

8.5

23% annual TRI (1994-2004), $8.2 b profit in 2004, highest in its industry

4. General Electric

8.5

$16.6 b profit in 2004, 3rd highest in Fortum 500 (F500); 18% annual TRI, 1994-2004

5. Sony

5.9

6. Dell

5.6

__ 52% TRI 1994-2004, 2nd highest in Fortune 500 list; 47% RoE in 2004 (16th highest in Fortune 500 companies) 9

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

7. IBM

5.3

$8.4 b in profit in 2004, $147 b market value (#10 in F500), 19% TRI 1994-2004

8. Google

5.2

Sales more than doubled in 2004 to $3.2 b while profits nearly tripled

9. Procter & Gamble

4.2

$6.5 b profits in 2004, 38% RoE

10. Nokia

4.2

__

11. Virgin

4.2

__

12. Samsung

3.9

__

13. Wal-Mart

3.2

14. Toyota

3.0

__

15. EBay

2.9

80% TRI in 2004, #1 in industry, 24% net margin, #1 in industry

16. Intel

2.7

$7.5 b profit (up 33%), #1 in its industry, and 19% RoE, #2 in its industry

17. Amazon

2.7

$588 m in profits, up 1,588% in 2004 (second-biggest rise in its industry)

18. IDEO

2.2

19. Starbucks

2.1

20. BW

1.7

Leads world in revenues ($288 b), 5th highest market value ($222b )

__ 36% RoE in 2004, highest in its industry, 34% TRI in 2004, highest in its industry __

(Source Business week – 15, August 2005) 10

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Have you understood?

NOTES

1.3 (a) Define technology. 1.3 (b) What are the various attributes of technology? 1.3 (c) Define innovation 1.3 (d) Define crativity. 1.3 (e) Distinguish between creativity and innovation. 1.3 (f) Differentiate invention and innovation. 1.3 (g) Compare R & D and Innovation. 1.3 (h) What are the changes in organizations due to innovation? 1.3 (i) Describe the various types of innovation with examples. 1.3 (j) What is disruptive technology? 1.4 DISRUPTIVE INNOVATION When the best products in the market are offering technology that is far beyond what the customer needs, disruptive innovation involves introducing products that are not as good as those in use in established markets. The performance of these innovation products is not good enough to be in mainstream markets. However, these products are simple and convenient to use, and are less expensive. They are meant for customers from new, small, and initially unattractive segments. Disruptive innovation helps the customer meet his needs, but a far lower price and more conveniently. When two products offer the same technology and match the customers' requirements, higher performance ceases to be the criterion on which the customer bases his decision to buy. The prime criterion then becomes reliability. When both the products are reliable, then the basis of product choice is convenience. When convenience is no 11

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

longer a differentiating factor, price becomes the most important criterion. Here the product with high technology is almost edged out of the competition since the combination of high technology and a lower price is not sustainable in the long run (because competitors will benchmark the market leader's processes, practices and nullify the advantages they enjoy). When the larger company can no longer offer a technologically superior product at a cheap price, through the economies of scale it derives, disruptive innovation is likely to replace the product. This is how disruptive innovations enter an established market. Disruptive innovations occur in small, new markets in which large companies are not interested. Large companies prefer to take a wait-and-see approach when a new market is evolving, but this could be a mistake. A new market is often the ideal ground for disruptive innovations. And a disruptive innovator gains significant first mover advantages once it enters and establishes itself in the new market. Even seasoned market researchers and business planners find it difficult to measure new markets created by disruptive innovations. Evidence from industries such as the disk drive, motorcycle, and microprocessor markets shows that forecasts made about the evolution of new markets is unreliable. Hence, companies that rely on the analysis of market sizes and financial returns before entering new markets are often wrong-footed when faced with disruptive innovations. In new markets there is hardly any market data, and the revenues and costs cannot be reliably estimated. 1.4.1 Factors that affect Disruptive Innovation The general belief is that outcomes of innovation efforts are impossible to predict. But Clayton Christensen thinks that it is not so. According to him, even an undesirable outcome has a cause. Outcomes appear random because all the variables that affect successful innovation are not known. If these variables are understood and managed, innovation will be less risky. Christensen classifies the variables into four sets: taking root in disruption, the necessary scope to succeed, leveraging the right capabilities, and disrupting competitors, not customers. 1.4.1.1 Taking Root in Disruption Many previously successful companies that fall from their dominant position in a market are not badly managed. In fact, they are well managed. These companies listen to 12

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

their best customers. They help them meet their needs. But they also commit themselves, willingly or unwillingly, to strategies that restrain their ability to unleash disruptive innovations: they concentrate on the most profitable segments of the market, and make significant investments in them.

NOTES

By sticking to the principles of good management, leading firms create sustaining innovations that bring better products to establish markets. These market leaders are the best in their industries at adopting sustaining innovations. However, these firms face a threat from firms that create disruptive innovations. Some new companies employ strategies to create sustaining innovations. They create better products than those offered by incumbents in the market, and sell these to the customers of the incumbent firms. But Christensen’s research indicates that, this type of company is likely to succeed in only 6 out of 100 times. If a company creates a product meant for ignored customers, even when it is inferior in quality compared to the one in the market, the company is likely to be successful, 33 out of 100 times. This disparity can be understood by looking at the motivation and position of leading firms. The leading firms have more resources than entrants. When new entrants try to attract their customers, incumbent firms overwhelm them with their financial muscle or other resources. When new entrants are targeting ignored customers or customers who are unattractive for leading firms, they are relatively safe. In this segment, money power and proprietary technology do not matter. Hence it is better for new entrants to take root in disruptive innovation rather than in sustaining innovation. Example: The Mac team inside Apple Steve Jobs wanted to spearhead disruptive innovation. He understood quite well the type of environment necessary, the people needed and the work patterns necessary in a new team. He handpicked his design team. Then he posted the team to work many miles away from the other divisions in Apple. He created a post-teenage work environment for the young programmers, installing a stereo system and six-feet-high speakers in the offices where this team worked. Fresh fruit juice and mineral water were made available to the team at a cost of $1,00,000 per year. A Bossendorfer grand piano worth $50,000 was kept in the lobby of the office. Expensive European cars such as BMWs and Saabs were at the service of the team members. 13

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Jobs took utmost care to protect this team from the interference of other managers in the organisation. He used his status as a founder of Apple to ensure that all the funds and resources the team wanted, were at its disposal. Result: the magic called Macintosh. Creating a Spin-off If the values of the mainstream organisation are blocking resources meant for an innovation project, a spin-off may be necessary to meet the challenges of disruptive innovation. Often, large organizations do not allot critical financial and human resources meant for mainstream business to innovative projects. Assigning such resources to mainstream business is more important to them than trying to create a strong position in small and emerging markets. The cost-structure of these organizations is tuned to high-end markets and does not work for low-end markets. Hence, a new venture is more of a compulsion than a choice Example: A Spin-off at HP Hewlett-Packard’s printer division based at Boise, Idaho, is a very successful division. It has high profit margins and a reputation for superior product quality. This division also housed an ink-jet project that was promising a disruptive innovation. But the managers at the division were unwilling to divert the resources necessary to the ink-jet project from the mainstream HP printer business line. The process involved in developing the two types of printers was the same. Bu the managerial values necessary were different. To be successful in the ink-jet market, managers would have to adjust to lower gross margins, a small market, and lower performance standards that were characteristic of the ink-jet market. They were unwilling to adjust or change their values and as a result the project languished. It succeeded only when it was transferred to a separate division in Vancouver, British Columbia. When the project is relocated, there is no longer competition between the project developing a disruptive innovation, and those that are supporting the mainstream business 14

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Creating and nurturing such a new project is often difficult for the top management of a running concern. They perceive the development of the disruptive new operation as bringing about the death of old operations that are still doing well and are profitable. They hate doing this. The managers at the top have to learn to be comfortable with two businesses, in cases like this. The CEO of the organization has to take particular care to allot the necessary resources, and ensure the freedom necessary to create new processes and values. Then only can the spin-off meet its intended purpose and address new challenge.

NOTES

Have you understood? 1.4 (a) What is disruptive innovation? 1.4 (b) What are the factors that affect innovation? 1.4 (c) Give an example and explain disruptive innovation? 1.5 DESIGN AND INNOVATION Innovation is one of today’s hottest business topics. Globalisation, maturing markets, deregulation, new technology, ecological constraints and more knowledgeable customers can put companies in unfavorable situations almost overnight. Continuous innovation is the key to sustaining competitive advantage in today’s fact moving and global marketplace. So, how does design fit into the innovation process? Design is everywhere – wherever you are, look around –everything that you see has been designed: a building, telephone, printer, light fitting, table or flower vase. The only thing that has not been put through some sort of design or innovation process is nature. Today, most successful companies are using designs as a way to help them differentiate their products, services and customer experiences. The role of design in the innovation process is as follows: •

Design research techniques can be used to help identify new product or market opportunities.

•

The design process is used to both generate ideas and to implement solutions for useful, usable and delightful product, services and environments. 15

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

•

Design techniques can be used to communicate innovation and new idea through prototyping and visualization.

Having good ideas is easy but actually getting them to market is a different matter. The following two case studies (Dyson and Linear Drives) provide examples of innovative companies that have used techniques common to designers and the design process, to help them achieve their business success. Risk a little, gain a lot Innovation by definition is about doing something new, and doing anything new implies a level of risk. However, in today’s dynamic economic, not taking risk is the biggest risk of all. Companies must innovate – but they must carefully manage their risk in order to avoid costly mistakes. When Dyson started working on his new product, he was told that there was not a market for it. Thus it became even more important for him to mitigate the risk. One way that Dyson did this was though prototyping and visualization – throughout every stage of the design process. Dyson and his team prototyped early and often – they tested and evaluated their ideas – continually learning, iterating and collecting feedback in order to inform their next move. The idea for Dyson’s DC03 product was actually generated by feedback on earlier product models. As design teams, we need to test ideas early in order to reduce risk. Prototyping and visualization techniques are extremely valuable as ways to minimise risk when developing new product or service ideas. Prototyping serves as a way to bring ideas to life, to keep them alive, make them tangible, and above all make them communicable. It can enable ideas to be taken rapidly to a point where they can be reviewed and evaluated quickly by a variety of audiences – including management teams and end users. Prototyping must start early, and there needs to be many prototypes made - and thrown away – as part of the development process. Dyson built his first models using basic materials such as cardboard and polystyrene – materials that are not too precious and require little financial investment.

16

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Visualisation techniques, including computer-based renderings, physical models, storyboard illustrations or video are used to portray life with future products or services before they even exist. Linear Drives Limited use video footage to help communicate their products to a broad audience at exhibition and trade shows.

NOTES

Prototyping and visualisation go hand in hand with innovation. They are ways of learning and improving the quality of the ideas – and thus reducing risk. Interdisciplinary teamwork and collaboration Design consultants must generate compelling and inspiring ideas - they must also solve problems. The business of both generating inspiring ideas and solving problems is not discipline specific but rather an experimental and collaborative process, and thus is it important to work in small interdisciplinary teams. At IDEO our interdisciplinary teams include experts with a variety of backgrounds; industrial design, interaction design, prototyping, human factors and engineering, as well as people with MBAs and business backgrounds. Teamwork is central to the working practices at Dyson. It is through cross functional teamwork that people with different skills and expertise can contribute their diverse perspectives, views and experiences to challenge the problem at hand. Innovation leaps across such different points of view. At Dyson, teams are flexible – they change in both size and mix of people as a response to each stage of the development process. Team members rotate from project to project in order to cross-fertilise ideas and share know-how. The design and innovation process is strengthened through the power of such collaboration and synergies. Another core skill for innovation is the ability to manage external collaborations and to form working partnerships or strategic alliances with other companies whose skills are complementary to your own. Linear Drives Limited have demonstrated this by creating a network of distributors around the world – such collaboration is helping them to establish themselves in the market as a global player. It is worth mentioning that this approach also reduces risk – forming such a network is a useful way of testing or ‘prototyping’ the market without having to incur significant costs.

17

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Connecting with customers and key stakeholders Finding the right place to innovate can be challenging. As industries mature, it is no longer possible to differentiate a product or service on the basis of technology or even on price. Some companies use market research to drive their next new product or service development. Dyson and his team did not rely on market research when deciding to pursue their new product idea. In the early days, when the idea was still embryonic, they were told that there was no market for their product. James Dyson and his team decided to pursue their idea anyway, believing that it would address an untapped market need. A common problem with trying to use traditional quantitative market research, to create radically different products, is that the customers’ ability to guide the development of new products and services is limited by their experience and their ability to imagine and describe possible innovations In other words, customers have difficulty articulating unidentified, or latent needs. To innovate from the perspective of the user or customer requires a deep understanding of the user’s explicit and, more importantly, their latent needs. This understanding of customers latent needs can be gained through the use of specialists design research methods – methods that look at the behaviours of real users in real environments. At IDEO, design teams carry out observations of real people in real life situations to find out what makes them tick and whether they have latent needs that are not being met through current products or services. The advantage in having the design teams collect these insights first hand is that they have a high knowledge of various technologies and are skilled at interpreting the insights and translating them into design concepts. Now that Dyson’s product is on the market, the company continues to improve their products by using feedback from a range of people – including end users as well as other important stakeholders such as repair experts and retailers. This is also seen in the Linear Drives case – they work closely with their distributors to understand and respond to feedback from international customers. Indeed, it was connecting with these customers that helped influence the company’s design and raise it to international industry standard. 18

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

To innovate and to get a new idea to market requires risk management, teamwork and collaboration, lots and lots of prototyping, refinement and iteration. Innovation requires connecting with your customers and end users but also other key stake holders – like repair experts and retailers.

NOTES

Both Dyson and Linear Drivers Limited demonstrate how two very different companies have proven that these activities are key to achieving innovation. It is not easy, but in today’s business climate, companies have little choice. 1.5.1 Forms of Technology Change It is useful to distinguish between two types of the technological change: process and product. Process technology pertains to the techniques of producing and marketing goods and services. Process technology also includes work methods, equipments, distribution and logistics. Thus, it is embedded in a firm’s value chain. For example, Henry Ford’s idea of assembly line manufacturing and the Japanese management concept of quality circles are examples of process technologies in the automobile industry. Process technology changes are designed to produce and market goods and services faster, more efficiently, or in greater volume. In a university, technological changes represent changes in techniques for teaching courses and, in recent years, have ranged from the traditional lecture format to multimedia presentations and self-based learning methods. As a further example, many supermarket chains have adopted laser scanning check out systems, which represent a change in the delivery process of a grocery store. Similarly, many firms trading in stocks have introduced artificial intelligence routines based on neural networks; this represents a change in the process of selecting stocks to buy and sell. Product technology, on the other hand, refers to the elements of technology embodied in the goods and services of a firm. For example, gasoline and electric cars represent different product technologies in the automobile industry. Changes in product technology could range from minor refinements (e.g., different styles of an automobile) to entirely new products (e.g., Wankel automobile engines). Changes in product technology add new features or provide superior substitutes for existing products.

19

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Thus, process technology refers to the way an organization conducts its business, whereas product technology refers to the output of an organization. It should be noted, however, that the distinction between process and product technology depends on the nature of the firm. What is often a product technology for one firm may very well be a process technology for another firm. Thus, laser scanning checkout systems represent a process change for the many supermarkets that have adopted these systems; but, they also represent product technology changes for the manufacturers that produce them. The distinction between product and process technology is important for three reasons: 1.

Relative to changes in products, process technology changes are much less visible in the marketplace. Such changes are much more difficult to detect either by a firm’s customers or by its competitors: This means that a firm can better conceal some process improvements from the competitors.

2.

Both process and product technology changes have ramifications for the economic performance of the firm. In many cases, process technology changes make it feasible for the firm to reduce its cost or cycle time and improve the quality of its products. Japanese firms have often been credited with continual improvements in process technology; this has led to lower costs and higher product quality.

3.

Process and product technologies have different consequences for a firm. Product technology helps firms compete for customer; changes in product technology help firms to radically redefine their product/market scope. Process technology changes modify the way a firm conducts its business. Thus, changes in process technology may brings about changes in the organization, including its human resources practices, logistics, and marketing functions.

So, both process and product technologies are important for the ultimate success of a firm. Indeed, in addition to developing technological capabilities, the deployment of capabilities in products, and processes is central to the value creation by firms.

20

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

1.5.2 Product innovation and Process innovation:

NOTES

In immature markets, innovations tend to be learning by doing. You start from scratch with a vision and take it from there. The focus is on product innovation that is creating your product or service. As the market matures, the focus moves to process innovation. Improving the product or service and the process around it. Usually the first version of the product is not perfect as you learn by doing in immature markets. The example cited is Windows 3.0. It was far from perfect. Following versions provided its uses with improvements. The first Palm Pilot was really basic but overtime the company released improved versions. Geoff Moore, the silicon valley guru, in his book “Crossing the Chasm” explains the transition from immature markets to mature markets in the high tech area. His findings is that the hardest part with growing a new product is changing a customer base from the nerds who want to have a newest cool product towards the average member of the public who simply buys the product because it makes their lives easier. A lot of products fails to succeeds because of missing this transition, which Moore, calls as “the Chasm”. Examples of companies that have successfully crossed the chasm are Microsoft, Nokia and Intel. The variables of innovations in matured markets is known but the variables in immature markets are unknown. Alexander Loudon says that, “Innovation is a linear process in mature markets, but it is not linear but interative and – learning by doing – in immature markets”. Many major players were made obsolete by losing sight of the needs for innovation. Although they remained market leader for a product, the product was replaced by another one making the leadership worthless. Again Alexander Loudon gives the following example. In the late 1800, the Northeast of the U.S. had the successful ice industries. Ice blocks were cut from frozen lakes and ponds and sold around the world. Ships were used to transport the ice. Though, generally, half of the shipment melted during the transport, the other half was enough to make a profit. The companies that innovated mechanical ice makers put these ice harvesters out of business. Because of that innovation cutting and shipping of ice was no longer necessary since it was possible to make ice anywhere and at anytime. 21

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

While this ice making business started to boom, another radical innovations came into place - that of the refrigerator. People now could make ice and store it at home. Now in turn, the ice- makers were put out of business. Although places like Bell labs, IBM and GE become famous for their basic research, science alone did not make them great. It was their ability to bring together a wealth of talents and view points – scientist with engineers, chemist with mathematician, deep thinkers with practical minded. From that volatile combinations – rather than from basic research itself – leaps this spark of discovery. 1.5.3 Punctuated Equilibrium Tushman and Anderson argue,that technologies evolve through periods of incremental change punctuated by breakthroughs that either enhance or destroys competencies of existing firms in an industry. They support this theory of punctuated equilibrium with evidence from the minicomputer, cement, and airline industries and find, among other things that: 1.

Newcomers initiate competence destroying technological changes, whereas existing firms use competence enhancing technology.

2.

Organisations that initiate major technological innovations have higher growth rates than other firms in that product class.

3.

Until a dominant design emerges in the competition, there is considerable competitive turmoil, later reduced to relative calm when the current standard emerges in an industry and shake-out abates.

First, there is the large performance impact of a major, radical technology breakthrough, for example the Boeing 247 and then the DC-2 and the DC-3, This period is followed for a long time by only minor improvements in performance from incremental innovations (e.g., the DC-6 was similar to the DC-3, only larger). Then a breakthrough technology comes along, like the commercial jet engine, and there is another large spike in performance; here it is the Boeing 707-120.

22

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Refinement and application of the model appears later and finds that comparisons between veterans and newcomers depend upon whether we are discussing discontinuities (radical breakthroughs in technology) or dominant designs of actual products. Both are obviously important.

NOTES

Newcomers only have the advantage for new products that undermine the competence of veterans. In all other cases, veterans have the edge, according to empirical findings in these three industries. It remains to be seen if these results hold up in other settings, but the model does make clear predictions for these other contexts. The results are also quite consistent with the notion introduced earlier that managing for incremental innovation is quiet different than managing for radical innovation. Therefore, it is not surprising that successful management styles for start-up firms, especially in high technology industries, are usually quite different than successful management styles in mature firms and industries. Have you understood? 1.5 (a) What is the role of design in innovation? 1.5 (b) How design teams can reduce risk? 1.5 (c) Explain cross functional team work? 1.5 (d) Distinguish between process technology and product technology. 1.5 (e) Differentiate product innovation from process innovation. 1.5 (f) What is meant by punctuated equilibrium? 1.6 TECHNOLOGY CHANGES IN SOME INDUSTRIES Genetic Engineering: The process of defining and changing specific gene traits. Two current applications are recombinant DNA, the mapping, restructuring, and remodeling of gene codes, and anti-sense compounds that have the power to block the expression of specific genes.

23

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Advanced Biochemistry: The use of advance biological techniques. Although significant commercial applications do not yet exist, we can expect such things as new disease diagnostic systems and highly effective “superdrugs” to evolve from these techniques. Digital Electronics: Digital devices translate signals into a form understandable by computers. In digital form, information of all types such as data, text, sound, and images can be moved from one device to another. Significant commercial applications that are currently emerging include digital imaging, interactive television, cellular telephones and personal communication networks. Optical Data Storage: Using lasers to read information stored in digital form. Current commercial application include advanced compact disks that contain large amounts of information. Advanced Video Displays: Current commercial applications include advanced flat-panel displays as used in most laptop computers. High-definition television (HDTV), when commercialized, will also be a product emerging from this core technology. Advanced Computers: Current examples emerging in the marketplace include electronic notepads, multimedia computers, parallel processing computers, and multi-sensory robotics. Distributed Computing: These devices permit the sharing of information across many individuals. Current examples include desktop videoconferencing and computer-integrated manufacturing.

24

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Artificial Intelligence:

NOTES

This core technology represents computers that are able to learn, adapt, recognize, classify, reason, and correct. Commercial applications that have recently emerged include advanced expert systems, advanced simulations, object-oriented programming, and neutral network. Lasers: These devices use highly coherent, high-intensity light. The most significant current commercial applications is in advanced compact disks. We might also expect to see commercial applications of holographs in the near future. Fiber Optics: This core technology uses light to transmit digital information. Though fiber-optic telecommunications systems are currently used to transmit telephone data, in the future these systems can also be expected to carry television, radio, and computer data. Microwaves: Significant current applications include transmitting things as conduct electricity, dissolve in sunlight, carry light waves, and function as moving parts in automobiles. As this core technology advances, many new commercial applications should emerge Advanced Satellites: Satellites can be expected to play a continuing role in communications and in mapping and surveying the earth. Some expected future uses include low earth orbit satellites that would allow worldwide communication between digital cellular telephones and direct broadcast satellites designed to carry strong signals of higher frequency that will be needed for super-VHS-quality pictures and HDTV signals. Photovoltaic Cells: These devices convert sunlight to electricity. Current commercial applications include pocket calculators, refrigerators, and portable communication devices. As technological advances make these cells more efficient, many future uses can be anticipated. 25

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Micromechanics: This core technology involves designing and building tiny mechanisms such as values, sensors, and surgical tools. In the future, these devices may be etched on silicon wafers and used for such applications as giving robots a sense of touch. New Polymers: Polymers are complex chemical structures that can be adapted to many uses. Chemists have currently produced over 60,000 different polymers that can do such things as conduct electricity, dissolve in sunlight, carry light waves, and function as moving parts in automobiles. As this core technology advances, many new commercial applications should emerge. High-Tech Ceramics: Ceramics are hard, chemically inert substances that resist corrosion, wear, and high temperatures. Current commercial uses of this technology include engine components, ball bearings, heat shields and artificial bone implants. Again, future technological advances hold the potential to span many new commercial applications. Fiber-Reinforced Composites: Composites are materials that have been reinforced with synthetic fibers. These materials are lightweight and often stronger than steel. Current commercial applications include automobile and air-plane parts. Superconductors: These are materials that carry electricity without any loss of energy. Currently, these materials must be operated at well below room temperature: the technological push is to create superconducting materials that can operate at higher temperatures. As this technology advances, it will have a great impact on all electrical devices.

26

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Thin-film Deposition:

NOTES

This core technology allows specific materials as thin as one atom to be deposited on almost any surface. One commercial application that is currently emerging is diamond thin- film coating, a process that deposits a diamond film only several molecules thick on surfaces such as razor blades and knives. Molecular designing: This core technology represents the process of designing new materials at the molecular level. Using lasers, atoms and molecules can be laid down in a precise manner on surfaces to create the desired material’s property. • • • • • •

Nanotechnology Bioinformatics Convergence of Digital Technology Cryptography Quantum Computing XML

These technologies alone and in combination with one another may generate many new commercially viable technologies in the future. Nanotechnology Nanotechnology is an everybody’s hit parade of technologies of the future, and it would seem a sure bet that this is the real thing. Nanotechnology allows configuration and manufacturing at the molecular level by arranging atoms. For example, rearrange the atoms of a piece of coal and you have a diamond. Applications of nanotechnology are almost endless so just a few are given here to illustrate. For example, we have reached the physical limits of silicon technology for chip making in computers, but nanotechnology promises to surpass those limits. What if you could “weave” carbon atoms into working transistors? IBM is already doing this in the lab.

27

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Molecular imaging and treatment are also applications of nanotechnology, so the medical field will fell a big impact of this technology in the next five to 10 years. For example, sophisticated new radiation treatment systems provide targeted radiation therapy that matches the tumor shape, but protects surrounding tissue. The result: better success rates, quicker pain relief, and fewer complications. There is no mystery about the central position that nanotechnology will play in the next decades of R&D and innovation; the question of what commercial plays will result from this applied research is somewhat confusing. One attempt to sort this out – the “harvesting” of nanotechnology research – was recently published by Bean et al. What these experts are predicting is that companies will use at lest six different product approaches to capitalize on nano, based on a small survey(17 companies) of members of the Industrial Research Institute. Few companies as yet have a well-articulated strategy for nanotechnology, and most are in the monitoring mode, so scanning the data explosion becomes the first challenge, and assimilating and using this information is the second big hurdle. Add the global picture into the equation (30 nations have government-funded nano programs) and we can see how this becomes one of the challenges of the decades to come. Bioinformatics Bioinformatics deals with the application of information technology to biological, pharmaceutical, and medical problems; the market is expected to be nearly $40 billion within three years. For example, IBM’s life science business unit provides the IT infrastructure for biotechnology. There are opportunities to supply hosting, data storage, knowledge management, application implementation, and consulting services to this rapidly growing market. Examples include genome sequencing of amino acids, using micro fluidic chips – a laboratory on a chip. The cost of these chips will drop like the cost of electronic chips, making chemical analysis cleaner, faster, and much cheaper. Convergence of Digital Technology It is fairly easy for most consumers to see how the convergence of digital technology has immediate application in daily life. A cell phone that serves as a personal assistant, computer, Internet connection, and so on, is digital technology already in use, to a limited extent. In the home, the merging of television and computers is tat hand. Telephone on the computer using voice over-Internet protocol (VoIP) is already here. VoIP is currently a 28

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

tiny part of the market, but the advantages of the Internet – inexpensive data transmission, standardized protocols, extensibility, and ubiquitous connection – ensure that VoIP will grow dramatically. Digital sensors and photograph on your cell pone are all the beginning of a world of integrated technology based on digital format convergence?

NOTES

A near perfect example of the implications of all this technology convergence is the meteoric rise of blogs and blogging. According to one source: A blog is a personal diary. A daily pulpit. A collaborative space. A political soapbox. A breaking-news outlet. A collection of links. Your own private thoughts. Memos to the world. Your blog is whatever you want it to be. In simple terms, a blog is a Web site, where you write stuff on an ongoing basis. New stuff shows up at the top, so your visitors can read what’s new. Then they comment on it or link to it or e-mail you. Or not. Since blogs were first launched five years ago, they have grown exponentially. Business Week, at this writing, estimates that there are currently 9 million blogs in cyberspace, with 40,000 new ones appearing every day. According to survey data, 27 percent of Internet users read them every day, so corporations have been quick to take them into account in all that they plan and do. Anyone can publish a blog, and say almost anything; they became quite important in the last U.S. presidential election. Soon, blogs will be part of the mainstream as well as pushing the state-of-the-art of morphing the Internet. Cryptography Cryptography is the art and science of keeping information secure. It is a crucial element of modern digital networks and electronic commerce. Modern cryptography uses advanced mathematics. Mathematical algorithms for encryption are public, but the keys are kept secret. Public-key encryption is a solution to the key distribution problem. Each participant has a public key and a secret private key. A PKI, or public key infrastructure, will be needed to support widespread use of encryption in electronic commerce applications. Examples include one-time pads, which use long random keys, which are critical for national security, but simple systems of everyday use are more likely to evolve. Digital watermarks are a combination of encryption and steganography, and are intended to provide protection for digital intellectual property such as pictures and music.

29

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Quantum Computing What is the next big thing in computers? Some think it is quantum computing, named after the theory of quantum machines, which says that electrons orbiting the nucleus of an atom are never really there – they behave according to probability theory. So instead of bits of info5rmation that are on or off, zero or one, qubits range one to zero according to probabilities. A quantum computer could link qubits together, which means if one is changed, all would change, according to probabilities that allow large problems to be solved quickly. How quickly? According to one estimate, and in one demonstration, a quantum computer can decrypt a coded message that would take a regular computer billions of centuries to solve in a few seconds. But the problem is linking more than a few qubits together, which are made of phosphorous atoms placed by a machine as big as a room to achieve the needed precision, and them communicating with them. Sincere fiction, you say? Perhaps today, but so was the computer when all we had were vacuum tubes. XML Users want to share data between their applications and build integrated enterprise information systems. Proprietary data formats and standards make this expensive and difficult. XML, the extensible Markup Language, originally was designed to simplify Web publishing, but has also become the de-facto standard for data exchange. XML also has become a fundamental technology for Web services, the next big trend in application development. Applications include the diffusion of XBRL, in the accounting profession in order to standardize data and entry formats, and collaborative engineering systems allowing anywhere-anytime design by virtual teams. Video and computer games are a $10 billion a year business and growing. Online games are a large and growing source of network traffic and some require extensive hosting installations. Game development is becoming a recognized academic subject. Major universities offer certificates or degrees in game development. There are academic journals and workshops on games. Games technology is increasingly used in training simulations and in education. Animated movies made by using games eventually could threaten the established movie30

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

making business. Game-like features are appearing in business applications. Future versions of Microsoft Windows will incorporate 3D objects, animation, video and lighting effects.

NOTES

Have you understood? 1.6 (a) List out some of the recent technological changes in industries. 1.6 (b) Make projections on some of the technological changes in the near future in information technology? INDIAN INNVOATIONS RATAN TATA’S ACE Few products designed and made in India have been awaited as eagerly and with as much apprehension in some quarters of the auto industry and outside as the new, small car from Tata Motors that was unveiled on January 10,2008. A car for 1 lakh of rupees was the dream of one man , Tata Motor’s chairman Ratan Tata, who saw the peril in whole families riding on a two wheeler and the need to offer them a car that would be much safer for travel, yet affordable. It was as much a dream for many of the seven million Indians who buy themselves a two wheeler each year only because they cannot afford to pay a couple of lakh of rupees for the cheapest four wheeler in the market. Perhaps it was the slogan coined by management guru C.K. Prahalad about finding fortune at the bottom of the pyramid that pumped up the businessman and entrepreneur in Mr.Tata and spawned similar low cost products ,notably Tata Ace and Ginger Hotels. Between the dream and reality was the challenge of putting on sale a car for a price no manufacturer in India or abroad was willing to countenance. So the visionary Mr.Tata and his flagship company , Tata Motors ,deserve great credit for accomplishing what most people considered as utopian, and reinforcing the point global automobile manufacturers are now acknowledging: India is a home for “frugal engineering”. Inside the little Nano are some 20 INNOVATIONS , for which patent applications have been made, and the genius of many engineers at Tata Motors and its suppliers. (Adopted from The Hindu ,January 11,2008.)

31

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

TECHNOLOGY DRIVES INDIAN BANKING SYSTEM Grappling with issues of change management, innovation for new delivery channels and broadening the range of services portfolio-both internal and external, the banking sector in the country, like its peers across the world, is taking to business transformations solutions. With the Indian banking sector poised to open up further by welcoming global competition, consolidation has gained momentum. This means that the large banks , with disparate systems, cannot any longer assume that the current rate of growth and returns will continue given the nimbleness of some of the new players and the likely competitive environment in the financial service business. A common connecting link for the banking sector globally is continued consolidation and sustained pressure on profitability. It is here that early technology adoption is making a difference. They would require non-traditional innovation that stands out, according to Mr.Sandip Patel, Managing Partner for IBM Global Services in India and South Asia. The areas of general focus have been building loyalty programmes while enhancing branch research and strengthening customer relationship management and significantly ,product innovation that is a differentiator. This therefore requires reengineering the basic technology infrastructure. While most of the technology infrastructure developed in Indian banks is relatively new when compared to some of the large integrated banks and financial services players in the U.S , some of the banks who had taken to core banking solutions about 5-6 years are now faced with a situation where their technology infrastructure is actually getting obsolete or becoming another legacy system. These banks would require either a new technology platform or a massive updation of their systems .This is where technology would be a differentiator while bringing about greater flexibility and efficiency. (Adopted from the Business Line ,9th J ANUARY ,2008)

32

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

NOTES

UNIT II

VENTURING TECHNOLOGY 2.1 INTRODUCTION Technology planning is important for many reasons. Globally, companies are facing many competitive problems. Technology roadmapping, a form of technology planning, can help deal with this increasingly competitive environment. While it has been used by some companies and industries, the focus has always been on the technology roadmap as a product, not on the process. This unit focuses on formalizing the process so that it can be more broadly and easily used. Once identified, technology enhancements or new technologies may be developed internally or collaboratively with external partners. For either approach, technology roadmapping, is an effective tool for technology Planning and coordination, which fits within a broader set of planning activities. The main benefit of technology roadmapping is that it provides information to make better technology investment decisions by identifying critical technologies and technology gaps and identifying ways to leverage R&D investments. It can also be used as a marketing tool. Technology roadmapping is critical when the technology investment decision is not straight forward. This occurs when it is not clear which alternative to pursue, how quickly the technology is needed, or when there is a need to coordinate the development of multiple technologies. The technology roadmapping process consists of three phases — preliminary activity, development of the technology roadmap, and follow-up activity. Preliminary activity includes: (1)

Satisfy essential conditions.

(2)

Provide leadership/sponsorship

(3)

Define the scope and boundaries for the technology roadmap. 33

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Development of the technology roadmap includes: (1)

Identify the “product” that will be the focus of the roadmap.

(2)

Identify the critical system requirements and their targets.

(3) . (4)

Specify the major technology areas Specify the technology drivers and their targets.

(5)

Identify technology alternatives and their time lines.

(6)

Recommend the technology alternatives that should be pursued.

(7)

Create the technology roadmap report.

Follow-up activity includes: (1)

Critique and validate the roadmap.

(2)

Develop an implementation plan.

(3)

Review and update.

2.2 LEARNING OBJECTIVES: (1)

To understand technology Roadmapping

(2)

To learn about the internal technology venturing

(3)

To learn about the external technology venturing

(4)

To correlate technology pioneering and competitive technology.

(5)

To comprehend the phases of technology transition.

34

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

2.3 USES AND BENEFITS OF TECHNOLOGY ROADMAPPING

NOTES

At both the individual corporate and industry levels, technology roadmapping has several potential uses and resulting benefits. Three major uses are: 1)

First, technology roadmapping can help develop a consensus about a set of needs and the technologies required to satisfy those needs.

2)

Second, it provides a mechanism to help experts forecast technology developments in targeted areas.

3)

Third, it can provide a framework to help plan and coordinate technology developments both within a company or an entire industry.

The main benefit of technology roadmapping is that it provides information to help make better technology investment decisions. It does this by: • •

First, identifying critical technologies or technology gaps that must be filled to meet product performance targets. Second, identifying ways to leverage R&D investments through coordinating research activities either within a single company or among alliance members.

An additional benefit is that as a marketing tool, a technology roadmap can show that a company really understands customer needs and has access to or is developing (either internally or through alliances) the technologies to meet their needs. Industry roadmaps may identify technology requirements that a company can support. Some companies do technology roadmapping internally as one aspect of their technology planning (corporate technology roadmapping). However, at the industry level, technology roadmapping involves multiple companies, either as a consortium or an entire industry (industry technology roadmapping). By focusing on common needs, companies can more effectively address critical research and collaboratively develop the common technologies. For example, the SIA (Semiconductor Industry Association) Semiconductor Technology Roadmap addressed the requirements for semiconductor manufacturing and 35

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

the NEMI (National Electronics Manufacturing Initiative) Technology Roadmap addressed the common needs for information products to connect to information networks such as NII (National Information Infrastructure). This level of technology roadmap allows industry to collaboratively develop the key underlying technologies, rather than redundantly funding the same research and underfunding or missing other important technologies. This can result in significant benefits because a certain technology may be too expensive for a single company to support or take too long to develop, given the resources that can be justified. However, combining the resources across companies may make developing the technology possible and consequently the industry more competitive. 2.3.1 Technology Roadmapping Technology roadmapping is a needs-driven technology planning process to help identify, select, and develop technology alternatives to satisfy a set of product needs. It brings together a team of experts to develop a framework for organizing and presenting the critical technology-planning information to make the appropriate technology investment decisions and to leverage those investments. Given a set of needs, the technology roadmapping process provides a way to develop, organize, and present information about the critical system requirements and performance targets that must be satisfied by certain time frames. It also identifies technologies that need to be developed to meet those targets. Finally, it provides the information needed to make trade-offs among different technology alternatives. Roadmapping can be done at either of two levels — industry or corporate. These levels require different commitments in terms of time, cost, level of effort, and complexity. However, for both levels the resulting roadmaps have the same structure — needs, critical system requirements and targets, technology areas, technology drivers and targets, technology alternatives, recommended alternatives or paths, and a roadmap report — although with different levels of detail. Technology roadmapping within a national laboratory is essentially corporate-level roadmapping, although a national laboratory may participate in an industry roadmapping process. 2.3.2 Technology Roadmap A technology roadmap is the document that is generated by the technology roadmapping process. It identifies (for a set of product needs) the critical system 36

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

requirements, the product and process performance targets, and the technology alternatives and milestones for meeting those targets. In effect, a technology roadmap identifies alternate technology “roads” for meeting certain performance objectives. A single path may be selected and a plan developed. If there is high uncertainty or risk, then multiple paths may be selected and pursued concurrently. The roadmap identifies precise objectives and helps focus resources on the critical technologies that are needed to meet those objectives. This focusing is important because it allows increasingly limited R&D investments to be used more effectively.

NOTES

2.3.3 Types of Technology Roadmaps There are different types of technology roadmaps. The product technology roadmap is driven by product/process needs. In our context, the product technology roadmap is referred to simply as a technology roadmap. Another type of technology roadmap, which is used by some corporations, is an emerging technology roadmap. An emerging technology roadmap differs from a product technology roadmap in two ways: •

First, the emerging technology roadmap lacks the broader product context provided by the product technology roadmap.

•

Second, the emerging technology roadmap focuses on (1) forecasting the development and commercialization of a new or emerging technology, (2) the competitive position of a company with respect to that technology, and (3) how the emerging technology and the company’s competitive position will develop.

The emerging technology roadmap focuses on a single technology, describes the way it is expected to develop, and may include project plans to support that development. The result of an emerging technology roadmap may be a decision to allocate additional resources to develop the technology and improve your competitive position. The implication is that as the technology develops, uses will be found for it. While this emerging technology roadmap is valuable and has its uses (especially within the context of a product technology roadmap), it is not the type of technology roadmap and is described here. Still another type of roadmap is the one described by the DOE Environmental Restoration and Waste Management in Revised Roadmap Methodology Document (May 37

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

1993). This is an example of an issue-oriented roadmap, rather than a technology roadmap, although the availability of a required technology may be considered an issue to be addressed. This roadmapping approach, customized for DOE EM sites, is intended to identify issues and their consequences for project planning and budgeting. This roadmapping process, which is allocated four months in the annual planning and budgeting cycle, feeds the strategic plan, the five year plan, budgeting, and detailed human resource planning. The uses for this roadmapping approach: • Communicate planning assumptions and information from the sites to DOE/HQ. • Support the budgeting process. • Tie issues to low-level project planning and budgeting documents. This roadmapping consists of three phases: 1.

Assessment (i.e., establish assumption, establish regulatory requirements, establish committed milestones, depict logics and planned activities).

2.

Analysis (i.e., identify issues, perform root-cause analysis, and translate issues to activities).

3.

Resolution (develop issue-resolution documents and integrate activities with activity data sheets).

Although there are some similarities, this roadmapping approach is fundamentally different (in purpose, scope, and steps) from the technology roadmapping we are considering. Have you understood? 2.3 (a) What is technology roadmapping? 2.3 (b) What are the benefits of technology roadmapping? 2.3 (c) What are the different types of technology roadmaps? 38

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

2.4

PLANNING AND BUSINESS DEVELOPMENT CONTEXT FOR TECHNOLOGY ROADMAPPING

NOTES

Technology roadmapping is an iterative process that fits within the broader corporate strategic planning, technology planning, and business development context. However, there are many successful variations of strategic planning, technology planning, and business development processes. Planning activities must link three critical elements — customer/market needs, products/services, and technologies. The corporate vision drives the strategic planning effort, which generates high-level business goals and directions. Given a corporate vision, strategic planning involves decisions that identify and link at a high level the customer/ market needs a company wants to address and the products and services to satisfy those needs. Given this strategic plan, technology planning involves identifying, selecting, and investing in the technologies to support these product and service requirements. Business development involves planning for and implementing certain aspects of the strategic plan, specifically those involving the development of new products and services and/or new lines of business. Technology roadmapping is a type of technology planning. However, technology roadmapping is more appropriate in some cases than in others and a decision needs to be made when to use it. Technology roadmapping is critical when the technology investment decision is not straight forward. This occurs when it is not clear which alternative to pursue (e.g., enhance an existing technology or replace it with a new technology), how quickly the technology is needed, or when there is a need to coordinate the development of multiple technologies. In some cases, a decision is made that the technologies that need to be developed are too expensive or risky for a single corporation to develop independently. If this insight occurs in several companies, there may be a movement toward industry technology roadmapping. In summary, regardless of the level of formality, participation, and resources, there must be a linkage between the technology investment decisions and the business requirements. Technology roadmapping is an effective tool for providing this linkage.

39

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

2.4.1 Knowledge and Skills Required for Technology Roadmapping Both corporate and industry technology roadmapping require a certain set of knowledge and skills. Some of the participants or consultants must know the technology roadmapping process. This includes how to identify needs and technology drivers, as well as how to identify, analyze, and select technology alternatives and paths. Some participants must also have some content knowledge of the area being roadmapped. Different participants may have the content and the technology roadmapping process skills. However, while these skills are important, they are not nearly enough. Equally important are the interpersonal and group process skills. Therefore, for a corporate- or industry-level roadmapping project, you need a roadmapping consultant and/or facilitator who has both types of skills (roadmapping and interpersonal) or a well-integrated team that includes both types of skills. The roadmapping consultant does not need to be an expert, or even particularly knowledgeable, in the content of the area being roadmapped. In fact, such expertise can be a detriment if the consultant/facilitator becomes too involved in the content of the roadmap. It is not the consultant’s roadmap. It should be owned by the group of experts developing the roadmap, so their involvement and commitment is critical. 2.4.2 Technology Roadmapping Process This section provides an overview of the three phases in the technology roadmapping process. The first phase involves preliminary activity without which the roadmapping probably should not be done. The second phase is the development of the technology roadmap. The third phase is the follow-up and use of the technology roadmap.

40

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

NOTES

Phase I. Preliminary activity 1. Satisfy essential conditions. 2. Provide leadership/sponsorship. 3. Define the scope and boundaries for the technology roadmap. Phase II. Development of the Technology Roadmap 1. Identify the “product” that will be the focus of the roadmap. 2. Identify the critical system requirements and their targets. 3. Specify the major technology areas. 4. Specify the technology drivers and their targets. 5. Identify technology alternatives and their time lines. 6. Recommend the technology alternatives that should be pursued. 7. Create the technology roadmap report. Phase III. Follow-up activity 1. Critique and validate the roadmap. 2. Develop an implementation plan. 3. Review and update. The three phases in the technology roadmapping process. 2.4.2.1 Phase I: Preliminary Activity In this phase, the key decision makers must realize/perceive that they have a problem that a technology roadmap can help them solve. They must decide what will be roadmapped and how the technology roadmap will help them make their investment decisions. The acceptance and buy-in of these decision makers is critical to get the resources needed to create the roadmap and the willingness to use it. This process is iterative because as the scope of the roadmap evolves, their buy-in must be maintained. A complication is that different people expect different results and all of them must be at least partly satisfied. The steps in this phase provide some assurance that this essential buy-in will be obtained. However, this buy-in must be maintained throughout the later two phases.

41

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

1. Satisfy essential conditions. For a technology roadmapping effort to succeed, a number of conditions must be satisfied. This step involves checking to ensure that those conditions are already met or that someone is taking the necessary actions to meet them. These required conditions are similar, but not identical, for corporate- and industry-level technology roadmapping: •

There must be a perceived need for a technology roadmap and collaborative development, although a much broader group must perceive this need for an industry roadmap.

•

The technology roadmapping effort needs input and participation from several different groups, which bring different perspectives and planning horizons to the process.

•

The corporate technology roadmapping process needs participation from various parts of the organization (e.g., marketing, manufacturing, R&D, planning, etc.) as well as from key customers and suppliers.

•

The industry technology roadmapping process needs participation from members of the industry, its customers and suppliers, as well as government and universities. The focus should be on areas of common need and adversarial conditions must be avoided.

•

The technology roadmapping process should be needs-driven rather than solutiondriven. There must be a clear specification of the boundaries of the effort — what is and is not within the scope of the technology roadmap and how will the roadmap be used.

2. Provide leadership/sponsorship. Because of the time and effort involved in roadmapping, there must be committed leadership/sponsorship. Furthermore, this leadership/sponsorship must come from the group that is going to do the actual implementation and benefit from it. For a corporatelevel technology roadmap, this means that the line organization must drive the roadmapping process and use the roadmap to make resource allocation decisions. For an industry level 42

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

technology roadmap, this means that industry must lead the effort, although its customers and suppliers, along with government and universities, should also be participants in developing, validating, and implementing the technology roadmap.

NOTES

3. Define the scope and boundaries for the technology roadmap. This step ensures that the context for the roadmap has been specified. It develops or ensures that a vision exists (for either the industry or corporation) and that a roadmap can support that vision. It identifies why the technology roadmap is needed and how it will be used. Finally, it clearly specifies the scope and boundaries of the roadmap. A roadmap starts with a set of needs. The intended use of the roadmap determines the planning horizon and the level of detail. The time horizon for roadmaps varies, but for industry roadmaps it is typically at least 10 to 15 years, although there are intermediate points every three to five years. Corporate roadmaps may have a shorter time horizon. This step is important for roadmapping at both the corporate and industry level. However, it is more difficult, complex, and time-consuming at the industry level for two reasons: •

First, there are many levels of needs, which must be decomposed, and different levels of product, subsystems, and/or components that can be roadmapped. The level selected must have a commonality for the various participants.

•

Second, since many companies do not know how to effectively collaborate, this step (and the previous two) involves a major learning effort, so this phase of industry roadmapping can easily take at least six months. The involvement of an industry umbrella organization, such as a consortium or a trade association, can improve the speed and efficiency of the process and can often provide some of the support resources.

2.4.2.2 Phase II: Development of the Technology Roadmap This phase involves seven steps. These steps to create the actual technology roadmap are similar for both corporate and industry technology roadmaps, but the resource and time requirements are much greater for an industry roadmap. In both cases, working groups or teams are essential to develop the content of the roadmap.

43

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

1. Identify the “product” that will be the focus of the roadmap. The critical step in roadmapping is to get the participants to identify and agree on common product needs (e.g., for an energy-efficient vehicle) that must be satisfied. This agreement is important to get their buy-in and acceptance of the roadmapping process. Depending on the complexity of the product, there may be many components and levels on which the roadmap may focus. Selecting the appropriate focus is critical. If there is major uncertainty about the product needs, the use of scenario-based planning can help. For example, for an energy-efficient vehicle there could be a scenario based on a major oil find or a breakthrough in a renewable energy technology that would drastically lower the price of gas or other fuel, or a scenario based on another oil shock that would drastically reduce the supply and drive up the cost. Each scenario must be reasonable, internally consistent, and comparable with the other scenarios in that it affects one or more of the needs postulated for the roadmap. The scenario analysis may/should include extreme cases, but it should not over emphasize them or let them drive the roadmap. The important point is that the scenarios are not ends in themselves. They are only a means for addressing uncertainty in the environment and the needs to improve the quality of the roadmap. The scenarios are used to better identify the needs, services, or products. In many cases, there will be common needs that apply across all of the scenarios, although the demand may be different for different scenarios. In other cases, a need may be critical for a particular scenario that has too high a probability to be ignored. Some of the work on this type of need could be considered insurance. Over time, as the degree of uncertainty about needs changes, the emphasis on technologies addressing this need could be increased or decreased. This is one of the reasons for periodic reviews and updates of the roadmap and its implementation plan. 2. Identify the critical system requirements and their targets. The critical system requirements provide the overall framework for the roadmap and are the high-level dimensions to which the technologies relate. Once the participants have decided what needs to be roadmapped (which is not a trivial process), they must identify the critical system requirements. Examples of critical system requirements for an energy-efficient vehicle include mpg, reliability, safety, and cost. Examples of targets include 60 miles per gallon (mpg) 2 years and 80 mpg in 5 years.

44

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

3. Specify the major technology areas.

NOTES

These are the major technology areas that can help achieve the critical system requirements for the product. Examples of technology areas to meet the performance target of 80 mpg by 2005 for an energy efficient car include materials, engine controls, sensors, and modeling and simulation. 4. Specify the technology drivers and their targets. At this point, the critical system requirements are transformed into technology oriented drivers for the specific technology areas. These technology drivers are the critical variables that will determine which technology alternatives are selected. For the materials technology area, examples of technology drivers could include vehicle weight and acceptable engine temperature, while for the engine controls technology area a technology driver could be the cycle time for the computer controlling the engine. Technology drivers are dependent on the technology areas being considered, but they relate to how the technology addresses the critical system requirements. At this point, technology driver targets are also set based on the critical system requirement targets. The technology driver targets specify how well a viable technology alternative must be able to perform by a certain date. For example, to get 80 mpg (a system requirement), engine control technology may need to be able to deal with x number of variables and adjust engine parameters every y milliseconds, which requires a processor cycle time of z (e.g., technology driver targets). 5. Identify technology alternatives and their time lines. Once the technology drivers and their targets are specified, the technology alternatives that can satisfy those targets must be identified. A difficult target may require breakthroughs in several technologies or a technology may impact multiple targets. For each of the identified technology alternatives, the roadmap must also estimate a time line for how it will mature with respect to the technology driver targets. When multiple technologies are being pursued in parallel, decision points need to be identified for when a technology will be considered the winner or when it will be dropped from further consideration.

45

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

6. Recommend the technology alternatives that should be pursued. This step selects the subset of technology alternatives to be pursued. These technology alternatives vary in terms of cost, schedule, and/or performance. One path may get you there faster, another path may be cheaper, while still another path may result in a 20 percent performance improvement over the target. Considering the trade-offs, a faster path may not matter if the technology is not on the critical path for the end product/ service. However, if it is on the critical path, then a faster path can result in faster time to market — an important competitive advantage. In some cases, a 20 percent improvement over the minimum performance target may be worth the extra time or cost, while in other cases doubling the performance may not significantly affect the value of the end product if other factors become the dominant constraints. This emphasizes the difference between simply improving performance with respect to a technology metric versus the actual change in the product metrics, which a technology change causes. To further complicate the problem, a certain technology may help you meet the first one or two targets for a driver but cannot satisfy later targets, while another technology may not satisfy the immediate targets but can meet the subsequent targets. The latter is called a disruptive technology as we have already knew in unit I. A disruptive technology is one that cannot satisfy current needs, so it is often ignored in favor of the current technology. However, its potential performance and rate of improvement if it is developed is much greater than the current technology, which it will eventually replace. Without the broader perspective provided by a technology roadmap (or other tools), the disruptive technology is often underfunded or completely ignored. In some cases, there may be analytical and modeling tools to help determine which technology alternative to pursue and when to shift to a different technology (i.e., jump to a new technology curve with a disruptive technology). In other cases, the tradeoffs and decisions are determined by the best judgment of the experts. In either case, the roadmapping process has consolidated the best information and develop a consensus from many experts. Furthermore, the roadmapping process (at either the corporate or the industry level) has begun a collaborative effort that, when carried into the implementation, will result in more effective and efficient use of limited technology investment resources. 7. Create the technology roadmap report. Now, the roadmap has been developed. It becomes one of the documents within the roadmap report. This report should also include: 46

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

• The identification and description of each technology area and its current status.

NOTES

• Critical factors (show-stoppers) which if not met will cause the roadmap to fail. • Areas not addressed in the roadmap. • Technical recommendations. • Implementation recommendations. The report may also include additional information. For example, the SIA roadmap report included information on competencies that cut across multiple technologies and political/economic issues that impact the entire U.S. R&D establishment. 2.4.2.3 Phase III: Follow-up Activity With early buy-in and support in Phase I, the follow-up activities will be much easier. Without this buy-in, the technology roadmap may not address the issues that the key decision makers need to resolve. As a consequence, the roadmap may not be used. Since relatively few people were involved in developing and drafting the technology roadmap, it must now be critiqued, validated, and accepted by a much larger group that will be involved in any implementation. An implementation plan needs to be developed using the information generated by the technology roadmapping process to make and implement the appropriate investment decisions. Finally, since both the needs and the technologies are evolving, the roadmap needs to be periodically reviewed and updated. 1. Critique and validate the technology roadmap. We have seen that, in Phase II, a relatively small group or groups of experts and technologists developed a draft technology roadmap or roadmaps if multiple technology areas are involved. This work must be exposed to a much larger group for validation and buy-in for two reasons: •

First, the draft needs to be reviewed, critiqued, and validated. If the recommended technology alternatives are developed, will the targets be met? Are the technology alternatives reasonable? Are any important technologies 47

ANNA UNIVERSITY CHENNAI

DBA 1732

missed? Is the roadmap clear and understandable to people who were not involved in the drafting process?

NOTES •

Second, there must be buy-in from the broader corporate or industry group that will be involved in implementing the plan. With an industry roadmap, a large, highly structured workshop is often used to provide this feedback. Implicit in this step is the possible revision of the roadmap.

2. Develop an implementation plan. At this point, there is enough information to make better technology selection and investment decisions. Based on the recommended technology alternatives, a plan is then developed. At the corporate level, the implementation plan may be one or more project plans, which would be developed based on the selected technology alternatives. At the industry level, the same type of project plan may be developed by the participants, but there is also a need for explicit coordination, which is often done through an industry association. In other cases, there may not be an industry plan — only corporate project plans by the participants. 3. Review and update. Technology roadmaps and plans should be routinely reviewed and updated. A formal iterative process occurs during this review and update. With the initial roadmap, uncertainty increases with the time frame. Over time, as certain technologies are explored and better understood, some of this uncertainty is reduced, although other areas of uncertainty may develop. Also if scenarios were used up front to address uncertainty about the needs, there may be refinement, or even elimination, of some of the scenarios, which could affect the roadmap or its implementation plan. The review and update cycle allows both the roadmap and the implementation plan to be adjusted for these changes. The review cycle may be based on a company’s normal planning cycle or based more appropriately on the rate at which the technology is changing. 2.5 TECHNOLOGY ROADMAP – AN ILLUSTRATION This section provides an example of a needs-driven technology roadmap and Phase II of the process to develop it. The SIA roadmap, which has become one of the most 48

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

frequently referenced examples of an industry technology roadmap, is used. The purpose of this example is to show the process flow from product need to actual roadmap, not to completely describe the SIA process and roadmap.

NOTES

Stage 1, the product focus of the roadmap was semiconductors, which could be used in various types of products (such as memories, consumer products, portable computers, and high-performance computers), each of which had different requirements. However, semiconductor manufacturing technology was the common area on which the industry could cooperate. They competed on semiconductor designs and the products that used them, not the underlying manufacturing technology. Stage 2, the critical system requirements included smaller size (i.e., feature size), lower cost, and power dissipation for portable equipment. As an example of targets, they projected feature size between 1992 and 2007 as declining in three year increments from .5 to .1 microns. Stage 3, the roadmap identified 11 technical areas (e.g., chip design and test, lithography, and manufacturing systems). Using the critical system requirements as an overall framework, teams were set up for each technical area and technology roadmaps were developed for each area. Stage 4, each team developed a set of technology drivers specific to their area, which were derived from and related to one or more of the critical system requirements. For example, technology drivers in the lithography area that related to feature size included overlay, resolution, and device size. The lithography area was further decomposed into exposure technology; mask writing, inspection, repair, processing, and metrology; and resist, track, and metrology. Stage 5, for each technology area (e.g., lithography) and/or subarea (e.g., exposure technology), the roadmap identified technology alternatives such as x-ray, e-beam, and ion projection. Technology driver performance was projected for each technology alternative for various time points. Stage 6, based on these projections and their impact on the critical system requirement targets, certain alternatives were recommended.

49

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Stage 7, the completed technology roadmap report was created in preparation for the follow-up activity. A major workshop was held to critique and validate the roadmap. Technology roadmapping is a useful technology planning tool in an increasingly competitive environment, such as that faced by Sandia and other national laboratories. For a successful technology roadmapping process, it is critical to identify why you are doing the roadmapping and how it will be used. Technology roadmapping is particularly useful for coordinating the development of multiple technologies, especially across multiple projects. This coordination is critical when dealing with technologies that are related to a corporation’s core competencies. The information about and analysis of needs and technology alternatives is far more important than following a precise process and format. In summary, technology roadmapping is a valuable process if done for the right reasons, but it should not be undertaken lightly or without good justification. Have you understood? 2.4 (a) What are the skills needed for technology roadmapping? 2.4 (b) How the preliminary activity for technology roadmapping is done? 2.4 (c) Explain the development phase of technology roadmapping? 2.4 (d) What are the follow-up activities after the development phase? 2.6 LINKING TECHNOLOGY PIONEERING AND COMPETITIVE ADVANTAGE The choice of which way to perform a value chain activity – which technology to use – should be governed by the competitive advantage(s)that the firm is pursuing in implementing its competitive strategy. In other words, if low cost – low price is the strategy, then low-cost technology should be used, consistent with maintaining acceptable levels of quality, availability, attractiveness, and so forth. (Of course, technology choice interacts with other strategic variables – e.g., low unit cost are often achieved through economies of scale which in past have depended on mass- production technologies and large customer markets demanding standardized product and service.)Similarly, if a differentiating uniqueness is the strategy, then technologies which maximize the specific competitive 50

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

advantage in terms of higher performance, sooner delivery, better customer service, etc., should be used , consistent with the price premium customers are willing to pay for the uniqueness.

NOTES

Technology choice is therefore a more complex decision for firms pursuing a differentiation strategy. The number of potential differentiating competitive advantages is very large, and much more source of competitive advantage being sought. To say that one is pursuing the advantage of higher performance is not enough. One must specify performance dimension that is predicted to be of value to a segment of the customers. look at which activities create and deliver that performance value, and make technology choice for those activities accordingly. in trying to understand and illustrate these concepts. We often find ourselves limiting our thinking to manufacturing activities, manufacturing technologies, manufactured products. But Porter’s value-chain analysis and the definition of technology should open our thinking to a much border range of concepts. The technology development activity is an important case in point. Technology development activities have the promise of creating new ways to do things – new technologies – that can contribute even more to higher performance, sooner delivery, better customer service, etc., than existing alternatives. Or that can lower the cost penalty of achieving that higher performance, sooner delivery, etc. The linkage between technology and competitive advantage can be illustrated more explicitly by focusing on advanced manufacturing technologies, pertaining primary to discrete – parts fabrication and assembly activities, and on management technologies usually labeled as Japanese manufacturing management techniques such as TQC, JIT, and Kanban pull systems. These technologies will be related to the three competitive advantages of low price, higher quality, and availability. 2.6.1 Production Costs and Advanced Manufacturing Hardware Technology Production costs are divided into the familiar categories of plant and equipment, labor, materials, energy, and manufacturing process cost, when an examination is made of how advanced manufacture hardware technologies [AMHTs e.g., CAM,CAD/ CAM,CIM,FMS,NC,CNC (computer - aided manufacturing ,computer-aided design/ manufacturing, computer- integrated manufacturing flexible manufacturing system, numerical control, computer numerical control )]might affect these production costs compared with alternative, traditional manufacturing technologies,there is no clear and easy answer. The answer is the all-too-familiar “it depends!” 51

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Plant and Equipment Cost: On what do these cost impacts depend? A partial list might include whether the AMHT was implemented in system or in a series of standalone pieces of equipment – e.g., replacing an entire machinery systems vs. replacing a worn-out lathe with a new NC or CNC lathe. Especially in product flow layouts, the AMHT systems approach might cost less than traditional technology because of the potential cost savings due to systems redesign. Similarly, equipment costs might be affected by the choice of specialized vs. multipurpose AMHT – e.g., a CNC lath vs. A CNC machining center. The lathe might fit into a system providing one of number of required machining operations. While the matching center might do all the required operations itself, so the comparison of AMHT equipment costs with traditional manufacturing technology equipment cost has adjusted accordingly. But this later example illustrate other potential cost impacts as well. The multipurpose CNC machining center should also take up much less space than the syatem with the CNC lathe alternative(and in growth-capacity expansion situations, avoiding the cost of building additional factory floor space can be quite considerable) and should avoid WIP inventory costs associated with product flow through a series of specialized CNC operations. The impact of AMHT on plant and equipment costs might also be affected by how sensitive the AMHT equipment is to environmental factors such as temperature, humidity, and vibration. This sensitivity can imply plant infrastructure costs that might not normally be considered in certain cases ; these infrastructure costs are known up front, but there is also the case where a sophisticated piece of CNC equipment installed and adjusted in the winter didn’t work alright in the summer because of the higher angle of the sun shining through the windows! 2.6.2 Labor Cost The traditional justification for using more advanced manufacturing equipment has been the substitution of capital for labor, and there is little doubt that utilized AMHT usually lowers direct-labor costs. However , there are other cost implications to consider. Although the amount of direct labor might be reduced, what are the skill requirements of the labor that remains? If the AMHT requires less but more highly skilled direct labor there may be additional cost associated with training or higher wages. In addition. What happen to 52

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

direct labor with the utilization of AMHT compared to traditional manufacturing technology? AMHT maintenance is again an “it depends” situation. AMHT equipment is normally more complex and sophisticated so that maintenance costs might be presumed to be greater, but on the other hand much of the complex electronics is modularized on printed-circuit board which are simply replaced when a circuit goes bad, so maintenance cost might be less.

NOTES

AMHT might have more positive cost impacts when the health and safety of worker is considered. Automating dangerous or environmentally hazardous operation utilizingAMHT (e.g., spray, painting, welding )may require more expensive equipment but provide savings in lost labor hours, workmen’s compensation premiums, and other employee health and safety costs. Similarly, automated operation that are difficult for humans to do because of their physical markup or boring for humans to do because of their psychological markup can both lower health and safety costs and prevent human error that results in scrap, rework, or other cost of poor quality. 2.6.3 Materials Costs Materials cost might or might not increase with AMHT and less direct labor. the human operator may lack the data input and processing speed of the computer, but is more flexible when it comes to dealing with unexpected problems. Using AMHT is assembly operations, for example, may require higher-tolerance and higher-cost components so that feeders don’t position parts off center, whereas human operators using traditional manufacturing technology could have easily handled these kinds of exceptional problems when they occurred. The point of all this discussion is that contribution of advanced manufacturing hardware technology to the competitive advantage of low cost-low price is ambiguous and situation-specific. One would not want to precipitously rush into AMHT pursuing a low-cost low-price competitive strategy! Production costs and Advanced Manufacturing Management Technology : Japanese management practices. When we look at advanced manufacturing management technologies (AMMTs),advanced ways to manage manufacturing operations, however, we see a more 53

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

straightforward linkage with various production costs. There are a number of so-called Japanese manufacturing management practice that can affect production cost; for instance, JIT lowers WIP inventory and plant costs; the scheduling systems lowers scrap, rework, and other costs of poor quality; kanban scheduling systems lower finished-goods inventory costs; the reported preference of Japanese managers for multiple copies of smaller, les expensive, more mobile,less sophisticated machinery rather than “supermachnies” lowers equipment costs; and cellular layout and group technology lower labor and manufacturing process cost. Management Policies: Many of these “technologies” might seem to be “policies,” but they are policies that govern the way activities are done. For example, the way in which investment in new equipment are cost-justified – high-hurdle-rate discounted cash flow vs. strategic cost management techniques – can impact the decisions of the firm to purchase and implement any new techniques ; the way in which overhead cost are defined allocated- the traditional way in of basing this on direct-labor vs. activity-based on cooperative partnering rather than arm’s-length confrontation can lead to lower materials and manufacturing process cost; negotiated partnering with labor unions (trading job security for work – rule flexibility) vs. confrontational bargaining over wages and benefits can lead to lower labor and manufacturing process cost and giving operators the power and the responsibility for quality, rather activities associated with their principal work takes rather than replying on specialized quality control or maintenance staffs can labor and manufacturing process costs. Hardware and Management Technologies These kinds of illustration can go on and on. Two general points to make are as follows: 1.

2.

Advanced manufacturing management technologies appears to have a more direct and a impact on lowering production costs the cost and reliability benefits from implementing AMHT are regards as the real key to manufacturing improvement. even when AHMT is successfully implemented and has a positive impact on production cost and other competitive factors, it usually occurs after or in tandem with the successful implementation of AMHT – what one author has called synchronous innovation. 54

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Reliability: building it in

NOTES

Working from right to left, there are two basics ways to improve reliability: to build it in or inspect it in is usually the preferred way to improve reliability because, as discussion earlier, the involves improvement of the production process itself and therefore has the added competitive effect of lower manufacturing process costs at the same time – see the earlier discussion of reliability. Thus the dashed arrow (A) in fig Process control. Improving the production process is a matter of getting it under control or stabilized so that operation are repeatable; thus, variations in operations due to special causes arising out of specific circumstance not inherently part of the process removed, and only the acceptable; variation that is inherently part of the process remains. (if a process to produce a product or service must be redesigned –or both.) Getting a process under control result in increasing yield rates(or declining defect rates), and this is the source of the net reduction in production process costs. Advanced Manufacturing hardware Technology: What are the benefits of advanced manufacturing hardware and advanced manufacturing management technologies on building reliability in to production processes? The first benefits for all computer automation in CAM which removes human beings from direct contact with the production process reduce human error as a source of special variation affecting the process. The greater the potential for human error in operating a process, the more important CAM is to improving reliability. Second, the operation of sensors, computer, analytical software, and output devices make it possible for vast amount of process data to be collected and analyzed in real time. The results of the analyses can be fed back to automatically adjust process parameters or to alert human operators or computer monitors to the need for action –e .g., predictive maintenance. In either case, reliability is improved and process costs are reduced compared with the use of more traditional and conventional manufacturing hardware technology. Advances in materials science embodied in cutting tools also might improve process control and reliability.

55

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Advanced Manufacturing Management Technology: Perhaps the best-known advanced manufacturing management technique affecting the production process is statistical process control (SPC). SPC alerts human operators to the fact that special sources of variation have crept into the process and that steps must be taken to bring the process Japanese total quality control techniques such as hazard lights (andon), production control boards, and the use of foolproof mechanisms (pokayoke), should also work in the same direction. Although quality circles and total quality management (TQM) techniques both contain the world quality ,their scope of meaning goes beyond the narrower definition of quality being used here, and they more aptly fit under the title of continuous improvement. Reliability: Inspecting quality in to the process without building it in result in higher reliability as perceived by the customer because few or on defects get past the inspection system, but there are no reduction in production process costs because the process itself remains unchanged –warranty, service,, loss of customer goodwill, and liability costs of poor quality are merely shifted to scrap and rework. A firm can inspect quality in by providing more inspection –hiring more QC inspectors-or by providing better inspection. which can be the result of using advanced technology. Automated quality control and inspection equipment such as coordinate measuring machines or automated test equipment can improve the inspection activity by reducing human error that would result in mistakenly letting defects get through (or mistakenly weeding out nondefects), by doing inspections faster than humans can, and by doing inspection with greater accuracy method design might also be used to improve manual inspection, but in all these instances the investment made to achieve the higher reliability (as perceived by the customers)is a direct cost tradeoff since there are no cost reductions from brining the process under control. Performance: Improving product performance is largely a matter of product design and the choice that are made in the product in the product design activity. These design choice include the tightness of the tolerances that are specified, the special features that are include , the choice of materials utilized, and the size of the product or service offerings. 56

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Advanced Manufacturing Hardware Technology:

NOTES

Computer-aided design/engineering (CAD/CAE) technologies would appear to have a significant impact on performance in terms reducing the potential for human error and in the enhanced ability to design more sophisticated and complex (assuming that sophistication and complexity contribute to performance!) products. At the same time unit design costs should be significantly reduced because of the labor productivity gains that CAD/CAE offers. However, higher performance normally is achieved in tradeoff with higher costs. Hardened metal cutting tools or purer materials may also offer performance gains in precision and accuracy or product consistency. Advanced Management Technology: As was pointed out earlier, however, the higher performance provided by the product must be valued by the customer, and valued highly enough to cover any price premium associated with it which covers the higher costs needed to achieve that performance. Advanced management techniques in market research such as the use of focus group or quality functional development help ensure that the customer ‘values are reflected in design decisions. Traditional design techniques such as value analysis and value engineering are also applicable in this regard. Integrating Reliability and performance: The integration of CAD/CAM and CAM provide a hardware linkage between reliability and performance, the two dimension of quality. The hardware linkage gives design and manufacturing engineers real-time electronic sharing of information that supports concurrent or simultaneous engineers each group can feed back cost and capability information to the other so that in the end, the product-process combination is optional for the firm. rather than one or the order. This hardware integration can be supported by management policies to, for example, use standardization components whenever feasible or justify why not. The policies can be programmed into the CAD/CAM and the computer process simulation system to prompt either group of engineer to consider the viewpoint of the other. Thus hardware and management technologies are themselves integrated into design for manufacturability.

57

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Aesthetics and Customer Service: Two side issues complete this discussion of quality. In terms of performance. There is an aesthetic dimension that must be taken into account apart from objective facts. Many people, for example, prefect natural leather or wood products over plastic. relating this in their minds to higher quality , even though on any given performance dimension (hardness, durability,cleanability, etc.), the plastic product might objectively score higher. Market research techniques helps identify these aesthetic preferences. Second, there is also a customer service dimension to the reliability issue. When customers unfortunately experience a product defect, the loss of goodwill can be prevented and customer loyalty even enhanced through appropriate customer service activities. Information technologies which speed up the service to fix or replace the defective product combined with management policies whish remove the “hassles” from the experience for the customer can go a long way toward alleviating customer. Complaints, but this service again comes at additional cost only unless the process is first brought under control. TECHNOLOGY AND AVAILABILTY: New Products: Two situations from which to examine the availability advantage: That of new products and that of extended product lines. Perhaps the ultimate availability advantage is to come to market first with a new product that is not available from any competitor for that period of time when no competing alternative is available, a firm can charge what the market will bear, can create first- move advantages which will endure even after a competing alternative is available, can obsolete its current new product with an even better or cheaper one to stay ahead of the competition and so forth. Licensing or Acquisition: There are a couple different ways to obtain new products. One way is to license or acquire them as products, or to license or acquire underlying technologies which feed into the second way –the firm’s internal new-product development process, which normally is managed by he R&D functions. Licensing or acquiring technology – external technology sourcing, as some call it – have become more popular activities as trends for downsizing 58

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

and focusing on core competencies have increased, and information technologies have improved firm capabilities to monitor and evaluate external technology development on a global scale.

NOTES

New-Product Development Cycle Time: The conventional way to achieve new product is still the internal development process, however, which begins with R&D activities but extends through manufacturing and marketing and sales – through commercialization. Because competition is becoming more intense and product life cycles in many industries have been shortening, there is increasing pressure lead time over competitors. How might advanced manufacturing hardware and management technologies impact new product development cycles times so as to achieve the competitive advantage of availability? The short answer to this question is, potentially, “a very great deal!” In fact, I would contend that the biggest contribution that these technologies can make to competitive advantage is in this area of availability. Advanced Manufacturing Hardware Technology Earlier we mentioned the performance impact of CAD/CAE technologies, but surely a bigger impact of CAE/CAE pertains to the speed with which product design and engineering analysis activities can be done. Fast prototyping is another technology that has the potential to speed up product design. New products must be manufactured before they can be sold, however, and CA/FMS technologies can be used to changed manufacturing systems over from existing to new products – as long as the new products are within the envelope of the systems – almost instantaneously and at almost no cost. CIM technology, which integrates the product design and manufacturing processes electronically, has the potential to make the transition from design to manufacturing go even more quickly and smoothly. Other activities and new technologies also have the potential for expediting the new-product development process. The more fundamental research that goes on in industry as well as in universities and national laboratories can result in an iteration between science and technology that results in new and faster way of doing R&D. Advances in microscopy and spectroscopy technologies have resulted in much more powerful scientific instruments 59

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

which have advanced the scientific study of molecular and atomic structures related to materials and resulted in computer-aided molecular design technologies for developing new pharmaceuticals, for example. Advanced Management Technology New management technologies can also play an important role in speeding up new product development. Concurrent or simultaneous engineering – the parallel or joint development of new-product and accompanying new-process technology – not only improves design for manufacturability as discussed earlier but also can significantly speed up the development cycle. Management policies to deliberately shorten product life cycles by obsoleting current products with new developments can speed things up as well. Many of the process improvements that result from TQM – type programs in new product development also tend to speed up the process. All of these new product decision can, of course, be affected by the firm’s approach to intellectual property protection, and market research activities still play an important role in identifying the customer values that can be satisfied through new products. Have you understood? 2.5 (a) What are the effects of technology on production cost? 2.5 (b) What are the effects of technology on labour cost? 2.7 FINACING A START-UP In many technology-based start-ups, the uncertainty of success of a venture is indeed quite high. In addition, both the moral hazard and adverse selection problems inhibit the flow of funds to the start-up. For an entrepreneur interested in starting up a technology –based company, it is useful to think of the front start-up as evolving over stages. We can identify six stages in the evolution of a start-up: Basic research, which in the case of a start-up may involve the entrepreneur to test some aspects of the technology being developed. 60

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Applied research, while involves the incorporation of technology into a new product process or service.

NOTES

Commercialization, which includes all activities involved in moving the product into market – developing a business for the market, assessment, a business plan, and so on. Start-up which involves embodying the activities in the form of a business. Rollout, when the firm starts manufacturing and marketing its products or services in selected target markets. Growth, which involves the growth in sales and continued investment in the manufacturing and marketing capabilities of the firm to enhance its sales. The funds required for the operation of the start-up increase over the various stages from basic research to growth. In this sense, this is similar to the technology project life cycle Indeed, basic research activities before start-up of a new venture are usually undertaken by individuals in the laboratory, be it in a university setting, a governmentfunded research center, or corporate R&D unit. The funds required for these activities are relatively minuscule compared to a full-blown enterprise. Applied research may require the building of a prototype and, therefore, will require additional amounts of money to buy the material and lease/acquire manufacturing facilities for building the prototype. The commercialization stage requires the building of a viable business plan and, therefore, requires estimates of the market potential, estimates of manufacturing capability and the administrative and workers’ cost involved in operating the venture. As The amount of funds required during start-up, roll out, and the growth phases are significantly higher relative to the previous stages. Not all start-ups go through the initial stages in such a clear sequence. For example, some of the Internet company start-ups do not require basic research, although they need considerable applied research. These firms face a considerably dynamic environment and require frequent changes as they develop both their product and the business plan. But one estimate, in the case of Internet companies, it may take $250,000 to $5000,000 to get a viable business plan. Many of these companies are not profitable for a long period of time, and for them, funds from operations are several years away. 61

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Funds Required

Basic Growth

Applied Commercialization Research

Start-Up Roll Out

Also as shown in the figure the activities during the various stages of a start-up are financed from different sources of funds. •

During the basic research and applied research phases of a start-up, the project is riddled with technical and commercial uncertainty, and as a result, an entrepreneur will find it very difficult to raise money through debt or from the private equity markets. During these stages, the activities are financed either by government sources or through personal sources In addition if the person is working in a large firm, the corporate R&D resources are often utilized for the benefit of both basic and applied research.

•

Government sources continue to play an important role in many start-ups during commercialization stages. Also, the entrepreneur may have access to facilities provided by investors, both private and public. Additionally, private placement may be another source of funds for the commercialization phase.

•

During the later stages of the start-up, the entrepreneur may rely on venture capital funds, and when he or she is ready to move into the growth phase, the firm may have the opportunity of initiating a public offering or raising money through mergers and acquisitions with larger firms. It may be we noted that in the United States several regional networks are being developed with the assistance of state governments to foster innovation. State networks include not merely technology developers but also facilitators, such as the venture capital funds, Indeed, as shown in the different sources of financing for a start-up, both government agencies and private corporations are assisting with financing of technology start-ups.

62

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

CHALLENGES FOR THE ENTREPRENEUR

NOTES

Reliance on external sources of financing, be they government or private, opens up the potential for conflict between ownership and control. As external sources of financing are injected into the operations of the company, the outside shareholders may increasingly demand a voice in the running of the company. Sometimes, the objectives of the private equity provider may diverge from the objectives of the entrepreneur; in this case, conflicts between the two are highly likely. Thus, the choice of the specific private equity provider is an important issue to which the entrepreneur should pay attention. For example, many of the university-based biotechnology start-ups in the Midwest(USA) prefer equity providers that will allow the start-up to continue operating out of the Mid-west. In other words, these start-ups look for equity providers who will not demand that the operations be moved to either the east or west cast – region which have a greater concentration of technical labor force in biotechnology. Have you understood? 2.6 (a) What are the six stages in evaluation of the startup? 2.6 (b) What are the challengers to be faced in external financing? 2.8 VENTURE CAPITAL PROCESS Because financing the technology project is flawed with adverse selection and moral hazard challenges, how should a venture capitalist or an equity provider evaluate the controls put forth by an entrepreneur? The venture capital process involves an intense company scrutiny by the venture capital providers of the business plan, management team and the request for funds. The steps involved in a particular venture capital process are enumerated in Table. The initial contact between the start-up and the venture capitalists may be initiated by either of the two parties. Having decided to explore the start-up further, the venture capitalist will spend a significant amount of time examining the business potential of the start-up. This may include an initial visit, examination and analysis of the business plan presented by the startup, and of course due diligence checks on the founders and the targeted market. This may be followed by additional visits by the venture capital providers and further checks on the 63

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

various aspects of the business plan. It is only after this initial screening that negotiations will begin in earnest between the two parties; when the negotiations are successful, an agreement is reached on the terms of the venture capital provisions. Of course, venture capital includes legal documents as well as transfer of funds from the venture capital to the start-up. Steps in Venture Capital Process 1. Introductory Visit 2. Business Plan Review 3. Due Diligence Check (A) Founders (B) Targeted Markets 4. Additional Visits 5. Negotiations 6. Draft Agreement 7. Legal Documents 8. Closing Date Set 9. Checks DepositedChecks Cashed/Stocks Issued Just what do the venture capitalists look for during their initial scrutiny of the business plan and management team? We can identify four major sets of factors that lead to a startup successfully negotiating with venture capital: 1. Nature of the management team within the start-up: The venture capitalist typically looks for an experienced and complete management team that has successfully worked together. Ensure that the management team has all the necessary expertise that is required to operate the start-up successfully. 2. Nature of the market: The venture capitalist usually prefers start-ups with aggressive intentions in the market. This can take two forms: a high-growth segment, where the company can play an important role and expect a higher market share; or a target market with no strong competitors and with a limited number of potential customers that is large by incapacity. The venture capitalists usually do not like to fund start-ups with “me-too” products. 64

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

3. Nature of the product:

NOTES

The start-up should be offering a product with significant performance improvements. 4. Technology development: Because the venture capita funds in the early stages flow into technology development, the start-up should have a well articulated defensible technology plan consistent with its market needs. The venture capitalists tries to attenuate the adverse selection and moral hazard problems through initial scrutiny, terms of agreement, and monitoring mechanisms that are placed in the continual evaluation of the start-up. In short, raising the necessary funds for a start-up is a significant challenge faced by many entrepreneurs. Indeed, the entrepreneurs will have to look for different sources of funding at different stages of the start-up. Infusion of venture capital funds into the start-up will require the entrepreneur to accommodate the interest of the capital providers. 2.8.1 Financial Products in Large Firms The challenges of financing a technology project in a large firm are different from those for a start-up in three major ways: The technology development projects are carried out in several different parts of the organisation: central research laboratory, corporate R&D unit, and divisional R&D department. Each unit will have a portfolio of projects as opposed to a single project. The raising of finances for the firm outside is usually mounted from the finance department, rather than from the technology groups. The decisions about debt, raising equity in public markets, and negotiations with strategic alliance partners will usually involve the representatives from finance department, who have the expertise in valuation of projects and financing related issues.

65

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Invariably, the financing of technology projects in large firms is tied up with its budgeting process. In our discussion of project evaluation, we have underscored the tendencies of the typical budgeting process to drive out innovation. Indeed, the emergence of option pricing models is a response to the need to protect innovation from the dysfunctional pressures of the typical budgeting processes. Nonetheless, the responsibility for maintaining the innovativeness of a firm, to a large extent, will hinge on the success of technology managers in influencing the flow of funds to appropriate technology projects. Have you understood? 2.7 (a) What are the steps venture capital process? 2.7 (b) What are the challenges to be faced in financing the technology project of a large firm? 2.9 TECHNOLOGY VENTURING Sometimes, it may be difficult to fund innovation projects internally. Due to the fact that the technology may be unproven and also the business concept not proven, the cost of capital may be higher and options for financial sources are limited. In the beginning, they may have to rely on family and personal sources. Since, initially the venture appears to be very risky, even banks may hesitate to support. Some new ventures may be able to get start-up funds, from government sources. In India, the National Technology Board extends such support. Here, we will discuss about Angel Investors and Venture Capitalists. 2.9.1 Angel Investors ANGEL Investors are private investors. They are successful and wealthy business people. They derive a feel of adventure by investing in start up firms. They normally fund up to one million dollars. They may loose in some and gain in some other. If there is a successful one, the return is very high. Normally, Angel Investors help in what is called the “seed stage”, that is, before a real product is made. 2.9.2 Venture Capital For higher level of investment, the source is venture capitalists. There can be two types of arrangements. 66

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

1.Independent venture capital firms

NOTES

2.Corporate venture capital sources. First, we will discuss about Independent venture capital firms. They manage pool of investments. They invest in projects with high growth potential. Some Venture capital firms involve themselves in particular industries. In this case their evaluation will be more accurate. It may be interesting to note that if the company performs well, the funds are treated as equity, otherwise the funds many be treaed as debt. Generally, venture capitalists are very selective. Their participation lends credibility and so, access to further capital is easier. In some cases, apart from seed stage funding they may provide funding during subsequent early stages—after the company has been organized and the company is showing signs of success. 2.9.3 Corporate Venture Capital Some firms may like to take minority equity stake in another firm’s technology development. They may establish an internal venturing group that is closely tied to the company’s own internal operations or they may create a dedicated external fund. In the internal venturing tied to the internal operations type, the firm will be able to utilize its expertise better. But on the other hand, the later structure has more independence. Examples: Eastman Ventures of Eastman Kodak. GE Equity of General Electric. Intel Capital of Intel. Have you understood? 2.8 (a) Who are angel investors? 2.8 (b) Who are venture capitalists? 2.8 (c) Explain the concept of corporate venture capital.

67

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

68

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

NOTES

UNIT III

TECHNOLOGY CYCLE 3.1 INTRODUCTION Examples of revolutionary technological changes that transform industries abound. Ceramic engine parts will replace metal engine part in the next decade, thanks to their high strength–to- weight ratio and resistance to heat. Flat screen display will obsolesces today’s bulky cathode ray tube television screens. Billions of bytes will supplant today’s magnetic fixed disks for mass computer storage. Lithium batteries will supersede today’s lead-acid technology. It is precisely this sort of discontinuous change that bring about “creative destruction,” the over turning of established structures. Example of creative destruction based on both product and process revolution abound: the shift from vacuum tube to semiconductors overturned the dominance of firms such as RCA and Sylvania. Managing through period of upheaval model of technological change. are there predictable patterns of innovation that recur time and time again in industry after industry? Are there predictable consequences of technological discontinuities? Who do leader become loser? Foster’s depiction of technological progression through a series of S-curve suggests that technological change follows a cyclical pattern. Our study of the entire history of industries leads us to conclude that technology progresses in a series of cycles, hinging on technological discontinuities and the emergence of dominant designs. Here we discuss 69

ANNA UNIVERSITY CHENNAI

DBA 1732

• • • • • •

NOTES

The cyclical nature of technology change The influence of “competences”. The empirical character of observed technology cycles. Who pioneers discontinuities and dominant designs? The process of “creative destruction. “ The implication of technology cycles for managers.

3.2 LEARINING OBJECTIVES: 1. 2. 3. 4. 5.

To understand technology cycle. To understand technological changes. To know how to respond to technological changes. To learn about adoption of technology. To comprehends different approaches to overcoming resistance.

3.3 TECHNOLOGY CYCLES: An industry evolves through a succession of technological discontinuity. Discontinuities are breakthrough innovations that advance by an order of magnitude the technological state –of- the –art which characterized an industry. To illustrate, the manufacture of window glass has been characterized by their great discontinuities. In the 19th century, skilled artisans blew molten glass into long cylinders, which were cut with a wire and flattened into glass sheets. In 1903, the lubbers process substituted an automatic blowing machine for the artisans. In 1917, the Colburn machine, which drew a continuous ribbon from a tank of molten glass, was introduced. In 1963, the Pilkington float glass, was introduced in the United States, producing a continuous ribbon by floating molten alloy. In each case, a process with inherently higher limits redefined the state of the art, increasing machine capacity by an order of magnitude while lowering costs and improving quality.

70

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

% Capacity Improvement Over Last Year

500

400

NOTES Lubbers Machine Float glass

300

200

100

1900

Colburn Machine

1910

Capacity in Square Foot per Hour 1920 1930 1940 1950

1960

1970

Three great discontinuities mark the development of machinery for manufacturing window glass in the United States

Era of Substitution

Era of Era of Design Incremental competition Change

To Next

Era of Ferment

Discontinuity Time Technological Discontinuity

Dominant Design

Industries evolve through successions of technology cycles, each started by a technological discontinuity

71

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Each technological discontinuity inaugurates a technology cycle. The breakthrough initiates an era of ferment, characterized by two processes. First, the new technology displaces its predecessor during an era of substitution. Though Foster argues that new technologies appear only when the old technology reaches its technical limits, often the older technology improves markedly in response to the competitive threat. Gaslight technology, for example, improved dramatically in the decade after the introduction of the Edison electric light; Apple has pushed the limits of 8-bits microcomputer technology forward dramatically since the appearance of 16-bit and 32-bit replacements for the once-dominant Apple II. Despite these improvements, demonstrate that in many cases, the substitution process proceeds with mathematical inevitability once a small initial penetration is achieved. The second process partly overlaps the first. An era of design competition follows a discontinuity. Radical innovations are usually crude, and are replaced by more refined versions of the initial product or process. Typically, several competing designs emerge, each embodying the fundamental breakthrough advance in a different way. Examples include the tremendous proliferation of automobile designs following Duryea’s first auto or the appearance of dozens of competing airplane models after the Wright brothers’ invention. The design competition culminates in the appearance of what Abernathy and Utterback term a “dominant design,” also called a “technological guide-post” by Sahal. This design is a single basic architecture that becomes the accepted market standard. Dominant designs are not necessarily better then competing designs, and they often pioneer no innovative features themselves. Rather, they represent a combination of features, often pioneered elsewhere, that sets a benchmark to which all subsequent designs are compared. Examples include the IBM 360 computer series, the Fordson tractor, and the Ford Model T automobile. The emergence of a dominant design marks the end of the era of ferment and the beginning of a period of incremental sharply, and the focus of competition shifts to market segmentation and lowering costs through designs simplification and process improvement. Many scholars and R&D managers contend that it is the patient accumulation of small improvements that accounts for the bulk of technological progress. Though this may not be true in every case, there is little doubt that once a design becomes a standard, it establishes a trajectory for future technical progress and changes the basis of competition in the industry. This era of competition based on slight improvements on a standard design continues until the next technological discontinuity emerges to kick off a new technology cycle. 72

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

The nature of the technology cycle is dramatically affected by the cutting dimension of competence. Some discontinuous innovations are competence-destroying. They obsolesce existing know-now; mastery of the old technology does not imply mastery of the new. Float glass is a competence-destroying process discontinuity; a firm’s knowledge of Colburn drawing technology conferred little advantage in mastering the Pilkington float glass process.

NOTES

Other discontinuous innovations are competence-enhancing. These breakthroughs push forward the state-of-the-art by an order of magnitude, but build on existing knowhow instead of obsolescing it. Thus the turbofan jet engine is a competence-enhancing product innovation. It markedly improved engine performance, but built on existing knowhow instead of overturning it. The introduction of process control in cement kilns was a competence-enhancing process innovation. Computerization made possible enormous kilns, allowing cement manufacturers to employ their existing cement-making know-how to make more and better cement than any human operator could produce. Both product and process innovations may either enhance or destroy existing competences. Yet there is a fundamental difference between product and process innovations. Product innovations normally affect more links in the value chain than do process innovations. The customer must be made aware of new products; often, he is not aware of process innovations. New products often require distribution channels and suppliers different from those which serviced older products. Process innovations usually make the product better and cheaper without necessarily disrupting upstream and downstream linkages. Thus, a key factor is not only whether the core technical know-how of an industry is disrupted by an innovation, but whether links in the value chain are overturned or reinforced by the new technology. 3.3.1 Characterizing the Technology Cycle Discontinuities are generally uncommon, and their frequency varies greatly by industry. Nonetheless, they characterize both young and mature industries. Tracking 24 years of minicomputer data, over 100 years of cement industry history, and nearly 200 years of glass industry history, only 17 discontinuities were found. The minicomputer industry passed through three discontinuities in a quarter-century, while the cement and glass industry experience 50-year periods of incremental change. However, every industry studied, experienced at least one discontinuity since 1960, and the “mature” cement industry witnessed two. 73

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

A single dominant design always emerged following a discontinuity, except in two situations. When one discontinuity follows another very rapidly (within 3-4 years), a dominant design may not have time to emerge before the second new technology displaces the first. When several producers each patent their own proprietary process and refuse to license to others, a dominant design may not emerge. Otherwise, in every case a single product or process architecture accounted for over 50 percent of new installations. Ultimately one standard prevails. The original discontinuous innovations never became a standard. Some improved version of the initial breakthrough became the basis of a dominant design in every case. Furthermore, more often than not dominant designs lagged behind the state-of-the-art at the time they were introduced. The winner of the design competition is seldom at the industry’s performance frontier; typically, the industry pushes the state-of-the-art forward during the era of ferment, then standardizes on a design that is behind the leading edge of the technology. The length of the era of ferment (the lag from introduction of the new technology to establishment of a dominant design with 50 percent of the market) depends on whether the discontinuity enhances or destroys existing know-hoe. It took longer for an industry to converge on a dominant design following a competence-destroying discontinuity. When existing know-how is reinforced, the industry arrives at a standard relatively rapidly; when it is overturned, it takes considerably longer for the design competition to culminate in a single technological guidepost. Further-more, when a series of discontinuities enhance the same underlying competence, the length of the era of ferment grew shorter in each successive technological cycle, bolstering the argument that the more familiar the underlying knowhow, the easier it is to reach a standard. 3.3.2 Pioneers of Discountinuous and Dominant Designs A key competitive question is, when will a discontinuity overturn an industry – when will leaders become losers?. Focusing on the first five firms to adopt an innovation, we observed that in general veterans – firms which competed in the industry before the discontinuity – are more likely to pioneer breakthrough innovations. This runs counter to the often-hears argument that revolutions usually come from outside an industry. It is often the case that the initial innovator is a newcomer to the industry, but when we look at the group of first-movers, we usually find that veterans predominate. 74

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Discontinuities Product

NOTES

Process

Competence Destroying

Newcomer

Veteran

Competence Enhancing

Veteran

Veteran

Dominant Designs Product

Process

Competence Destroying

Veteran

Veteran

Competence Enhancing

Veteran

Veteran

Veteran firms are more likely to pioneer each class of discontinuity and dominant design except the competence-destroying product innovations. It is easy to understand why this is so when an innovations builds on existing know-how. Firms which posses that know-how – the veterans – are most likely to build on that expertise. It is also easy to understand why competence destroying innovations are pioneered by newcomers. The new technology obsolesces what the veterans know, temporarily knocking down barriers to entry. Veterans are reluctant to adopt the new technology because it wipes out their considerable investments and forces them to change in fundamental ways. It is in this case that leaders are most likely to become losers. However,competence-destroying process innovations are typically pioneered by veterans, despite the fact that they obsolesce their own process know-how. Veterans still are able to exploit strengths upstream and downstream in the value chain following a process discontinuity; only their core technical know-how is overturned. As a result, veterans are willing to write off investments in existing facilities and expertise to exploit the price/ performance advantage of new technology. 75

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Finally, dominant designs are always pioneered by veterans, whether or not they build on or destroy competences. The revolutionary is seldom the standard-setter. The dominant designs seldom are state-of-the-art, and that industry experience is needed to understand what the market needs in a standard. CREATIVE DESTRUCTION Industries are characterized by waves of founding and failures. A period when the failure rate is unusually high is often termed a “shakeout”. The conventional wisdom is that overcapacity or downturns in demand cause shakeouts. By analyzing mortality rates, it is found that no relationship between changes in demand and failure rates. Instead, failure rates were remarkably higher during eras of ferment than in any other period. The inability to adapt to a new technical order seems to kill more firms than the inability to withstand a recession in the industry. Interestingly, only one American cement firm failed during the Great Depression; in contrast, dozens failed when confronted with the challenge of adapting to new kiln technology. IMPLICATION FOR MANAGERS The model of technology cycles provided here is one step toward developing what Foster terms “a language and a facility for talking about and directing technology.” It allows managers in different industries to organize their view of the industry’s technical history, and to compare the effects of various types of innovations on the industry’s structure. Four principal lessons for managers emerge from this research. Expect discontinuities: They do not happen frequently, but they do occur even in mature industries, and they are watershed events. When evaluating potential discontinuities on the horizon, consider whether they would enhance or destroy fundamental competences in you industry. Consider developing competences that survive technological revolutions, such as flexible manufacturing capability or strong distribution channels. When a discontinuity appears, expect an era of ferment culminating in a single dominant design. Expect several designs to compete; expect one to emerge as a winner. The dominant design will seldom be a state-of-the-art architecture; it is usually introduced 76

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

by industry veterans, and the time it takes to reach a design depends on whether the discontinuity is competence-enhancing or competence-destroying.

NOTES

Realize that technological revolutions may be introduced by an industry newcomer, but the group of firms that adopt it earliest typically includes a majority of veterans. Only in the case of competence-destroying product discontinuities do we observe a preponderance of newcomers in the pool of first-movers. It is worth while to monitor potential competitors from outside an industry, particularly when you suspect that a new product technology can obsolesce existing know how. But more often than not, the pioneers of discontinuities are competitors you already know, not newcomers to the industry. Consider the implications of the finding that technological change, not downturns in demand, is associated with shakeouts. Top management always pays attention to industry recessions and is willing to make painful cost-cutting moves when demand drops. Yet it is not this form of competition that threatens the very survival of the firm and its rivals. Maintaining the organization’s ability to navigate the rapids of creative destruction brought on by technological discontinuities is the key to fulfilling management’s first duty of shareholderspreserving their capital by ensuring the continuance of the enterprise. The ability to direct the firm’s marketing and financial operations helps top managers improve a firm’s profitability. The ability to direct the firm’s marketing and financial operation helps top managers improve a firm’s profitability. The ability to direct process and product innovation affects not only profitability but the viability of the firm itself in a world of technological upheaval. 3.3.3 The Technology Cycle - Another Apporach David Sumanth contends that the Technology in enterprises is not just a one shot deal, but rather a continuous process , involving five distinctly different phases of technology: awareness, acquisition, adaptation, advancement, and abandonment. 1. Awareness phase: This is the first phase of the technology cycle, in which a company has a formal mechanism to become aware of emerging technologies relevant to company’s needs. Some companies from “think tank “with engineers, scientists, who research from around the world , and gather information through computer bulletin services. Journals, magazines, books, conferences, international product exhibitions, etc. This information is synthesized 77

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

and put in short internal report from for the benefits of corporate strategic planners and technology policy makers. 2. Acquisition Phase: This phase involves the actual acquisition of a particular technology. To go from the awareness phase to the acquisition phase, a company’s technology group, in collaboration with the industrial engineering group, would do a technical feasibility study, as well as an economic feasibility study, before justifying and acquiring a new technology. Of course, companies which do not spend much time and effort in either the technical feasibility study or the economic feasibility study usually face serious repercussions down the road through a rapid technological obsolescence, or through the acquisition of an inappropriate technology for their needs. For example, a major computer equipment manufacturer acquired an IBM 7535 robot in the early 1980s, assuming that it would replace an injection-molding operator. However, because of inadequate and inappropriate economic feasibility, the company found that the robot was costing more than the savings projected. After a few months, the company put aside the robot and brought back the human operator! Sometimes major plant relocation decisions are made, overriding both technical and economic feasibility recommendations. At times, these decisions have nothing to do with technical factors, but rather, are the result of someone’s personal bias while making a policy decision in a boardroom. 3. Adaptation phase: Virtually every enterprise ends up adapting an acquired technology for its particular needs. Of course, if the homework is done correctly, the transition from acquisition to adaptation becomes much smoother and less expensive. Conversely, if sufficient time and effort have not gone into studying the relevance of a particular technology to a company’s present needs, a great deal of rework and adaptation result. This not only frustrates the people acquiring the technology but also, and more importantly, slows down the assimilation rate, causes major productivity losses, and results in severe quality problems. Clearly, good planning and preparation before acquiring new technologies ensures the expected greater economic returns. This becomes a more dominant problem when companies import technologies from else-where. For example, a Far Eastern company once brought in a western fertilizer plant without first studying what not to bring. Because of its lack of preparation, the company did not know that the technical collaborator was using that part 78

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

of the equipment because of the cold, snowy climate it was operating in. Thus, the company was installing equipment which was inappropriate for the humid tropical climate in which it operated.

NOTES

4. Advancement Phase: When capital is limited, as has become the case for many companies today, one cannot indiscriminately purchase and abandon technologies with scarce money. Therefore, it becomes imperative to improvise the acquired technologies for one’s home needs. Companies like Lincoln Electric have taken this thinking to a new height. They are a world leader in electric arc-welding equipment, and generate most of their process technologies internally, eventually patenting them because they cannot find equipment out among the vendors. For the most part, it advances its technologies through the efforts of its design and development engineers. A company which buys stator-winding machines from a accompany like Lincoln Electric, within the legally permissible limits, may be able to improvise the feed rates, the winding patterns, and other such features in order to enhance the original technological capabilities of the equipment. Similarly, an automotive company, which might spend several billions of dollars to retool for new models, might have to create advancement features for its basic tooling in order to reduce the overall tooling costs. 5. Abandonment phase: This last phase of the technology cycle is probably one of the most critical ones, because this is where decisions are made concerning the obsolescence of a particular technology. With the rapid discarding of existing technologies (product-based, processbased, information-based, and management-based), timing for new technologies is critical for winning in the business game, let alone for survival. Posturing for new technologies involves many interdependent variables including the competition’s product entry timing, the customer’s ability to absorb and invest in new technologies, the technical knowledge and skills needed, the spare-parts management program, and the marketing and advertising channels available. Bad timing in prematurely abandoning a product could result in lost revenues on one hand, but on the other hand, waiting too long to abandon might also result in lost revenues to be an easy formula to make the selection – it is still an art – but it can be done with greater input of information from different areas of the company such as research and development, marketing, and production.

79

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

When technology introduction is planned, it progresses along a continuum of distinctive stages. The totality of this process can be though of as a technology adoption life cycle. As used most commonly in the engineering and business literature, the term “life cycle” refers to evolutionary stages of product development. In their simplest form, these stages are “introductory,” “growth,” and “maturity”. These broad categories obscure the many steps it takes to move a new product from conception to design to engineering to prototype to production and finally to market or customer. Other life cycle models refer to technology project progression. Ford and Ryan describe the steps and decision points a company faces when dealing with new technology as (a) development, (b) application, (c) application launch, (d) application growth, (e) technology maturity, and (f) degraded technology. It has been argued that “acquisition” is the first stage in the life cycle of any technology. However, there are several steps that ought to precede acquisition or development, such as strategy determination, needs assessment, design, and planning. Some would argue that business realities produce ambiguities and challenges that defy rational predictability, and that linear models are inappropriate to the hard realities of the “real world.” However there is value in outlining the logical steps to follow in order to manage the technological change process, keeping in mind that progression through the stages may take place in an iterative rather than sequential manner. Technology Adoption Life Cycle This diagram gives a prescriptive model for the adoption of technological change. The first step I the technology adoption process is to identify business strategy and goals according to the strategic planning. At this early point in the process, the joint steering committee reviews all of the data from the SWOT strengths, weaknesses, opportunities, threats analysis and the formulation of mission and value statements, goals, objectives, and strategies. The strategic directions set forth through the planning process serve as the compass guiding all future decisions. Technology goals also become the basis against which technology success is determined during the evaluation stage. The second step is a multidimensional assessment of whether new technology is needed to help the organization meet its business goals and objectives, and whether the organization is ready for the technology. This assessment begins with a study of existing 80

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

technological and organizational procedures using the process called “variance analysis” or a similar methodology. Technology selection, cost benefit analysis, and organizational readiness are part of the needs assessment process.

NOTES

The third step in the technology adoption life cycle is planning. At this stage the steering committee, having determined that new technology is needed and having decided whether to “build or buy” the technology, invites employees from the affected groups to participate in the development of design specifications and an implementation plan. Decisions made as a result of this process should be communicated to the workforce as a whole. A plan for training employees is also developed at this stage. Business Strategy Needs Assessment Evaluation

Technology Planning Implementation

System Design

The next step in technology adoption is system design, where technology specifications are determined, and the vendor (if the technology is being purchased instead of built internally) is selected. One of the most frequent problems during this step is failure of the purchasing organization to negotiate with the vendor for such items as assistance with software debugging, ongoing maintenance, and training of those who will use the technology. Initial employee training may be offered at this stage (conceptual classroom training that can take place without the equipment), and the physical infrastructure is readied for the new technology’s arrival (e.g., wiring, expansion of floor space through rearrangement, or surplusing of existing equipment, etc.).

81

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

The implementation stage is the actual rollout of the technology. This rollout may occur in one or more pilot departments, which is most common, or across the entire organization all at one. The obvious advantage to pilot rollout is that debugging can occur before full-scale implementation. Cross-functional implementation teams consisting of workers from the affected departments help to make decisions about the best ways to install and optimize the performance of the technology without adversely affecting employees. Hands-on training should be offered during pilot testing, before the new equipment or software is expected to be used fully. Although evaluation is listed as the final phase of the technology adoption life cycle, it is on ongoing process. As stated earlier, technology success is determined by measuring performance against the goals and objectives that the technology is expected to meet. When the objectives are quantifiable, it is easy to determine whether the technology has fulfilled its intended purpose. Although not every objective may be quantifiable, having some that are helps to demonstrate to high-ranking managers and external constituencies that the technology has been a worthwhile investment. For example, if a local police department has a goal of being more responsive to community needs and an objective of improving police response time by 50%, the agency may invest in automatic vehicle locator (AVL) technology. AVL is a communications system that enables a dispatcher to see precisely where police cruisers happen to be at any time so that the police vehicle that is closest to an incident can be the one sent to respond to a call. Actual response time can be measured, and any reduction can be attributed to the AVL system. However, measurable outcomes may not be the result of the technology as such, which makes evaluation a more difficult task. Police response times may have much more to do with the number of cruisers in the field during a given shift, the training of the officers, the type of incident being reported (some may require officers who are specially trained), and degree of traffic congestion on the roads. Although evaluation of performance results is not a simple matter, it is a necessary step in the technology adoption life cycle. An organization must know whether technology has improved overall or a specific performance (e.g., quality, efficiency, safety, customer responsiveness, etc.,) and whether technology has brought about tangible and intangible benefits that help to justify the cost, thereby “adding value” in ways that go beyond the accounting ledger. The information derived from the evaluation is fed back into business strategy, making the adoption life cycle a circular process. 82

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Have you understood?

NOTES

3.3 (a) What is technological cycle? 3.3 (b) What is a dominant design? 3.3 (c) What is creative destruction? 3.3 (d) Describe the five phases of technology adoption. 3.4 APPROACH TO TECHNOLOGY ADOPTION Knowing the steps involved in the technology adoption process is important, but following them is not enough to ensure successful change. If technology is the driving force in the change process, system integration may be difficult to achieve. A review of systems theory is helpful in illustrating what is meant by system integration. Systems Theory: An Overview Systems theory is derived in part from biological science, with its emphasis on “hierarchically nested systems” in which components are broken down into elemental units, which, in turn, are subdivided. For example, a biological organism is “composed of organs, which are composed of cells, which contain organelles, which are composed of molecules, and so on” Complex systems theory plays an important role in organizational sociology, industrial psychology, and management theory. In short, systems theory views an organization as a “living organism” with interrelated and interdependent components. Moreover, organizations are thought of as “adaptive” and “evolving” and self-regulating, even in the face of environmental instability. Organizations are also thought to be open systems, capable of modular recombination or “synergistic specificity” in which components work interactively on the specific problem at hand. Sociotechnical Systems Theory The sociotechnical systems theory of work organization illustrates the benefits of a synergistic approach to change. This theory analyzes the technical system used to produce 83

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

goods or services, the social system of work organization, and the interactive effects of the two. The technical system consists of physical tools, machines, and integrated systems as well as work methods and processes. The social system consists of vertical and horizontal work-related interactions, relationships and role expectations. This system also refers to the way in which work is organized, the structure of jobs and of the organization, organizational culture, human resource management practices, and labor relations. The areas of intersection are representative of systems integration or joint optimization – the symbiotic relationship that is meant to occur as the two interdependent systems interact. Sociotechnical systems theory owes its origin to field research conducted in 1949 in the newly nationalized coal mines of postwar Great Britain. Eric Trist, a psychologist with London’s Tavistock Institute of Human Relations, and Kenneth Bamforth, a postgraduate fellow who had spent 18 years as a coal miner before entering academe, set out to discover why productivity and morale lagged with increased automation (Trist, 1981). The “hand-got” method of extracting coal in “shortwall” rock faces in use before mechanization consisted of autonomous work groups of two skilled men, assisted by one or more laborers. The miners were multi-skilled and able to exchange tasks with one another, and they operated with minimal external supervision. Trist characterized the atmosphere as being cooperative, with high personal commitment and productivity and low absenteeism and infrequent accidents.

Sociotechnical Integration

Social System

Technical System

Sociotechnical Systems Integration

84

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

This contrasted dramatically with the “longwall” method of extraction made possible by mechanization, which involved mining a single long rock face instead of a series of short faces. The mechanization required the work to be reorganized into much larger units of about fifty men, with each worker performing a different set of job tasks. Coordination and control became the province of supervisors who were external to the work groups, and who exerted some degree of coercion. It was found that the mass production nature of the longwall method created high-productivity expectations, increased competitiveness and individualism within and between work units, broke down group cohesiveness, and increased absenteeism. The lesson learned from this study was that it is unwise to make changes in the technical system of an organization without paying sufficient attention to its likely effect on the preexisting social system.

NOTES

Socio-technical systems (STS) integration is both a theory and a method of work design or redesign. Unlike job enrichment schemes, socio- technical systems redesign focuses on the work system, not on the individual job. Its three basic principles are as follows: 1.

Joint optimization seeking the best fit between the technical and social systems.

2.

Open systems planning-establishing feedback mechanisms to allow the social and technical systems to improve and adapt to changing environmental requirements.

3.

Participation-allowing employees to participate in the analysis and design the structure of their work.

This latter aspect is stated more strongly by Taylor and Felten who discuss the need for an “empowered” workforce that is in control of the product or service and the methods. Taylor and Felten argue that although managers must be empowered to deal with strategy and long-term tasks, the workforce also must be involved in long-term decisions and strategy formulation. Socio-technical systems work redesign was popular in Scandinavia, particularly in Sweden and Norway, as early as the 1960s. The Volvo Uddevalla automobile factory in Sweden was for many years a model of socio-technical manufacturing success. Other notable examples were Shell petrochemical plants in Great Britain and Canada and a Cummins Engine plant in the United States. The U.S. importation of STS coincided with 85

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

the “Quality of Work Life” movement, which was thought to be an antidote to worker alienation evident in large manufacturing plants with routinizsed , low-skill operations. The basis steps involved in STS work design are outlined in the Table below: STS Word Design Steps Advocates of “lean production” have pointed to the closure of the Udevalla plant as proof that socio-technical systems design cannot compete in today’s highly competitive market. “Lean production” refers to the Japanese manufacturing system heralded by Womack, Jones, and Roos (1990) that relies on short production cycle time, reduced inventory, and work teams, among other organizational factors to attain high levels of efficiency and quality. Yet a professor of operations management at Swedens’ Chalmers University of Technology argues that certain aspects of the Japanese and /Swedish systems (e.g., total quality management, total productive maintenance, teamwork, and participation) are compatible especially in product development engineering, adding that the Udevalla closing was because of a sales decline and the increased role of suppliers in subassembly (Karlsson, 1995). Berggren (1992) echoes the view, pointing to the fact that the supplier industry for the Volvo which accounts for “75% of the value of a car, “lacked the quality and commitment of the Japanese components sector (p. 165). Indeed, the concurrent engineering philosophy that guided Amcar’s strategy of shortening product development time represented socio-technical systems integration, because organizational and technological changes in the engineering operation occurred in tandem and complimented one another. Citing the work of another researcher, Karlsson notes that in product engineering operations’ most technical problems are solved in the social system. Haddad’s findings affirm this view, but her research also points to the value of communications technologies that supported the work of product development teams. Step

Process

1.

Scanning: mapping out an overview of the system that transforms inputs to outputs within a bounded area (a specific workplace or department), including personnel.

2.

Identification of Unit operations: those processes that transform a material, product or service within the target area. 86

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

3.

Discovery of key variance (deviations from the norm that significantly affect the quality or quantity of the operation) and their interrelations.

4.

Drawing up a table of variance control to determine how much the key variances are controlled by the social system (workers, supervisors, and managers) and whether any are imported or exported across units or departments.

5.

Mapping out linear role relationships (vertical and horizontal) in the target unit.

6.

Analysis of employees’ (workers, managers, supervisors) perceptions of their roles and their possibilities, plus constraining factors.

7.

Analysis of the role relationships of employees with those of neighboring systems (e.g., support and maintenance) and boundary-crossing systems (supplier & user systems).

8.

Examination of the general management system and the effects of technical or social policies or plans.

9.

Design proposals for the target and/or neighboring systems.

NOTES

Some organizations find it difficult to implement socio-technical systems integration for any or all of the following reasons: BARRIERS TO STS INTEGRATION • • • • •

Narrow orientation of people from different functional groups. Technological determinism practiced Organizational culture not conductive to participation Lack of empowerment of employees Lack of business manager familiarity with technology

Socio-technical systems theory is the antithesis of scientific management , not only because it allows employee participation in work redesign, but also because under joint optimization the technical system cannot lead the change effort in a deterministic way, thereby forcing the social system to adapt to it. Rather, new technology is meant to be 87

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

“human centered” rather than technology driven . Howarth too, emphasizes this latter point as she outlines some principles that have guided more recent socio-technical work design/redesign efforts: If an organization follows the dictates of the technical system at the expense of the social (or vice versa), the good results hoped for will not be achieved. For any one technical system a whole range of workable social systems is possible. The use of cohesive, autonomous groups as the base of the social system offers great advantages in terms on the satisfaction and commitment of the workers, and, therefore, in terms of productivity. For best results, it is preferable to design (or redesign) the technical and social systems together.Originally the technical system is taken as given and the social system redesigned to give improved results, but more recently it has become clear that better results can be achieved if the technical system is improved, or chosen, in conjunction with the social system. An organization (or “socio-technical system”) cannot be isolated from the environment in which it operates (the so-called open systems approach); socio-technical analysis therefore now incorporates the relationship between an organization and its environment, taking into account how changes in the world of work affect society and how changes in society affect the world of work. Relevant trade unions should be fully involved in research and experimental projects and where possible the workers affected by changes should also have a say in their formulation (again this was not originally typical of the sociotechnical approach, but recently its importance has become more apparent – possibly because a good deal of the more recent work has been done in Norway and Sweden with their national emphasis on industrial democracy and participation). Industrial Relations Theory As Howarth (1984) indicates, the labor-management relationship is key to successful technology adoption in a framework of socio-technical integration. An industrial 88

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

relations perspective goes beyond management theories designed to humanize work and “leads us to consider human resource practices from the point of view of all the stakeholders to an employment relationship”. Greater complexity in labor-management structures and processes has changed the nature of collective bargaining; whereas in the past there were regular, formal bilateral negotiations, now in many cases others seek to influence labormanagement negotiations”.

NOTES

To not regard labor unions and the employees they represent as one of many stakeholders in work redesign is to miss an opportunity for strategic, joint collaboration that is a prerequisite to fundamental and lasting change. Unions serve as a “collective voice” and create conditions for ongoing input and improvement of management practices. Although proponents of socio-technical systems in the United States have “largely ignored” the role of unions both in theory and practice, “true union engagement is a necessary” for STS to have the breadth of impact it should”. This collaboration requires employee and union input upfront at the problem analysis and solution design status. Thus, the strategic dimension of partnership falls between socio-technical systems theory, which is focused primarily on the internal organization, and strategic management theory, in which external factors play a role in the formulation of business strategy. It is vital that organizational structures for joint decision making be included in collective bargaining agreements with unions and embedded in the day-to-day operation of the organization, so that joint decision making does not become merely a passing fad or “flavor of the month” – to use the parlance of union leaders who have seen employee involvement programs come and go. Participative change that is systemic rather than piecemeal can result in improved business productivity and performance. The formal labor-management relationship converges around the regular negotiation of the terms and conditions of employment, which are codified in a collective bargaining agreement, and the subsequent administration and enforcement of that agreement. Yet in the United States, decision about capital investment and efficiency improvements are legally within the scope of management rights, and bilateral agreement in advance of the change is not required. For this reason, when unions are successful in negotiating technological change provisions, the language is far more likely to be “protectionist” (e.g., concerning advance notification, seniority governing layoff, income protection), than “future oriented”. In contrast, a strategic partnership approach to technological change in a unionized workplace is based on negotiated provisions that create joint structures at the top and 89

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

bottom levels of the organization. These strategic and departmental joint committees serve as forums for union and worker “involvement” in “decision about technology choice, appropriate technologies, selection of hardware and software, selection and role of vendors, workplace redesign, software programming and training”. Proactive union involvement in technological change is consistent with a technology management paradigm premised on open systems theory, in which the organization is ever evolving through its interactions with the external environment. To be effective in this role, workplace-level union leaders may need technical assistance or training in technology needs assessment, planning, design (including ergonomic fit), and evaluation. Have you understood? 3.4 (a) Explain systems theory. 3.4 (b) Explain socio-technical system theory. 3.4 (c) Describe industrial relations theory. 3.5 Readiness for Change Assessment A readiness-for-change assessment has multifaceted value. First, it helps to determine whether or not serious internal obstacles exist that might diminish the effectiveness of the change – in this case new technology. Internal obstacles may take the form of • • • • • • •

Attitudes (individual, group, culture); Organizational structure (e.g., composition of departments, levels of hierarchy, job design); Physical infrastructure (e.g., size of facility, wiring for new hardware, physical capacity to run new equipment); Human resources (e.g., adequacy of personnel, skills, compensation); Governance (e.g., degree of participation, labor relations); Financial resources (e.g., resources that can be devoted to new technology and related costs); and Technical skills (e.g., level of resident technical expertise).

90

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Second, a readiness-for-change audit helps identify readiness variances among departments and subpopulations thereby providing valuable information to steering committee members as they decide where to pilot test the new technology. Third, it can be a source of information on self reported or tested training needs. Finally, measuring change readiness prior to technology implementation provides a baseline against which future progress can be compared.

NOTES

3.5. MEASURING CHANGE READINESS An organization can engage in its own self-study using action research methodology under the guidance of a trained internal organizational development / human resource professional or external consultant. A consultant who is jointly selected by labor and management can bring a level of objectivity and dispassion to the process that can be helpful – especially in a workplace with a history of labor-management distrust or poor employee morale. As with the Hawthorne experiments, interviews conducted by outsiders can have a cathartic value, and employees may feel more comfortable about revealing their views to external researchers who hold no power in the organization. Action research is the name of a methodology in which employee representatives participate directly in the research design and in the data collection process of their own self-study. Although members of the joint steering committee will be centrally involved, there should also be input from frontline employees. Typically the methods for assessing change readiness are (a) interviews with a small sample of personnel representing a cross-section of the organization (including the steering committee) and (b) a survey of a larger representative sample of employees. • • • • • • • • •

Employee perceptions of technology performance Attitudes toward workplace modernization Job structure and degree of discretion Job safety Job stress Job satisfaction Managerial communication Adequacy of training Performance recognition 91

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

• •

Level of involvement and influence (individual and union) in work-place change and plant operations decisions. Labor relations climate

Although it is no substitute for a more thorough organizational assessment survey, it can help an organization’s leaders anticipate possible enablers of an barriers to technological change. Pragmatic Issues Assessing the need and readiness for technological change according to the methods described is highly advisable, but not always feasible. There are times when the need to introduce new technology is so compelling that a lengthy needs assessment is impractical. For example, a health care insurance provider that had been processing claims manually found that as its business grew, customer service waned. The only way to improve operational efficiency and thus service quality was to introduce new technology – computer workstations and software designed in-house that provided scanning, batching, labelling, indexing, and electronic retrieval capabilities. Such a system promised to improve claim accuracy, processing timeliness, and claim tracking capability, thereby improving service to customers. In this case, an expedited needs assessment was required, thereby permitting the organization to move more quickly to the change readiness assessment phase and determining the best method of implementing this system. Similarly, a police department in a large metropolitan area charged with the goals of maintaining peace and reducing crime sought to increase arrests by 5% to 10% over a 12-month period and to improve the quality of life for resident. An enhancement to its “911” emergency call and dispatch system became available. This new technologycomputers with word recognition software would monitor all incoming data and color code it according to (a) danger to police, (b) identification of a perpetrator or victim, or (c) recovery of a weapon, illegal drug, or contraband. Citizens phoning the emergency number twice within a short time period would get expedited service, and the codes would enable a more precise police response. The software would also play an important role in providing updated information to officer responding to an emergency call. In both of these cases, the organizations stood to increase efficiency and responsiveness to citizen-customer needs by adopting the new technology. By expediting 92

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

the needs analysis process and by performing a variance analysis, these organizations could advance more quickly to the readiness assessment phase of the change process. Readiness assessment is a vital component of the technological change planning process, for even when it appears that technology is good for the organization, there may be employees who do not agree with this judgement. In the case of the police department, dispatchers are likely to be less than enthusiastic about the new 911 technology, fearing added job stress at best and job dislocation at worst. Knowing this prior to implementation is very important so that training and redeployment can be built into the overall technology adoption plan.

NOTES

Inclusive Needs Assessment Involving a broad cross-section of stakeholders in the technology planning process helps to promote needs readiness by making needs assessment a collective, engaging experience. This certainly appears to have been the case in the East Detroit, Michigan public school district, where a 70-person Technology Task Force was developed, with representatives from a broad base of the community as well as the schools. Input from the task force shaped a strategic long-range plan and integrated curriculum. The school district hired a director of educational technology to oversee this process and to provide leadership for the instructional technology programs and the technology management process. The subsequent success of the district’s technology adoption, use, and educational outcomes was attributed in large part to its inclusive planning process. Another Michigan School District also used an inclusive process to determine whether or not to purchase a computer-based integrated learning system for the teaching of high school math and science. After receiving information about this program from the vendor, the director of secondary education surveyed teachers to determine their need for such a system and then forwarded these specifications to the company selling the software. The software company adjusted the software program to meet teacher needs and agreed to allow schools to pilot test the program for one year, during which time hardware and software problems and incompatibilities were resolved. The teachers involved in the pilot test then became trainers of other teachers. A second, more systemic example of inclusive needs assessment at the same district was the development of a Technology Inquiry Group to study current and “best practice” pertaining to the integration of instructional technology into the elementary school curriculum, 93

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

and to make recommendations about a computer-based integrated learning system. This group consisted of one teacher from each elementary school, a representative from the teacher association executive board, principals from each elementary school, a media specialist and clerk, four computer paraprofessionals, a representative from the district technology department, the district director of staff development, and a consultant. This group developed a framework for the elementary school technology curriculum and highlighted several models for the integration of technology into subject and grade curricula, including models that had been developed by elementary teachers in the district. The inquiry group also recommended that each school building establish a “technology team” to develop a 3-year building technology plan and provide leadership in the acquisition and use of the technology. Attitudes Toward New Technology Employee attitudes toward their jobs and their employer are influenced by various factors including job structure, management practices, and the match between personal needs and job realities. Employee attitudes toward new technology may be somewhat influenced by inherent comfort level with new challenges or other personal factors. However, managerial practice plays a large role in shaping the views of employees toward technological change. Level of complexity of the technology used of the job (an automated storage and retrieval system was labeled a “complex” technological system requiring major job restructuring, compared to a “simple” stand-alone computer-controlled assembly stand; some of the employees used to new technology) Training in the use of the new technology Duration of new technology use Advance notification of the new technology’s introduction into their jobs. The job position held in the organization (e.g., managerial, technical, skilled trades, or production workers) Leadership unions representing employees at the plant. 94

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Technology Implementation Design

NOTES

It is not only technology design but also the design of the implementation process itself that must be planned in advance of technology’s introduction. An implementation process that is jointly designed and representative of the workforce will go a long way in smoothing problems with installation, start-up and continued technology use. Multilevel Team Structure and Function The joint steering committee is the committee responsible for setting forth the strategic vision, goals, and parameters of the technological change. It is this group that ensures integration of business and technology strategy, directs the needs assessment and cost analysis, and establishes an overall plan for technology introduction and ongoing evaluation. The steering committee should consist of top-level managers who have authority and access to the organization’s strategy and resources, and managers from key constituent groups (e.g., human resources, information system, etc.). On the union side, it should include top local officers, and representatives of the bargaining council, shop steward structure, and standing committees. In a manufacturing plant, the composition of the steering committee might be as follows: Management

Union

Plant manager Human resource manager Information systems manager Engineering manager Quality control manager Training manager

Local union president Vice president Secretary Bargaining committee chair Chief steward Education committee chair

For a school’s steering committee, the principal would substitute for the plant manager, and representatives of appropriate grade levels and curriculum committees would serve in place of some of the other slots listed above. Members of the steering committee should be selected for strategic reasons and to ensure that the committee has the needed authority and skill mix to lead the change. It is also the role of the steering committee to keep any higher-level management “in the loop” 95

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

to ensure their continued support for the project. In a school district, for instance, this executive level would include the superintendent and school board members on the management side, and the representative and regional leaders from the state teachers’ association on the union side. The steering committee should charter working committees at the intermediate level, consisting of appointed members that are approved by both parties. At least one steering committee member should serve on these task-specific committees. Figure presents one possible configuration that includes a survey committee to assess employee and management technology needs, a cost-benefit committee to analyze ability to purchase the technology and methods of justifying its costs, and a technical design committee to work with information systems/engineering specialists to develop technical specifications for the software and hardware to be developed or purchased. Other possible committees would be a training committee, a health and safety site preparation and maintenance committee, and a publicity and public relations committee. The precise number and composition of these committees will depend on the specific needs and structure of the organization.

Levels of Technological Change Committees Implementation teams operate at the department or unit level, or on a crossdepartmental basis if the technology project involves more than one area. It is suggested that the new technology be pilot-tested in one or two areas rather than rolled out across 96

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

the entire organization all at once. Selection of departments/units should be based on these factors: 1. Strategic business needs 2.

The receptivity of employees (frontline users and management) to the proposed technological change (based on the results of a survey, focus groups, or other readiness assessment methods)

3.

Technical competency and trainability of employees

NOTES

Pilot approaches to technology implementation “work best when the target group is a small, cohesive department that operates largely independently of others”. The composition of the implementation team will vary, but a typical group would include approximately five operations employees, two supervisors, one technical expert (engineering or systems management), and one quality control technician. Normally the steering committee identifies potential team members with the needed experience, functional role, and peer respect, and approaches them about serving on the implementation team on a voluntary basis. It is the job of the implementation team to decide precisely how to introduce the technological change in its unit and ensure that all needed elements are in place. Any needed training, site preparation, and backup of existing data (if converting to a new software system) should be anticipated and completed before bringing the new system fully online. (Hands-on training can take place after installation but before full operation). The implementation team must also be involved directly in the ongoing evaluation of the new system, based on the success criteria provided by the steering committee with input from the implementation team. Adequate staff time and resources must be allocated to enable committees to meet on a regular basis (generally biweekly) and otherwise do their work (e.g., conducting surveys during company time, etc). Training in group process and problem identification and problem-solving skills will most likely be needed by the all three levels of committees.

97

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

First Mover Advantages Competitive advantages that result from being a technological leader are commonly referred to as first mover advantages. These advantages allow a leader to translate technology gaps into other competitive advantages that persist even after the technology gap closes. In general, a first mover gets the opportunity to define the competitive rules in a variety of areas. There are several important sources of first mover advantages. Reputation: First movers may establish a reputation as the pioneer or leader. Leadership places a firm in a position of being the first top serve buyers and, thus establish relationships that may build loyalty. Preemptive positioning: First movers may preempt attractive market positions, forcing competitors to adopt less desirable ones. They are also positioned to be the first to increase capacity, preempting competitors from expanding profitably. Switching costs: A first mover can lock in later sales if switching costs are present, that is, when a customer finds it unattractive, or increased costs in moving, switching from one competitor to another. Channel selection: A first mover may be able to choose the best brokers, distributors, or retailers; followers must either accept second best or persuade the channels to shift or divide their loyalties. Proprietary learning curve: When there are experienced curve effects in value activities, the first mover starts the learning curves first in the affected activities and will gain a cost or differentiation advantage.

98

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Favorable access to facilities inputs or other industry resources:

NOTES

First movers often enjoy cost advantages due to favorable access to facilities and inputs. The firm may get its pick of sites for facilities, for example, or favorable deals with raw material suppliers eager for new business. In the airline industry, the early no-frills carriers required cheap surplus aircraft and low-cost terminal space, and hired out-ofwork pilots. Definition of standards: The ability to define standards may make a firm’s position more sustainable For example, RCA defined the standards in color TC, which meant the competitors had to go down the learning curve far behind RCA rather than create a new one. Institutional barriers: First movers may secure patents or, being first into the country, may receie special status from the government. Such factors may also facilitate the first mover’s ability to define standards, as well. Early profits: In some industries, the first mover may be in a position to enjoy temporarily high profits from its position. It may be able to contract with buyers at high prices because the new item is relatively scarce or sell to buyers who value the new technology very highly. First mover advantages need to be weighed against the potential disadvantages that are associated with being a pioneer. FIRST MOVER DISADVANTAGES First moves often face disadvantages as well as advantages. These disadvantages come from three sources: (1) the cost of pioneering, (2) the risks ensuing from uncertain conditions, and (3) low-cost imitation.

99

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

The costs of pioneering: A first mover often bears substantial pioneering costs. The pioneering costs are often engendered by the need of gain regulatory approval, educate buyers, develop infrastructure in such areas as service facilities and training, develop inputs such as raw material sources and machinery, and the highest cost of early inputs because of the scarcity of supply or small scale of needs. Risks: The first mover often faces three different types of risk created by uncertain conditions. First, the first movers bear the risk of uncertainty over future demand, especially because buyer needs may change. Second, the first movers may be at a disadvantage if early investments are specific to the current technology and cannot be easily modified for later generations. Finally, technological discontinuities work against the first mover by making obsolete its investments in the established technology. Low-cost imitation: The first moves expose themselves to followers who may be able to imitate the innovation at lower costs than the cost of innovating. All three factors,sustainability of technological need, first mover advantages, and first mover disadvantages-combine to determine the best choice for a particular firm. Hence, all three needs to be analyzed concurrently in order to decide whether the firm should pursue a leader versus a follower strategy in its new product launches. Decisions may vary from industry to industry as well as from product launch to product launch. Impressive evidence exists concerning the impact of pioneering on new product performance. In one study of 40 industrial product entries, pioneering entrants generally maintained their market share advantage. Similarly, in another study of 174 industrial products, pioneering was discovered to be one of the major determinants of long-term success of a new product. In the case of consumer products, it was discovered that second entrants obtained, on average, only about three-quarters of the market share of the pioneer, and later entrants were able to capture progressively smaller shares. However, there are also studies that uncover significant first mover disadvantages. For example, in the study of 100

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

the cigarette market, it was found that later entries in rapidly growing markets or entries that were significantly differentiated from existing products could gain substantial shares; this removed the first entrant from its dominant position. These studies generally show that the decision to be a pioneer or a follower is a complex one and should not be taken lightly.

NOTES

Have you understood? 3.5 (a) What are the obstacles for new technology? 3.5 (b) How change readiness can be measured? 3.5(c) Explain the attitude of employees towards new technology. 3.5 (d) What are the advantages for first mover? 3.5 (e) What are the disadvantages for first mover?

101

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

102

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

NOTES

UNIT IV

CREATIVITY AND TECHNOLOGY 4.1 INTRODUCTION The human brain is a place where knowledge and experience are laid out in fixed lines and paths. In a normal logical mode, humans think along these structured paths. This conventional mode of thinking often does not result in original ideas or novel solutions to a given problem. Only when people leave these structured paths and merge previously unconnected pieces of knowledge and experience that have no obvious relationship, can creative thinking occur. Creative thinking can be stimulated by applying heuristic (i.e. learning or discovering) principles such as association, abstraction, combination, isolation, variation, and the transfer of structures between unconnected problems. Creativity techniques are based on these specific heuristic principles, which are integrated into the rules of the techniques and guarantee that the techniques are properly applied. 4.2 LEARNING OBJECTIVES: 1.

To understand creativity

2.

To learn about creativity techniques

3.

To know process innovation and nurturing innovation

4.

To analyse R&D Management in the firm

4.3 CREATIVITY TECHNIQUES: 4.3.1 Classification of Creativity techniques: Most creativity techniques should be applied in groups. In a group, the knowledge elements of the members can fuse to new ideas. The optimal group size has turned out to 103

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

be between five to seven members. Participants should come from different departments and/or should have a different professional background. Although creativity techniques also exist for individual use, such techniques are often less effective because there is less discipline and stimulation in individual settings. Creativity techniques can be classified on the basis of two sets of principles: 1. Working principles contained in the techniques: The generation of ideas can be improved either by 1) stimulating the problems solver’s intuition of the (methods fostering intuitive thinking), or 2) approaching the problem systematically (systematic idea generation methods). Systematic idea generation methods steer the problem solver toward analysing the problem structure and elaborating solution components systematically. These methods differ from those that foster intuitive thinking, which stimulate the problem solver to come up spontaneously with ideas. 2. Applied triggering principles: Ideas can result from 1) Variation of existing ideas (forming of idea chains through further development of ideas), or 2) from the confrontation which impressions not related to the problem, which leads to the coupling of stimulus elements resulting in new ideas. The combination of the working and triggering principles results in the following four classes of idea-generation methods: 1. 2. 3. 4.

Intuitive association; Intuitive confrontation; Systematic variations; and Systematic confrontation.

More than hundred creativity techniques are known. Most of these techniques are simply variants of a few fundamental methods. 4.3.2 Descriptin of Creativity Techniques It is important to note that the creativity techniques discussed in this section can only be successfully applied after the problem in question has been thoroughly analyzed. 104

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

This analysis should finally result in a precise problem definition, which is the starting point for all problem-solving sessions.

NOTES

4.3.2.1 Methods of Intuitive Association Brainstorming: Brainstorming, which is based on four fundamental rules, is the best known and most commonly used of all creativity techniques. It offers people the opportunity to carry out problem-solving sessions efficiently. Conventional meetings often contain long discussions on insignificant details, because it is difficult for many people to really concentrate on the problem itself. Instead, people tend to judge other people’s ideas first. Therefore, the first of the four fundamental rules of brainstorming is that judgement or negative criticism is not allowed. Negative remarks such as “that has been tried before” or “that’s impossible” should not be made during brainstorming sessions”. Brainstorming’s second rule is that participants should mention all ideas that come into their minds. Even ideas that are at first sight utopian or fantastic should be mentioned, because they may initiate other realistic ideas. Third, ideas from group members should be picked up by the other members and further developed into new ideas (i.e., variations). This means that group members must be able and willing to listen to one another. Fourth, as many ideas as possible should be produced. The more ideas that are generated, the greater the probability that a really original and feasible idea will emerge. Brainstorming is often considered a simple method, but it requires an experienced moderator and discipline from the participants. This method is especially useful for tackling problems of a simple nature where the number of possible solutions is large. Brainstorming sessions should last no more than thirty minutes. After the ideas are generated, they should be briefly evaluated. This first evaluation can be subjected to a more thorough screening and selection process.

105

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

It is important to prepare a brainstorming session in advance. Participants should be informed about the problem to be dealt with and the date and duration of the session at least two days in advance. In a classic brainstorming session, the following steps are followed: •

The moderator should explain the problem, give background information and requirements, and stress the four fundamental rules of brainstorming mentioned earlier.

•

Next, all ideas coming to mind should be expressed. Even the most ridiculous ideas can be useful, because they can stimulate other group members to come up with something new. A golden rule of brainstorming is that “quantity breeds quality”.

•

Obvious ideas should be mentioned at the beginning of the session so that there will be room for really original ideas.

•

It is crucial for everyone to get a chance to speak up without being interrupted.

•

An idea may be presented in a general way; there is no need for detail.

•

The moderator should write down all ideas on a flipchart. Recording all ideas on tape is an additional mode that can be used.

•

The moderator should ensure that the rules are obeyed.

•

If participants run out of ideas, the moderator can add some of his or her own. The moderator can also mention some new principles that may lead the thinking into new directions or read the ideas that have been stated already again. When repeating the ideas, the moderator should stress general statements, very original ideas, and unclear suggestions.

Brainstorming is widely known and frequently applied in companies, although the rules are often not very well observed and the kind of problems that companies tackle are not suitable for brainstorming. Brainstorming is especially suited for working on problems that 106

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

emphasize original ideas. Therefore, it may be applied particularly when the basic product idea is established and developed. It may also be used when a wide range of new product applications is sought (e.g., in searching for new indicators that show whether the freezing chain of foods is interrupted or for new applications for specialty glues).

NOTES

Brainstorming may always be applied when a group is not familiar with other methods or when it spontaneously decides to generate ideas for a question that has come up in a meeting. However, other techniques are more effective for complex and very difficult problems that usually come up in the conceptual phase of the product-innovation process. These techniques are described in the following sections. Brainwriting: Brainwriting is a collective name for a number of creativity techniques developed for groups. Although brainwriting is based on the same principles as brainstorming, brainwriting participants form their ideas in writing instead of by speaking. Problems of group dynamics as well as the skills of the moderator are less important with brainwriting. Ideas are written on cards or other sheets of paper and circulated in the group. Participants are stimulated by reading the ideas that the others write down. Brainwriting has the following advantages over brainstorming. All ideas are automatically recorded. The pile of cards or sheets serves as a complete record of the idea-generation session. There is no room for judgement or criticism; participants work individually and have time to really consider and develop their own ideas. Brainstorming can be applied even without an experienced moderator. One of the disadvantages of brainwriting methods is that, in contrast to brainstorming, spontaneity might get a bit lost. However, problems that need solutions that take some individual time to develop are especially suitable for brainwriting techniques. People can take their time and even use graphics or figures to express their ideas. Brainwriting techniques, therefore, are especially suited for design tasks.

107

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

One valuable brainwriting method is the circulating card technique. In using this technique, all participants sit in a circle and write down their ideas on cards with a thick marker so that they can be seen from a distance. Participants lay their completed cards down to their right, within easy reach of their neighbors. As participants need new ideas, they look through the pile of cards that their neighbor has placed on their left and try to develop new ideas through variation on the basis of these ideas. The idea-generation phase should be completed after 20 to 25 minutes. The major advantage of the circulating-card technique method is that the resulting ideas are easy to structure and evaluate later. This is best done by clustering the idea cards on a long table and giving these card clusters specific headings (thematic grouping). Then these cards should be put on a bulletin board for further processing. The ideas are evaluated by distributing adhesive colored dots that represent a participant’s approval of an idea. As the ideas all lie on the flipcharts on the wall, the participants place their dots on their favorite ideas. With a group of over 50 people, the total number of dots that each person receives equals about 10% of the ideas. On the other hand, when there are less than 50 group members, the budgeted dots for each person equal approximately 20% of the ideas. In addition, colour coding is by marketing staff as opposed to research and development staff) or the rank of the participants, and therefore the value of their judgement. The circulating card technique is especially useful where a large number of ideas of quite different natures are expected. In the process of product planning, this technique has particularly proven its value for searching for attractive market segments, identifying user problems, and finding product or product application ideas. 4.3.2.2 Methods of Intuitive Confrontation Empirical research shows that original ideas are often born when the problem solver is confronted with a situation or an object that has no direct relation to the problem. This phenomenon is part of the natural individual creative process. The anecdote of Archimedes, the famous Greek geometrician, is a classic example of a brilliant idea found during a moment of enlightenment. Archimedes was assigned the task of verifying that a crown that his master had received was made of gold. Normally, he would have simply compared the weight of the object to be verified with the weight of a piece of Fold having the same volume as that object. However, he found that the crown 108

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

had a very complicated form, and after days of trying he conducted that calculating the crown’s volume was impossible using classical geometry. When he later relaxed by taking a hot bath, he saw that the water flowed over the edge of the bathtub under the influence of his body’s volume. He realized that by measuring the volume of the amount of water that flowed over the bathtub’s edge after putting the crown in a tub full of water, he could measure the crown’s volume simply. Archimedes had transferred the principles of a situation that had nothing to do with the problem (i.e.., overflowing water) to the problem itself.

NOTES

The principle of estrangement and confrontation has been used to develop methods of intuitive confrontation. People are confronted with unconnected situations or objects from which inherent principles, structure, or functions are used to generate ideas. The application of this principle differs from principles of classical brainstorming and brainwriting methods. In this case: •

There is a difficult problem for which solutions are not at all obvious.

•

Other efforts (individual work or other simpler creativity techniques like brainstorming or brainwriting) have achieved no satisfactory results.

•

The emphasis is on finding exceptionally original ideas.

Intuitive confrontation can be used both by individuals working on a problem or by a group. The methodological approach of intuitive confrontation can best be illustrated by the method of stimulating word analysis. Stimulating Word Analysis: After a thorough problem analysis, a group (five to seven persons) is confronted with a series of words that can simply be chosen at random from, for example, a dictionary nouns are most suitable. For these words, which are unconnected with the problem, the group determines the inherent principles, structures, functions, and the like, and it spontaneously derives solutions from this confrontation. Excursion Synectics: Excursion synectics is a pioneer method of creative problem solving aimed at stimulating all phases of the natural creative process by intensive consideration of the 109

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

problem, incubation (estrangement), illumination, and verification. The session on this method promote unconventional thinking and therefore often result in truly novel ideas. The ten stages of this method are: 1. Explain, define, and analyze the problem. 2. Elicit spontaneous ideas (purge the mind). 3. Check the generated ideas and redefine the problem as understood by the group. 4. Create direct analogies. 5. Create personal analogies (personal identifications). 6. Create symbolic analogies (contradictions). 7. Create direct analogies to a selected symbolic analogy. 8. Transfer structures of the direct analogy to the problem (force fit). 9. Develop approaches to solutions. 10. Select and develop promising ideas. Visual Group Confrontation: Visual group confrontation, a methodology that is similar to stimulating word analysis, is derived from the stages of the natural creative process. This method particularly emphasizes relaxation and estrangement. Following a thorough analysis of the problem, group participants are shown a series of approximately five pictures for their relaxation and dissociation. These pictures should not contain too many clearly recognizable details. Quiet background music can help to show these pictures. The process of relaxation and dissociation should take about five minutes, after which participants are ready to develop ideas by means of a new set of pictures. This group is presented with six to eight pictures. These pictures should be clear and not too abstract or emotional. They must evoke positive feelings. To make the picture concrete to the group, one group member describes what he or she sees in detail. Individual participants then pick out elements of the picture, identify principles related to these elements, and try to draw solutions to the problem under investigation. The ideas are simultaneously written down on a flipchart.

110

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

The other group members should consider and elaborate on the ideas that are generated. Communication within the group is, therefore, very important. Both visible confrontation and verbal variation within the group will lead to new ideas.

NOTES

Confrontation techniques should be applied when one is looking for new solutions under rather stringent conditions (when the problem is a tough nut to crack because there are no obvious answers, and one is happy to find just a few feasible solutions). In the product-innovation process, these methods should be applied during the development process when technical problems come up or conventional solutions are not satisfactory. The following are examples of these situations: ¾ ¾ ¾ ¾

Developing a new method to facilitate the process of separation of waste. Developing a method of attaching a plug for thin or hollow walls. Developing help for truck drivers where the driver has no one to help navigate and must drive backwards to the loading bridge. Developing a new kind of snow chain that is simple to install.

Confrontation techniques require a distinct way of thinking aimed at developing new aspects by relating the problem with non related objects. Therefore, some advance training is absolutely necessary. Confrontation techniques are very strong, because when they are applied, the natural creative process is copied and enforced. For example, in a training session, two objects (e.g., a book and a toaster) are chosen. The participants then try to give out ideas about relating these two objects to the problem in any possible way. The moderator at the same time helps the participants by stimulating them to come up with thoughts. In the next step, the individuals attempt to do the same without any help from the moderator. Finally, the group as a whole comes up with even more creative ideas to connect these objects and the problem together. 4.3.2.3 Methods of Systematic Variation The best-known method of systematic variation is the development of a morphological tableau . There are two major steps in this tableau. First, all different elements, sub problems, or sub functions of the problem under investigation are identified (i.e., parameters are set). Second, solutions (options) for each parameter are found. These solutions are then tied together to generate an array of overall solutions. Problems are 111

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

solved by this method in the following way: 1. Describing, discussing, and formulating the problem: The problem definition should be formulated in a more broad setting than the actual problem being worked on. An example: The problem should be “city car,” not “concept of a new car of carmaker X and Y suitable for use in the city”. 2. Collecting and selecting parameters: Make sure that all the problem’s main parameters are covered. These parameters must be independent from each other. It might be practical to write down each parameter on a card. Pin all cards to a pin-board. These cards form the first column of the morphological tableau 3. Searching for alterative options for each parameter: This can be done by means of brainstorming or brainwriting. Be sure that all options are written on cards. 4. Forming the morphological tableau: Pin all options down the line behind the parameters that already form the first column of the tableau on the pinboard. 5. Choosing an optimal combination of options as the best solutions: Each arbitrary combination options can be an overall solution to the problem being investigated. However, considering all possible solutions is not feasible. For example, a simple morphological tableau with seven parameters and five options for each of the seven parameters contains 78.125 possible solutions. Therefore, it is recommended to concentrate on the (at first sight) most interesting and feasible options Finally, the best solution can be selected from this chosen set. Special computer programs (e.g., MOSEL) are available to support the overall solution selection. 6. Interpreting and working out the details for the chosen solutions: Creative efforts are especially required in the final step to further develop the best solutions. 112

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Options for the first two parameters are first two parameters are first looked at. Then, a meaningful combination between two options, one from each parameter, is sought and the two options are then connected with a line. Afterwards, the next row of options is considered until an overall solution (i.e., combination) is reached at the bottom shown.

NOTES

4.3.2.4 Sequential Morphological Analysis: A morphological tableau can become cluttered because the morphological analysis produces an enormous amount of possible solutions. To avoid this, an alternative method, sequential morphological analysis has been developed by Horst Geschka and Helmut Schlicksupp. This analysis uses the following steps: 1.

The morphological tableau is built up as described in the previous section.

2.

The parameters are then ranked on the basis of their impact on the final result.

3.

The two parameters that have the biggest impact are put in a matrix, in which two or three attractive, new, and strong combinations (core solutions) are to be found. These solutions serve as a basis for the further morphological solution development.

4.

The remaining parameters are considered one after the other, in order of ranking. That is, from the options of the third parameter, one option is chosen that fits the core combination best. To this three-element combination, the best-suited option of the fourth parameter is added, and so on. At the end of this procedure, two to three overall solutions to the problem under investigation are available.

The morphological tableau is well-suited for the conceptual phase of new-product development, when the type of new product is already determined but the product concept is still open. The morphological tableau is also helpful for finding new combinations within a given product structure when an innovative change of an existing product is needed or for looking for variants of special application fields. For a morphological tableau to be successfully applied, the concept under investigation absolutely must be divisible in separate components or functions. As a result, products or systems like machines, appliances, and service packages are especially suitable for using a morphological tableau. 113

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Progressive Abstraction: In progressive abstraction, a given problem is discussed and analyzed, and suggestions for its solutions are put forward. The concept here is to look at a complex problem from different levels of abstraction (broadness). “What really matters?” is the key question asked in every stage, whereupon the problem in reconsidered at a higher level of abstraction and possibly reformulated every time. As the problem is viewed from different angles, different approaches to its solutions are produced. Finally, the most effective level at which the problem could be attacked and solved is identified. This method is well suited for analysis problems, where a fundamental insight into the problem structure is needed. Methods of Systematic Confrontation In the discussion of methods of intuitive confrontation, methods that were useful for idea generation were presented. These methods were based on the stimulation of creative thinking by means of unrelated objects or situations presented by words or pictures randomly given to the problem solver. Like methods of intuitive confrontation, methods of systematic confrontation are also based on the stimulation of the idea-generation process by confrontation with different elements. The main difference is that the elements presented are not randomly chosen, but are systematically developed as part of the method. Morphological Matrix: The morphological matrix is a variant of the morphological tableau. The difference between the two is that a morphological matrix has only two parameters, one put on the X axis, and the other on the Y axis. The options that go with each parameter are also put on the corresponding axis. In this way, all single options can be confronted with each other in the fields of the matrix. All important aspects of the problem are systematically brought together and analyzed, and they may stimulate solution ideas, ideally one idea per field of the matrix. To build up a morphological matrix, these steps should be followed. 1. 2.

Determine several independent parameters. Search for options for each parameter and place them in a the matrix along the X axis for one parameter and the Y axis for the other. Construct several matrixes with 114

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

the parameters and try first-idea finding. This test idea generation allows one to judge which matrix (i.e., parameter combination) stimulates the finding of the most original ideas. 3.

Work out the most suitable matrix in more details and check it for completeness.

4.

Work through the matrix field by field.

5.

Think of solutions for the problem under investigation that result from combining these two options. The combinations of two options have to be interpreted very creatively. Even if a combination does not seem feasible at first sight, the confrontation of both options might lead to new innovative ideas after further effort.

NOTES

The morphological matrix is a very effective structuring methods that can be used to approach any new field to be considered for the first time. It can be fixed place in the innovation-planning process and is being used for structuring search fields for new products. It may also be applied in technical areas, again as a first method of structuring before focusing on specific fields. This matrix has been used in the following areas: o o o o

New body care product identification; Gardening tools; Application for a color-recognition device; and Refrigeration at home.

Have you understood? 4.3 (a) How creativity techniques are classified? 4.3 (b) Explain the methods of intuitive association. 4.3 (c) Explain the methods of intuitive confrontation.

115

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

4.4 DEVELOPING AN R&D STRATEGY AND STRENGTHENING R&D ADMINISTRATION Most R&D organizations focus almost completely on selecting, planning, and managing projects and then transferring them to infrastructure is needed – one that increases the probability of a project’s success. Two key elements of the infrastructure of an R&D organization are an R&D strategy and R&D administration. An R&D strategy is important because it helps an R&D organization select projects in terms of a broader perspective rather then just piecemeal. When an R&D strategy, it will more likely select projects that match its technical strengths, the capabilities of its company, and the demands of the marketplace R&D administration encompasses many things – from purchasing instruments for the laboratory to handling grievances with the R&D organization, from determining the pay scales of R&D people to designing the work areas of a laboratory. This discusses three areas of R&D administration : strengthening the technical skills; and determining the number of people in various groups in the R&D organization. The better projects will be planned, managed , and transferred to business operations. 4.4.1 Developing an R&D Strategy: To develop an R&D strategy , an R&D organization first must ensure that certain conditions are in place: 1. 2.

3. 4. 5. 6.

A perception that an R&D strategy can solve a problem. A planning staff within a large R&D organisation or in a small R&D organisation, a strong commitment by the R&D line managers an devote enough effort to doing R&D strategic planning. A way of linking to do strategic marketing. The active support of senior business managers. One or more previous efforts to develop an R&D strategy. A series of concrete efforts that produce tangible results on their own but also allow R&D people to improve R&D strategy

116

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

The perception that an R&D Strategy Can Solve a Problem:

NOTES

Although the idea of developing an R&D strategy may be accepted, usually the development of an R&D strategy will not come about unless an R&D strategy is perceived as solving a problem. That is, the effort that goes into developing an R&D strategy - and the conflicts that may unless an R&D organization needs to have an R&D strategy in order to solve a problem it usually will not make the effort or face the conflict. For example, the head of an R&D organization in a chemical company championed the need to develop an R&D strategy because he was anxious about his R&D organization’s ability to deliver the new business that senior business managers expected from the R&D organization. When this R&D organization’s company had sales of $100 million, this R&D manager was always confident that his R&D organization could develop one new business worth $40 million each year. After the company reached $1 billion in sales, however, this R&D organization was expected to develop four new businesses, each worth $40 million every year. Although this R&D manager was confident that his R&D organization could develop one or two of these new businesses each year, he was not confident that it could develop four of them a year. In addition, at this time the R&D organization was also under pressure to be more productive in its use of R&D resources. For these reasons, therefore, this R&D manager perceived developing an R&D strategy as a way of solving his problem related to what the R&D organization was expected to produce. The R&D manager of a food - processing company recognized the need to develop an R&D strategy for other reasons. To accomplish this task, they recognized that they had to have an R&D strategy to help establish priorities and coordinate the R&D being done on beverages, these R&D managers perceived the need to develop an R&D strategy related to R&D on beverages. In short, while acknowledging the value of an R&D strategy, unless R&D managers perceive that an R&D strategy will solve a problem, an R&D strategy usually will not be developed. The Creation of a Planning Staff: Although line manager within a large R&D organization can develop an R&D strategy, in practice, if there is not a planning staff that facilitates the development of an R&D strategy, these usually will not be one. 117

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

For example, In a natural resources company, there was no R&D strategy for quite a while, because no one was appointed to facilitate the development of an R&D strategy, this R&D organization still does not have an R&D strategy. In contrast, in a pulp and paper company there has been an R&D planning group for eight years. Although this company now has an R&D strategy, it was not easy to develop. The R&D planners ran across two types of problems: analytical and organizational. The analytical problems surfaces when the R&D planners first attempted to facilitate the development of an R&D strategy. They found that there was no accepted methodology for developing an R&D strategy. Although other R&D managers, consultants, and academicians all had their opinions on what is to be done, none of them had a complete picture of the process. In addition, the opinions of these various R&D managers, consultants, and academicians often were in conflict with each other or were irreconcilable. Thus, the R&D planners in this company had to develop their own methodology. The R&D planners also found that members of the R&D staff were not interested in developing an R&D strategy. Because of this, the R&D planners had to spend 70 percent of their time during the first few years persuading the R&D staff to do R&D strategic planning and then educating them with regard to how an R&D strategy can be developed. The experience of these R&D planners are typical. Someone usually has to develop the methodology to be used in doing R&D strategic planning. Someone also has to be the day-to-day champion to R&D strategic planning – or it will not get done. Theoretically, R&D managers in a large R&D organization can handle these responsibilities. In practice, R&D line managers in a large R&D organization normally have so many other responsibilities that they neglect R&D strategic planning. Thus, an R&D planning group usually proves to be necessary to accomplishing R&D strategic planning. In a small R&D organization, on the other hand, R&D line managers are the only ones who can develop an R&D strategy because staff positions usually do not exist. Thus, to get R&D strategic planning done, the R&D line managers in a small R&D organization must add the responsibilities of an R&D planning group to their normal responsibilities. These R&D managers usually will not be able to devote much time to developing a planning methodology. However, because they have responsibility for managing the R&D groups, if 118

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

the R&D managers in a small R&D organization do develop an R&D strategy, they should have less difficulty in getting this strategy accepted and implemented.

NOTES

The Linking of R&D Strategic Planning to R&D Operations To get an R&D staff to develop an R&D strategy, R&D planners (or R&D line managers) must find ways to relate R&D strategic planning to R&D operations. This connection between R&D strategic planning and R&D operation has two aspects. First, R&D staff members must be able to see that their interest can be served through developing an R&D strategy. Thus, R&D planners must find a mechanism that involves R&D strategic planning while serving the interests of the R&D staff. For example, R&D planners at a candy company established a cross disciplinary forum involving a variety of R&D people. One of the purposes of this forum was to get these R&D people to talk with each other. Although they all carried out R&D on chocolate, they seldom interacted. This cross disciplinary forum turned out to be a useful mechanism not only for improving communication, but also for getting R&D strategic planning accepted. Once involved in this cross-disciplinary forum, these R&D people became interested in coordinating their technical activities. However, they lacked a common language to describe their technical activities and an analytical framework through which they could evaluate their various technical activities. With the help of the R&D planners, they learned how to use the tools of R&D strategic planning, which helped them in both areas. Thus, through this mechanism, R&D people not only found a way to coordinate their technical work, but also in the process learned how to do R&D strategic planning. Second, for the R&D strategy to be meaningful, the R&D projects that are actually selected and carried out have to be linked to the strategy. In other words, an R&D strategy is not worth much if it does not affect which R&D projects are selected and carried out. An R&D organization in a household products company addressed this problem by viewing the development of an R&D strategy as involving two phases. During the first phase, the senior R&D managers defined the overall direction of the R&D strategy. During the second phase, middle-level R&D managers defined the specifics of the R&D strategy through the projects they selected and carried out.

119

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

4.4.2 Strengthening R&D Administration: One way in which R&D organizations can strengthen technical skills in house is by recruiting technical people from other industries. For example, the R&D organization of a food processing company gained a great deal by bringing in an engineer from the petrochemical industry. Because this engineer had a different technical perspective on the handling of oils, he was able to develop technical solutions that engineers who had spent their career in food processing could not. At a toy company, an engineer with an extremely varied career in many types of industries, including the machine tool and aerospace industries, has provided valuable help in identifying technologies that can be utilized from other industries. Finally, at a tobacco company, a medical doctor from the health care product industry has provided a totally new perspective on how research might alleviate some of the health problems related to smoking. When R&D organizations do recruit young scientists or engineers, one good practice that they could follow is to recruit them as interns while they are in graduate school. For example, an R&D organization in an electronics company recruits most of its young scientists and engineers in this way. By being able to evaluate in depth the technical skills and work habits of these scientists and engineers before making a commitment, the R&D organization finds that it makes better choices. The organization hires about one-half of these interns permanently. Deciding about Contracting for Technical Skills Outside Because R&D organizations increasingly find that they do not have all of the technical skills that they need in house, many of them are contracting out for the necessary technical skills. R&D organizations follow a variety of strategies with regard to what technical skills they maintain in house and what technical skills they receive from outside. In deciding what strategy to follow R&D organization can consider the following two questions: In which technical areas should the company be able to use skills from any source? And how much should the company control the technical skills that it needs? Although there are a variety of possible ways in which R&D organizations could answer these questions, the actual strategies the R&D organizations formulate fall into roughly four types. 120

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

¾

Strategy 1: The company should have complete control over skills in all technical areas.

¾

Strategy 2: The company should have some control over skills in all technical areas.

¾

Strategy 3: The company should have complete control over skills in the most important technical areas.

¾

Strategy 4: The company should have a little control over skills in all technical areas.

NOTES

Strategy 1: Be Self-sufficient: The basis of this strategy is the belief that all technical knowledge about the company’s products and processes is vitally important and must be kept within in order to maintain the company’s competitiveness. For example, one consumer product R&D organization rarely contracts out for tests concerning safety because competitors may learn important information based on the kinds of tests run by the outside contractors. However, R&D organizations following this strategy do contract out on occasion in areas in which they lack any expertise (e.g., in biotechnology). Strategy 2: Use Strategic Alliances: Under this strategy, R&D organizations work as partners with the outside contractor, rather than have the contractor do all of it. The organizations often perform some of the technical work themselves, in order to deal on an equal basis with the contractor. Many R&D organizations have developed strategic alliances with their suppliers. For instance, many food processing R&D organizations have developed strategic alliances with ingredient manufacturers. One chemical R&D organization has 42 different strategic alliances with outside organizations. Its overall aim in utilizing so many strategic alliances is to bring many new technologies into the company in order to improve its speed and flexibility in developing new products. A health care products company has used strategic alliances with universities and small companies for the purpose of developing technologies that are central to this company’s businesses, but which this company’s R&D organization does not have the technical skills to develop. 121

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Strategy 3: Maintain the Technical Skills at the Highest Level in House Only in Areas That Are Directly Related to Product Development: Companies that follow this strategy between knowledge related to product development, which they consider proprietary, and other technical knowledge, which they consider non proprietary. Although each R&D organization has its own definition of what is non proprietary, some areas of technical knowledge that R&D organizations often consider non proprietary are packaging, manufacturing equipment, toxicology, and safety. Many R&D organizations contract out for analytical studies, especially studies that involve the use of expensive research instruments. Strategy 4: Contract Out Much of the Work: There are some R&D organizations that follow a strategy of contracting out a great deal of their work. For example, one R&D organization, which consists of 25 technical people, has been contracting out much of its work for over 20 years. Another R&D organization, which has 20 technical people, contracts with university professors to do most of its research. As might be expected, many of the R&D organizations that follow this strategy do not pursue an aggressive policy of new product development. The following analogy illustrates and compares these various strategies. Assume a homeowner needs to build and paint an outside deck. The homeowner might have four choices on how to get the job done: the homeowner could build and paint the deck; the homeowner could build and paint the deck with the help of a contractor for specialized building tasks; the homeowner could build the deck, and have a contractor paint it; and a contractor could build and paint the deck. All four ways of getting the deck built and painted could work very well. The choice depends on the handiness of the homeowner, and the amount of time the homeowner has. Homeowners who are extremely handy and have enough time to build and paint a deck should build and paint the deck themselves: Strategy 1. Homeowners who are only fairly handy and have very little time should have the deck built and painted by a contractor; Thus, there is not any best way to have a deck built and painted. This is similar with regard to doing the technical work in house or contracting for it outside. There is not a right answer for all R&D organizations because it depends on an R&D organization’s circumstances and values. 122

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Determining the Number of People in Various Groups in the R&D organization:

NOTES

Two questions are helpful in determining the number of people in various groups in the R&D organization. The first question concerns the right ratio between different groups or personnel within an R&D organization (e.g., between technical support groups and other R&D groups, between technicians and R&D professionals, and between administrative support personnel and R&D personnel). The second question concerns the optimum number of personnel that an R&D manager should supervise. Right Ratio of Groups of Personnel: Questions about the proper ratio between technical support groups and other R&D groups, between technicians and R&D professionals, and between administration support personnel and R&D personnel can only be answered in terms of a particular context. There is not one universal answer. The right-ratio questions are similar to asking “What percentage of their salary should people save? Some individuals will argue for saving 5%, others for saving 10%, and still others for saving 15% of their salary. Who is right? The answer is “No one”. All individuals need to make their own decisions based on their personal circumstances. The same holds for ratios related to various technical groups or personnel. There is no right answer for all R&D organizations. However, what complicates matters related to determining the right ratio between technical groups or personnel is that most R&D managers do not have sufficient knowledge to adequately compare the tradeoffs involved in one ration with the tradeoffs involved in another ratio (e.g., how does a ratio of one analytical support person for four line technical people compare with a ratio of one analytical support person for six line technical people). In reality R&D managers make decision about these matters based mostly on their gut feel. On the whole, R&D managers do not understand well how technical support personnel, technicians, and administrative support personnel work. During their career, R&D managers normally have worked primarily in product development or exploratory R&D not as technicians or technical or administrative support personnel. Therefore, they 123

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

are inclined to err on the side of ensuring that there are enough R&D professionals in product development or in exploratory R&D rather than erring on the side of having enough technical support personnel, technicians, or administration support personnel. Their rationale is that it is easier to contract out for technical support personal, technicians, and administrative support personnel, who usually have less specialized skills, than it is to contact out for R&D professional. However, R&D managers should consider that they, on the whole, do not understand the tradeoffs between various technical groups because they do not understand how those technical groups or personnel work, therefore, how can they know if they have the correct number of R&D professionals in product development or exploratory R&D to maintain the proper ratio? It might be mentioned that R&D managers make decisions about technical support personnel, technicians, and administration support personnel that, on the whole, are not unlike the decisions that senior business managers make about R&D people. Because senior business managers usually do not understand well how R&D people work, they often make decisions about R&D budgets or R&D personnel that are based either on certain arbitrary ratios (e.g., spending on R&D should be a certain percent of sales) or an arbitrary figures (e.g., the maximum number of people in an R&D organization should be such-and-such). Similarly, because R&D managers usually do nor understand well how technical support personnel, technicians, and administrative support personnel work, they also often rely on arbitrary ratios or figures when making decision about the operation of these groups or personnel. Optimum Number of Personnel Whom an R&D Manager Should Supervise. In this area, R&D managers’ knowledge is also inadequate and they often make decisions based on their gut feeling. For example, an R&D manager at one chemical company believes that R&D managers should not supervise more than six technical people, because, if the staff were larger the manager would not be able to know the substance of the staff’s work adequately. At another chemical company, an R&D manager believes that R&D managers can supervise up to 20 to 30 technical people. There is no right answer for all R&D organizations concerning the optimum number of people an R&D managers should supervise. Right answers in this area must be determined, however, not only for an specific R&D organizations by taking into account its situation, but also for each R&D manager within that R&D organization by taking into account his or her particular situations. 124

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

To increase the probability of success of R&D projects, R&D manages should improve the infrastructure of the R&D organization. Specifically, they need (1) to develop an R&D strategy, and (2) to strengthen R&D administration. By doing this, they will also improve how projects are selected, planned and managed, and transferred to business operations – in turn, increasing the probability of success of the R&D projects.

NOTES

4.5 TYPES OF INNOVATION Technological innovations are often categorized into different types such as “radical” versus “incremental.” Different types of innovation require different kinds of underlying knowledge and have different impacts on the industry’s competitors and customers. Four of the dimension most commonly used to categorize innovations are described here: product versus process innovation, radical versus incremental, competence enhancing versus competence destroying, and architectural versus component. 4.5.1 Product Innovation versus Process Innovation Product innovations are embodied in the outputs of an organization – its goods or services. For example, Honda’s development of a new hybrid electric vehicle is a product innovation. Process innovations are innovations in the way an organization conducts its business, such as in the techniques of producing or marketing goods of services. Process innovations are often oriented toward improving the effectiveness or efficiency of production by, for example, reducing defect rates or increasing the quantity that may be produced in a given time. For example, a process innovation at a biotechnology firm might entail developing a genetic algorithm that can quickly search a set of disease-related genes to identify a target for therapeutic intervention. In this instance, the process innovation (the genetic algorithm) can speed up the firm’s ability to develop a product innovation ( a new therapeutic drug). New product innovations and process innovations often occur in tandem. First, new processes may enable the production of new products. For example, as discussed later in the chapter, the development of new metallurgical techniques enabled the development of the bicycle chain, which in turn enable the development of multiple-gear bicycles. Second, new products may enable the development of new processes. For example, the development of advanced workstations has enabled firms to implement computer-aided-manufacturing processes that increase the speed and efficiency of 125

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

production. Finally, a product innovation for one firm may simultaneously be a process innovation for another. For example, when United Parcel Service (UPS) helps a customer develop a more efficient distribution system, the new distribution system is simultaneously a product innovation for UPS and process innovation for its customer. Though product innovations are often more visible than process innovations, both are extremely important to an organization’s ability to compete 4.5.2 Radical Innovation versus Incremental Innovations: One of the primary dimensions used to distinguish types of innovation is the continuum between radical versus incremental innovation. A number of definitions have been posed for radical innovation and incremental innovation, but most hinge on the degree to which an innovation represents a departure from existing practices. Thus radicalness might be conceived as the combination of newness and the degree of differentness. A technology could be new to the world, new to an industry, new to a firm, or new merely to an adopting business unit. A technology could be significantly different from existing products and processes or only marginally different. The most radical innovations would be new to the world and exceptionally different from existing products and processes. The introduction of wireless telecommunication products aptly illustrates this – it embodied significantly new technologies that required new manufacturing and service processes. Incremental innovation is at the other end of the spectrum. An incremental innovation might not be particularly new or exceptional; it might have been previously known to the firm or industry, and involve only a minor change from (or adjustment to) existing practices. For example, changing the configuration of a cell phone from one that has an exposed keyboard to one that has a flip cover or offering a new service plan that enable more free weekend minutes would represent incremental innovation. The radicalness of innovation is also sometimes defined in terms of risk. Since radical innovations often embody new knowledge, producers and customers will vary in their experience and familiarity with the innovation, and in their judgement of its usefulness or reliability. The development of third generation (3G) telephony is illustrative. 3G wireless communication technology utilizes broadband channels. This increases bandwidth and gives mobile phones far greater data transmission capabilities that enable activities such as videoconferencing and accessing the most advanced Internet sites. For companies to develop and offer 3G wireless telecommunications service required a significant investment 126

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

in new networking equipment and an infra structure capable of carrying a much larger bandwidth of signals. It also required developing phones with greater display and memory capabilities, and either increasing the phone’s battery power or increasing the efficiency of the phone’s power utilization. Any of these technologies could potentially pose serious obstacles. It was also unknown to what degree customers would ultimately value broadband capability in a wireless device. Thus, the move to 3G required managers to assess several different risks simultaneously, including technical feasibility, reliability, costs and demand.

NOTES

Finally, the radicalness of an innovation is relative, and may change over time or with respect to different observers. An innovation that was once considered radical may eventually more common. For example, while the first steam engine was a monumental innovation, today its construction seems relatively simple. Furthermore, an innovation that is radical to one firm may seem incremental to another. Although both Kodak and Sony introduced digital cameras for the consumer market within a year of each other (Kodak’s DC40 was introduced in 1995, and Sony’s Cyber-Shot Digital Still Camera was introduced in 1996), the two companies’ paths to the introduction were quire different. Kodak’s historical competencies and reputation were based on its expertise in chemical photography, and thus the transition to digital photography and video required a significant redirection for the firm. Sony, on the other hand, had been an electronics company since its inception, and had a substantial level of expertise in digital recording and graphics before producing a digital camera. Thus, for Sony, a digital camera was a straightforward extension of its existing competencies. 4.5.3 Competence-Enhancing Innovation versus Competence-Destroying Innovation Innovations can also be classified as competence enhancing versus competence destroying. An innovation is considered to be competence enhancing from the perspective of a particular firm if it builds on the firm’s existing knowledge base. For example, each generation of Intel’s microprocessors (e.g., 286, 386, 486, Pentium, Pentium II, Pentium III, Pentium 4) build on the technology underlying the previous generation. Thus, while each generation embodies innovation, these innovation leverage Intel’s existing competencies, making them more valuable. An innovation is considered to be competence destroying from the perspective of a particular firm if the technology does not build on the firm’s existing competencies or 127

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

renders them obsolete. For example, from the 1600s to the early 1970s, no self respecting mathematician or engineer would have been caught without a slide rule. Slide rules are lightweight devices, often constructed of wood, that use logarithm scales to solve complex mathematical functions. They were used to calculate every-thing from the structural properties of a bridge to the range and fuel use of an aircraft. Specially designed slide rules for business had, for example, scales for doing loan calculations or determining optimal purchase quantities. During the 1950s and 1960s, Keuffel & Esser was the preeminent slide-rule maker in the United States, producing 5,000 slide rules a month. However, in the early 1970s, a new innovation relegated the slide rule to collectors and museum displays with in just a few years: the inexpensive handheld calculator. Keuffel & Esser had no background in the electronic components that made electronic calculators possible and was unable to transition to the new technology. But 1973, Keuffel & Esser withdrew from the marker. whereas the inexpensive handheld calculator built on the existing competencies of companies such as Hewlett-Packard and Texas Instruments (and thus for them would be competence enhancing), for Keuffel & Esser, the calculator was a competence destroying innovation. 4.5.4. Architectural Innovation versus Component Innovation Most products and processes are hierarchically nested systems, meaning that at any unit of analysis, the entity is a system of components, and each of those components is, in turn, a system of finer components, until we reach some point at which the components are elementary particles. For example, a bicycle is a system of components such as a frame, wheels, tires, seat, brakes, and so on. Each of those components is also a system of components: the seat might be a system of components that includes a metal and plastic frame, padding, a nylon cover, and so on. An innovation may entail a change to individual components, to the overall architecture within which those components operate, or both. An innovation is considered a component innovation (or modular innovation) if it entails changes to one or more components, but does not significantly affect the overall configuration of the system. In the example above, an innovation in bicycle seat technology (such as the incorporation of gelfilled material for additional cushioning) does not require any changes in the rest of the bicycle architecture. In contrast, an architectural innovation entails changing the overall design of the system or the way that components interact with each other. An innovation that is strictly 128

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

architectural may reconfigure the way that components link together in the system, without changing the components themselves. Most architectural innovation, however, create changes in the system that reverberate throughout its design, requiring changes in the underlying components in addition to changes in the ways those components interact. Architectural innovation often have far-reaching and complex influences on industry competitors and technology users.

NOTES

For example, the transition from the high-wheel bicycle to the safety bicycle was an architectural innovation that required (and enabled) the change of many components of the bicycle and the way in which riders propelled themselves. In the 1800s, bicycles had extremely large front wheels. Because there were no gears, the size of the front wheel directly determined the speed of the bicycle since the circumference of the wheel was the distance that could be traveled in a single rotation of the pedals. However, by the start of the 20th century, improvements in metallurgy had enabled the production of a fine chain and a sprocket that was small enough and light enough for a human to power. This enabled bicycles to be built with two equally sized wheels, while using gears to accomplish the speeds that the large from wheel had enabled. Because smaller wheels meant shorter shock-absorbing spokes, the move to smaller wheels also prompted the development of suspension systems and pneumatic (air-filled) tires. The new bicycles were lighter, cheaper, and more flexible. This architectural innovation led to the rise of companies such as Dunlop (which invented the pneumatic tire) and Raleigh ( which pioneered the three-speed, allsteel bicycle), and transformed the bicycle from a curiosity into a practical transportation device. For a firm to initiate or adopt a component innovation may require that the firm have knowledge only about that component. However, for a firm to initiate or adopt an architectural innovation typically requires that the firm have architectural knowledge about the way components link and integrate to form the whole system. Firms must be able to understand how the attributes of components interact, and how changes in some system features might trigger the need for changes in many other design features of the overall system or the individual components. Though the dimensions described above are useful for exploring key ways that one innovation may differ from another, these dimensions are not independent, nor do they offer a straightforward system for categorizing innovations in a precise and consistent manner. Each of the above dimensions shares relationships with others – for example, 129

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

architectural innovations are often considered more radical and more competence destroying than component innovations. Furthermore, where an innovation lies on the dimension of competence enhancing versus destroying, architectural versus component, or radical versus incremental depends on the time frame and industry context from which it is considered. Thus, while the dimension above are valuable to understand innovation, they should be considered relative for dimensions whose meaning is dependent on the context in which they are used. We now will turn to exploring patterns in technological innovation. Numerous studies of innovation have revealed recurring patterns in how new technologies emerge, evolve, are adopted, and are displaced by other technologies. We begin by examining technology s-curves. 4.5.5 Technology S-Curves Both the rate of a technology’s performance improvement and the rate at which the technology is adopted in the marketplace repeatedly have been shown to conform to an s-shape curve. Though s-curves in technology performance and s-curves in technology diffusion are related (improvements in performance may foster faster adoption, and greater adoption may motivate further investment in improving performance), they are fundamentally different processes. S-curves in technology improvements are described first, followed by s-curves in technology diffusion. This section also explains that despite the allure of using s-curves to predict when new phases of a technology’s life cycle will begin, doing so can be misleading. S-Curves in Technological Improvement Many technologies exhibit an s-curve in their performance improvement over their lifetimes. When a technology’s performance is plotted against the amount of effort and money invested in the technology, it typically shows slow initial improvement, then accelerated improvement, then diminishing improvement. Performance improvement in the early stage of a technology is slow because the fundamentals of the technology are poorly understood. Great effort may be spent exploring different paths of

130

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

NOTES

Limit of Technology

Performance

Effort Improvement. If the technology is very different from previous technologies, there may be no evaluation routines that enable researchers to assess its progress or its potential. Furthermore, until the technology has established a degree of legitimacy, it may be difficult to attract other researchers to participate in its development. However, as scientists or firms gain a deeper understanding of the technology, improvement begins to accelerate. The technology begins to gain legitimacy as a worthwhile endeavor, attracting other developers. Furthermore, measures for assessing the technology are developed, permitting researchers to target their attention toward those activities that reap the greatest improvement per unit of effort, enabling performance to increase rapidly. However, at some point, diminishing returns to effort begin to set in. As the technology begins to reach its inherent limits, the cost of each marginal improvement increases, and the s-curve flattens. Often a technology’s s-curve is plotted with performance (e.g.., speed, capacity, or power) against time, but this must be approached with care. If the effort invested is not constant over time, the resulting s-curve can obscure the true relationship. If effort is relatively constant over time, potting performance against time will result in the same characteristic curve as plotting performance against effort. However, if the amount of effort invested in a technology decreases or increases over time, the resulting curve could appear to flatten much more quickly, or not flatten at all. For instance, one of the more well-known technology trajectories is described by an axiom that became known as Moore’s law. In 1965, Gordon Moore, cofounder of Intel, noted that the density of transistors on integrated circuits had 131

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

doubled every year since the integrated circuit was invented. That rate has since slowed to doubling every 18 months, but the rate of acceleration is still very steep. However, Intel’s rate of investment (research and development dollars per year) has also been increasing rapidly, Not all of Intel’s R&D expense goes directly to improving microprocessor power, but it is reasonable to assume that Intel’s investment specifically in microprocessor power, would exhibit a similar pattern of increase. The big gains in transistor density have come at a big cost in terms of effort invested. Though the curve does not yet resemble the traditional s-curve, its rate of increase is not as sharp as when the curve is plotted against years. Most estimates (including those of Gordon Moore himself) predict that transistor miniaturization will reach its physical limits by about 2017. Technologies do not always get the opportunity to reach their limits; they may be rendered obsolete by new, discontinuous technologies. A new innovation is discontinuous when it fulfils a similar market need, but does so by building on an entirely new knowledge base. For example, the switch from propeller-based planes to jets, from silver-halide (chemical) photography to digital photography, from carbon copying to photocopying, and from vinyl records (or analog cassettes) to compact discs were all technological discontinuities. Initially, the technological discontinuity may have lower performance than the incumbent technology. For instance, once of the earliest automobiles, introduced in 1771 by Nicolas Joseph Cugnot, was never put into commercial production because it was much slower and harder to operate than a horse-drawn carriage. It was three-wheeled, steam-powered, and could travel at 2.3 miles per hour. A number of steam – and gaspowered vehicles were introduced in the 1800s, but it was not until the early 1900s that automobiles began to be produced in quantity. In early stages, effort invested in a new technology may reap lower returns than effort invested in the current technology, and firms are often reluctant to switch. However, if the disruptive technology has a steeper s-curve or an s-curve that increases to a higher performance limit there may come a time when the returns to effort invested in the new technology are much higher than effort invested in the incumbent technology. New firms entering the industry are likely to choose the disruptive technology, and incumbent firms face the difficult choice of trying to extend the life of their current technology or investing in switching to the new technology. If the disruptive technology has much greater performance 132

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

potential for a given amount of effort, in the long run it is likely to displace the incumbent technology, but the rate at which it does so can vary significantly.

NOTES

4.5.5.1. S-Curves in Technology Diffusion S-curves are also often used to describe the diffusion of a technology. Unlike scurves in technology performance, s-curves in technology diffusion are obtained by plotting the cumulative number of adopters of the technology becomes better understood and utilized by the mass market, and eventually the market is saturated so the rate of new adoptions declines. For instance, when electronic calculators were introduced to the market, they were first adopted by the relatively small pool of scientists and engineers. This group had previously used slide rules. Then the calculator began to penetrate the large markets of accountants and commercial users, followed by the still larger market that included students and the general public. After these markets had become saturated, fewer opportunities remained for new adoptions. One rather curious feature of technology diffusion is that it typically takes far more time than information diffusion. For example, Mansfield found that it look 12 years for half the population of potential users to adopt industrial robots, even though these potential users were aware of the significant efficiency advantages the robots offered. If a new technology is a significant improvement over existing solutions, why do some firms shift to it more slowly than others? The answer may lie in the complexity of the knowledge underlying new technologies, and in the development of complementary resources that make those technologies useful. Although some of the knowledge necessary to utilize a new technology might be transmitted through manuals or other documentation, other aspects of knowledge necessary to fully realize the potential of a technology might be built up only through experience. Some of the knowledge about the technology might be tacit and require transmission from person to person through extensive contact. Many potential adopters of a new technology will not adopt it until such knowledge is available to them, despite their awareness of the technology and its potential advantages. Furthermore, many technologies become valuable to a wide range of potential users only after a set of complementary resources are developed for them. For example, while the first electric light was invented in 1809 by Humphry Davy, an English chemist, it did not become practical until the development of bulbs within which the arc of light would be encased (first demonstrated by James Bowman Lindsay in 1835) and vacuum pumps to create a vacuum inside the bulb (the mercury vacuum pump was invented by Herman Sprengel in 1875). These early lightbulbs burned for only a few hours. Thomas Alva Edison 133

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

built on the work of these earlier inventors when, in 1880, he invented filaments that would enable the light to burn for 1,200 hours. Finally, it should be clear that the s-curves of diffusion are in part a function of the s-curves in technology improvement: as technologies are better developed, they become more certain and useful to users, facilitating their adoption. Furthermore, as learning-curve and scale advantages accrue to the technology, the price of finished goods often drops, further accelerating adopting by users. For example, drops in average scales prices for video recorders, compact disc players, and cell phones roughly correspond to their increase in household penetration. S-curves as a Prescriptive Tool Several authors have argued that managers can use the s-curve model as a tool for predicting when a technology will reach its limits an as a prescriptive guide for whether and when the firm should move to a new, more radical technology. Firms can use data on the investment and performance of their own technologies, or data on the over all industry investment in a technology and the average performance achieved by multiple producers. Mangers could then use these curves to assess whether a technology appears to be approaching its limits or to identify new technologies that might be then switch s-curves by acquiring or developing the new technology. However, as a prescriptive tool, the s-curve model has several serious limitations. Limitations of S-curve Model as a Prescriptive Tool First, it is rare that the true limits of a technology are known in advance, and there is often considerable disagreement among firms about what a technology’s limits will be. Second, the shape of a technology’s s-curve is not set in stone. Unexpected changes in the market, component technologies, or complementary technologies can shorten or extend the life cycle of a technology. Furthermore, firms can influence the shape of the s-curve through their development activities. For example, firms can sometimes stretch the s-curve through implementing new development approaches or revamping the architecture design of the technology. Christensen provides an example of this from the disk-drive industry. A disk drive’s capacity is determined by its size multiplied by its area of recording density; thus, density 134

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

has become the most pervasive measure of disk-drive performance. In 1979, IBM had reached what it perceived as a density limit of ferrite-oxide-based disk drives. It abandoned its ferrite-oxide-based disk drives and moved to developing thin-film technology, which had greater potential for increasing density. Hitachi and Fujitsu continued to ride the ferriteoxide s-curve, ultimately achieving densities that were eight times greater than the density that IBM had perceived to be a limit.

NOTES

Finally, whether switching to a new technology will benefit a firm depends on a number of factors, including (a) the advantages offered by the new technology, (b) the new technology’s fit with the firm’s current abilities (and thus the amount of effort that would be required to switch, and the time it would take to develop new competencies), (c) the new technology’s fit with the firm’s position in complementary resources (e.g., a firm may lack key complementary resources, or may earn a significant portion of its revenues from selling products compatible with the incumbent technology), and (d) the expected rate of diffusion of the new technology. Thus, a firm that follows an s-curve model too closely could end up switching technologies earlier or later than it should. 4.5.6 The Diffusion of Innovation and Adopter Categories S-curves in technology diffusion are often explained as a process of different categories of people adopting the technology at different times. One typology of adopter categories that gained prominence was proposed by Everett M. Rogers. Figure shows each of Rogers’s adopter categories on a technology diffusion s-curve. The figure also shows that if the non- cumulative share of each of these adopter groups is plotted on the vertical axis with time on the horizontal axis, the resulting axis with time on the horizontal axis, the resulting curve is typically bell shaped (though in practice it may be skewed right or left). INNOVATORS Innovators are the first individuals to adopt an innovation. Extremely adventurous in their purchasing behavior, they are comfortable with a high degree of complexity and uncertainty. Innovators typically have access to substantial financial resources (and thus can afford the losses incurred in unsuccessful adoption decisions). Though they are not always well integrated into a particular social systems, innovators play an extremely important role in the diffusion of an innovation because they are the individuals who bring 135

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

new ideas into the social system. Rogers estimated that the first 2.5 percent of individuals to adopt a new technology are in this category. EARLY ADOPTERS The second category of adopters is the early adopters. Early adopters are well integrated into their social system and have the greatest potential for opinion leadership. Early adopters are respected by their peers and know that to retain that respect they must make sound innovation adoption decisions. Other potential adopters look to early adopters for information and advice, thus early adopters make excellent missionaries for new products or processes. Rogers estimated that the next 13.5 percent of individuals to adopt an innovation (after innovators) are in this category. EARLY MAJORITY Rogers identifies the next 34 percent of individuals in a social system to adopt a new innovation at the early majority. The early majority adopts innovations slightly before the average member of a social system. They are typically not opinion leaders, but they interact frequently with their peers. LATE MAJORITY The next 34 percent of the individuals in a social system to adopt an innovation are the late majority, according to Rogers. Like the early majority, the late majority constitutes one-third of the individuals in a social system. Those in the late majority approach innovation with a skeptical air and may not adopt the innovation until they feel pressure from their peers. The late majority may have scarce resources, thus making them reluctant to invest in adoption until most of the uncertainty about the innovation has been resolved.

136

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Technology Diffusion S-curve with Adopter Categories S-Curve of 100% Cumulative Adopters 84%

NOTES Laggards Late Majority

50% Early Majority Early Adopters Innovators Innovators

16% 2.5% Time Normal (Bell-Shaped) Curve of Market Share

Innovators

Early

Early

Late

Laggards Adopters

Majority

Majority

34% Share 13.5% 2.5% . Time

137

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

LAGGARDS The last 16 percent of the individuals in a social system to adopt an innovation are termed laggards. They may base their decisions primarily upon past experience rather than influence from the social network, and they possess almost no opinion leadership. They are highly skeptical of innovations and innovators, and they must feel certain that a new innovation will not fail before adopting it. Have you understood? 4.5 (a) How will you develop an R & D strategy? 4.5 (b) How will you strengthen R & D administration? 4.5.7. Stages in Technology Cycles: The s-curve model above suggests that technological change is cyclical: Each new s-curve ushers in an initial period of turbulence, followed by rapid improvement, then diminishing returns, and ultimately is displaced by a new technological discontinuity. The emergence of a new technological discontinuity can overturn the existing competitive structure of an industry, creating new leaders and new losers. Schumpeter called this process creative destruction, and argued that it was the key driver of progress in a capitalist society. Several studies have tried to identify and characterize the stages of the technology cycle in order to better understand why some technologies succeed and other fail, and whether established firms or new firms are more likely to be successful in introducing or adopting a new technology. One technology evolution model that rose to prominence was proposed by Utterback and Abernathy. They observed that a technology passed through distinct phases. In the first phase (what they termed the fluid phase), there was considerable uncertainty about both the technology and its market. Products or services based on the technology might be crude, unreliable, or expensive, but might suit the needs of some market niches. In this phase, firms experiment with different form factors or product features to assess the market response. Eventually, however, producers and customers begin to arrive at some consensus about the desired product attributes, and a dominant design emerges. The dominant design establishes a stable architecture for the technology and enable firms to focus their efforts on process innovations that make production of the 138

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

design more effective and efficient or an incremental innovations to improve components within the architecture. Utterback and Abernathy termed this phase the specific phase because innovations in products, materials, and manufacturing processes are all specific to the dominant design. For example, in the United States the vase majority of energy production is based on the use of fossil fuels (e.g., oil, coal), and the methods of producing energy based on these fuels are well established. On the other hand, technologies that produce energy based on renewal resources (e.g., solar, wind, hydrogen) are still in the fluid phase. Organizations such as Royal Dutch/Shell, General Electric, and Ballard Power are experimenting with various forms of solar photocell technologies, wind-turbine technologies, and hydrogen fuel cells in efforts to find methods of using renewable resources that meet the capacity and cost requirements of serving large populations.

NOTES

Building on the Utterback and Abernathy model, Anderson and Tushman studied the history of the U.S. minicomputer, cement, and glass industries through several cycles of technological change. Like Utterback and Abernathy, Anderson and Tushman found that each technological discontinuity inaugurated a period of turbulence and uncertainty (which they termed the era of ferment). The new technology might offer breakthrough ca[abilities, but there is little agreement about what the major subsystems of the technology should be or how they should be configured together. Thus, while the new technology displaces the old (Anderson and Tushman refer to this as substitution), there is considerable design competition a firms experiment with different forms of the technology. Just as in the Utterback and Abernathy model, Anderson and Tushman found that a dominant design always arose to command the majority of the market share unless the next discontinuity arrived too soon and disrupted the cycle, or several producers patented their own proprietary technologies and refused to license to each other. Anderson and Tushman also found that the dominant design was never in the same form as the original discontinuity, but it was also never on the leading edge of the technology. Instead of maximizing performance on any individual dimension of the technology, the dominant design tended to bundle together a combination of features that best fulfilled the demands of the majority of the market. In the words of Anderson and Tushman, the rise of a dominant design signals the transition from the era of ferment to the era of incremental change. In this era, firms focus on efficiency and market penetration. Firms may attempt to achieve greater market segmentation by offering different models and price points. They may also attempt to lower production costs by simplifying the design or improving the production process. This period of accumulating small improvements may account for the bulk of the technological progress in an industry, and it continues until the next technological discontinuity. 139

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Understanding the knowledge that firms develop during different eras lends insight into why successful firms often resist the transition to a new technology, even if it provides significant advantages. During the era of incremental change, many firms cease to invest in learning about alternative design architectures and instead invest in refining their competencies related to the dominant architecture. Most competition revolves around improving components rather than altering the architecture; thus, companies focus their efforts on developing component knowledge and knowledge related to the document architecture. As firms’ routines and capabilities become more and more wedded to the dominant architecture, the firms become less able to identity and respond to a major architectural innovation. For example, the firm might establish divisions based on the primary components of the architecture ad structure the communication channels between divisions on the basis of how those components interact. In the firm’s effort to absorb and process the vast amount of information available to it, it is likely to establish filters that enable it to identify the information most crucial to its understanding of the existing technology design. As the firm’s expertise, structure, communication channels, and filters all become oriented around maximizing its ability to compete in the existing dominant design, they become barriers to the firm’s recognizing and reacting to a new technology architecture. While many industries appear to conform to this model in which a dominant design emerges, there are exceptions. In some industries, heterogeneity of products and production processes are a primary determinant of value, and thus a dominant design is undesirable. For example, art and cuisine may be example of industries in which there is more pressure to do things differently than to settle upon a standard. 4.6 ORGANISATION CULTURE AND INNOVATION Culture determines a great deal about the behavior of people in an organization and about the overall performance of the organization. In fact, culture has been shown to strongly correlate with the financial performance of an organization over an extended period of time. In one study, firms with cultures that emphasized all the key managerial constituencies and leadership from managers at all levels outperformed firms that did not have those traits. Over an 11-year period, they outperformed their comparison group in revenues, growth of work force, stock price, and net income. Because culture can have such a major impact on an organization, technology managers cannot ignore it as a factor in the success of their organizations. For most 140

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

technology managers, the key to that success is innovation. Dozens, of US organizations in a variety of industries and sizes were analyzed to try to identify the major factors in the culture that support and encourage innovation. This analysis has been by observation, interviews, and discussion and has led to conclusions regarding what needs to exist in a culture that supports innovation.

NOTES

High Energy A culture that supports innovation is first a culture of high energy where people are busy, active, and involved in what they do. They walk through the halls gesturing, talking, engrossed in what they are talking about with the people they are walking with. In the cafeteria and around the coffee pots and water fountains, people are rarely alone; instead they are usually talking to others, again actively involved in discussing projects, work, and ideas. There is a high degree of electricity and energy in the air. Pragmatic The second characteristic of the culture is that it is pragmatic, utilitarian, highly functional and work focused. Everything has a functional purpose. There are not a lot of fancy pictures or decorative plants. Desks and workspaces are crammed with papers, and halls are filled with copy machines, file cabinets, and lab equipment. The conference rooms are bare except for the essential video equipment. The cafeterias reflect the pragmatic, utilitarian air – get your food, concentrate on what needs to be done, and then get back to work. However, it is not at all an unpleasant environment; it is an environment that shuns the amenities and the fanciness of the more traditional, corporate setting. People are there to work, and there are few distractions. Thoughtful and Serious People in a culture that encourages innovation are typically quite thoughtful and serious. In such an organization, people are not compelled to be constantly talking and meeting with one another. There is ample time for people to sit at their desks, and they generally use this desk time to think, contemplate, and plan their experiments or projects.

141

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Informal and Idiosyncratic Another striking characteristic about these cultures is that they are informal and idiosyncratic. There are no dress rules or dress code. Some people come to the office in ties, jackets, and white scratched shirts; others come to the office in much more casual attire. The offices were also idiosyncratic, very much reflecting the individual personalities of the people in them. One office could be more formal and very neat and tidy with tasteful artwork and lighting. The office next door might be a madhouse, with papers and journals all over the floor and papers piled high on the desk. This idiosyncrasy was also reflected in the very wide latitude of acceptable behavior. For example, some socialized outside of work, others did not. Some always broke for lunch, other never stopped for lunch, and others used their lunch hour to go jogging. Unpretentious Finally, in a culture that supports innovation, the physical environment is completely unpretentious. The surroundings are tasteful, cheerful and colorful, but there is not any grand testimony to corporate wealth with expensive works of art or grandiosity of scale. The entrances are plain and functional. Public area and offices do not have fancy rugs or furniture. The buildings themselves do not resemble castles, nor are they on grand estates. They are designed for the work to be done. VALUES AND PHILOSOPHY A second major aspect of a company culture is the values and philosophy of the organization. Four key dimensions are very useful in terms of understanding this aspect of organizational culture: how the organization values ideas, individuals, goals, and authority. How organizations deal with these four dimensions seems to give them a unique position in the universe of organizational culture. The following sections address what it is about each dimension that support innovation. Honor Ideas Ideas are honored in organizations that foster innovation. In this type of environment, ideas from every source and from every level – experts or non experts – are considered. People do not judge the source of the idea before they listen to the idea. In addition, testing 142

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

and questioning of someone else’s ideas are key ingredients to success. Testing is viewed as a sign of respect – that is, the idea is worth the time to be tested, questioned, and though about.

NOTES

Honoring ideas is also supported by the assumption that new ideas are essential to reaching the organization’s goals. People in this culture know that the current ways of doing things – the practices of the past – will not allow them to achieve those goals. New ideas are essential. There is also an appreciation for the need to balance the time spent thinking, coordinating, and doing. People who spend all their time doing or coordinating feel remiss about not having time to think. Honoring ideas is reflected in the value placed on new ideas and the willingness to listen to and work with them. Respect Individuals The next dimension is how individuals are valued. In organizations where innovation is high, the culture fosters respect for individuals. This ties to the informality and the acceptance of people’s idiosyncratic behavior. One of the underlying assumption is that individuals, throughout the organization, are the source of ideas and energy that will fuel organizational performance. Individuals – not system, leaders in positions of great power, or crafty reengineering or acquisition deals – are viewed as being responsible for the organization’s success. There is also an assumption that individuals are capable of great things, and that they are fully capable of being self-sufficient, taking initiative, taking responsibility, and understanding where they need to change in order to keep things on track. Hence, there is a heavy reliance on personal responsibility, personal initiative, and accountability in these organizations. The message is that great people make great organizations, not vice versa. The organization will only be as great as the individuals inside of it allow it to be. For this to exist, it must be understood that individuals have a right to their own goals, ambitions, and ways of doing their work. Conformity and consensus are not valued; individuality is. As a result, individuals are treated with care in these organizations, because they are the lifeblood and the success of the organization. There are nor fits and spurts of reorganizations. In addition, mindless outsourcing and people assigned to teams and task forces just for the sake of having teams and task forces do not occur. The virtual organization is viewed with skepticism. It is seen as an organization that cannot fully respect its members because they become contracts. Nor is the innovative organization paternalistic. It allows 143

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

lots of freedom and rewards performance. Behind all of this is an inherent trust in the ability and motivation of the people throughout the organization. Reverse Goals The third element of this culture analysis is how the organization values goals. In innovative organizations, goals are absolutely revered; they are clear, and they are compelling. Goals – not the climate, not the compensation, and not office politics – are regarded as the single most important drivers for the work in the organization. It is the high, compelling goals and the organization’s commitment to them that contribute more than anything else to the level of innovative activity. The underlying assumption is that setting and achieving high goals is the most important activity the senior managers of the organization can do, and that communicating and reinforcing these goals needs to occur daily. Relationships, when they’re formed, are formed around the projects and tasks necessary to achieve the goals. Organizational structure is therefore highly fluid. People have little regard for organizational charts. When the goal is achieved, the assumption is that relationships will be amended so that new and different relationships can be formed to deal with the next challenge. Management is expected not to interfere unless the person or group requests help or is in trouble moving towards the goals. Consistent with this is that problems, if they are identified, are expected to be dealt with and resolved immediately. They are not pushed under the carpet, nor are people blamed for them. It is expected that problems will be flagged at once and tackled immediately. If this does not occur, the problem gets serious attention from senior management. Seniority, loyalty, and rank are all considered quite secondary in terms of the person’s assignment. What is most important is the person’s expertise and experience relevant to the goal at hand. According value to position and rank at the expense of expertise and experience is in complete conflict with innovation, which is by definition a break from the past. Finally, commitments to achieving goals are seen as paramount. They are more important than any other commitment that the person makes. The commitments to goals supersede commitments made regarding other matters that may not revolve around the 144

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

goal-directed work of the organizational development off-sires or training activities are left up to the discretion of the individual.

NOTES

It is the commitments to achieve the goals that gets the superordinate commitment. All other aspects are expected to be in service to the goals. It should be noted, however, that this can get overzealously interpreted as each person focused slowly on their personal goals or projects. A section in the next chapter discusses how to avoid this. Tolerate Authority To support innovation, authority is tolerated. The word authority – not leadership – is specifically used here. They are different. Authority is imbued in a position or rank. Leadership is a type of behavior. Authority in these organizations is not readily embraced or seen to have all the answers; it is simply tolerated – that is, it is accorded what it earns. Throughout the organization, logical reasoning is regarded more highly than the voice of authority. The voice of expertise outweighs all voice of authority. Authority is accepted where it can be useful and not where it cannot be. Authority in such a culture does not come from position, status, or rank; it comes from the ability to contribute to solving the problem. The underlying assumptions of organizations that are bale to foster this culture are that new ideas, testing, and questioning are more important than dictates from senior management. Senior management set the targets, and the people are expected to achieve them. Hence, the best direction and source of correction when there are mistakes comes from the person doing the work, not from above. Senior leaders are seen to serve at the will of the people, not vice versa. There is a humility at the senior levels that makes them more approachable and evokes more respect and commitment. It is assumed that knowledgeable people who can contribute will thrive on questions, challenges, and learning. The experts are not express because of their position; they are experts because they can learn, challenge, question, and grow, starting with themselves. This is a very different veil of authority than is traditional in most organizations. There, the pyramid dominates, where authority, position, rank, and status carry weight in making decisions and solving problems. To foster innovation, this kind of authority, at best, can be tolerated, but never blindly obeyed. Where innovation occurs most is where the people in the organization understand it is their energy and ideas that will lead to achieving high goals and then to satisfying and fulfilling careers. It is the opposite of entitlements; individuals 145

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

know it is up to them to get the job done. They do not wait to be empowered, which would essentially give up the power to act to someone else. This is a very difficult kind of organization to lead. The traditional basis for leadership tends to be status, rank, and control over information and resources. These bases are not tolerated in this type of culture. The new basis is one of honoring ideas, respecting individuals, revering goals, and taking one’s own authority with the proverbial grain of salt. Market leader in 1996: Industry

Market leader

Innovation new product

Aerospace

Boeing

Passenger aircraft

Pharmaceuticals

Glaxo-Smithkilne

Ulcer treatment drug

Motor cars

Mercedes, Ford

Car design and associated Product development

Computers

Intel IBM Microsoft

Computer chip technology, computer hardware improvements and software developments respectively

Nineteenth-century economic development fuelled by technology: Innovation

Innovator

Year

Steam engine

James Watt

1770-80

Iron boat

Isambard Kingdom Brunel

1820-45

Locomotive

George Stephenson

1829

Electromagnetic induction dynamo

Michael Faraday

1830-40

Electric light bulb

Thomas Edison and Joseph swan

1879-90

146

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Innovation and Invention

NOTES

Many people confuse these terms. Indeed, if you were to ask people for an explanation you would collect a diverse range of definitions. It is true that innovation is the first cousin of invention, but they are not identical twins that can be interchanged. Hence, it is important to establish clear meanings for them. Innovation itself is a very broad concept that can be understood in a variety of ways. One of the more comprehensive definitions is offered by Myers and Marquis (1969): Innovation is not a single action but a total process of interrelated sub processes. It is not just the conception of a new idea, not the invention of a new device, nor the development of a new market. The process is all these things acting in an integrated fashion.

It is important to clarify the use of the term ‘new’ in the concept of innovation. Rogers and Shoemaker (1972) do this eloquently: It matters little, as far as human behavior is concerned, whether or not an idea is ‘objectively’ new as measured by the lapse of time since its first use or discovery …If the idea seems new and different to the individual, it is an innovation. 147

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Most writers, including those above, distinguish innovation from invention by suggesting that innovation is concerned with the commercial and practical application of ideas or inventions. Invention, then, is the conception of the idea, whereas innovation is the subsequent translation of the invention into the economy (US Dept of Commerce, 1967). The following simple question helps to show the relationship between the two terms. Innovation = Theoretical conception + technical invention + commercial exploitation However, all the terms in this equation will need explanation in order to avoid confusion. The conception of new ideas is the starting point for innovation. A new idea by itself, while interesting, is neither an invention nor an innovation, it is merely a concept or a thought or collection of thoughts. The process of converting intellectual thoughts into a tangible new artifact (usually a product or process) is an invention. This is where science and technology usually play a significant role. At this stage inventions need to be combined with hard work by many different people to convert them into products that will improve company performance. These later activities represent exploitation. However, it is the complete process that represents innovation. This introduces the notion that innovation is a process with a number of distinctive features that have to be managed. To summarise, then, innovation depends on inventions but inventions need to be harnessed to commercial activities before they can contribute to the growth of an organisation. Thus: Innovation is the management of all the activities involved in the process of idea generation, technology department, manufacturing and marketing of a new (or improved) product or manufacturing process or equipment. This definition of innovation as a management process also offers a distinction between an innovation and a product, the latter being the output of innovation. The following illustration will clarify the difference. An example of an invention Scientists and development engineers at a household cleaning products company had been working for many months on developing a new lavatory cleaning product. They had developed a liquid that when sprayed into the toilet pan, on contact with water, would fizz and sparkle. The effect was to give the impression of a tough, active cleaning product. 148

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

The company applied for a patent and further developments and market research were planned.

NOTES

However, initial results both from technical and market specialists led to the abandonment of the project. The preliminary market feedback suggested a fear of such a product on the part of consumers. This was because the fizz and sparkle looked too dramatic and frightening. Furthermore, additional technical research revealed a short shelf life for the mixture. This is a clear example of an invention that did not progress beyond the organisation to a commercial product. It is a necessary at this point to cross-reference these discussions with the practical realities of managing a business today. The senior vicepresident for research and development at 3M, one of the most highly respected and innovative organizations, recently defined innovation as: Creativity: the thinking of novel and appropriate ideas. Innovation: the successful implementation of those ideas within an organization. Successful and unsuccessful innovations There is often a great deal of confusion surrounding innovations that are not commercially successful. A famous example would be the Sinclair C5. This was a small, electrically driver tricycle or car. Unfortunately for Clive Sinclair, the individual behind the development of the product, it was not commercially successful. Using the definition above, the fact that the product though passed from the drawing board and into the marketplace makes it an innovation – albeit an unsuccessful one. 4.6.1 Modes of Innovation Traditional arguments about innovation have centred on two schools of thought. On one hand, the social deterministic school argued that innovations were the result of a combination of external social factors and influences, such as demographic changes, economic influences and cultural changes. The argument was that when the conditions were ‘right’, innovations would occur. On the other hand, the individualistic school argued that innovations were the result of unique individual talents and such innovators are born. Closely linked to the individualistic theory is the important role played by serendipity.

149

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Serendipity Many studies of historical cases of innovation have highlighted the important of the unexpected discovery. The role of serendipity or luck is offered as an explanation. This view is also reinforced in the popular media. It is, after all, every one’s dream that they will accidentally uncover a major new invention leading to fame and fortune. On closer inspection of these historical cases, serendipity is rare indeed. After all, in order to recognise the significance of an advance, one would need to have some prior knowledge in that area. Most discoveries are the result of people who have had a fascination with a particular area of science or technology and it is following extended efforts on their part that advances are made. Discoveries may not be expected, but in the words of Louis Pasteur, ‘chance favours the prepared mind’. It was US economists after the Second World War who championed the linear model of science and innovation. Since then, largely because of its simplicity, this model has taken a firm grip on people’s views on how innovation occurs. Indeed, it dominated science and industrial policy for 40 years. It was only later that management schools around the world seriously began to challenge the sequential linear process. The recognition that innovation occurs through the interaction of the science base (dominated by universities and industry), technological development (dominated by industry) and the needs of the market was a significant step forward. The explanation of the interaction of these activities forms the basis of models of innovation today. There is, of course, a great deal of debate and disagreement about precisely what activities influence innovation and, more importantly, the internal processes that affect a company’s ability to innovate. Nonetheless, there is broad agreement that it is the linkages between these key components that will produce successful innovation. Importantly, the devil is in the detail. From a European perspective an area that requires particular attention is the linkage between the science base and technological development. The European Union (EU) believes that European universities have not established effective links with industry, whereas in the USA universities have been working closely with industry for many years.

150

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

As explained above, the innovation process has traditionally been viewed as a sequence of separable stages or activities. There are two basic variations of this model for product innovation. First, there is the technology-driven model (often referred to as ‘technology push’) where it is assumed that scientist make unexpected discoveries, technologists apply them to develop product ideas and engineers and designers turn them into prototypes for testing. It is left to manufacturing to device ways of producing the products efficiently. Finally, marketing and sales will promote the product to the potential consumer. In this model the marketplace was a passive recipient for the fruits of R&D. This technology-push model dominated industrial policy after the Second World War. While this model of innovation can be applied to a few cases, most notably the pharmaceutical industry, it is not applicable in many other instance; in particular where the innovation process follows a different route.

NOTES

It was not until the 1970s that new studies of actual innovations suggested that the role of the marketplace was influential in the innovation process. This led to the second linear model, the ‘market-pull’ model of innovation. The customer need-driven model emphasises the role of marketing as an initiator of new ideas resulting from close interactions with customers. These, in turn, are conveyed to R&D for design and engineering and then to manufacturing for production. Whether innovations are stimulated by technology, customer need, manufacturing a host of other factors, including competition, misses the point. The model above concentrate on what is driving the downstream efforts rather than on how innovations occur. The linear model is only able to offer an explanation where the initial stimulus for innovation was born, that is, where the trigger for the idea or need was initiated. The simultaneous coupling model shown in Figure suggests that it is the result of the simultaneous coupling of the knowledge within all three functions that will foster innovation. Furthermost, the point of commencement for innovation is not known in advance.

151

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Interactive Model The interactive model develops this idea further and links together the technologypush and market-pull models. It emphasis that innovations occur as the result of the interaction of the marketplace, the science base and the organisation’s capabilities. Like the coupling model, there is no explicit starting point. The use of information flows is used to explain how innovations transpire and that they can arise from a wide variety of points. While still oversimplified, this is a more comprehensive representation of the innovation process. It can be regarded as a logically sequential, though not necessarily continuous, process that can be divided into a series of functionally distinct but interacting and interdependent stages (Rothwell and Zegveld,1985). The overall innovation process can be thought of as a complex set of communication paths over which knowledge is transferred. These paths include internal and external linkages. The innovation process outlined in Figure represents the organisation’s capabilities and its linkages with both the marketplace and the science base. Organisations that are able to manage this process effectively will be successful at innovation. 152

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

At the centre of the model are the organisational functions of R&D, engineering and design, manufacturing and marketing and sales. While at first this may appear to be a linear model, the flow of communication is not necessarily linear. There is provision for feedback. Also, linkages with the science base and the marketplace occur between all functions, not just with R&D or marketing. For example, as often happens, it may be the manufacturing function which initiates a design improvement that leads to the introduction of either a different material or the eventual development by R&D of a new material. Finally, the generation of ideas is shown to be dependent on inputs from three basic components organisation capabilities; the needs of the marketplace; the science and technology base.

NOTES

The chronological development of models of innovation Date 1950/60s

Model Technology Push

Characteristics Simple linear sequential process. Emphasis on R&D. The market is a recipient of the fruits of R&D

1970s

Market Pull

Simple linear sequential process. Emphasis on marketing. The market is the source for directing R&D. R&D has a reactive role.

1980s

Coupling Model

Emphasis on integrating R&D and marketing

1980/90s

Interactive Model

Combinations of push and pull.

2000

Network Model

Emphasis on external linkages

The above table summarises the historical development of the dominant models of the industrial innovation process. 4.6.2 Innovation as a management process The preceding sections have revealed that innovation is not a singular event, but a series of activities that are linked in some way to the others. This may be described as a process and involves (Kelly and Kranzberg, 1978):

153

ANNA UNIVERSITY CHENNAI

DBA 1732

1.

A response to either a need or an opportunity that is context dependent

2.

A creative effort that if successful, results in the introduction of novelty

3.

The need for further changes.

Usually in trying to capture this complex process the simplification has led to misunderstandings. The simple linear model of innovation can be applied to only a few innovations and is more applicable to certain industries than others. Other industries, like the food industry, are better represented by the market-pull model. For most industries and organisations innovations are the result of a mixture of the two. Managers working within these organisations have the difficult task of trying to manage this complex process. 4.6.3. A framework for the management of innovation Industrial innovation and new product development have evolved considerably from their early beginnings outlined above. However, establishing departmental functions to perform the main tasks of business strategy, R&D, manufacturing and marketing does not solve the firm’s problems. Indeed, as we have seen, innovation is extremely complex and involves the effective management of a variety of different activities. It is precisely how the process is managed that needs to be examined.

Organisation and business strategy

Organi sation’s Knowledge base Accumulates k nowledge over ti me

s Re rch ea te

tin g

d an y l og no ch

Ma rke

NOTES

154

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

A framework is presented in Figure that helps to innovation as a management process. This is simply an aid in describing the main factors which need to be considered if innovation of the functions inside the organisation are important, so too are the interactions of those functions with the external environment. Scientists and engineers within the firm will be continually interacting with fellow scientists in universities and other firms about scientific and technological developments. Similarly, the marketing function will need to interact with suppliers, distributors, customers and competitors to ensure that the day-today activities of understanding customer needs and getting products to customers are achieved. Business planners and senior management will likewise communicate with a wide variety of firms and other external institutions, such as government departments, suppliers and customers. All these information flows contribute to the wealth of knowledge held by the organisation. Recognising this, capturing and utilizing it to develop successful new products forms the difficult management process of innovation.

NOTES

Within any organisation there are likely to be many different functions. Depending on the nature of the business, some functions will be more influential than others. The framework shown in Figure identifies three main functions: marketing, research and manufacturing and business planning. Historical studies have identified these functions as the most influential in the innovation process. Whether one lists three or seven functions misses the point, which is that it is the interaction of these internal functions and the flow of knowledge between them that needs to be facilitated. Similarly, as shown on the framework, effective communication with the external environment also requires encouragement and support. The need to share and exchange knowledge The framework in Figure emphasis the importance placed on interaction (both formal and informal) within the innovation process. Indeed, innovation has been described as an informal-creation process that arises out of social interaction. In effect, the firm provides a structure within which the creative process is located. These interactions provide the opportunity for thoughts, potential ideas and views to be shared and exchanged. However, we are often unable to explain what we normally do; we can be competent without being able to offer a theoretical account of our actions (Polanyi, 1966). This is referred to as ‘tacit knowledge’. A great deal of technical skill is knowhow and much industrial innovation occurs through on-the-spot experiments, a kind 155

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

of action-oriented research with ad hoc modifications during step-by-step processes, through which existing repertoires are extended. Such knowledge can only be learned through practice and experience. This view has recently found support from a study of Japanese firms (Nonaka, 1991) where the creation of new knowledge within an organisation depends on tapping the tacit and often highly subjective insights, intuitions and hunches of individual employees and making insights available for testing and use by the organisation as a whole. This implies that certain knowledge and skills, embodied in the term ‘knowhow’, are not easily understood; moreover they are less able to be communicated. This would suggest that to gain access to such knowledge one may have to be practicing in this or related areas of knowledge. Cohen and Levinthal (1990) refer to this condition as ‘lockout’, suggesting that failure to invest in research and technology will limit an organisation’s ability to capture technological opportunities; ‘once off the technological escalator it’s difficult to get back on’. In addition to informal interactions, the importance of formal interactions is also highlighted. There is a substantial amount of research stressing the need for a ‘shared language’ within organisations to facilitate internal communication (Allen, 1977; Tushamn, 1978). The arguments are presented along the following lines. If all actors in the organisation share the same specialized language, they will be effective in their communication. Hence, there needs to be an overlap of knowledge in order for communication to occur. Such arguments have led to developments in cross-functional interfaces, for example between R&D, design, manufacturing and marketing Concurrent engineering is an extension of this; in this particular case a small team consisting of a member from each of the various functional departments manages the design, development, manufacture and marketing of a product. Such thinking is captured in the framework outlined in Figure. It stresses the importance of interaction and communication within and between functions and with the external environment. This networking structure allows lateral communications helping mangers and their staff unleash creativity. This framework emphasises the importance of informal and formal networking across all functions. This introduces a tension between the need for diversity, on the one hand, in order to generate novel linkages and associations, and the need for commonality, on the other, to facilitate effective internal communication. Clearly, there will be an organisational trade-off between diversity and commonality of knowledge across individuals.

156

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Introducing organisational heritage

NOTES

Finally, the centre of the framework is represented as organisational heritage, sometimes referred to as the organisational knowledge base. This does not mean the culture of the organisation. It represents a combination of the organisation’s knowledge base (established and built up over the years of operating) and the organisation’s unique architecture. This organisational heritage represents for many firms a powerful competitive advantage that enables them to compete with other firms. For Marks & Spencer it is its customer service and customer relations, developed and built up over decades, that provides the company with a powerful competitive advantage. ICI’s organisational heritage is dominated by its continual investment over almost a hundred years in science and technology and the high profile given to science and technology within its businesses. For Unilever, its organisational heritage can be said to lie in its brand management skills and knowhow developed over many years. These heritages cannot be ignored or dismissed as irrelevant when trying to understand how companies manage their innovative effort. This framework will be used as a navigational map to help through this complex field of study. Very often product innovation is viewed from purely a marketing perspective with little, if any, consideration of the R&D functions and the difficulties of managing science and technology. Likewise, many manufacturing and technology approaches to product innovation have previously not taken sufficient notice of the needs of the customer. Finally, the organisational heritage of the firm will influence its future decisions regarding the markets in which it will operate. The point here is that firms do not have a completely free choice. What they do in the future will depend to some extent on what they have done in the past. The 2001 Innovation Scoreboard The Innovation Scoreboard is designed to complement the structural indicators. These are things like education systems, financial systems for raising capital, level of employment, etc., which the EU Commission currently assesses through other mechanisms and statistical analysis. To minimize the additional statistical burden, the Innovation Scoreboard mainly uses official Eurostat Data if official data is not available. It analyses statistical data on 17 indicators in four areas, depicts achievements, trends and highlights strengths and weaknesses and examines the extent of convergence in innovation. The four key areas are as follows:

157

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

1 Knowledge creation The three indicators used for the creation of new knowledge are: public R&D expenditure, business R&D expenditure and patenting activity. 2 Human resources The scale an quality of human resources are major determinants of both the creation of new knowledge and its use throughout the economy. The indicators used are the education of scientists and engineers, the skill level of the working age population and a measure of a life-long learning. In addition employment indicators are used such as the share of the workforce in technology-intensive industries. 3 Transmission and application of new knowledge This area covers the activities outside formal innovation. It is more concerned with the extent of adoption and use of new technology and knowledge. The indicators on inhouse innovation and cooperative innovation are limited to Small and Medium Enterprises. These, however, provide a better picture of innovation within small and medium-sized firms than R&D expenditure which is more prevalent among large firms. Moreover, SMEs form the majority of firms in most countries and play a vital role in innovation; linking public and large firm research to practical applications within industrial settings. 4 Innovation finance, output and markets This group includes indicators that cover the supply of finance to industry. For the EU as a whole analysis of changes over the past four years shows improvements in many areas and importantly in some areas countries within the EU lead the world, indicating that there is potential for member states to learn and replicate best practise. It is this idea of learning from other member countries that lies at the heart of the unique policy approach being applied to the coordination of improving innovative performance within the EU. The so-called ‘open-method’ approach to coordination is different from the usual EU policies which are based on establishing targets that all EU countries have to achieve over a period of time. For example, the EU has a policy on clean bathing water within the EU, and all countries have been targets to bring their bathing 158

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

water to the required standard. Depending on the initial state of cleanliness, countries have been given time-scales within which they must achieve these targets or face the risk of fines. The innovation policy, however, required a different approach and the ‘open method of coordination’ was developed. This is based on the premise that countries will progressively develop their won policies by spreading best practice.

NOTES

4.6.4 Waves of innovation – An overview: When we investigate the history of capitalist development, there is a pattern of economic growth. The work of Kondratieff and Schumpeter have been influential in identifying the major stages of this development. The five sages, or growth cycles are identified. This highlights that technological developments and innovations. Have a strong spatial dimension; however, leadership in one wave is not necessarily maintained in the succeeding waves. So one can observe shifts in the geography of innovation through time. The leaders of the first wave were Britain, France and Belgium. The second wave brought new players into the game, namely the USA and Germany. Wave three saw the strengthening of the positions of the USA and Germany. In wave four, Japan and Sweden joined the technology and innovation race. And recently, in Wave five, Taiwan and South Korea are becoming key players in the global economy. In these Kondratieff waves, the capitalist economy grew on the basis of major innovations in product, process and organisation with accompanying shifts in the social area. Kuhn’s theory on the nature of scientific revolutions has been justified: each wave comes to an end due to its major shortcomings and the successive wave fundamentally restructures and improves those weaknesses. Each major phase of innovation produced a ‘star’ industry or industry branch, which seemed to affect the way the economy was organised. The leap forward provided by such industries resulted in a major transformation of the economy and economic relations – given that other factors such as demand, finance, industrial and social conditions were favourable. Products, processes, and organisations created by technological development became universal and cheaply available to a vast population, which, in turn, created the economic shift. These Kondratieff waves took place in the order of early mechanization, steam power and railways, electrical and heavy engineering, ‘Fordism’, and information and communication. The last of these waves is currently underway with what is now termed the information revolution. Almost every day we are presented with a number of ‘new’ ways in which we can do business, we can 159

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

search for information, communicate and socialize with other people or carry out our bank operations. This means that the new developments deeply affect not only economic relations but also out private (home and relations) and work (public) spheres. In the very first Kondratieff wave, the rise of the factory and mechanisation in textiles was only part of the story. The need to produce in larger numbers to start serving the growing overseas markets with better ways of transportation available was complemented by the abundance of finance with the money flowing in from colonies, particularly the USA. Universally and cheaply available input (i.e. cotton), improving nation-wide transport infrastructure (with rising investment into canals and roads by landlords), the advent of the so-called adventures (now widely recognised as entrepreneurs), pools of labour available for employment in some local markets, the growing education infrastructure, the role played by academic and scientific societies, and the attitude of the state towards manufacturing interests were the other complementary factors affecting change.

160

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

NOTES

Characteristics of the five waves of growth 4.6.5 Facilitators for innovation process The innovation process, is of very complex nature. Innovation has to be viewed in the context of the organisation. The main organisational characteristics that are continually identified as necessary for successful innovation are explained here.

161

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Growth orientation: It is sometimes surprising to learn that not all companies’ first and foremost objective is growth. Some companies are established merely to exploit a short-term opportunity. Other companies, particularly family-run ones, would like to maintain the company at its existing size. At that size the family can manage the operation without having to employ outside help. Companies that are innovative are those companies whose objective is to grow the business. This does not imply that they make large profits one year then huge losses the next, but they actively plan for the long term. There are many companies who make this explicit in their annual reports, companies such as ICI, BMW, Siemens and Microsoft. Vigilance: Vigilance requires continual external scanning, not just by senior management but also by all other members of the organisation. Part of this activity many be formalized. For example, within the marketing function the activity would form part of market research and competitor analysis. Within the research and development department scientists and engineers will spend a large amount of their time reading the scientific literature in order to keep up to date with the latest developments in their field. In other functions it may not be as formalized but it still needs to occur. Collecting valuable information is one thing, but relaying it to the necessary individuals and acting on it are two necessary associated requirements. An open communication system will help to facilitate this. Commitment to technology Most innovative firms exhibit patience in permitting ideas to germinate and develop over time. This also needs to be accompanied by a commitment to resources in terms of intellectual input from science, technology and engineering. Those ideas that look most promising will require further investment. Without this long-term approach it would be extremely difficult for the company to attract good scientist. Similarly, a climate that invests in technology development one year then decides to cut investment the next will alienate the same people in which the company encourages creativity. Such a disruptive environment does not foster creativity and will probably cause many creative people to search for a more suitable company with a stronger commitment to technology.

162

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Acceptance of risks

NOTES

Accepting risks does not mean a willingness to gamble. It means the willingness to consider carefully risky opportunities. It also includes the ability to make risk-assessment decisions, to take calculated risks and to include them in a balanced portfolio of projects, some of which will have a low element of risk and some a high degree of risk. Cross-functional cooperation Inter-departmental conflict is a well-documented barrier to innovation. The relationship between the marketing and R&D functions has received a great deal of attention in the research literature. But generally this is because the two groups often have very different interests. Scientists and technologists can be fascinated by new technology and may sometimes lose sight of the business objective. Similarly, the marketing function often fails to understand the technology involved in the development of the new product. Research has shown that the presence of some conflict is desirable, probably acting as a motivational force (Sounder, 1987). It is the ability to confront and resolve frustration and conflict that is required. Receptivity The capability of the organisation to be aware of, identify and take effective advantage of externally developed technology is key. Most technology-based innovations involve a combination of several different technologies. It would be unusual for all the technology to be developed in –house. Indeed, businesses are witnessing an increasing number of joint ventures and alliances (Hinton and Trott, 196), often with former competitors. For example, IBM and Apple have formed a joint venture to work on mutually beneficial technology. Previously these two companies fought ferociously in the battle for market share in the personal computer market. ‘Slack’ While organisations place great emphasis on the need for efficiency, there is also a need for a certain amount of ‘slack’ to allow individuals room to think, experiment, discuss idea and be creative. In many R&D functions this issue is directly addressed by allowing scientists 10-15 per cent of their time to spend on the projects they choose. This is not always supported in other functional areas. 163

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Adaptability The development of new product innovations will invariably lead to disruptions to established organisational activities. Major or radical innovations may result insignificant changes, although the two are not necessarily linked. The organisation must be ready to accept change in the way it manages its internal activities. Otherwise proposed innovations would be stifled due to a reluctance to alter existing ways of working or to learn new techniques. In short, organisations need the ability to adapt to the changing environment. Diverse range of skills Organisations require a combination of specialist skills and knowledge in the form of experts in, say, science, advertising or accountancy and generalist skills that facilitate cross-fertilisation of the specialist knowledge. In addition they require individuals of a hybrid nature who are able to understand a variety of technical subjects and facilitate the transfer of knowledge within the company. Similarly, hybrid managers who have technical and commercial training are particularly useful in the area of product development (Trott, 1993). It is the ability to manage this diversity of knowledge and skills efficiently that lies at the heart of the innovation process. 4.6.6. Industrial firms are different: a classification A brief look at companies operating in particular area will soon inform that industrial firms are very different. The point is, that in terms of innovation and product development it is possible to argue that some firms are users of technology and others are providers. For example, at the simplest level most towns will have a range of housebuilding firms, agricultural firms, retail firms and many others offering services to local people. Such firms tend to be small in size, with little R&D or manufacturing capability of their own. They are classified by Pavitt (1984) as supplier-dominated firms. Many of them are very successful because they offer a product with a reliable service. Indeed, their strength is that they purchase technologies in the form of products and match these to customer needs. Such firms usually have limited, if any, product or process technology capabilities. Pavitt offers a useful classification of the different types of firms with regard to technology usage. At the other end of the scale are science-based firms or technology-intensive firms. These are found in the high-growth industries of the twentieth century: chemicals, 164

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

pharmaceuticals, electronics, computing, etc. It is the manipulation of science and technology usually by their own R&D departments that has provided the foundation for the firms’ growth and success. Unlike the previous classification, these firms tend to be large and would include corporations such as Bayer, Hoechst, ICI, Glaxo Smithkline, Siemens, RhonePoulene and 3M.

NOTES

The third classification Pavitt refers to as scale-intensive firms, which dominate the manufacturing sector. At the heart of these firms are process technologies. It is their ability to produce high volumes at low cost that is usually their strength. They tend to have capabilities in engineering, design and manufacturing. Many science-based firms are also scale-intensive firms, so it is possible for firms to belong to more than one category. Indeed the big chemical companies in Europe are a case in point. The final classification is specialist equipment suppliers. This group of firms is an important source of technology for scale-intensive and science-based firms. For example, instrumentation manufacturers supply specialist measuring instruments to the chemical industry and the aerospace industry to enable these firms to measure their products and manufacturing activities accurately. This useful classification highlights the flows of technology between the various firms.

4.6.6 Organisational structures and innovation The structure of an organisation is defined by Mintzberg (1978) as the sum total of the ways in which it divides its labour into distinct tasks and then achieves coordination among them.

165

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

One of the problems when analysing organisational structure is recognising that different groups within an organisation behave differently and interact with different parts of the wider external environment. Hence, there is a tendency to label structure at the level of the organisation with little recognition of differences at group or departmental level. Nonetheless, there have been numerous useful studies exploring the link between organisational structure and innovative performance. The seminal work by Burns and Stalker (1961) on Scottish electronic organisations looked at the impact of technical change on organisational structures and on systems of social relationships. It suggests that ‘organic’, flexible structures, characterized by the absence of formality and hierarchy, support innovation more effectively than do ‘mechanistic’ structures. The latter are characterized by long chains of command, rigid work methods, strict task differentiation, extensive procedures and a well-defined hierarchy. Many objections have been raised against this argument, most. Nevertheless, flexible rather than mechanistic organisational structures are still seen, especially within the business management literature, as necessary for successful industrial innovation. In general, an organic organisation is more adaptable, more openly communicating, more consensual and more loosely controlled. As Table indicates, the mechanistic organisation tends to offer a less suitable environment for managing creativity and the innovation process. Formalisation Following Burns and Stalker, there have been a variety of studies examining the relationship between formalisation and innovation. There is some evidence of an inverse relationship between formalisation and innovation. That is, an increase in formalisation of procedures will result in a decrease in innovative activity. It is unclear, however, whether a decrease in procedures and rules would lead to an increase in innovation. Moreover, as was argued above, organisational planning and routines are necessary for achieving efficiencies. Complexity The term complexity here refers to the complexity of the organisation. In particular, it refers to the number of professional groups of diversity of specialists within the organisation. For example, a university, hospital or science-based manufacturing company would represent a complex organisation. This is because 166

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

NOTES

within these organisations there would be several professional groups. In the case of a hospital, nurses, doctors and a wide range of specialists represent the different areas of medicine. This contrasts sharply with an equally large organisation that is, for example, in the distribution industry. The management of supplying goods all over the country will be complex indeed; but it will not involve the management of a wide range of highly qualified professional groups. Centralisation Centralisation refers to the decision-making activity and the location of power within an organisation. The more decentralized an organisation the fewer levels of hierarchy usually required. This tends to lead to more responsive decision making closer to the action.

167

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Organisational size Size is a proxy variable for more meaningful dimensions such as economic and organisational resources, including number of employees and scale of operation. Below a certain size, however, there is a major qualitative difference. A small business with fewer than 20 employees differs significantly in terms of resources from an organisation with 200 or 2000 employees. The role of an individual in the innovative process The innovation literature has consistently acknowledged the important of the role of the individual within the industrial technological innovation process. Furthermore, a variety of key roles have developed from the literature stressing particular qualities. Rubenstein (1976) went further, arguing that the innovation process is essentially a people process and that organisational structure, formal decision-making processes, delegation of authority and other formal aspects of a so-called well-run company are not necessary conditions for successful technological innovation. His studies revealed that certain individuals had fulfilled a variety of roles (often informal) that had contributed to successful technological innovation. In a study of biotechnology firms, Sheene (1991) explains that it is part of a scientist’s professional obligation to keep up to date with the literature. This is achieved by extensive scanning of the literature. However, she identified feelings of guilt associated with browsing in the library by some scientists. This was apparently due to a fear that some senior managers might not see this as a constructive use of their time. Many other studies have also shown that the role of the individual is critical in the innovation process. Establishing an innovative environment and propagating this virtuous circle The role of the organisational environment in the innovation process has been high-lighted. It has also shown how many different factors influence this environment. Given the importance of innovation, many businesses have spent enormous sums of money trying to develop an environment that fosters innovation. Each year Fortune produces a list of the most innovative companies in the USA. For the past few years the following companies have finished at or near the top: 3M, Rubbermaid, Merck and Motorola. Developing a 168

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

reputation for innovation helps propagate a virtuous circle that reinforces a company’s abilities.

NOTES

The concept of a virtuous circle of innovation can be viewed as a specific example of Michael Porter’s (1985) notion of competitive advantage. Porter argued that those companies who are able to achieve competitive advantage – that is, above-average performance in an industry sector – are able to reinvest this additional profit into the activities that created the advantage in the first place, thus creating a virtuous circle of improvement, or so-called competitive advantage.

Reputation of the organisation The reputation of a company for innovation takes may years to develop. It is also strongly linked to overall performance. However, within a selection of successful companies there will inevitably be some that are regarded as more innovative than others. This may be due to several factors, including recent product launches; recent successful programmes of research; high levels of expenditure on R&D. Depending on topical media events at the time, some companies are able to achieve wide exposure of new products or new research. Such exposure is often dependent on effective publicity but also serendipity.

169

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Attraction of creative people Creative people will be attracted to those companies that themselves are viewed as creative. In much the same way as undergraduates apply for positions of employment with those companies viewed as successful, top scientists will seek employment from those companies which have a reputation for innovation and scientific excellence. Organisation encourage creativity Many organisations pay lip service to creativity without putting in place any structures of plans to encourage innovation. It has to be supported with actions and resources. The organisation has to provide people with the time to be creative. This can be in a formalized way, as used in much of the chemical industry. For example, 15 per cent of a research scientist’s time may be dedicated to projects of personal interest. Alternatively, organisations can try to build sufficient slack into the system to allow for creative thinking. In addition, the organisation should try to build an environment that tolerate errors and mistakes. This will encourage people to try new ideas and put forward suggestions. Successful new ideas need to be rewarded in terms of publicity for the people involved. This is usually most easily achieved through internal newsletters or company magazines. In addition, financial rewards – promotions, gifts or holidays – may be offered. Some organisation also use creativity – stimulation techniques such as a weekend away at a country retreat to discuss new ways of working, new ideas, etc. These activities collectively will help send a clear message that the organisation is serious about innovation. Development of innovative products This does not mean the ability to develop products incorporating the latest technology, although this may be an output. It means developing new products that are genuine improvements compared to products currently available. Moreover, it is success in the marketplace that very often leads to further success.

170

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

A willingness to accept new ideas

NOTES

Many organisations suffer from an inability to implement changes and new ideas, even after rewarding the people involved in developing the new idea. Once a new product idea has been accepted it is important that it is carried through to completion. Increased motivation and reduced frustration If individuals within the organisation can see their ideas and efforts contributing to the performance of the business, they will be encouraged still further. On the other hand, if seemingly good ideas are constantly overlooked, this will lead to increased frustration. High morale and retention of creative people All of the proceeding activities will help contribute to increased morale within the organisation. A rewarding and enjoyable working environment will help to retain creative people. This in turn should reinforce the company’s innovative capabilities. Have you understood? 4.6 (a) What are the organizational factors that foster innovation? 4.6 (b) What is serendipity? 4.6 (c) Explain the various linear models of innovation. 4.6 (d) What is an innovation score board? 4.6 (e) Explain the characteristics of waves of growth. 4.6 (f) What is cross functional cooperation? 4.6 (g) How organizational structures affect innovation? 4.6 (h) Explain the role of an individual in innovation process.

171

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

172

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

NOTES

UNIT V

TECHNOLOGY CHANGE 5.1 INDRODUCTION Many managers see their organization design work as completed when “the announcement” is made. Because so much energy may have been expended on reaching an agreement on a design, little thought may have been given to what will happen next. As a result, after the announcement is made, managers suddenly begin to think about how to manage the implementation of the change in design. In fact , implementing a new design is difficult, as is the implementation of any major change with in an organization. Design changes are particularly problematic because it seems so easy to create a design on paper that managers often overlook how truly difficult and often takes a good deal of time Many failures – in which everyone agrees that the reorganization was a disaster – are not failures because of a technicality inadequate design but rather are failures of implementation. In practice, an adequate or even mediocre design, if implemented well, can be effective, while the most elegant and sophisticated of designs poorly implemented will fail. This discussion is devoted to the question of implementation of organization designs. The underlying issue in design implementation appears to be one of managing organizational change. We will therefore start by providing a way of thinking about changes in organization. Next, we will point out some of the very predictable problems that one encounters when attempting to bring about change. Finally, we will discuss some specific techniques for managing change and outline some specific techniques and action areas for enhancing the implementation of organization design changes.

173

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

5.2 LEARNING OBJECTIVES 1.

To find the impact of technology change on business strategy

2.

To understand the organisational issues arising out of technology change

3.

To learn about the opportunities created by technology change for entrepreneurs

4.

To analyse the effect of technology change on productivity

5.3 CRITERIA FOR ORGANIZATIONAL CHANGE: During the past decade, there has been increasing interest in the subject of managing organizational change. One approach to thinking about change that many have found useful was originally proposed by Richard Beck-hard and Reuben Harris. They saw the implementation of change, such changes in terms of transitions. At any time, an organization exits in a Current state (A). The current state describes how the organization functions prior to a change. In terms of our congruence model, we can think of the current state as a particular configuration of the strategy, task, individual, and formal and informal organizations. A change involves movement toward a desired future state (B), which describe ho the organization should function after the change. In a design, the full set of design documents (strategic design, impact analysis, operational design and so on) provides a written description of the intended future state. The period between the current state (A) and the future state (B) can be through of as the transition state (C) In the most general terms, then, the effective management of change involves developing an image of the desired future state and moving the organization through a transition period. In design , we deal with the first two of these steps. Implementation concerns the moving of the organization through the transition period. Typically as much care needs to be taken in designing the transition as in designing the future state both are critical.

Figure5. 1 Organization change as transition. 174

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Several criteria can be used to judge the effective management of transition. Building on the transition framework just presented, an organizational change, such as the implementation of a new design, can be managed effectively when: 1.

The Organization is moved form the current state to the future sate – in which the design is actually installed or implemented.

2.

The functioning of the organization design in the future state meets expectations, or works as planned. In the case of design, this meets that the design in practice met the criteria that it was intended to satisfy.

3.

The transition is accomplished without undue cost to the organization. This means that the design is implemented without significant disruptions to the business or damage to relationships with customers, suppliers, or regulators. While there is always some cost associated with implementation, the cost should be managed, predictable, and controlled consistent with estimates done in the impact analysis. “Undue” cost is cost that is unplanned, unpredicted, or uncontrolled.

4.

The transition is accomplished without undue cost to individual organization members. Here again, the key operative word is “undue” as defined by the original impact analysis. Much of the cost to individuals occurs more through the manner in which changes are made than thorough the change itself.

NOTES

Of course, not every implementation of a new design can be expected to meet all of these criteria consistently, but such standards provide a target for planning implementation. The question is how to maximize the chances that the design will be implemented effectively. PROBLEMS OF IMPLEMENTING ORGANIZATION CHANGES There are two basic issues-what the change should be and how the changes should be implemented. The first issue has been dealt with in earlier units. The second question – how the changes are implemented – is the one on which we will focus now. Observations of changes seem to indicate that there are three types of problems encountered in some form whenever a significant organizational change is attempted.

175

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

The Problem of Power Any organization is a political system made up of various individuals, groups, and coalitions competing for power. Political behavior is thus a natural and expected feature of organizations. Such behavior occurs during the current and future states. In the transition state, however, these dynamics become even more intense as an old design, with its political implications, is dismantled and a new design takes its place. Any significant change (and design changes clearly are significant in terms of power) poses the possibility of upsetting or modifying the balance of power among various formal any informal interest groups. The uncertainty created by change creates ambiguity, which in turn tends to increase the probability of political activity as people try to create some structure and certainty by attempting to control their environment. Individuals and groups may take political action based on their perceptions of how the change will affect their relative power position in the organization. They will try to influence where they will sit in the organization (both formal and informal) that emerges from the transition and will be concerned about how the conflict of the transition period will affect the balance of power in the future state. Finally, individuals and groups may engage in political action because of their ideological position with regard to the change – the new design, strategy, or approach may be inconsistent with their shared values or their images of the organization. The Problem of Anxiety Change in organization involves the movement from something that is known toward something that is unknown. Individuals naturally have concerns, such as whether they will be needed in the new organization, whether their skills will be valued, and how they will cope with the new situation. These concerns can be summarized in the question that is frequently voice during a major organizational change – “What’s going to happen to me?” To the extent that this question cannot fully be answered, individuals may experience stress and feel anxious. As stress and anxiety increase, they may result in a variety of behavior or performance problems. For example, stress may result in difficulty in hearing or integrating information. It may lead people to resist changes that they might otherwise support or in the extreme, engage in irrational and even self-destructive acts. Resistance is a common 176

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

occurrence, although in many large organizations people may not actively resist the change by openly refusing to implement the new organization design. What does occur is that people passively or subtly resist the change or act in ways that objectively do not appear to be constructive for either the individual or the organization.

NOTES

The Problem of Organization Control A significant change in organization design tends to disrupt the normal course of events within the organizations. Thus, it frequently undermines existing systems of management control, particularly those that are embedded in the formal organizational arrangements. An impending change may suddenly make control systems irrelevant or cause them to be perceived as “lame ducks”. As a result, it is often easy to lose control during a change as goals, structures, and people shift, it becomes difficult to monitor performance and make correct assumptions, as one would during a more stable period. A related problem is that most of the formal organizational arrangements are designed either to manage the current state (the existing design) or to manage the future state (the proposed new design), but those same designs may not be adequate for the management of the transition state. In most situations, they are not appropriate for managing implementation, since they are steady state management systems designed to run organizations already in place. They are not transitional management devices. 5.3.1. Iimplication for Change Mangagement Each of these three problems lead to some relatively straight-forward conclusions about actions needed to manage change. To the extent that a change presents the possibility of significant power problems, the management of the organization’s political system must shape the political dynamics associated with the change, preferably prior to implementation. Second, to the extent that change creates anxiety and the associated patterns of dysfunctional behavior, it is critical to motivate individuals, through communications and rewards, to react constructively to the change. Finally, if a change presents significant control problems, this implication is the need to pay attention to the management of the transition state to ensure effective organizational control during the transition period. The question is how to do this. There appear to be some patents in the effectively managed changes. While not universal principles, they represent some relatively consistent difference between the actions that managers take in effective cases of change management and the actions taken in ineffective cases. 177

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

For each of the three implications for change management, there are four actions that appear to characterize effectively managed changes. Action Areas for Shaping Political Dynamics The first set of practices concerns the organizations as a political system. Any significant change usually involves some modification of the political system, thus raising issues of power. The implication is a need to shape and manage the political dynamics prior to and throughout the transition. This concept relates to four specific action areas. The first action area involves getting the support of key power groups within the organization in order to build a critical mass in favor of the change. The organization is a political system with competing groups, cliques, coalitions, and interests, each with varying views on any particular change. Some favor the change. Some oppose it. Some may be disinterested. But the change cannot succeed unless there is a critical mass of support; several steps can be used to build that support. The first step is identifying the power relationships as a basis for planning a political strategy. This step may involve identifying the key players in the organization, or the individual and/or group stakeholders – the individuals who have a positive, negative, or neutral stake in the change. Frequently, drawing a diagram or creating a stakeholder or influence map may be useful in conceptualizing these relationships. This should include not only the various stakeholders but their relationships to each other – who influence whom and what the stakes are for each individual. Having identified the political topography of the change, the next step is to think about approaches for building support. There are several possible methods. The first is participation, which has long been recognized as a tool for reducing resistance to change and for gaining support. As individuals or groups become involved in a change, they tend to see it as their change, rather than one imposed on them. Participation, while desirable, might not be feasible or wise in all situations. In some cases, participation merely increases the power of opposing groups to forestall the change. Thus, another approach may be bargaining with groups, or cutting deals. In this case, those favoring the change get the support of others by providing some incentive to comply.

178

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

A third step is isolation. There may be those who resist participation or bargaining and who persist in attempting to undermine the change. The goal in this situation is to minimize the impact of such individuals on the organization by assigning them to a position outside the mainstream.

NOTES

In the extreme, the final step is removal. In some cases, individuals who cannot be isolated or brought into constructive roles may have to be removed from the scene through a transfer to another organization or by outplacement. Obviously, participation and bargaining are more desirable and leave a more positive aftermath; however, it would be native to assume that these first two methods will be successful in all cases. An important consideration in creating the political momentum and sense of critical mass is the activity of leaders. Thus, a second action area is leader behaviour in support of the change. Leaders can greatly shape the power distribution and influence patterns in an organization. They can mold perceptions and create a sense of political momentum by sending out signals, providing support, and dispensing rewards. Leaders can take a number of specific actions. First, they can serve as models; through their behaviour, they provide a vision of the future state and a source of identification for various groups within the organizations. Second, leaders can serve as important persons in articulating the vision of the future state. Third, leaders can play crucial role by rewarding key individuals and specific types of behavior. Fourth, leaders can provide support through political influence and needed resources. Similarly, leaders can remove roadblocks and, through their public statements, maintain momentum. Finally, leaders can send important signals through the informal organization. During times of uncertainty and change, individuals throughout the organization tend to look to leaders for signals concerning appropriate behavior and the direction of movement in the organization. Frequently, potent signals are set through such minor acts as patterns of attendance at meetings or the phrases and words used in public statements. By careful attention to these subtle actions, leaders can greatly influence the perceptions of others. The third action area concerns the use of symbols associated with a change. Such symbols as language, pictures, and acts create a focus for identification and the appearance of a critical mass within the organization’s political system. Symbols are used by public and social movements and are similarly relevant to dealing with the political system with an organization. A variety of devices can be used, such as names and related graphics that 179

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

clearly identify events, activities, or organizational units. Language is another symbol; it can communicate a unique way of doing business. The use of symbols is a mundane behavior that can, however, have a powerful impact on the clarity of the informal organization. The more focused the informal organization, the less the political turbulence. For example, a particular promotion, a firing, the moving of an office, or an open door, all can serve to create and send important signals. These small but visible signals by the leaders can be important in providing a symbolic sense of political movement. The final action area is that of building stability. Too much uncertainty can create excess anxiety and defensive reaction, thus heightening political conflict to a counterproductive level. The organization must provide certain “anchors” to create a sense of stability within the context of the transition. This can help limit the reverberations of the change and dampen counter productive political activity. A number of steps, such as preparing people for the change by providing information in advance, can buffer them to a degree against the uncertainty that will occur. Secondly, some stability can be preserved – even in the face of change – if managers are careful to maintain the consistency of messages they convey to organization members throughout the period of change. Nothing creates more instability than inconsistent or conflicting messages. Thirdly, it may be important to maintain certain very visible aspects of the business, such as preserving certain units, organizational names, management processes, or staffing patterns or keeping people in the same physical location. Finally, it may help to communicate specifically what will not change – to mediate the fears that everything is changing or that the change will be much greater than what actually is planned. In summary, the four action areas focus on identifying the political system and then developing a political strategy. Specify action includes using leadership and related symbols to maintain momentum and critical mass in support of the change and building stability to prevent the counterproductive effects of extreme anxiety. 5.3.2. Motivating Constructive Behavior When a broad, significant change occurs in an organization, the first questions many people asks are “What’s in it for me?” and “What’s going to happen to me?”. This is an indication of the anxiety that occurs when people are faced with the uncertainty associated with organizational change. Anxiety may result in a number of reactions, ranging from withdrawal to panic to active resistance. The task of management is to somehow relieve 180

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

that anxiety and motivate constructive behavior through a variety of actions. Some actions are aimed at providing much needed information communicating the nature, extent, and impact of the change. Others are focused on providing clear rewards for required behavior, recognizing and dealing with some of the natural anxiety. There are four specific action areas.

NOTES

The first action area is to surface or create dissatisfaction with the current state. Individuals may be psychologically attached to the current state, which is comfortable and known, compared to the uncertainty associated with change. A critical step, then, is to demonstrate how unrealistic it is to assume that the current state has been completely good, is still good, and will always remain good. The goal is to “unfreeze” people from their inertia and create willingness to explore the possibility of change. Part of their anxiety is based on fantasies that the future state may create problems, as well as on fantasies about how wonderful the current state is. Techniques for dealing with this problem involve providing specific information, such as educating people about what is occurring in the environment that is creating the need for change. In addition, it is useful to help people understand the economic and business consequence of not changing. It may be helpful to identify and emphasize discrepancies – the discrepancy between the present situation and the situation as it should be. In critical cases, it may be necessary to paint a disaster scenario, in which people can see what would happen if the current state continued unchanged. It may be helpful to present a graphic image of how the failure to change would affect people. One manager for example, talked very graphically about what would happen if the division did not become successful within eighteen months: “They’ll pull buses up to the door, close the plant, and cart away the workers and the machinery”. The manager presented a highly graphic image of the consequence of not making the change. An alternative to management’s presenting this kind of information may be to involve organization members in collecting and presenting their own perceptions. Participating in the collection and discovery process may make the information more salient, since it comes from peers in the work force. There is a need to over-communicate during change management efforts. Extreme anxiety impairs normal functioning; thus, people may be unable to hear and integrate messages effectively the first time. Therefore, it may be necessary to communicate key messages two, three, four and even five times to individuals through various media.

181

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

The second action area for motivation is to obtain participation in planning and implementing change. Employee participation in the change process yields proven benefits. It tends to capture people’s excitement. It may result in better decisions because of employee input, and it may create more direct communications through personal involvement. On the other hand, participation also has some cost. It takes time, involves giving up some control, and may create conflict and increase ambiguity. The question, then, is to choose where, how, and when to build in participation. People may participate in the early diagnosis of the problems, in the design or development of solutions, in implementation planning, or in the actual execution of the implementation. There are many options. Various individuals or groups may participate at different times, depending on their skills and expertise, the information they have, and their acceptance and ownership of the change. Participation can be direct and widespread or indirect through representatives, Representatives may be chosen by position, level or expertise. Using some form of participation usually out weighs the costs of no involvement at all. The third action area is to visibly reward the desired behavior in both the future and transition states. People tend to do what they perceive they will be rewarded for doing. To the extent that people see their behavior as leading to rewards or outcomes they value, they will tend to do motivated to perform as expected. It is important to realize that during implementation, the old reward system frequently loses potency and new rewards are not set up as an early step. This results in a situation in which an individual is asked to act in one way but has been rewarded for acting in another way. Sometimes people are punished by the existing measurement system for doing things that are required to make the change successful. Management needs to pay special attention to the indicators of performance, to the dispensation of pay or other tangible rewards, and to promotion during the transition. In addition, there are informal rewards, such as recognition, praise, feedback, or the assignment of different roles, and it is important to carefully manage these to ensure that they support constructive behavior during the transition. It is equally important to reestablish clearly an appropriate reward system for the future state. The fourth action area directly affects individual anxiety. It is the need to provide time and opportunity to disengage from the current state. People associate a sense of loss with change. It is predictable that they will go through a process of “letting go of,” or mourning the old structure. Management, knowing that this is essential, can greatly assist in this process. A number of specific techniques are possible. One is to provide the appropriate time for letting go, while giving people enough information and preparation to work through 182

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

their detachment from the current state. An other technique may be to provide the opportunity to vent emotions through an even similar to a wake. This can be done in small group discussions, in which people are encouraged to talk about their feelings concerning the organizational change. While this may initially be seen as promoting resistance, it can have the opposite effect. People will undoubtedly talk about these issues, either formally or informally. If management can recognize such concerns and encourage people to express their feelings, it may help them let go of them and move into constructive action. It may also be useful to create ceremony, ritual, or symbols, such as farewell or closing-day ceremonies, to help give people some psychological closure on the old organization.

NOTES

Thus, there are four action areas in motivating constructive behavior. One concerns helping people detach themselves from the current state. The second concerns obtaining appropriate levels of participation in planning or implementing the change. The third concerns rewarding desired behavior during the transition, and the final action areas has to do with helping people let go of their psychological attachment to the present situation. 5.3.3. Managing the Transition The third implication concerns the actual and explicit management of the transition state, which is that time period between the current state and the implemented future state. It is frequently characterized by great uncertainty and control problems, because the current state is disassembled prior to full operation of the future state. Managers need to coordinate the transition with the same degree of care, the same resources, and the same skills as they manage any other major project. There are four specific action areas in which managers can work. The first action area is to develop and communicate a clear image of the future state. The ambiguity of change without a focus produces major problems. It is difficult to manage toward something when people do not know what that something is. In the absence of a clear direction, the organization gets “transition paralysis.” And activity grinds to a halt. This is caused by uncertainty over what is appropriate, helpful, or constructive behavior. Several specific practices are relevant in this situation. First, there is a need to develop as complete a design as possible for the future state. This may not always be feasible, but to the extent possible, it is important to articulate at least a vision ahead of time. Secondly, it may be useful to construct a statement that identifies the impact of the change on different parts of the organization. Thirdly, it is important to maintain a stable vision and to avoid 183

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

unnecessary changes, extreme modification, or conflicting views of that vision during the transition. Finally, there is a need to communicate. As previously indicated, it is important to communicate repeatedly and to use multiple media, be it video, small group discussions, large group meeting, or written memos. It is critical to think of this communication as both a telling and a selling activity. People need to be informed, but they also need to be sold on why the change is important. This may necessitate repeated explanations of the rationale for the change, the nature of the future state, and the advantages of the future. Finally, the future state must be made real, visible, and concrete. Communications should include information on future decision-making and operating procedures. The way in which this is communicated can help shape the vision of the future. For example, one company showed television commercials, both inside and outside its organization, demonstrating the specific types of customer service that it was attempting to provide. The commercials gave people clear, graphic, and memorable images of the future state. The next area is to use multiple and consistent leverage points for changing behavior. This issue relates to the organizational model underlying this approach to change management. An organization is a system made of tasks, individuals, formal organizational arrangements, and informal organizational arrangements. During a transition, when certain aspects of the organization are being changed, there is a potential for problems arising from a poor fit. An organization works best when all elements fir smoothly. Managers need to use all of these levers for change. Specifically, managers need to think about modifications that need to be made in the work, individuals, formal structure, and informal arrangements. Secondly, there is a need to monitor and/or predict some of the poor fits that may occur when changing any of the organizational components. It is necessary to plan the changes to minimize poor fit among different elements of the organization. The next action area involves using transition devices. The transition state is different from the current and future states; therefore, there may be a need to create organizational arrangements that are specifically designed to manage the transition state. These devices include: 1) a transition manager; 2) specific transition resources, including budget, time and staff; 3) specific transition structures, such as dual management systems and backup support; and 4) a transition plan. All of these can be helpful in bringing needed management attention to the transition.

184

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

The final area is to obtain feedback and an evaluation of the transition state. The transition is a time when managers need to know what is going on in the organization. There is usually a breakdown in the normal feedback devices that managers use to collect information about how the organization is running. This is particularly serious during a period of change when there may be high anxiety and people hesitate to deliver bad news. Therefore, it is critical to build in various channels for feedback. Formal methods may include individual interviews, various types of focus-group data collection, surveys used globally or with select samples, or feedback gathered during a normal business meeting. Informal channel include senior manager’s meetings with individual or with groups, informal contacts, or field trips. Finally, feedback may be promoted through direct participation by representatives of key groups in planning, monitoring, or implementing the change.

NOTES

In summary, the initial emphasis in transition management is on identifying a clear image of the future state. Secondly, there is need to pay attention to the changing configuration of the organizational system and to develop – where needed – unique organizational arrangements to manage the transition period. Finally , there is a need to monitor progress through the development of feedback systems. All of these are important elements in managing a transition. Have you understood? 5.3 (a) Explain the process involved in moving from current state to future state. 5.3 (b) What are the problems in implementing organizational changes? 5.3 (c) How constructive behavior can be motivated? 5.3 (d) How transition can be effectively managed? 5.4 IMPACT OF TECHNOLOGICAL CHANGE ON ORGANISATIONAL PRODUCTIVITY Introduction or adaptation of new technology, or technological change, can have both positive and negative effects on organisational productivity.

185

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Productivity: Productivity is the relationship between output and inputs of business system. Higher the ratio between the two, more is the productivity. It can be expressed on a total factor basis or on a partial factor basis as under: •

Total productivity (total factor basis) measured by ratio of outputs to all inputs

•

A partial measure of productivity, for example, is output per labour hour

Strategies for improving productivity: Following strategies can be adopted for improving productivity: 1. Attaining increased output for same level of inputs Under this strategy, focus is on attaining more, or increased output by using almost the same quantum of inputs. For example, converting waste into a useful by-product, improving process efficiency etc. Here, output will increase at a much higher rate accompanied by almost negligible increase in inputs. 2. Using decreased or lower inputs for same level of output Under this strategy, focus is on attaining same level of output by using lesser quondam of inputs. For example, finding low cost substitutes, simplification of product design etc. Here, consumption will decline, but output level shall be maintained. 3. Proportionate increase in output is more than proportionate increase in input Under this strategy, focus is on attaining increase in output in such a way that it is more than proportionate increase in input. For example, offering additional varieties of product or service, by using existing facilities. Here more output can be generated by minor adjustments in existing plants and capabilities through minor expenditure 4. Proportionate decrease in input is more than proportionate decrease in output in such a way that proportionate decrease in input is more than proportionate decrease in the 186

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

output. For example, dropping an uneconomical product as it is loss making i.e. its costs are more than revenues. Once an uneconomical product is dropped, reduction in cost will be more than decline in revenues.

NOTES

5. Attaining simultaneous increase in output with decrease in inputs Under this strategy, focus is on attaining increase in output in such a way that it is accompanied by simultaneous decrease in input. For example, use of automation, mechanization and computerization. This will ensure lower wastages, lower resource requirements, more output accompanied by decrease in inputs. Most of the above strategies call for improvement in current technology, use of new technologies, innovations etc. 5.4.1 Management of New Technology in Relation to Organisational Productivity: Introduction or adoption of new technology, or technological change, can have both positive and negative effects on organisational productivity. 1. Introduction of new technology may increase or decrease organisational productivity: It may increase organisational productivity if new technology facilitates lower consumption of inputs, lower processing time, lower wastages, lower defective, more ease and safety in manufacturing, and more efficiency. Organizational productivity may decrease if new technology leads to suspicion of workers due to likely adverse impact on employment level and demoralization due to impending retrenchment, deterioration of working environment, more stress on workers, more accidents etc. New technology may kill existing products as well, thus leading to decline in productivity. 2. Introduction of new technology may increase or decrease QWL. It may increase QWL if safety at work increases, human convenience at work increases, pollution decrease, ease in manufacturability increases, change is properly managed etc. QWL may decrease if safety at work decreases, human convenience at work decreases, pollution increases, ease in manufacturability decrease, changes bring in uncertainties and there could be resistance to change. 187

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Thus proper management of new technology and technological change is essential in relation to organisational productivity. Proper management of the new technology calls for: ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾

Providing training to employees to handle new technologies and technological changes Managing resistance to change i.e. managing change Offering incentives for creative and innovative ideas Seeking worker participation Problem solving instead of avoiding problems Ensuring effective communication across the organisation Use of multifunctional teams Bringing R&D closer to manufacturing and marketing Seeking regular feedback Continuous technological assessment Regular technology audit.

The above strategies and steps can help in reducing/avoiding negative effects of introduction of new technology and technological change on organisational productivity and QWL. Vie Versa of the above also holds true. 5.4.2 Resistance to Change The biggest challenge to any change comes through resistance to change. Change disturbs the existing equilibrium, existing procedures, power structures etc within the system or organisation, which may not be liked by many persons, thus leading to resistance to change. 1. The resistance to change could be: (a) Overt or Immediate: These resistances are easier to anticipate, diagnose and deal. Examples are threat to strike, slow down etc. (b) Implicit or Deferred: These resistances are difficult to anticipate, diagnose and deal. Example are job dissatisfaction, decreased loyalty to organisation, lesser motivation to work, increased errors or mistakes (which may be deliberate), increased absenteeism (by claiming false sickness), increased turnover of labour etc. 188

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

2. Resistance to change can come from employees as well as employers or management. Example of resistance at employee level is the resistance to computerisation in 1990s by public sector banking employees. Example of resistance at employers, or management, level is the resistance by some private managements to the proposed mandatory reservation for weaker sections of society in the private sector.

NOTES

3. Resistance to change can occur at any level i.e. individual level, group level and organisation level. For example, introduction of a single new machine may create health or safety concerns in the minds of one or two operator, leading to resistance by individuals. Similarly, workers of a section of production department, viz. welding section, may be affected by new incentive scheme at the works, leading to resistance by a group. Similarly proposed changed from time wage system to piece rate system may lead to resistance at organisation level. As the resistance to change can come from any direction, occur at any level, and occur in any form, it calls for its effective management. 5.4.3 Building Culture for Change Building culture for change is a time consuming exercise and involves lot of efforts. Management’s first responsibility is to detect trends in the macro environment so as to be able to identify changes and initiate programme. It is also important to estimate what impact a change will likely have on employee behavior patterns, work processes, technological requirements and motivation. Management must assess what employee reactions will be and craft a change programme that will provide support as workers go through the process of accepting change. The programme must then be implemented, disseminated throughout the organisation, monitored for effectiveness and adjusted where necessary. Management, managers and senior executives of the organisation must manage the change in a way that employees can cope with it. Change can be unsettling, so the manager logically needs to be a setting influence. The manager has a responsibility to facilitate and enable change and to help people understand reasons, aims and ways of responding positively according to employees’own situations and capabilities. Increasingly the manager’s role is to interpret, communicate and enable not to instruct and impose, which nobody really responds too well. If an organisation imposes new things on people, there will be great difficulty. 189

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

Check that people affected by the change agree with, or at least understand, the need for change, and have a chance to decide how the change will be managed, and to be involved in the planning and implementation of the change. Participation, involvement and open, early, full communication are the important factors for success. Face-to-face communications should be used to handle sensitive aspects of organisational change management. Workshops are very useful processes to develop collective understanding, approaches, policies, methods, systems, ideas, etc. Staff surveys are a helpful way to repair damage and mistrust among staff – provided people are allowed to complete them anonymously, and management publishes and acts on the findings. Management training, empathy and facilitative capability are priority areas for building the culture for change. One cannot impost change – people and teams need to be empowered to find their own solutions and responses, with facilitation and support from managers, and tolerance and compassion from the leaders and executives. Management and leadership style and behaviour is more important than cleaver process and policy. Employees need to be able to trust the organisation. In general terms, the change programme should: ¾

Describe the change process to all people involved and explain the reasons why the changes are occurring. The information should be complete, unbiased, reliable, transparent, and timely.

¾

Be designed to effectively implement the change while being aligned with organisational objectives, macroenvironmental trends, and employee perceptions and feelings.

¾

Provide support to employees as they deal with the change and, whether possible, involve the employees directly in the change process itself.

¾

Be consistently monitored and reviewed for effectiveness. A successful change management programme is typically also a flexible project.

190

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

At an individual level, the ADKAR model developed by Jeff Hiatt for individual change management can be highly helpful. The model presents five building blocks than an individual must obtain to realise change successfully. These include awareness, desire, knowledge, ability and reinforcement. It is the management’s job to create an environment in which people an go through these stages as quickly as possible, including: ¾ ¾ ¾ ¾ ¾

NOTES

Building awareness as to why the change is needed Creating desire to support and participate in the change Developing knowledge as to how to change Fostering ability to implement new skills and behaviour Providing reinforcements to sustain the change

By taking the above measures, an organisation can build a culture for changes over passage of time to achieve understanding, involvement, action and commitment from employees. In addition, Kotter’s eight-step change model can also be used for building a culture for changes, which is discussed later in the chapters. Have you understood? 5.4 (a) What are the various strategies for improving productivity? 5.4 (b) Explain the impact of new technology on productivity. 5.4 (c) Why there is resistance to change? 5.4 (d) How will you build a culture prepared to accept change?

191

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

5.5 CHANGE MANAGEMENT STRATEGIES There are four basic change management strategies, which are given in the table as under:

Organisations do not pursue a single strategy. They adopt a suitable mix of the above four strategies depending upon the following factors: ¾ ¾ ¾ ¾ ¾ ¾

Degree of resistance Target population The stakes involved The time-frame Degree of expertise involved Dependency

Some of the strategies are discussed as below: 1. Proper timing/tact: There is an old saying – ‘Well begun is half done’. Any ill-timed move can have serious implications for an organisation. A properly planned and well-timed change has much higher chances of successful implementation.

192

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

2. Education and communication:

NOTES

Most of the problems arise because of lack of information, inadequate communication and fear about uncertainties. Through proper communication and education about reasons an needs for change, many problems can get reduced or eliminated. 3. Seeking participation: Involvement and participation in decision-making process can significantly reduce communication gaps, reduce fear about uncertainties etc. This, in turn, can help in successful change management. 4. Facilitation and support: Counseling, training and proper motivation can greatly help employees to adapt to the change thus helping in its successful management. 5. Negotiation: It helps in accommodating different views and reaching a consensus or some acceptable solution to a given problem. While negotiation helps in overcoming resistance to change, the acceptable solution may not always to optimal and thus negotiation may be sometimes costly. 6. Manipulation and co-optation: Manipulation involves twisting the facts or hiding crucial information. This may recoil on the management in the long run. Sometimes managements twist the facts by presenting a rosy picture about change and hide its adverse effects. Sometimes managements may go for gradual release of information by releasing favorable information in very early stages and unfavorable information at very late stags. 7. Coercion: It involves use of direct threats like threat of transfer etc. Coercion, as a strategy may be used by managements to bring out certain changes, but it usually adversely affects congenial and healthy working environment. 193

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

8. Introducing incentives / rewards: There is an old saying ‘Making makes the mare go’. In this era of materialism, rewards/incentives can motivate the employees / organizations to go ahead with change. For example, government offers tax incentives for dispersal of industries to remote areas. By taking some of the above steps/strategies, resistance to change may be overcome, leading to successful/proper change management. Alternatively Kotter’s eight step change model may be used for effective change management. CHANGE MANAGEMENT PROCESS Change management/change control is a formal process used to ensure that a product, service or process or some operation is modified in line with the identified necessary change only. Change control process comprises a set of six step as under: 1. Identify the potential change: Sometimes, the management may itself identify the need for change. Sometimes a formal request is received for something to be changed. These requirements for bringing change are recorded and categorized and passed on to impact assessor(s). 2. Assess: The impact assessor or assessors then make their risk analysis and make a judgement as to whether to go ahead with the change, what shall be its implications and who should carry out the proposed change? 3. Plan: Change is planned in detail, all safety measures are incorporated and an action plan/ solution is built. 4. Implement: Action plan/solution is approved and the change is implemented. 194

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

5. Review:

NOTES

Implementation is tested to ascertain whether it is successful or not? If required, corrective actions are undertaken to obtain desired change. If required, change programme may be modified on the lines of feedback. It is also reviewed whether change is sustaining or not? 6. Close the process if change of goals have been met with. Have you understood? 5.5 (a) Explain the change management strategies. 5.5 (b) Describe change management process. 5.6. The Effects of Technological Change on the Skill Requirements of the Workforce The introduction of new and advanced technologies into the workplace immediately results in different skill requirements. The magnitude and nature of the changes will be influenced by the economic sector and the type of industry involved. Matching and Training the Skilled Workspace to Meet the Requirements of New Technologies Once the decision to adopt a new technology has been made, management must determine, before implementation, the skills necessary to run the new installations efficiently and effectively. Management must also develop operational plans to accomplish the transition with minimal disruption to operations and minimal adverse effects on the existing workforce. Reliable, perhaps industry-dependent, date can guide management in its decisions about how much change the workforce can handle and the types of reeducation, retraining, and relocation that are needed. Obsolescence of Professional staff and the Continuing Need for Professional Development Activities

195

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

The growth in scientific knowledge and the escalating rate of technological change renders obsolete the training that professional staff acquired during their formal education or prior education or prior work experience. There is a growing need for continuing education for the professional staff. Reliable data and necessary strategies must be developed to determine how to meet the needs of the organization under various circumstances. The Role of Technological GateKeepers and Internal Entrepreneurs In view of the rapid nature of technological change, organizations must find ways to determine, choose, adapt and implement appropriate technologies. The role of an organization’s technological gatekeepers and internal entrepreneurs in the successful and identification, implementation, and utilization of new technologies is essential and must be thoroughly understood. Social Consequences of Technological Change Technology is the most important source of change in human experience. Its impact on our daily lives, socioeconomic structure, political system, and employment necessitates a through understanding of its implications and the development of reliable predictive models. Industry should determine what social-support structures within organizations, particularly high-technology organizations, exist or should exist to assist the following groups in coping with the demands of new or changing technologies: • • •

Working couples, single parents, or individuals with extended family obligations. Working and professionals with changing or interrupted careers. Working and professionals displaced by technology.

Other Areas of Importance Management should consider the implementation of: 1. Reward and incentive systems for engineers, scientists, and internal entrepreneurs in corporations (e.g., evaluation and use of a “dual-ladder” reward system). 2. Measures to facilitate the transition from technical specialist to technical manager. 3. Measurement methodologies related to professional, human, and worker-machine interactions. 196

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

Have you understood

NOTES

5.6 a how will you mach and train the skilled workforce to meet the requirements of new technologies? 5.6b what are the social consequences of technological change? 5.7 INNOVATIONS AND ENTREPRENEURSHIP Eventhough much of today’s discussion treats entrepreneurship as something slightly mysterious or flash of genius, innovation and entrepreneurship are tasks that can be organized as a systematic work, according to Peter Drucker. The test of an innovation does not lie in its novelty, its scientific content. It lies in its success in the market place. Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation. All new businesses have many factors in common. But to be entrepreneurial an enterprise has to have special characteristics over and above being new and small. An enterprise also does not need to be small and new to be an entrepreneur. Indeed, entrepreneurship is being practiced by large and old enterprises. The General Electric company, one of the world’s biggest businesses and more than a hundred years old, has a long history of starting new entrepreneurial businesses from scratch and raising them into sizable industries. Entrepreneurship is thus a distinct feature whether of an individual or of an institution. Entrepreneurs see change as the norm and as healthy. Usually they do not bring about the change themselves. But the entrepreneur always searches for change, responds to it and exploits it as an opportunity. Entrepreneurs innovate. Innovation is the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth. In fact, innovation 197

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

creates a resource. There is no such thing as ‘resource’ until man finds use for something in nature and thus endows it with economic value. Entrepreneurs will have to learn to practice systematic innovation. Technology based innovation has the longest lead time of all innovations. The Technology based innovator needs to learn and practice entrepreneurial management. The technology based innovator needs to learn and practice entrepreneurial management. As the inherent risks of technology based innovations are high, entrepreneurial management is particularly necessary.

198

ANNA UNIVERSITY CHENNAI

MANAGING TECHNOLOGY CHANGE

NOTES

199

NOTES

ANNA UNIVERSITY CHENNAI

DBA 1732

NOTES

NOTES

200

ANNA UNIVERSITY CHENNAI