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Amity Business School

Strategy and the Management


of Technology and Innovation
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Overview
Issues addressed in this chapter include:
– The meaning of strategy
– Continuous versus radical technology
– Offensive versus defensive technology
– Key MTI concerns in strategy
– The strategy process
– Understanding an industry and its impact
– Strategic groups within an industry
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Strategy
• Strategy Defined
– A coordinated set of actions that fulfill the
firm’s objectives, purposes, and goals.
– It is not a single act in a firm.
• Without a strategy, managers have:
– No well-defined business path to follow
– No roadmap to manage by
– No cohesive, reasoned action plan to produce
successful performance
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Establishing the Strategy


• Strategic Planning
– The process that lays the groundwork and direction of
the firm over the next several years as outlined in a
formal written strategic plan.
• Strategic Management
– An ongoing process in which the organization defines:
• the nature of the businesses in which it will be active
• the kind of economic and human organization it intends to be
• The nature of the contribution it intends to make to its various
constituents

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External and Internal Strategic Interactions

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Types of Capabilities
• Technical Capabilities
– How the firm approaches technology
• Destroy—eliminating and replacing technology
• Preserve—maintaining technology; continuous
improvement
• Develop—leaping others with new technological
capabilities

• Market Capabilities
– the ability to place the product or technology
appropriately. 6
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Competitive Advantage

• Competitive Advantage
– Something that the firm does better than any
of its competitors.
– Goal: To have a sustainable competitive
advantage
• Requires that the advantage:
– Must be valued by customers
– Cannot be easily duplicated
by competitors

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The S-Curve of Technological Progress

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Key Activities in the Strategic Management Process

SOURCE: Adapted from UC Santa Cruz Leadership Convocation, Kristine Hafner, Director Business Initiatives, UCOP, February 4, 1999. 9
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The Planning Process


1. Data gathering
2. Mission generation
3. Objective setting
4. Strategy establishment

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Mission Statement
• A simple statement of the basic purpose or
reason for a firm to exist.
– It should:
• Identify what is unique about the firm
• Identify the scope of activities it wants to pursue
• Help the firm stay focused by defining who and
what it is.

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Levels of Strategy

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Corporate Strategy
• The pattern of decisions in a company that:
– Determines and reveals the firm’s objectives,
purposes, or goals
– Produces the principal policies and plans for
achieving those objectives, purposes, or goals
– Defines:
• The range of businesses the firm is to pursue
• The kind of economic and human organization it is or
intends to be
• The nature of contribution it intends to make to its
constituencies.
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Business Level Strategy


• Business Level Strategy
– How to operate the businesses that the firm
decides to enter into.
• Porter’s model of low cost and differentiation is the
most popular business level strategy model.
• Functional Strategy
– How each functional area in a given business
will operate to aid the firm’s business level
strategy.
– Examples: marketing strategy, and financial
strategy 14
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External Environment

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Forces Model Plus
Porter’s Five-Forces

SOURCES: “Co-opetition: Competitive and Cooperative Business Strategies for the Digital Economy,” Nalebuff B., Brandenburger A.,
Strategy and Leadership (1997,Vol. 2, No. 6) © Emerald Group Publishing Limited. http://www.emeraldinsight.com/sl.htm.
Republished with permission, Emerald Group Publishing Limited; adapted with the permission of The Free Press, a Division of Simon &
Schuster Adult Publishing Group, from COMPETITIVE STRATEGY: Techniques for Analyzing Industries and Competitors, by Michael
E. Porter. Copyright © 1980, 1998 by The Free Press. All rights reserved. 16
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Buyers
• Factors increasing the bargaining power of
a buyer:
– The larger the percentage of the industry’s
output that the buyer purchases.
– The lower the cost of switching to competing
brands.
– The greater the number of sellers available to
the buyer.

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Suppliers
• Factors increasing the bargaining power of
a supplier:
– There is high demand for supplier’s goods.
– The quality and performance of supplier’s
product are unique.
– Customers are unable to vertically integrate
backward into the supplier’s industry.

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New Entrants
• The threat of new entrants in a competitive
rivalry is reduced when:
– Customers have strong brand loyalties.
– Economies of scale must be achieved.
– Large capital requirements are required.
– New entrants cannot gain easily gain access
to distribution channels
– Industry products have proprietary protection
(e.g., patents)
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Substitutes
• The power of substitutes increases when:
– Customers have the opportunity to compare
quality/performance.
– Customers’ costs for switching to competitors’
products are low

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Complementors
• The power of complementors to influence
the competitive environment of an industry
increases when:
– They have the ability to integrate
forward/backward into the complement’s
industry
– There are few or no substitute complements
– Buyer or supplier switching costs are high
– There is relative concentration in the
complement’s industry 21
Strategic Implementation Process
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Technologies in the Value Chain

SOURCE: Adapted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from COMPETITIVE ADVANTAGE:
Creating and Sustaining Superior Performance, by Michael E. Porter. Copyright © 1985, 1988 by Michael E. Porter. All rights reserved. 23
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Balanced Scorecard Issues

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Major Strategic Questions in MTI


• Should we create our own new
technology and innovations internal to the
firm?
OR
• Should we acquire technology from
others through acquisition or strategic
alliances?

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Managerial Guidelines
• For a firm to navigate successfully the strategic
processes involved in the management of
technology and innovation, it must keep certain
actions in mind. These include:
1. Forget traditional organizational functions—judge
ideas, not positions.
2. Know where the firm is in the life cycle of the
technology and where its competitors are.
3. Be willing to assume risk if the potential long-term
reward is great.
4. Utilize all resources in the environment. Do not get
caught by the “not invented here” syndrome.
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Managerial Guidelines
5. Break down communication barriers. Many firms lose
opportunities because of a “not shared here”
approach to lessons learned.
6. Keep expectations realistic. Too often, firms abandon
technologies too soon because unrealistic
expectations cannot be met.
7. Establish processes for new initiative approaches to
management.

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Technology-Driven
Corporate Cycle
Characteristics of a Technology

SOURCE: Girifalco, L. Dynamics of Technological Change.© 1991,Van Nostrand Reinhold, p. III. Reprinted with permission of Springer
Science and Business Media. 28
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Key Terms
• barriers to entry • next-generation
• buyers technologies
• capabilities • offensive technology
• competitive advantage • radical technology
• complementors • S-curve
continuous technology • strategic group
• defensive technology • strategy
• disruptive technology • sustainable competitive
• low-end disruption advantage

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