Chapter 11 – Appropriating the Gains from Innovation
Wharton Chapter 11 discusses one of the most important issues surrounding emerging technologies– how to make profits from the technology and block other from profiting. The chapter discusses three common misunderstandings about intellectual property and profitability, and then presents four ways to secure value from a technology.
Too much emphasis is put on intellectual property law as a way to secure profits from emerging technologies, and this can actually have a negative impact on a company. By assuming that patents and other legal protections are the best way to make money, attention and resources are heavily devoted to securing that legal protection that probably won’t pay off in the long run. Projects and technologies that might be very profitable are often overlooked if legal protection can’t be secured. The book uses Starbucks and their business as an example; they are able to be successful without using legal protection such as patents.
While the chapter first dismisses the myths surrounding intellectual property, patents and other legal protection is listed as a way to appropriate gains from innovation. The chapter cautions that while patents are costly and do not prevent other companies form “inventing around” the product, they have shown to be highly effective in varying industries.
The second way to appropriate gains from innovation is secrecy. Secrecy is the available means to provide protection. Secrecy would appear to be most beneficial in the early stages of development, while maintaining secrecy in later stages may hinder commercialization of the product. Secrecy runs the risk of negatively impacting the flow of communication within a company, hurting future R&D efforts, and stopping the flow of communication coming into a company. Once again I think the effectiveness and practicality would vary by industry and even in regards to processes and products.
Complementary assets are another way to make profits from technology. The book has touched on this in previous chapters, and it is again emphasized that complementary assets can be extremely beneficial to a company. The chapter uses the Biotech industry and IBM to illustrate complementary assets benefiting the companies. Assets such as established marketing and distribution channels, external relationships, R&D, manufacturing processes, etc. can be leveraged to accommodate for not being first to market with a product.
Finally lead time is presented as the most effective way to achieve profits. The more durable a product is, the more valuable having a lead time advantage is. Lead time can provide a company with a unique opportunity to get to further know the customers and develop relationships, while capturing any complementary assets that emerge.
The chapter concludes by saying that there is no one right way to make money from a technology, but by knowing the uncertainties involved and by assessing the business environment and paying close attention to rivals, patents, changes, etc., a company can select the best way to obtain profits from a technology.
Chapter 17 – Design of New Organizational Forms
Chapter 17 discuses how the presence of emerging technologies has caused retooling of the normal organizational forms. The six elements that constitute organizational forms - goal, strategies, authority structure, technologies, markets, and processes - need to be recombined accordingly to meet the changing business environment needs. The chapter discusses six current emerging organization forms.
Virtual Organization
Employees, suppliers, and customers are not physically located together but are connected by technology. This has proven to be very effective because it dramatically lowers overhead costs and creates unique opportunities for customer relationships. This has proven challenging as far as team collaboration and authority and accountability.
Network Organization
Self-governing work groups work together to provide a completed product or service. There can be external networks, which the book refers to “outsourcing in the extreme,” or internal networks. In external network organizations, independent companies work to collectively provide an end product or service. Internal networks functions the same way, but maintained within an organization.
Spin-Out Organization
Parent/child relationship where a new company is created inside a larger company, and then spun out into its own organization. The child company can take advantage of the resources of the parent company, and this a very useful way for a company to develop risky and expensive emerging technologies.
Ambidextrous Organization
Existing businesses and new businesses operate side by side within an organization. Separation is limited so potential issues can be addressed and resolved quickly. Current business can still be maintained while new business is developed.
Front-Back Organization
The customer is the front of the business and the business works to support that customer. There are hybrid variations of this form, where vertical reporting lines can be bypassed if needed. This would apply more in the service industry.
Sense and Respond Organization
Company is designed around meeting the ever-changing customer needs. A company must be able to remain flexible, sense the customer’s needs, and be able to change as needed.
Chapter 17 concludes by saying that as with everything else to do with emerging technologies, there is no one right form for an organization. There are many different variables to take into account, and by using these six organizational forms as starting points, a company can create an organizational form suitable to their nature.
I really enjoyed chapter 11, especially the information about patents. Before this I was under the impression that patents were a sure way to earn profits, but after this chapter and initial research for the chapter presentation, it seems like patents are a better defensive mechanism to prevent a company from being sued. If a company has a patent on a specific process or product, they have some protection against other companies who could potentially sue them. As the chapter stated, patents are not always efficient at stopping competition from inventing around the original product, but they can act as “speed bumps” to delay the competition and allow the company with the patents to secure lead time. It seems to me that there would be differences between patenting processes/business methods and products, and the degrees of security from the patent would vary by industry. The book only really touched on the worth of individual patents, not large corporations and their patent portfolio. One of the articles I read stated that Texas Instruments actually makes more money from their patent royalties than they do from their actual products, but I would imagine they are a minority in that aspect. What I really gathered from both these chapters is that there is no right way to achieve profitability or a right organizational form for a company. By being aware of the different options and picking the characteristics that fit the specific company and circumstance a company will be more likely to be profitable and remain competitive.
Safeguard Scientifics, Inc. and Novell Inc. were both mentioned in Chapter 17, Safeguard being the holding company that provided Novell with enough support to get up and running. Both companies are both in business, and Novell has been credited (or at least, credited itself) with developing the concept and technology of the WAN. Since then they have branched out into a cross-platform company, offering many software platforms from operating systems to email, to consulting and training. They have strategic partnerships with Microsoft, and have branched into security products as well. They really seem to have quite a diverse portfolio, which could be why they have remained in business and competitive for so many years.
http://www.safeguard.com/
http://www.novell.com/news/press/pressroom/history.html
Wednesday, April 29, 2009
Monday, April 20, 2009
Chapter 10 – Scenario Planning for Disruptive Technologies
Chapter 10 uses the challenges faced by the newspaper industry with the growing popularity of the Internet to discuss and demonstrate scenario planning techniques when emerging technologies are involved. As the Internet gains popularity as a source for information distribution, newspapers are faced with preparing for the uncertain future in the rapidly changing business environment. Chapter 10 reviews the various methods of scenario planning when the future is uncertain, and offers solutions for generating possible alternative scenarios and ways to deal with each scenario.
Three major challenges are present when developing scenarios, uncertainty, complexity, and paradigm shift. The ambiguous nature of emerging technologies exacerbates these three areas even more. Scenario planning is different from other methods of planning in that it examines different uncertainties in different ways, explores different outcomes and patterns in relationships, and generates a wide range of alternative scenarios. Scenario planning allows the business to see the relationship between the market and technology that might otherwise be difficult to visualize, especially if the market not does exist in the present. Scenarios can help a business better understand the challenges they face with a technology, and also portray the different technology options a business can choose from.
The chapter presents ten steps in the scenario planning:
1. Identify the main issues that need to be better understood. Identify the scope, timeframe, and different decision variable. Identify and understand any past changes and how they might influence the future.
2. Identify main stakeholders who are affected or have an interest in the issues. Attempt to understand how they will be affected and what influence they may have.
3. Study the future and identify the main forces shaping the future. This is an iterative process that covers social, technological, economic, environmental, and political areas.
4. Identify previously defined elements and trends that will affect the issues identified previously. Understand the relationships between the trends to identify patterns that might have an effect in the future.
5. Identify main uncertainties from the previous list of major issues. Rank the uncertainties on importance and create possible outcomes for each uncertainty. Explain why they matter and how they relate to each other.
6. Select the two most important uncertainties and using a matrix format or other visual representation, examine both uncertainties and their corresponding possible outcomes to create possible scenarios.
7. Evaluate the two scenarios to see if they are plausible and internally consistent. Combinations that are not should be eliminated and new scenarios can be created.
8. Review the revised scenarios and assess how the key stakeholders will react. Through role playing, and discussions with different groups, areas that need more information and research will be identified.
9. When additional research is done, the scenarios can be reviewed again for plausibility and consistency. A quantitative model can be applied to represent the new possible environments and help persuade management of the need for change.
10. After all the scenario planning in complete, the uncertainty ranges of the main issues need to be re-examined and defined under the different scenarios.
Chapter 10 goes on to identify the issues facing modern day newspapers, how to embrace new emerging technologies while remaining competitive and not investing in technology that is not going anywhere.
The chapter also discusses common pitfalls to avoid with scenario planning. Not using signposts to track scenarios, not using diverse inputs, not seeking new strategic options, and not securing management support can cause the entire scenario planning efforts to fail.
There is no way to guarantee accuracy about the future of a technology, but by using scenario planning and the techniques listed in Chapter 10, a business can identify possible alternatives for the future and be better prepared for whatever happens.
I found this chapter interesting in that the struggle of the newspaper industry with in the introduction and rise of the Internet is still relevant and continuing today. The Idaho Statesman has been in the news several times recently for decreasing business (caused by the recession and the impact of the Internet on business), and I think we will continue to see this trend in the future. The Idaho Statesman and other newspapers are trying to remain competitive by getting creative – creating partnerships to cut down costs, offering information online, and pursuing other profit opportunities. A lot of the content online is now free to read (www.ktvb.com and www.idahostateman.com for example), so newspapers are struggling to make up that revenue. Some newspapers have chosen to offer a cheaper pay for use online version, such as The Wall Street Journal.
I know personally that I do not have a newspaper subscription and I have not bought one for years. If I need to advertise or sell something I choose a free alternative, such as Craigslist, to do so. The Internet has so much information available; I honestly cannot imagine paying for the news service I can easily get for free, especially as technology gets more advanced and I can subscribe to RSS feeds, email alerts, Twitter updates, and view everything on my cell phone. My parents and grandparents still subscribe to the local newspapers however, so I wonder if it is generational preference? I think as the Internet and surrounding technology gets more advanced, newspapers will have to struggle even more to adapt and remain competitive.
http://www.ktvb.com/news/business/stories/ktvbn-mar1509-newspapers_part_1.3b59a70d.html
http://www.businessweek.com/magazine/content/05_27/b3941024.htm
Three major challenges are present when developing scenarios, uncertainty, complexity, and paradigm shift. The ambiguous nature of emerging technologies exacerbates these three areas even more. Scenario planning is different from other methods of planning in that it examines different uncertainties in different ways, explores different outcomes and patterns in relationships, and generates a wide range of alternative scenarios. Scenario planning allows the business to see the relationship between the market and technology that might otherwise be difficult to visualize, especially if the market not does exist in the present. Scenarios can help a business better understand the challenges they face with a technology, and also portray the different technology options a business can choose from.
The chapter presents ten steps in the scenario planning:
1. Identify the main issues that need to be better understood. Identify the scope, timeframe, and different decision variable. Identify and understand any past changes and how they might influence the future.
2. Identify main stakeholders who are affected or have an interest in the issues. Attempt to understand how they will be affected and what influence they may have.
3. Study the future and identify the main forces shaping the future. This is an iterative process that covers social, technological, economic, environmental, and political areas.
4. Identify previously defined elements and trends that will affect the issues identified previously. Understand the relationships between the trends to identify patterns that might have an effect in the future.
5. Identify main uncertainties from the previous list of major issues. Rank the uncertainties on importance and create possible outcomes for each uncertainty. Explain why they matter and how they relate to each other.
6. Select the two most important uncertainties and using a matrix format or other visual representation, examine both uncertainties and their corresponding possible outcomes to create possible scenarios.
7. Evaluate the two scenarios to see if they are plausible and internally consistent. Combinations that are not should be eliminated and new scenarios can be created.
8. Review the revised scenarios and assess how the key stakeholders will react. Through role playing, and discussions with different groups, areas that need more information and research will be identified.
9. When additional research is done, the scenarios can be reviewed again for plausibility and consistency. A quantitative model can be applied to represent the new possible environments and help persuade management of the need for change.
10. After all the scenario planning in complete, the uncertainty ranges of the main issues need to be re-examined and defined under the different scenarios.
Chapter 10 goes on to identify the issues facing modern day newspapers, how to embrace new emerging technologies while remaining competitive and not investing in technology that is not going anywhere.
The chapter also discusses common pitfalls to avoid with scenario planning. Not using signposts to track scenarios, not using diverse inputs, not seeking new strategic options, and not securing management support can cause the entire scenario planning efforts to fail.
There is no way to guarantee accuracy about the future of a technology, but by using scenario planning and the techniques listed in Chapter 10, a business can identify possible alternatives for the future and be better prepared for whatever happens.
I found this chapter interesting in that the struggle of the newspaper industry with in the introduction and rise of the Internet is still relevant and continuing today. The Idaho Statesman has been in the news several times recently for decreasing business (caused by the recession and the impact of the Internet on business), and I think we will continue to see this trend in the future. The Idaho Statesman and other newspapers are trying to remain competitive by getting creative – creating partnerships to cut down costs, offering information online, and pursuing other profit opportunities. A lot of the content online is now free to read (www.ktvb.com and www.idahostateman.com for example), so newspapers are struggling to make up that revenue. Some newspapers have chosen to offer a cheaper pay for use online version, such as The Wall Street Journal.
I know personally that I do not have a newspaper subscription and I have not bought one for years. If I need to advertise or sell something I choose a free alternative, such as Craigslist, to do so. The Internet has so much information available; I honestly cannot imagine paying for the news service I can easily get for free, especially as technology gets more advanced and I can subscribe to RSS feeds, email alerts, Twitter updates, and view everything on my cell phone. My parents and grandparents still subscribe to the local newspapers however, so I wonder if it is generational preference? I think as the Internet and surrounding technology gets more advanced, newspapers will have to struggle even more to adapt and remain competitive.
http://www.ktvb.com/news/business/stories/ktvbn-mar1509-newspapers_part_1.3b59a70d.html
http://www.businessweek.com/magazine/content/05_27/b3941024.htm
Tuesday, April 14, 2009
Chapter 8 and 9
Chapter 8 – Commercializing Emerging Technologies Through Complementary Assets
Chapter 8 uses the firm Mergenthaler Linotype as a successful incumbent company that managed to stay in business throughout the years by successfully commercializing emerging technologies. Success does not necessarily come from mastering the technology; the longevity and profitability of a company depends on adapting and building complementary assets, addressing customer’s changing needs and changing market segments, and identifying and understanding new competition.
Emerging technologies have the potential to change and create market landscapes. In addition to changing the skills needed, they can also impact complementary assets, customers, and competition. Incumbent firms, while they have the resources to successfully develop and commercialize an emerging technology, may focus too much on mastering the technology and overlook the other areas affected.
Complementary Assets
Incumbent firms have the distinct advantage over new entrants of established distribution channels, service capability, infrastructure, supplier relationships, and complementary products. Incumbent firms can use these assets to aid in bringing the innovation to market easier, more efficiently, and possibility even faster than new entrants. As with Mergenthaler, the new technological advances in the typesetter industry still relied on an underlying asset than Mergenthaler was able to master, proprietary typefaces. While new entrants were able to produce higher quality products, they lacked the underlying font library. Mergenthaler was able to stay competitive by leveraging that asset above other competition. Standards that an incumbent firm establish may be used in newer product versions and be an asset throughout the product lifecycle to the company that developed them.
Emerging technologies may also render a company’s complementary assets useless, so companies must always assess which complementary assets are likely to remain important and which ones might be important later on. Investing in assets that a firm believes will continue to be important will help the company stay profitable even as the underlying technology changes.
Customers
Carefully examining an emerging technology’s impact on customers and potential customers is another part to developing a successful commercialization strategy. As discussed in the previous chapter, emerging technologies have the potential to extend market barriers and create new market segments, so companies have to focus not only on their existing customers but also possibilities for new customers. Firms need to invest in understanding how the technology will affect their customers and develop the best strategy for getting the customer to use the new technology.
Competition
New technologies and new customers will also result in new competition. Companies need to be conscious of the threat of their existing competition and also be prepared for new competition. This may result in changes in the way the company competes. Getting involved in emerging social networks in the new technology field can help a company stay up to date on the competition.
Developing and embracing emerging technologies is very important for companies to stay profitable in business, but if a company cannot successfully commercialize a new technology they cannot remain competitive. Successful commercialization will be different with every technology, but by focusing on more than just the technology itself and investing in other areas such as complementary assets, customers, and competition, companies can remain competitive in the changing business world today.
Chapter 9 – Disciplined Imagination: Strategy Making in Uncertain Environments
Chapter 9 discusses about the challenges of developing a strategy in the very dynamic, fast paced world of emerging technologies. Previous strategy planning techniques are no longer relevant, and chapter 9 gives the term “disciplined imagination” to the new type of strategy planning needed. While uncertainty is always a factor in strategy planning, the need to adjust a strategy quickly, and the lack of historical data available requires discipline and imagination when strategically planning with emerging technologies in the picture.
Discipline means consistently applying a set of constraints to evaluate a set of alternatives. A set of alternatives must be known, so when looking at an emerging technology this may prove to be a problem. Consistent evaluation tends to weed out “avoidable errors,” so there are many benefits to this approach. No matter what level of uncertainty a company is facing, systematically evaluating options can yield better decision making. By employing a strategy process with discipline, a company can retain control over the process.
A discipline process also has many limitations. The process does not lend itself to creative and innovative thinking; strategy is not created, but just systematically evaluated pre-defined alternatives. Historical data and biases are usually taken into account, which in regards to emerging technologies can be misleading. A discipline approach relies heavily on gathered information, which once again in regards to emerging technologies can pose a problem since there may not be much information available.
Imagination encourages creative thinking in generating varied and different alternatives. The problem can be varied as well, and multiple view points are encouraged. Conventional thinking is discarded, and often times younger employees who aren’t immersed in the company’s culture provide the most value insights. The idea is to get multiple views on the problems and possible solutions.
An imagination process also has many limitations. The process can get flooded with ideas, not all of them good or even achievable. Someone has to be tasked with weeding through them all and determining which ones are good or not. Focusing too much time and efforts on future strategy takes away time and effort from focusing on the present situation and issues, and along those lines the company may focus too much effort on the future and not take into account lessons learned in the past. Group-think may hinder individual creativity, and the more people involved into the process could mean that it takes more time to create a good strategy.
A company can take into account the advantages and disadvantages of these two strategies by adapting a disciplined imagination strategy. Rather than emphasizing one strategy over the other, integrating the two together can create a strategy process that results in creative alternatives and establishes a process for methodically evaluating those options. Developing and commercializing emerging technologies requires a strategy that is innovative, tolerable to change, and well defined and though out. By using disciplined and imagination techniques a company can develop a strategy that can enable a company to become and remain successful even as technology transforms.
I found both of these chapters very interesting. I think Chapter 8 discussed some very key points to being successful with emerging technologies. Even after a company has developed an emerging technology and found a use for it, if they can’t successfully market it there is no point in spending time and resources to develop it. I liked Chapter 9 because it held true to the ambiguous nature of emerging technologies discussed in this book – there is no one right way or set of rules to follow to be successful. Every situation is different and by developing a strategy that is flexible and subject to quick and considerable change, a company can be more successful in dealing with emerging technologies. Doing so does not guarantee success though, which is another theme of emerging technologies that is prevalent in the book.
PECO Energy
In 2000 PECO Energy and Unicom merged forming Exelon Corporation. PECO Energy still operates as a child company of Exelon. Since 2000 they have won numerous awards for advances in green technology. http://www.exeloncorp.com/ourcompanies/peco/
Woodgrain Millwork is a locally owned, private manufacturing company that operates out of Fruitland, Idaho. They manufacture windows, doors, and mouldings and are an excellent example of a company that leverages its complementary assets to stay in business. They have been around for 50 years and even though they may not be the most innovative incumbent company, they still manage to maintain their position as a market leader. Their supply chain is completely internal, meaning they own everything from the plantation where their wood comes from to the distribution centers the final products are sold out of. There are no third parties involved at any stages in the supply chain so that allows them to produce products and have complete visibility at all stages of the supply chain. This asset has allowed them to maintain their competiveness even when they may lag behind in adopting new manufacturing technologies and processes. www.woodgrain.com
Chapter 8 uses the firm Mergenthaler Linotype as a successful incumbent company that managed to stay in business throughout the years by successfully commercializing emerging technologies. Success does not necessarily come from mastering the technology; the longevity and profitability of a company depends on adapting and building complementary assets, addressing customer’s changing needs and changing market segments, and identifying and understanding new competition.
Emerging technologies have the potential to change and create market landscapes. In addition to changing the skills needed, they can also impact complementary assets, customers, and competition. Incumbent firms, while they have the resources to successfully develop and commercialize an emerging technology, may focus too much on mastering the technology and overlook the other areas affected.
Complementary Assets
Incumbent firms have the distinct advantage over new entrants of established distribution channels, service capability, infrastructure, supplier relationships, and complementary products. Incumbent firms can use these assets to aid in bringing the innovation to market easier, more efficiently, and possibility even faster than new entrants. As with Mergenthaler, the new technological advances in the typesetter industry still relied on an underlying asset than Mergenthaler was able to master, proprietary typefaces. While new entrants were able to produce higher quality products, they lacked the underlying font library. Mergenthaler was able to stay competitive by leveraging that asset above other competition. Standards that an incumbent firm establish may be used in newer product versions and be an asset throughout the product lifecycle to the company that developed them.
Emerging technologies may also render a company’s complementary assets useless, so companies must always assess which complementary assets are likely to remain important and which ones might be important later on. Investing in assets that a firm believes will continue to be important will help the company stay profitable even as the underlying technology changes.
Customers
Carefully examining an emerging technology’s impact on customers and potential customers is another part to developing a successful commercialization strategy. As discussed in the previous chapter, emerging technologies have the potential to extend market barriers and create new market segments, so companies have to focus not only on their existing customers but also possibilities for new customers. Firms need to invest in understanding how the technology will affect their customers and develop the best strategy for getting the customer to use the new technology.
Competition
New technologies and new customers will also result in new competition. Companies need to be conscious of the threat of their existing competition and also be prepared for new competition. This may result in changes in the way the company competes. Getting involved in emerging social networks in the new technology field can help a company stay up to date on the competition.
Developing and embracing emerging technologies is very important for companies to stay profitable in business, but if a company cannot successfully commercialize a new technology they cannot remain competitive. Successful commercialization will be different with every technology, but by focusing on more than just the technology itself and investing in other areas such as complementary assets, customers, and competition, companies can remain competitive in the changing business world today.
Chapter 9 – Disciplined Imagination: Strategy Making in Uncertain Environments
Chapter 9 discusses about the challenges of developing a strategy in the very dynamic, fast paced world of emerging technologies. Previous strategy planning techniques are no longer relevant, and chapter 9 gives the term “disciplined imagination” to the new type of strategy planning needed. While uncertainty is always a factor in strategy planning, the need to adjust a strategy quickly, and the lack of historical data available requires discipline and imagination when strategically planning with emerging technologies in the picture.
Discipline means consistently applying a set of constraints to evaluate a set of alternatives. A set of alternatives must be known, so when looking at an emerging technology this may prove to be a problem. Consistent evaluation tends to weed out “avoidable errors,” so there are many benefits to this approach. No matter what level of uncertainty a company is facing, systematically evaluating options can yield better decision making. By employing a strategy process with discipline, a company can retain control over the process.
A discipline process also has many limitations. The process does not lend itself to creative and innovative thinking; strategy is not created, but just systematically evaluated pre-defined alternatives. Historical data and biases are usually taken into account, which in regards to emerging technologies can be misleading. A discipline approach relies heavily on gathered information, which once again in regards to emerging technologies can pose a problem since there may not be much information available.
Imagination encourages creative thinking in generating varied and different alternatives. The problem can be varied as well, and multiple view points are encouraged. Conventional thinking is discarded, and often times younger employees who aren’t immersed in the company’s culture provide the most value insights. The idea is to get multiple views on the problems and possible solutions.
An imagination process also has many limitations. The process can get flooded with ideas, not all of them good or even achievable. Someone has to be tasked with weeding through them all and determining which ones are good or not. Focusing too much time and efforts on future strategy takes away time and effort from focusing on the present situation and issues, and along those lines the company may focus too much effort on the future and not take into account lessons learned in the past. Group-think may hinder individual creativity, and the more people involved into the process could mean that it takes more time to create a good strategy.
A company can take into account the advantages and disadvantages of these two strategies by adapting a disciplined imagination strategy. Rather than emphasizing one strategy over the other, integrating the two together can create a strategy process that results in creative alternatives and establishes a process for methodically evaluating those options. Developing and commercializing emerging technologies requires a strategy that is innovative, tolerable to change, and well defined and though out. By using disciplined and imagination techniques a company can develop a strategy that can enable a company to become and remain successful even as technology transforms.
I found both of these chapters very interesting. I think Chapter 8 discussed some very key points to being successful with emerging technologies. Even after a company has developed an emerging technology and found a use for it, if they can’t successfully market it there is no point in spending time and resources to develop it. I liked Chapter 9 because it held true to the ambiguous nature of emerging technologies discussed in this book – there is no one right way or set of rules to follow to be successful. Every situation is different and by developing a strategy that is flexible and subject to quick and considerable change, a company can be more successful in dealing with emerging technologies. Doing so does not guarantee success though, which is another theme of emerging technologies that is prevalent in the book.
PECO Energy
In 2000 PECO Energy and Unicom merged forming Exelon Corporation. PECO Energy still operates as a child company of Exelon. Since 2000 they have won numerous awards for advances in green technology. http://www.exeloncorp.com/ourcompanies/peco/
Woodgrain Millwork is a locally owned, private manufacturing company that operates out of Fruitland, Idaho. They manufacture windows, doors, and mouldings and are an excellent example of a company that leverages its complementary assets to stay in business. They have been around for 50 years and even though they may not be the most innovative incumbent company, they still manage to maintain their position as a market leader. Their supply chain is completely internal, meaning they own everything from the plantation where their wood comes from to the distribution centers the final products are sold out of. There are no third parties involved at any stages in the supply chain so that allows them to produce products and have complete visibility at all stages of the supply chain. This asset has allowed them to maintain their competiveness even when they may lag behind in adopting new manufacturing technologies and processes. www.woodgrain.com
Monday, April 6, 2009
Chapter 7 – Technology Strategy in Lumpy Market Landscapes
Chapter 7 discusses the “lumpy” aspect of emerging technology markets and ways to analyze and expand into other markets. A technology or product exists in a set of technology barriers, so finding ways to push the barriers can increase a company’s market share. Customers also value different attributes of the product higher than others, so understanding what attributes are important to customers and then exploiting that preference increases market share as well. Emerging technology markets are especially hard to predict because in this lumpy, changing, market scenery it must be decided what market and what attributes will derive the most benefit from the technology. Success with an emerging technology comes when the technology facilitates an improvement in the most favored set of attributes by the market. Companies need to understand the market and the lumpiness they are dealing with and strive to extend the barriers, either by looking for a technology to do so, or looking for a market to introduce a technology into.
Pushing Technology Barriers
Understanding the intersection between market segments and barriers created by the current technology, companies can use an emerging technology to expand the barriers and reach more customers. By expanding or eliminating barriers, companies can access markets that were previously out of reach and may still be out of reach by competitors. Also, when emerging technologies can create demand for new attribute sets, new customers can be acquired as well.
Identifying Valuable Technologies
To understand what technologies would be profitable for a market, the lumpiness of the market must be identified and understood. Attributes, most favored and valuation impact and technology barriers impact on market segments and attributes must be known. There are three different customer responses to attributes – basic, discriminators, and energize features, and by identifying a company’s current attributes, they can be categorized into valued attributes and ones that could be adjusted using emerging technology to provide more value and gain more customers. Once the attributes are scoped out, a company can look at what technology constraints are currently stopping the company from delivering the attributes. Companies can also look at what barriers might be present in the future. Understanding the current and future barriers makes it easier to identify or look for technology that will facilitate expanding the barrier to reach more customers. Market lumpiness is not static due to customer’s changing needs and wants, so by making small investments and employing options reasoning, a company can account for the changing atmosphere. Companies can position options – identify ways to extend barriers by looking for a technology to do so, or scout options – identify ways a technology will create attributes of value.
Identifying Positioning Options to Exploit Lumpy Markets
A company who wants to use technology to expand its barriers and enter new markets has three options to do so.
Single Niche Domination – A company extends a barrier and is now able to market a better product to a single market segment. This should be used when competition cannot provide better attributes because of technology barriers. The first company to use and emerging technology to provide a better product and extend that barrier will capture and control that niche.
Niche Fusion – A company identifies a technology that will change the current technology barriers and allow for the fusion of multiple market segments. That company will then dominate and capture those market segments. This should be used when the rate of performance improvement is sharp compared to alternatives.
Creating a New Technology Envelope – A company changes the attribute sets, usually by introducing an emerging technology. This radical change forces the competition to quickly adjust or go out of business, since the customers have transferred over to the new attributes and may not be interested in the old product or technology.
Identifying Scouting Options for Applying New Technologies
To be successful with this approach, companies must find attributes that can be created and improved by the emerging technology. The company then needs to determine what market segments would value the new or improved attributes the most. The attributes have to be measurable and dimensional, so by researching what dimensions the emerging technology will have an impact on will help determine what segment to market. Understanding what attributes the emerging technology will change and understanding how the customers view the attribute and their reaction to any changes will help a company choose the right market segment.
The lumpy market is just another facet in the complex and ambiguous nature of emerging technologies. Disrupting a technology barrier by introducing a new technology can provide huge benefits to a company, but can only be done when the lumpiness of the market and different customer segments is understood. Learning about the different segments and attributes that each segment values the most is key to being able to exploit the barriers and create improved attributes. A company can either look for a technology to facilitate expanding the barrier, or look for a market where their technology will expand the barrier. If done successfully, either option will yield more customers and increased profitability.
The book says in relation to creating a new technology envelope, “the Internet is putting conventional telephone network operators on edge.” I would have to disagree with that now, while VoIP has taken off in the business world (and decreased the use of PBX systems); it has not really become popular in the residential world (at least yet). Cell phones however, are displacing regular “land lines” and taking business away from the “telephone network operators.” The technology of cellular communication, not requiring a land line, has taken significant market share away from the conventional telephone companies.
Netbooks are a good example of the concepts presented in this chapter. By creating a very portable and very inexpensive laptop, companies are now able to reach a new market segment that previously did not own a laptop due to price. Customers who were not willing to pay a lot for a computer and do not have high computing demands can use a netbook. This customer segment in the past probably either owned a desktop (due to price) or no computer at all (due to low computing needs and price). By introducing the netbook into these segments, the main attribute of price can be decreased enough that this customer segment is now willing to purchase a computer/laptop.
Pushing Technology Barriers
Understanding the intersection between market segments and barriers created by the current technology, companies can use an emerging technology to expand the barriers and reach more customers. By expanding or eliminating barriers, companies can access markets that were previously out of reach and may still be out of reach by competitors. Also, when emerging technologies can create demand for new attribute sets, new customers can be acquired as well.
Identifying Valuable Technologies
To understand what technologies would be profitable for a market, the lumpiness of the market must be identified and understood. Attributes, most favored and valuation impact and technology barriers impact on market segments and attributes must be known. There are three different customer responses to attributes – basic, discriminators, and energize features, and by identifying a company’s current attributes, they can be categorized into valued attributes and ones that could be adjusted using emerging technology to provide more value and gain more customers. Once the attributes are scoped out, a company can look at what technology constraints are currently stopping the company from delivering the attributes. Companies can also look at what barriers might be present in the future. Understanding the current and future barriers makes it easier to identify or look for technology that will facilitate expanding the barrier to reach more customers. Market lumpiness is not static due to customer’s changing needs and wants, so by making small investments and employing options reasoning, a company can account for the changing atmosphere. Companies can position options – identify ways to extend barriers by looking for a technology to do so, or scout options – identify ways a technology will create attributes of value.
Identifying Positioning Options to Exploit Lumpy Markets
A company who wants to use technology to expand its barriers and enter new markets has three options to do so.
Single Niche Domination – A company extends a barrier and is now able to market a better product to a single market segment. This should be used when competition cannot provide better attributes because of technology barriers. The first company to use and emerging technology to provide a better product and extend that barrier will capture and control that niche.
Niche Fusion – A company identifies a technology that will change the current technology barriers and allow for the fusion of multiple market segments. That company will then dominate and capture those market segments. This should be used when the rate of performance improvement is sharp compared to alternatives.
Creating a New Technology Envelope – A company changes the attribute sets, usually by introducing an emerging technology. This radical change forces the competition to quickly adjust or go out of business, since the customers have transferred over to the new attributes and may not be interested in the old product or technology.
Identifying Scouting Options for Applying New Technologies
To be successful with this approach, companies must find attributes that can be created and improved by the emerging technology. The company then needs to determine what market segments would value the new or improved attributes the most. The attributes have to be measurable and dimensional, so by researching what dimensions the emerging technology will have an impact on will help determine what segment to market. Understanding what attributes the emerging technology will change and understanding how the customers view the attribute and their reaction to any changes will help a company choose the right market segment.
The lumpy market is just another facet in the complex and ambiguous nature of emerging technologies. Disrupting a technology barrier by introducing a new technology can provide huge benefits to a company, but can only be done when the lumpiness of the market and different customer segments is understood. Learning about the different segments and attributes that each segment values the most is key to being able to exploit the barriers and create improved attributes. A company can either look for a technology to facilitate expanding the barrier, or look for a market where their technology will expand the barrier. If done successfully, either option will yield more customers and increased profitability.
The book says in relation to creating a new technology envelope, “the Internet is putting conventional telephone network operators on edge.” I would have to disagree with that now, while VoIP has taken off in the business world (and decreased the use of PBX systems); it has not really become popular in the residential world (at least yet). Cell phones however, are displacing regular “land lines” and taking business away from the “telephone network operators.” The technology of cellular communication, not requiring a land line, has taken significant market share away from the conventional telephone companies.
Netbooks are a good example of the concepts presented in this chapter. By creating a very portable and very inexpensive laptop, companies are now able to reach a new market segment that previously did not own a laptop due to price. Customers who were not willing to pay a lot for a computer and do not have high computing demands can use a netbook. This customer segment in the past probably either owned a desktop (due to price) or no computer at all (due to low computing needs and price). By introducing the netbook into these segments, the main attribute of price can be decreased enough that this customer segment is now willing to purchase a computer/laptop.
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