Strategic Perspectives On Technology

Innovation does not necessarily require advanced technology. Innovation can create an advantage by applying an old technology or the same technology as the competition in an innovative manner that adds more customer-perceived value. Systematic innovation is a purposeful and organised search for ways to change aspects of the organisation in order to gain and/or sustain competitive advantage. It requires a systematic analysis of any opportunities that changes might offer for technological, social, organisational or business process improvement.

Drucker (1999: 31) identifies seven sources of innovation:

* The unexpected
* The incongruity
* Innovation based on process need
* Changes in industry or market structure
* Demographics
* Changes in perception, mood and meaning
* New knowledge

Hamel (2000: 23) regards innovation as the result of lucky foresight where the essential insight does not come from a deliberate and highly structured process, but from a mix of opportunity, curiosity, ambition and need that does not lend itself to deterministic analysis. Some of the factors that will influence the success of innovations include product innovation introduction requirements and process adoption constraints. Some 20 years ago,
Porter identified the most common requirements and constraints. Interestingly these have not really changed since. Porter's (1983) constraints are:

Product innovation introduction requirements:
* gaining regulatory approvals
* achieving code compliance
* winning customers away from substitutes (e.g. marketing, introductory pricing)
* customer product education
* infrastructure development, such as establishing service or outlet networks
* development of complementary goods and services to match new product standards
(e.g. performance, price and availability).

Process innovation adoption constraints:
* gaining regulatory approvals
* establishing reliability of the new process
* investments in infrastructure such as supply sources for new raw material inputs and machinery.

Technology, from a competitive point of view, can be used either:
* defensively, to sustain achieved advantage in differentiation or cost, or
* offensively, as an instrument of expansion, to create new advantage in established lines of business

Two major capabilities exist within a company: market capability—the linkages to customers; and the production system capability—the design, engineering, manufacturing and/or delivery of the product or service. Investment in new technology, therefore, must be understood from these two perspectives: how it affects product value characteristics—the value of the innovation from the customer's standpoint; and how it affects the organisation's ability to create those characteristics.

To plot the location of an innovation on Clark's map, it is useful to first analyse it in terms of its impact on the market and its impact on production systems. These analyses will help assess whether the decision to adopt a certain technology will tend to entrench existing markets and customer linkages or create new ones; and whether it will entrench existing production systems or move them towards obsolescence.

when establishing a technology strategy, it is important to:
* recognise the prevailing technological trends
* analyse the technological change phenomena that become evident
* forecast technological trends and their impact on the market.

An innovative technology strategy can lead to two types of competitive advantage: lower cost and differentiation. These two types of competitive advantage translate into four generic strategies: overall cost leadership, overall differentiation, focused segment differentiation or focused segment cost leadership. The fifth generic strategy, best value, contains elements of all of these.

Three factors that determine the choice of a technology strategy position are (Porter 1983):
* sustainability of technology leadership (the cost, resources and time required to maintain the leadership position)
* first-mover advantages (e.g. increased market share and an ability to define the characteristics that customers will come to expect)
* first-mover disadvantages (e.g. cost and risk).

The technologically effective organisation of the future will take a systems view of technology, recognising life-cycle effects and the interrelatedness between technology, innovation and the development of competitive advantage. It will encourage the development of specialised technical expertise, but not support technology management that does not make decisions in the context of overall competitiveness. It will also allow for the impact of technology on strategic capability and resource development and it will expect managers in all functions to incorporate technological implications into decision making.

A technologically effective organisation will be able to articulate the competitive rationale for its technology strategy. Such an organisation will be explicit about the way it uses technology to achieve competitive advantage. At the same time, it will recognise that external advances in technology will alter the nature of competition in the industry and will require the organisation to develop alternative forms of competitive advantage.

Back in 1990, Paul Cook (in Taylor 1990), suggested that innovation will be the key to all effective strategic plans. It is a prophecy that is now being realised. He identified three forces that would affect its management:

1. Intellectual property is key—make aggressive use of intellectual property laws and work to have the rest of the world adopt effective protection.
2. Technology is becoming more complex and interdependent—practising pioneering innovation requires a critical mass in many different skill areas. Small organisations must therefore focus on one core technology and large organisations can take advantage of their scale and scope to push the frontiers of the adopted technology.
3. Innovation is a global game—this applies to both the supply side and the demand side. Multi-disciplinary and multi-national development teams working together will produce the best global solution. Organisations have to be prepared to lead globally if they are to lead on the basis of innovation.

Strategy & Leadership, January–February 2001, 29 (1): 21–26.

[V]enture capitalists pour millions of dollars into technology start-up companies, most of which fail. If, on average, even one in ten pays off big, it more than compensates for the failures. Creativity and innovative action involve this kind of calculated risk-taking and experimentation.

Understanding and applying the process of strategic innovation requires a review of the levels of change, which provide the context for shaping innovative strategy; the S-curve model of business life cycles, which defines the role of transformative change in strategic success; and the Strategic Innovation Spiral, which puts knowledge creation and innovative action into practice.

A company's leaders will experience three basic levels of change in the business environment, each level requiring a different type of response

Gradual change represents fairly stable and slightly linear variation in an environment. An appropriate response at this level equates to gradual improvement.

Continuous change includes both steady change and incremental shifts in an environment over time. An appropriate response at this level equates to continuous improvement.

Discontinuous change represents abrupt, non-linear, profound shifts in an environment. It moves performance from one level to a radically different and potentially higher level.

The S-curve model offers an explanation of organizational growth, maturity, and progress over time. The basic curve is derived from evolutionary biology, but it has universal application. Products, services, processes, systems, structures, and business models—from the simplest to the most complex—go through three basic phases of growth and change before they must either leap to a new level of sophistication and complexity ordie.

The speed of change and increased competition make the strategic innovation process more essential than ever before. The process is based on repetitions of the five-phase strategic innovation cycle. This cycle helps transform difficult-to-describe tacit knowledge and experiences into more explicit form and enables a leader to deliberately and systematically create results-oriented knowledge and innovative action[2]. As the strategic innovation
cycle recurs, it generates increasing knowledge and innovation, spiraling up and across an
organization and even reaching outside the organization's boundaries.

The five phases of the strategic innovation cycle are:

(1) Phase one: generating
(2) Phase two: conceptualizing
(3) Phase three: optimizing
(4) Phase four: implementing
(5) Phase five: capturing

Five leveraging conditions provide the essential foundation for strategic innovation:
(1) Concentration of aims.
(2) Freedom of action.
(3) Creative tension.
(4) Spreading resources.
(5) Genetic diversity.