Technology and Innovation Strategy

Technology and Innovation Strategy

• Course grading: Class participation (20%), Hackathon competition (30%), Written exam (50%)
• Questions are encouraged for discussion.

What is Technology

• Technology is about creating useful and enjoyable products and services.
• It encompasses machinery, tools, and knowledge.
• Product technology is embedded in final products, while process technology mediates inputs and outputs.
• Technology is both practical and theoretical, applying knowledge to specific problems and devices.

Where Technology Comes From

• Technology sits between science and economics.
• Science provides general principles, while economics relates to practical decision-making.
• Technology connects these principles to the practical applications of tools, materials, processes, and techniques.

The Importance of Technology

• Technology is crucial for value creation.
• Schumpeter's model highlights entrepreneurs as key drivers in transforming inventions into innovations.
• The process involves imitation, followed by further innovation and a continuous cycle.
• Innovation fuels economic growth for a country.
• Technology is the engine of growth

Pharmaceutical Industry

• The pharmaceutical industry is characterized by both fragmentation and consolidation.
• Growth is driven by increasing longevity and rising incomes, particularly in developing nations.
• The largest markets are North America, Europe, and China.
• High entry barriers, due to significant R&D costs and patent protection, are a major factor in this field.
• The uncertainty associated with long research periods, and the possibility of costly side effects, also make the industry uncertain.
• There is a need to explore the versatility of knowledge and capabilities accumulated in addressing one therapeutic area, as it can be leveraged to other ones.
• The process typically involves drug discovery, development, and commercialization.

Videogame Industry

• The videogame industry evolved from arcade games to home consoles.
• It's characterized by rapid succession of generations by game consoles with successively greater graphics and action functionality
• The primary target consumer is children and teenagers.
• Console costs for consumers are generally low, allowing for high profits from the sale of software.

Books Industry

• The book industry is a cyclical market, frequently concentrated in the fourth quarter, often dependent on external factors like external technological advancements, with the US market reaching sales of $26 Billion in the 1990s with a modest growth rate of 5.4%.
• The market is quite concentrated, with a few large publishers controlling a significant share.
• Traditional publishing involved a consignment system where books could be returned for credit if unsold.
• The growing role of large “superstores” and online retailers such as Amazon has significantly altered the industry model.
• The rise of superstores (B&N) marked a shift toward a much larger scale, focusing on specific genres and attracting many consumers through better prices and more comprehensive product ranges.
• Amazon's rise marked a new entry strategy and a shift toward online retail, focusing on efficiency and extensive product assortment—becoming the most influential force to disrupt the retail model of the industry.

Automobile Industry

• The automotive industry has high barriers to entry due to substantial investments required for mass production.
• Tesla stands out for its approach to consumers via a direct model without traditional dealers for vehicles.
• It leverages electrification for environmental concerns and autonomous driving features as a competitive strength.

Photography Industry

• Kodak, founded in 1880, dominated the black-and-white photography market.
• Its competitive advantage initially was based on a simple user-friendly device ("you press the button, we do the rest"),
• Its strategies were to maintain a high level of R&D.
• Kodak had a major crisis because it did not anticipate the emergence of digital alternatives to photography.

Toy Industry

• The toy industry is characterized by fluctuating demand and cyclical product life cycles.
• The shift in market demand towards other forms of entertainment and technology (especially videogames) as well as increased pressure from competition has led this industry to a prolonged crisis.
• External pressures and internal problems (too many SKUs) led to severe issues and potential bankruptcy, but effective adjustments by new leadership resulted in resurgence after the crisis.

Tech Industry (Facebook & WhatsApp)

• Facebook's acquisition of WhatsApp was part of a diversification strategy.
• WhatsApp initially focused on simple, effective messaging, avoiding data collection issues—hence, avoiding concerns about users' privacy.
• Facebook leveraged existing platform strengths.
• Challenges were related to monetization, competitive pressures, privacy concerns, but Facebook maintained WhatsApp's independent operation.

Movie Industry

• Disney's approach in the movie industry was geared toward distribution of many products through its many stores.
• Pixar's focus was concentrated on highly-skilled animation production, which created a distinctive advantage highly valued by consumers for animation.
• The management decisions from one CEO (Eisner) contrasted with another CEO (Katzenberg), giving very different directions to Disney, and in general, the importance of well-defined management priorities and direction.

Telecommunications Industry

• The telecom industry faces significant challenges due to intense price wars and high CAPEX investments for expanding, and generally a market that's saturated.
• Competition and cost reduction are major pressures for profits and are a potential driver for consolidation and mergers.

Energy Drinks Industry

• Red Bull initially focused on the niche market of high energy products and its target was young rebels with extreme lifestyles.
• Successful marketing strategies and strong brand building.
• The success was based on marketing strategies like partnerships with extreme sports and targeting young people.

Dynamic Capabilities

• The ability of firms to adapt, change and create new capabilities in response to external pressures.
• The importance of dynamic capabilities for surviving and thriving in a changing environment.

Organizational Recipes

• Corporate venture capital: Investing in external companies to diversify risk and foster innovation.
• Business development: Establishing internal divisions to develop new products and increase market growth.
• Agile organization: Combining adaptation and alignment to promote flexibility and efficiency.
• Managing for value: Focusing on operations and efficiency to realize longer-term strategies.
• Importance of managerial decisions and cognitive inertia.

Takeaways

• Accurate evaluation of threats + consistent business strategy + maintaining flexibility is important to avoid failure when facing a changing industry scene.
• Proper due diligence (cost, revenues), risk assessment, understanding competitors, and consistent valuation procedures are important aspects to be considered during the acquisition of companies and any action impacting the firm.

Explore the fundamentals of technology and its strategic role in innovation. This quiz discusses the relationship between technology, science, and economics, as well as the importance of technology for value creation. Test your understanding of how technology influences product and process development.