Strategic Management of Technology Module 1

Welcome to Week 1!
This week, we begin our journey into the strategic management of technology.
A central question that will weave its way throughout the course is how a manager should integrate technology and innovation into the overall business strategy of the organization. To answer this, we will look at a number of important concepts, including core competencies, organizational change, and building a learning organization.
During this first week, we will start by looking at the importance of technological innovation, the impact that innovation has on society, the importance of creating a technology strategy, and the assessment of our ability to achieve that strategy. This week’s reading will provide tools for examining the links between specific technologies and a firm’s ability to innovate.
This week’s readings and activities will focus on the simple point stating that while technological innovation is the single most important competitive drive in many industries, developing a successful innovation strategy is very difficult. Competition in all areas is increasing, and it is becoming more and more difficult to outpace competitors. This class should give you the tools you will need to stay ahead of your competition.
The title of this class is the Strategic Management of Technology. The first thing that we need to do to begin the class is to define these three key terms:

  • Strategy = A plan to achieve a goal;
  • Management = The conducting or supervising of something; and
  • Technology (Tools) = The practical application of knowledge to solve a problem.

Using these definitions, you are ready to begin. Good luck! I’ll talk to you all in the Discussions.

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A Given a company situation be able to describe the industry dynamics of technological innovation.

Key Concepts:

  • Explain the role technological innovation plays in the competitive dynamics of industries and how technological innovation affects society both positively and negatively.
  • Identify the drivers of technological innovation.
  • Determine the attributes of successful innovation strategies including an in-depth understanding of the dynamics of innovation, a well-crafted innovation strategy, and a well-developed process for implementing the innovation strategy.
  • Analyze the relationship between creativity and innovation.
  • Evaluate the role of collaborative networks in innovation, including technological spillovers, and technology clusters.

The Importance of Technological Innovation
Introduction | The Importance of Technological Innovation | Definition of the Strategic Management of Technology | The Impact of Technological Innovation on Society | The Strategic Management of Technological Innovation | The Risks and Costs of Innovation | Creativity | Innovation in Collaborative Networks | Bibliography
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As soon as we stood upright, we discovered that our hands, newly freed from being used for walking, could manipulate the world to our benefit. We learned quickly that our hands could build tools that amplified our strengths and minimized our weaknesses. I wasn’t there, so I don’t really know, but I strongly suspect that it was probably obvious that without tools, we were the prey, but with tools, we were the predator. There is no question in my mind that our use of tools keeps us on top of the food chain, and let’s face it: Being on top of the food chain is much better than the alternative.
Two things are different about today than the old days. First, in the old days, all we needed were a few simple tools and a lot of hard work to stay on top of the food chain. A plow, an axe, a sickle, and a sharp knife were sufficient to survive. Today, things are different. To survive today, we need a cell phone, a nice car, four bathrooms, and a grocery store. This is not to say that our basic needs have changed; indeed, they have not. We still need the same things: communication, transportation, shelter, food, and entertainment. It is just that the tools that we use to satisfy those needs have changed. Second, the pace of innovation has increased. In the old days, we would have used the same tools that our parents and grandparents used. Today, the tools that we rely on to succeed change every few years.
In fact, the tools that we need to survive have changed so much and have become so complicated that we created a new word to describe them. We now call the tools that we use technologies.
Even though the name for tools has changed and the pace of change has increased, the fundamental truth about them has not. The fundamental truth is that the ability to manage tools and technology effectively separates those who reach their potential from those who do not. This was a fundamental truth in the past, and it is a fundamental truth today.
The Importance of Technological Innovation
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According to our author, “In many industries, technological innovation is now the most important driver of competitive success, and because the pace of innovation has increased, many firms now rely on products developed within the last five years for a large portion of their sales and profits. This period is reduced to three years for firms in fast-paced industries, such as computers, software, and telecommunications.
Innovation is also a very powerful driver of increased effectiveness and efficiency in producing goods and bringing them to market; firms that do not constantly innovate to make their development, production, and distribution processes more effective and efficient are likely to fall behind their competitors.” (Schilling, 2010)
To make matters even more complicated; companies are no longer just competing at the local level; they are competing with everyone in the world. Due to the pressures of global competition, companies have had to increase their investment in new product development. Even though the portion of R & D funding provided by the government has declined compared to the portion provided by the companies themselves, government contributions still play a significant part in new product development.
In new product development, as in life, rarely do you get something for nothing. It is important to be ever vigilant for unintended consequences of any new product development.
In summary, the importance of technological innovation stems from a few things.
“Many firms are relying on products developed in the previous three to five years for large portions of their sales and profits.
Globalization has increased competition, putting more pressure on firms to compete through innovation.
Advances in information technology have enabled both process improvements and the efficient generation of product variants which facilitate the execution of a differentiation strategy at a reasonable cost.” (Schilling, 2010)
Key Point
Specifically, this class will address how:
Tools/technology can leverage power from other sources to help us get or maintain power
The strategic management of tools/technology will help us compete better
Definition of the Strategic Management of Technology
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This class is about the Strategic Management of Technology.
Strategic Management of Technology
Strategy = A plan to achieve a goal
Management = The conducting or supervising of something
Technology = The practical application of knowledge to solve a problem – tools. (Webster)
The Impact of Technological Innovation on Society
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It is clear that technological innovation plays a major role in the competitive dynamics of industries. Companies often reap one third of their income from products created within the past five years.
There have been improvements in many areas of industry. However, there are occasionally serious negative consequences of these new technologies. The most well-known negative side effect is probably pollution. Some people even believe that technology is the cause of global climate change and increased incidences of diseases such as autism.
As a strategic technology manager, it is critical that you consider the results and influences of the technologies from a holistic viewpoint. It is inappropriate to simply develop technology and forget about it. It is important for you to consider the entire life cycle of new technology and attempt to anticipate any unintended consequences.
The Strategic Management of Technological Innovation
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The company should develop products that mirror their philosophies and capabilities. Of course, this is easier said than done. The key, however, is to honestly evaluate the company’s potential. The first step in this evaluation is to perform an audit of the firm’s innovation capabilities.
An innovation audit answers many questions related to the relationship between the innovation abilities of the company and its competition model.
The Risks and Costs of Innovation
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Very few new projects make the cut. Roughly one new product out of every 3,000 makes it to the production line. This creates a tremendous amount of pressure on an organization. The key question here is how does an organization determine ahead of time which will be that one successful product? To figure it out, careful consideration must be given to the role of creativity as the underlying process for the generation of new products.
Only after we understand how creativity is transformed into innovative outcomes by the separate components of the innovation system (e.g., individuals, firms, and so on) and the linkages between the different components can we craft an effective innovation strategy.
One of the things that we will need to do is focus on the role of innovation networks in new product and process development. Emphasis should be placed on developing an understanding of technological clusters, including how they are formed and the benefits associated with them. The role of knowledge transfer in the creation of clusters is demonstrated in the context of Silicon Valley.
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Creativity is defined as the ability to produce work that is useful and novel (i.e. different and surprising when compared to prior work). The most creative works are novel at the individual producer level, the local audience level, and the broader societal level. When a product is novel to its creator but known to everyone else, it is referred to as a reinvention.
One might think that knowledge is good. However, one needs just the right amount of knowledge. Too much knowledge can result in an inability to think beyond the existing logic and paradigms of a field, but too little knowledge can lead to trivial contributions. The most creative individuals can distinguish important problems from unimportant ones.
Organizational creativity is determined by the employees within the company. The creativity of individuals can be amplified or thwarted by an organization’s structure, routines, and incentives. Common methods of tapping employee creativity include 1) the suggestion box, 2) Employee-Driven Idea System (Honda), and 3) access to idea repositories on company intranets (BankOne). Idea collection systems (e.g., the suggestion box, Employee-Driven Idea System [HONDA]) create access to idea repositories on company intranets (BankOne) and are only the first step.
Managers can be trained to signal (through verbal and nonverbal cues) that each employee’s thinking and autonomy are respected. Employees can also be trained to use creativity tools, such as analogies or developing alternative scenarios.
A key element for any organization is translating creativity into innovation. Innovation occurs when new ideas are implemented into some useful form (e.g., new products or processes). The Inventor has been the focus of much study, and there is significant disagreement over whether inventors are born or made. It is also important to note that the qualities that make an individual inventive do not necessarily make that individual entrepreneurial.
Users are another important source of innovation. Users are keenly aware of their unmet needs and have the greatest motivation to find ways to meet those needs. Innovation by users can blossom into wholly new industries. An example is the development of snowboards. A brief history of this industry is provided in the “Theory and Action” section in the text.
Firms are very important engines of innovation. Firms consider research and development spending to be their most important resource for innovation. Research can refer to both basic research and applied research. Basic research does not focus on a specific and immediate commercial application. Applied research is directed at meeting a specific need or commercial objective.
A science-push approach to research and development views the process as linear, moving from scientific discovery to invention to engineering to manufacturing activities and, finally, to marketing. This approach has been shown to have little real-world applicability. The demand-pull model of research and development argues that innovation is driven by the demand of potential users. Scholars have concluded that different phases of innovation are likely to be characterized by varying levels of science push-and-demand pull.
Firms may also collaborate with competitors and complimentary firms. The line between complimentary firms and competitors can become blurred, making the relationships between firms very complex and difficult to navigate. For example, Kodak competes with Fuji in both the camera and film markets, yet Fuji’s film is also a complement for Kodak’s cameras, and vice versa. In some circumstances, bitter rivals in one product category will collaborate in that product category or in the development of complementary products. For example, when Palm Computer developed its Palm Pilot, the company licensed its Palm OS to various companies to support their objective of establishing the dominant design. However, the products produced by these companies were also competitors for Palm’s own hardware and applications products, putting the company in a tricky position.
Innovation in Collaborative Networks
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There is a growing recognition of the importance of collaborative research and development networks for successful innovation. Firms in close geographic proximity are more likely to collaborate and exchange knowledge.
Technology clusters often emerge because of three reasons. First, there are often economies that have buyers, suppliers, and complimentary firms located in close proximity. Second, proximity facilitates knowledge transfer. The exchange of complex or tacit knowledge typically requires frequent and close interaction. Proximity influences a firm’s willingness to exchange knowledge and its ability to develop common ways of understanding and articulating knowledge. Third, people (to a large extent) hold knowledge, and people tend to be reluctantly mobile. As a result, knowledge tends to be regionally localized. For example, Annalee Saxenian found that engineers in Silicon Valley were more loyal to their craft than to any particular company, but they were also very likely to stay in the region even if they changed jobs.
Technological spillovers occur when the benefits from the research activities of one firm (or nation, or other entity) spill over to other firms (or nations, or other entities). The rate at which technology spillovers will occur is a function of the strength of protection mechanism and the nature of the underlying knowledge. Adam Jaffe and his coauthors found that the R & D spending of other firms and universities in its geographical region influenced a firm’s patenting activities and profits. Knowledge brokers are firms or individuals who play a particularly important role in an innovation network by transferring information between different domains and exploiting synergies created by combining existing technologies. Hargadon and Sutton identify Robert Fulton and Thomas Edison as knowledge brokers. Fulton recognized that steam engines could be used to propel steamboats. Edison was known for borrowing from different industries to create products such as the telegraph, telephones, generators, and vacuum pumps.
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Schilling. (2010). Strategic Management of Technological Innovation. New York: McGraw-Hill.

Discussion Grading and Follow-up Topics
Remind students about the Discussion Grading Policy for this class as an announcement or in an early discussion posting.
A. The Importance of Innovation
How does technological innovation affect society both positively and negatively?
Why do you think so many innovation projects fail to generate an economic return?
Why do you think that it takes so long to bring a new product to market?
B. What Makes People Creative
What are some of the advantages and disadvantages of a) individuals as innovators, b) firms as innovators, c) universities as innovators, d) government institutions as innovators, e) nonprofit organizations as innovators?
Could firms identify people with greater capacity for creativity or inventiveness in their hiring procedures?
To what degree do you think the creativity of the firm is a function of the creativity of individuals, versus the structure, routines, incentives, and culture of the firm? Can you give an example of a firm that does a particularly good job at nurturing and leveraging the creativity of its individuals?