Essential of Technology Entrep. & Innovation- Chapter three critical factors in managing technology

CS443 Course
Introduction To Entrepreneurship
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Spring 2009, Modern Science & Arts University

Chapter Three: Critical Factors in Managing Technology

Instructor:
Al-Motaz Bellah Alaa Al-Agamawi

Chapter Source, “chapter three: critical factors in managing technology” from “customized
management of technology” book, by Tarek Khalil, 2000, McGraw-Hill Companies, Inc.

Critical Factors in Managing Technology Chapter 3 By: Motaz Al-Agamawi

Technology and Creativity
2

Technology is an Expression of human Creativity.
Managing Technology involves continuous effort in creating Technology,
developing novel products and services, and successfully marketing them.
This requires great creativity along with a system designed to exploit them.
It also requires an investment in Research and Development-R&D.
R&D is a costly endeavor. It is a risky investment and therefore needs to b well
i tl d i ik i t t d th f d t be ll
managed.
It is an investment in the future that can not be neglected, nor can its value be
underestimated.
Technology creation and exploitation require a chain of events, starting with
inventions and end at the market place.
ve o s a d e d a e a e p ace.


The Link Between Science and Technology
3

May never be developed
into marketable products Invention

Has No Instantaneous Scientific Innovation Adopting Invention
commercial value Discovery

Market Buying or ignoring the
Place innovation


The Link Between Science and Technology (Cont.)
4

Scientific Knowledge focus on natural phenomena is neutral on the question of
how this knowledge may be used.
Historically Speaking scientific knowledge and technology progressed slowly until
Speaking,
very recently. Only when science and technology started to interact and enforce
one another did the real explosion in knowledge and technology development.

When we discuss science we mention scientific discoveries
But when we talk about technology, we mention technology innovation
gy, gy


Types of Innovation
5

Radical/Revolutionary:
/ y
Radical breakthrough innovations are usually based on an invention.
They change or create new industries.
firm.
They are relatively rare and typically start outside the boundaries of a firm
When they are developed within the boundaries of a firm, they signify the
introduction of something that is not only new to the organization but drastically
different from its existing practice.
Example:
Invenstion as the transistor, which was invented in Bell Laboratories, was
, ,
the starting point of phoniminal development in the electronics industry.
Development of xeography by Carlson triggered radical innovation in
the photocopying industry and created a market of more than 20 Billion
USD.

Types of Innovation (Cont.)
6

Incremental/Evolutionary:
/ y
These are small but important improvements in a product, process or service.
They are relatively common and are created within the firm of an industry.
marketplace.
They help companies maintain a competitive position in the marketplace


Creativity and Innovation
7

Innovation is associated with the creation of value or the satisfaction of a
customer need.
Creativity is the engine of innovation.
The essence of creativity is combining two or more ideas to arrive at an entirely
new one.
For Example, Henry Ford assembly line was based on combining the production of
standardized parts, as a concept that had been introduced a century earlier, with
the idea of bringing the parts to the worker rather than moving the worker to the
parts.
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Bringing Innovation to Markets
8

There are time lags between the different stages of the innovation cycle’s
g g y
sequence of events- science, invention, innnovation and market.
The manipulation of these time spans is an important and effective competitive
weapon.
weapon
Good Example:
Microsoft: Strategy of licensing its DOS operating system for use by many
computer companies and then making its Windows 95 program available on
each PC, thus creating customer commitment to the product. The profit Microsoft
makes on each unit of software is minimal, however, the market p
, , penetration
permits the cornering of the software market for many years.
Apple Computer company on the other hand, kept its Macintosh user friendly
operating system software proprietary for many years and refused to license it
to other PC makers.

Apple Macintosh Launch Event- Video
9

http://www.youtube.com/watch?v=lSiQA6KKyJo&feature=related

Technology Price Relationship
10

When an entity such as a company has a technological advantage, it is able to
y p y g g ,
command a premium price for its technology.
The magnitude of this premium is dependent on the value of technology to
customers.
customers
If the knowledge gap between the company (as the owner of technology) and the
customer is high, the owner can command a high price.
As the customer gain experience with the technology, the knowledge gap shrink.
The value of the technology, as well as the commanded price, will decline and
eventually vanish.
y
Strategies for and appropriate rates of technology diffusion should be based on
exploiting the price advantage of the difference in knowledge.
One approach is to continue building a technological lead over time
time.


Technology Gap/Price Relation
11

echnolog Knowledge
Own
Price

Knowledge

gy
GAP Customer
Knowledge

Te
Technology Gap Time or Diffusion


The Timing Factor
12

One of the factors of vital concerns in proper management of technology is the
p p g gy
timely creation and introduction of technology into the marketplace.
Equally important is the timing of the introduction of follow-up technology that will
performance.
improve performance
Continuous improvement of products and the production capabilities of the
corporation are vital for the firm’s health and survival.
“Timely” is the key word in this discussion.
Action must be taken at the right time if an enterprise is to succeed in a
competitive marketplace.
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Osborn Computer Company- Case Study
13

The Osborne Computer Corporation (OCC) was
founded by Adam Osborne in 1980 based on a
product of not just personal computers but portable
computers. Adam Osborne asked Lee Felsenstein to
deve op s portable co pu e w
develop his po ab e computer with the result being
e esu be g
the Osborne 1.
The Osborne 1 featured a 5 inch (127 mm) 52-
column display (this size of Screen only allows 60
printed columns instead of the 80 commonly used by
people migrating from punch card mainframes), two
floppy-disk drives, a Z80 microprocessor, 64k of RAM.
Osborne struggled under heavy competition. K
Ob l d d h Kaypro
Computer offered portables that, like the Osborne 1,
ran CP/M and included a software bundle, but
Kaypro offered larger 9 inch (229 mm) screens
(supporting 80 columns).

Osborn Computer Company- Case Study
14

In 1983, the inventor Adam Osborne pre-announced several next-generation
, p g
computer models (the "Executive" and "Vixen" models) which had not yet been built,
highlighting the fact that they would outperform the existing model. According to
the myth sales of the Osborne 1 immediately plummeted as customers opted to
myth,
wait for these improved systems; this caused an attendant drop in cash flow and
thus profits, and a few months later the company became bankrupt.

Osborn shipped his first computer in July 1981. In two months the company had
its first $1 Million in sales, and by the second year its net revenues reached $100
$ , y y $
million. Six months later the company was bankrupt.


The Vision to Change Strategy
15

When a company has a strong market and its revenues are good, management
p y g g , g
tends to lose sight of environmental changes that may affect the company’s
competitive position and sometimes even its survival.
day-to-day
It is very common for managers to be drawn into the routine day to day problems
of running a business.
This can make them lose their vision for change and enthusiasm for innovation.


Managing Change
16

The only thing certain is change.
y g g
The tasks associated with generating new ideas, creating new products, controlling
production, and dealing with a new breed of competitors and demanding customers
are some of the challenges faced by today’s managers.
today s managers
The key issue for management in the current environment is how to utilize the
existing capabilities of the organization to take advantage of the possibilities.
The solution lies in creating a flexible, highly competitive organization capable of
coping with the state of the external world.
Whether it involves technologies, markets, suppliers, or competitors, successful
g , , pp , p ,
managers of technology must be able to recognize and react to external change as
early as possible.
Survival is at risk if a company cannot forecast or foresee the changes in the
external environment.

Leaders Versus Followers
17

Winners are those who can bring technology to the market. In terms of
g gy
technological innovation, a firm can be one of three types:
Leader: A Leader is a firm that is the first to market an innovation.
Follower: This firm misses the initial wave of capitalization on the technology
but recognizes the technology’s impact on its business. Such firm follow closely
behind the leader. They may be able to catch up or surpass the leader if they
can capitalize on their strength.
Laggards: This type of firms realize a potential for profit on technology but
seldom influences technology’s use. Laggards engage in “me-too” behavior,
gy gg g g ,
according to Holt (1990). Often, their survival may depend on adopting new
technology.


The Advantages of being a Leader in Innovation
18

Name Recognition: The names of leaders with innovative products come to be
g p
well known by the public (Kleenex instead of tissue, Xerox instead of photocopy).
Better Market Position: Being first to market gives a firm an opportunity to
share.
capture a large market share
A chance to define industry standards.
A Head start on the learning curve.
Protective Barriers: By Patents and other means.
High Profits: By Establishing a technology gaps between their products and their
customers and competitors.
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Delayed Customer Switching: Leaders establish special relation with their
customers. Brand Royalty and cost of switching.
Favorable response by outsiders: leaders have better potential for getting
support from government, VC and other industries interested in their innovation.

The Disadvantages of being a Leader in Innovation
19

The leader assumes the large cost associated with research, prototype, testing
g ,p yp , g
and overall development.
The leader must be able to sustain the lead. There are cost associate with
technology.
updating the technology
The initial investment in design, tooling, and production may create difficulty in
reversing the course of action should a competitor introduce a better technology or
an improved design.
There is a market uncertainty associated with the introduction of new technology.
It is difficult to predict demand and to set an optimal price.
p p p
The leader is a target for competition.


Chapter Assignment…
Assignment Deadline: Next W k lecture.
A i t D dli N t Week l t
20

Class will be divided into three groups each group will take one of the following (note each group
will have only 15 min to demonstrate its presentation):
Microsoft, Apple, IBM
Through Searching the internet, prepare a presentation about one of the above companies from the
development of the PC perspective…
Illustrate company History overview
Quick overview about Personal Computer Market at this early time.
Describe company PC strategy and describe if company was a leader or a follower in PC
p y gy p y
market (with justifications)
How company managed the competition and what was its main competitive edge.
Include company time line with the PC since early eights and until today, in brief.
Describe your own perception about the following;
what if the company had not entered the PC race, and the effect of this on the
PC/information technology markets.
Include all your references and source of information.
Include as much graph, diagrams and video as possible.

Extra Resources …
21

For Microsoft, Apple and Osborne:
http://www.youtube.com/watch?v=fUYy-y0Fyag&feature=related
http://www.youtube.com/watch?v=uQV2m2pafaw&feature=related
// /
http://www.youtube.com/watch?v=oIwz6Amffb8
http://www.youtube.com/watch?v=lSiQA6KKyJo&feature=related
http://en.wikipedia.org/wiki/Osborne_Computer_Corporation
// / /
http://en.wikipedia.org/wiki/Osborne_Effect#The_Osborne_Myth
http://freepages.genealogy.rootsweb.ancestry.com/~tlosborne/Osborne/Osbornehist
ory/Adamosborne/adamosborne.htm
http://www.intosaiitaudit.org/intoit_articles/18p63top63.pdf
http://entrepreneurs.about.com/od/famousentrepreneurs/p/adamosborne.htm


Nice to See…
22

Bill Gates and Steve Jobs interview:
http://www.youtube.com/watch?v=_5Z7eal4uXI&feature=related
http://www.youtube.com/watch?v=lK_HThS8DZo&feature=related
// /
http://www.youtube.com/watch?v=Scf6dV4FSf8&feature=related
http://www.youtube.com/watch?v=cCvLTlQWT6A&feature=related


23

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Essential of Technology Entrep. & Innovation- Chapter three critical factors in managing technology

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