What is Technology Strategy?

What is technology strategy ?

• According to Oxford English Dictionary --- the word
‘Strategy’ means:
• A plan designed to achieve a long-term aim
• The planning and directing of military activity in a war
or battle.
• According to Mintzberg and Quinn, a strategy is the pattern
or plan that integrates a nation’s or organization’s major
goals, policies and action sequences into a chosen whole.
 What is technology strategy ?
• A strategy serves to allocate a nation’s or organization’s
resources into a unique and viable posture which is based
on its strengths and weaknesses, and anticipated changes
in the environment.
• Technology Strategy is the way or plan of attaining
technological goals and technological changes.
• Technology strategies are formulated at the national level
and at the enterprise level.
Technology Strategy at National level
• At national level, two types of strategy options are usually
explored i.e internalisation oriented strategy & externalisation
oriented startegy.
• A nation may adopt any of the two technology strategy or
suitable combination of both.
Internalization Oriented Strategy
• This strategy aims at seeking technological development with an
objective to become internally self reliant.
• This strategy aims at seeking technology transfer by TNCs /
MNCs via Foreign Direct Investment (FDI).
• The strategy seeks proactive role in attracting TNCs / MNCs and
focusses on ensuring a stable macro-economic environment &
good supportive infrastructure.
Technology Strategy at National level
Externalization Oriented Strategy
• This strategy aims at seeking technological development with an
objective to tap external market.
• Under this strategy, there is restricted role for FDI. This strategy
seeks to foster / encourage indigenous technology development
i.e developing domestic technology capabilities in general or in
selected strategic industries.
• Some examples of this type of strategy are : Minority joint
ventures (with minor share to foreign collaborator), Technolgical
assitance to domestic firms, Encouraging import of capital
Goods
Technology Strategy at Enterprise level
• According to Bentz, Martino & Mintzberg Technological
Strategy at enterprise level means ---
“A formal set of enterprise intentions that allocates
available resources and sets priorties based on clearly
stated technological and enterprise objectives and a
perceived environment in which the process is to be
embedded.
Technology Strategy at Enterprise level
According to Porter- following three factors influence
enterprise’s Technology Strategy :

• Sustainability of technological lead : Technological

leadership can be sustained only if competitors cannot
copy it.
• First mover advantages : Enterprise gets many advantages
like increased reputation, pre-empting competition, early
profits, new sales etc,
• First mover disadvantages – Certain disadvantages and
risks can adversly affect the first mover like cost of
regulatory approvals, cost of educating buyers, demand
uncertainity, low cost imitation by competitors, risk of
technological discontinuities of existing technology /
products / processes
Technology Strategy at Enterprise level
Based on factor analysis, an enterprise may adopt any of
following technology strategies.
• Technology Leadership Strategy – Under this strategy, a
firm seeks to be the first to introduce technological
changes / innovations.
• Technology Followership Strategy – A conscious & active
strategy, by which a firm chooses not to be first on
innovations.
What is Technology Development / Generation ?
What is Technology Development / Generation ?
• Generation of technology is the process by which
technology is generated / developed by various entities.
• In communist or socialist countries, the technology is
mainly generated by government owned research
institutions, universities and other bodies with a very
lesser contribution coming from private sector.
• In capitalist countries, the technology is mainly developed
by private sector and there is some contribution from
government agencies as well.
• In countries with mixed economic system, both
government and private setor play a significant role in
technology generation .
Technology Development / Generation
Technology Development / Generation
• The government technology policy framework directly
influences technology generation in a nation.
• Thereafter, technology genaration depends upon the
technology strategy of the organization / enterprise i.e.
whether it wants to become technology leader or
technology follower?
Technology Generation
• The technology strategy of the organization sets the
direction for technology development in the organization
and to some extent also influences technological
strataegies of competitors as well.
• At organizational / enterprise level, generation of
technology is both an individual & group activity, but its
management is solely an organizational responsibilty and
activity
• Technology develops through a process of Creativity,
Invention and Innovation.
What is S Curve of Technology Evolution ?
What is S Curve of Technology Evolution
• Although the initial development of new technology often
appears to be a random process, once a technology comes
into existence, its evolution over time displays a reasonable
stable pattern.
• Technology Evolution refers to changes in the performance
characteristics of specific technology over time
• It is generally perceived that technology evolution follows
an S shape curve.
• S-curve of technological evolution” is widely cited to
determine at what point managers should shift investments
from a mature technology to a new one.
• [ Exceptions: A study done by Sood and Tellis suggests that
many technological evolutions do not follow S shape curve.]
What is S Curve of Technology Evolution

S curve of technological evolution summarizes four major stages

in the evolution of performance characteristics:
• 1. Emergence : when the new technology comes into
existence, but shows little improvement in its performance
characteristics
• 2. Rapid Improvement : When performance characteristics
improve at an accelerating pace
• 3. Declining Improvement: When the pace of improvement
declines
• 4. Maturity: When further improvements become very
difficult to achieve
What is S Curve of Technology Evolution?

Performance Characteristics

Stage 1 Stage 2 Stage 3 Stage 4

Time
What is S Curve of Technology Evolution
S curve shape of technological evolution occurs due to following
reasons / effects:
• Learning processes – which, in the first stage, generates more or
less stable design & process and in the second stage generates
rapid improvements
• Technology Limits – Once a technology reaches full potential,
technology limits come into play during later stages. These
technology limits are also known as technology frontiers –as
called by Dosi. In later stages, radical breakthrough occurs, as a
result new technology emerges which replaces existing
technology, This is known as Technology Progression
• The performance of the newer technology initially is lower than
that of the older technology, but because of their relative
positions on their respective S-curves, the performance of the
newer technology soon surpasses that of the older.
What is S Curve of Technology Evolution?

Performance Characteristics Technology Progression

Physical limits of technology <Technology

Regime 2
Technology
Regime 1 >

Time
What is Technology Transfer ?
What is Technology Transfer ?
• Technology Transfer is the process by which technology is
disseminated.
• It involves communication of relevant knowledge by the
Transferor to the Recipient.
• It is in the form of technology transfer transaction which
way or may not be a legally binding contract.
What is Technology Acquisition ?
There is thin line of demarcation between the two words
technology transfer and technology acquisition. Many a
times these two terms are used interchangeably.

The verb “Acquire” means

• To come into possesion of; get as one’s own
• To gain for oneself through one’s actions or efforts

Technology Acquisition is the process of acquiring a new

technology, new product, process or service ; by efforts of
an individual or an enterprise or any other macro entity.
This process can be conducted either internally or
externally to the enterprise.
Types of Technology Transfer
• Scientific Knowledge Transfer, Direct Technology Transfer,
Spin-off Technology Transfer

• Informal Technology Transfer & Formal Technology

Transfer

• Internal Technology Transfer & External Technology

Transfer
Internal Technology Transfer
Internal Technology Transfer refer to such technology transfers
/ investments where control on the ownership & usage of
technology resides with the transferor.
It is a complex process involving following decisions:
• Timing : When to introduce new technology / products in
the market?
• Location : Where to transfer new technology / products?
• Multi-functional teams --Which staff members should be
involved in transfer process ?
• Communication methods & procedures – What type of
Communication methods & procedures be adopted to
facilitate transfer ?
Barriers to Internal Technology Transfer
• R & D goals are not known to Production Department.
• Difficulties in stopping current production to test new products
/ processes
• R&D Department does not understand needs & capability of
Production Department.
• In general, Production Department is resistant to innovation
and is bound by routine.
• Non-linkage of new technologies to marketing / customer
needs.
Overcoming Barriers to Internal Technology Transfer
• Top management support and participation in the transfer
process
• Providing supportive organizational culture
• Use of multi-functional teams in the transfer process
• Ensuring effective communication in the organization
• Bringing R&D closer to production.
• Rotation of few person between R&D and production
• Linking & participation of marketing elements in the transfer
process.
Steps in Internal Technology Acquisition by a firm
1. Planning new products / services / processes to be offered –
planning must incorporate voice of the customer & user
needs
2. Screening new products, processes or services – only viable
/ feasible items be offered as only one out of 4/5 becomes a
commercial success.
3. Initiating development process – must be properly designed
and carried out so that it facilitates success. Enterprises
should
a. Consist of temporary system capable of adapting to
dymanics of change
b. Organize the systems around problem solving
Steps in Internal Technology Acquisition by a firm
c. Have flexible management system & replace rigid
management system
d. Use multi-functional teams.
e. Proper integration between R&D, Production & Marketing
sub-systems
f. Ensure effective communication
4. Carrying out trial production on small scale and test
marketing
5. Improving design & production processes based on
experiences / feedback
6. Commercialization i.e. mass production & sales
External Technology Transfer
• In these transfers, control on the ownership & usage of
technology usually does not remain with transferor and it
passes on to the recipient, like joint venture with local
control, licensing agreement etc.
External Technology Transfer
Successful external technology transfer depends upon following
factors:
• Type of the technology being transferred
• Complexity of the technology being transferred
• Transfer mechanism selected
• Relationships between the parties – building of mutual trust
• Core competencies of the parties & compatibilty thereof
• Organizational culture of the parties & mutual understanding
thereof
Methods of External Technology Transfer
• Co-operative & collaborative ventures / strategic alliances
• Licensing agreements
• Contracting agreements
• Enterprise acquisition.
Why External Technology Transfer
• Technology already developed saves time & efforts
• Sometimes Growth objectives or competitive goals cannot be
reached through internal development
• Lack of risk taking ability for innovations
• Lack of internal resources (physical & human) for innovation
• Firm does not have core competencies to deal with complex
technological developments.
• Need to keep up with competitors
• Need to cope up with acceleration of technological change
• As a part of firm’ strategy --- let other firms take big
risks & it will purchase technology developed by
them.
Barriers to External Technology Transfer
• Associated costs – usually high prices are required to be paid
in the form of royalities, technical & knowhow fees etc over
medium to long term period
• Appropriatesness of technology i.e. its suitability to core
competencies and market needs is always a point of
discussion and investigation
• Heavy reliances on foreign technology- may make transferee /
recipient technologically dependent on external technology
providers / transferors even for small issues
• Lack of mutual trust between two parties may hinder full &
timely transfer
Barriers to External Technology Transfer
• There is risk of loss of control over technology and the
transferee / recipient may use technology in an arbitrary
manner
• Transfer may render existing technology & its related products
/ services / processes obsolete
• Transferee may turn a potential competitor in future.
• Mismatch in core competencies of the transferor & transferee
may create difficulties in transfer
• Different organisation cultures may create difficulties in
transfer
• Lack of effective communication between the parties
may also create difficulties in transfer
Overcoming Barriers to External Technology Transfer
• Proper & well defined technology transfer agreement should
be signed
• Proper assessment / evaluation of appropriateness of
technology
• Proper assessment / evaluation of compatability of core
competencies of the parties
• Building pre-agreement relationships so as to develop mutual
trust and so as to understand culture of opposite parties
• Seeking cross cultural training
• Ensuring effective communication
• Anticipating problems and adopting measures for
facilitating transfer
Steps in External Technology Acquisition by a firm –
1. Identification of Need
2. Developing list of suitable technology providers
3. Short listing / selecting suitable technology providers on
the basis …. Cultural compatibility, compatibility of core
competences, appropriateness of technology, technical
feasibility etc
4. Negotiation
5. Agreement
6. Payments as per agreement
7. Transfer of specifications, blueprints, designs, documents,
CDs to purchaser
8. Training of technical personnel of purchaser
Modes of Payment for Technology Transfer
• Lumpsum payment or periodical instalments
• Royalities as a %age of sales over next few years
• Cross-licensing agreements
• Contracted supply of output
• Issue of equity shares in lieu of technology transferred
Acquisition of Technology By Nation
• What factors influence acquisition decision?
• What are national strategies for technology acquisition?
• Methods of technology acquisition by a nation
Methods of Technology Acquisition By Nation
• Attracting TNCs / MNCs
• Through direct measures viz. making a positive list of
industries open to FDI
• Through indirect measures - viz by offering incentives &
subsidies
• Attracting TNCs / MNCs into natural resource processing &
inducing greater value additions
• Using TNCs / MNCs to attract / encourage their overseas
suppliers to invest into country
• Improving skills & training of local technologists by involving
TNCs / MNCs
Methods of Technology Acquisition By Nation
• Developing industrial parks / technology parks to attract high
technology investors
• Offering incentives to existing investors to move to more
complex technologies and to increase or upgrade technological
R& D base
• Changing competitive environment and existing incentive
structure to encourage world class technology & management
• Improving technological access for local firms for outsourcing
/ technology transfer
• Collecting, organising & disseminating information about
technology development
Regulation of Technology Transfer By Nation
• The regulation is undertaken in two directions:
• Regulation of import of technology / technology inflows
• Regulation of export of technology / technology outflows & Setting up
of Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS) Abroad
• Why regulation of import of technology? – This question deals with
advantages & disadvantages of import of technology
• What are – Guidelines on import of Foreign Technology into India?
• Why regulation of export of technology? -This question deals with
advantages & disadvantages of export of technology.
• For above questions – refer to pg nos 112-115
• What are – Guidelines on Export of Technology & Setting up Joint Venture
& Wholly Owned subsidiary abroad – for this last question – refer to PPT
1.5 MTIC