Wharton Chapters 3 & 4

Chapter 3 - Technology Speciation

Technology speciation is the main topic of focus for chapter 3, more specifically, technology speciation and the creation of “new domains of application”. Technology speciation is the process by which technology evolves; there are 2 critical features of speciation:

1) “It is “genetically conservative”, it is not triggered by a transformation of the population from within”
2) “The speciation event allows the two populations homogenous entities to grow quite distinct as a result of their now different selection environments”

Technology evolution often takes place not as a result of technology development, per se, but as a result of changes in its application and use. One great example of this was the evolution of the Internet. Originally used by the military and deep computing scientists the Internet didn’t reach the mainstream until Netscape created a user-friendly browser and shifted the application use from those groups to the general population. There are 3 forms of speciation:

1) Lineage Development – products that are developed for niche areas then get spread through-out the rest of the general population (ie. 3.5” HDD)
2) Gradual Evolution and Creative Destruction – technology development is gradual, but the shift in its application is discontinuous (a technology may be around and developing for a while, but we may not know about it a discontinuous application for it is developed)
3) Melding of Technological Lineages (Convergence and Fusion) – Bringing 2 technologies together as never before to create a new technology and application (combination of the X-Ray and computer to form the CAT scan)

Now that we understand more how technological evolution works, we, as managers, can actively look for ways to progress this evolution by:

· Focusing on the intersection of markets and applications – what new ways and in what new markets can the technology be applied?
· Focusing on selecting market context for a product, rather than selecting products for a fixed market context – where can this technology work and thrive? Vs. what technology will work in this area?
· Understanding market heterogeneity – what are the different needs and uses the markets have for this product?
· Expanding our selection criteria – what other criteria could be applied to a technology initiative?
· Studying lead users – what niche groups of people can be the lead group and give feedback for a technology?
· Being careful where we look for market insights – are we asking multiple types of groups for insight and feedback about the technology?
· Learning by doing – are we engaged in and learning from the correct markets?
· Looking for opportunities for convergence or fusion – are looking to combine with other technologies to possibly create an entirely new technology and market?
· Accelerating the evolution

Chapter 4 - Identification and Assessment

Chapter 4 focuses on the assessment and identification of emerging technologies in the marketplace. Companies need to look at the marketplace and decide how and where teir technologies fit in most successfully. According to a 1992 study by the R&D Decision Quality Association, technology identification and assessment is the first step to the R&D decision making process, and lays the foundation for many of the best practices in assessing a technology. The 4 assessment steps to emerging technology are:

• Scoping - scope and domain are established based on the capabilities of the firm, weighing the threats and opportunities of the technology
• Searching – firm needs to determine the how, what and where information should be gathered and screened to “search for signals of both emergent technology and its commercial viability”
• Evaluating - after technologies are identified they must beevaluated based on fit to firm's technical capabilities, competitive opportunities and target market needs. Financial risks and benefits are also weighed inthis stage to rank technologies to pursue
• Committing - once a technology is ranked and determined as worthy to pursue, how a firm commits and pursues that tehnology is the final step. There are 4 way a firm commits:

1) Watch and Wait - covered in earlier chapters, when a firm waits to see how the market reacts to a technology

2) Position and Learn - this is more positional than the first, possibly when a firm has an option agreement of rights of first refusal

3) Sense and Follow - when a firm chooses to pursue a technology but not be the leader in the market and industry

4) Believe and Lead - firm has extreme confidence in the technology and chooses to lead the industry in its development and to-market strategy

I think the key, as managers, is making sure that we are looking beyond a narrow scope to find new applications for technology. Sometimes companies, managers and technology developers are so focused and determined on fitting their technology into what they initially set out to provide that they can miss an entirely separate, more successful market and business opportunity. The perfect example I think is the Kittyhawk HDD produced by HP. They were so determined to use this in a computing capacity they overlooked what is now a multi-billion dollar a year business, the gaming industry. As managers of technology we need to be the ones to look beyond that scope and find other possible alternatives to the technology we are developing.

Wharton Chapter 2 - Avoiding the Pitfalls of Emerging Technologies

Wharton Chater 2 – Avoiding the Pitfalls of Emerging Technologies

Summary

The title of this chapter is self explanatory. Here Day and Schoemaker outline the traps that established firms often fall into when competing to develop emerging technologies, as well as possible remedies for to avoid these traps. These traps, or “pitfalls’, are said to often be the reasons as to why established firms fail in these development ventures. However, we must keep in mind that while this list does give large firms a rough guide to avoid losing, it is, “…not an exhaustive list of traps or solutions, these pitfalls and remedies have been prominent themes in academic research and discussions with managers.” The 4 pitfalls put forth in chapter 2 are:

1) Delayed Participation
Delayed participation or “watch and wait”, is when established firms sit back watching emerging technologies develop, but do not participate in them because they do not fit into the managers “mental models”. It is often because of these mental models that managers may not appreciate the opportunities that emerging technologies can possess. Examples given of a large firm that stood on the sidelines was IBM with the Haloid-Xerox 914 copier and the PC.

2) Sticking with the Familiar
When established firms stick with what they know as opposed to branch out into emerging technologies, often due to the lack of imagination and underestimation of profits. Staying with the familiar occurs for a few reasons; past success reinforces problem solving and decision making techniques, firms lack the ability appraise and assess technology properly and therefore often underestimate potential and/or “proprietary mind-set gets in the way”. Primary example here was Encyclopedia Britannica and the possibility of the putting their volumes on CD-ROM.

3) Reluctance to Fully Commit
This is a statement of attitude from the established firm and not a financial statement. That is, to be fully committed, the firm does not need to commit all the monetary resources needed up front, those can come as staged investments (it is actually more fiscally responsible if they come as staged). However, if the attitude of the top management is not in full support of the emerging technology then chances are, it will fail. Not in the market place, but rather at the particular firm. There are 5 main issues that hold firms back from fully committing;
1) Managers concern of cannibalizing existing profitable products (IBM mainframes vs. distributed computing)
2) Paradox in managerial risk-taking between bold forecasts and timid choices
3) Unclear profit prospectives and futures of the emerging technologies vs. current business lines
4) Established firms look to meet the current needs of their current customers. To make their revenue and profits today as opposed to in some undetermined future
5) Successful firms are not naturally “ambidextrous” in balancing the familiar with the unfamiliar

4) Lack of Persistence
While all of these traps go hand in hand with each other, this forth trap ties particularly closely with “Reluctance to Fully Commit”. If a firm is not fully committed, it can easily justify moving away from an emerging technology. These established firms have pressures to achieve revenue objectives and when an emerging technology is panning out, making any money any at times losing money it is easy for an uncommitted firm to “cut their losses”. This trap is the other side of another trap, the sunk cost trap, where a firm is overly committed to their core business and is often too quick to pull the plug on emerging technologies.

The key to established firms success in a given emerging technology is whether that technology has high level management sponsorship. If management doesn’t see the possibilities of the new technology, future monies probably won’t be allocated to its development in down times. To go along with upper management/executive support, Day and Schoemaker also give some solutions in overcoming the traps given above as well as other possible traps. Similar to the traps these solutions should be looked at collectively and firms can take away something by looking at each one and seeing how they apply wholistically to their business. These prescriptions do not match up one for one with the traps rather they should be used to provide direction. The prescriptions as listed by Wharton are:

1) Widening Peripheral Vision
Managers must be able to look beyond the poor initial signs that the emerging technology is producing. Disappointing results and limited functionality can all be overcome if the anticipated possibilities can be seen and projected. Managers must be able to predict where their new technology fits, what its possibilities are, what its markets look like and how they act. Three key principles to help guide the assessment of the markets are:
1) Paint the big picture
2) Use Multiple methods
3) Focus on needs not products

2) Creating a Learning Culture
Established firms need to always encourage collective learning, not just individual learning. One can lead to the other, but unless there is a free flow of information individual learning will not benefit the overall organization, characterized by:
1) An openness to a diversity of viewpoints - divergent thinking leading to convergent ideas/solutions
2) Willingness to challenge deep-seated assumptions - challenge the prevailing mental model
3) Experiment Continually - experiment to see what works and what will be a success
4) Deep Dialog - connect with colleagues at a deeper level to really encourage creative dialogue


3) Staying Flexible in Strategic Ways
Being agile and nimble allows a firm the flexibility to change its direction quickly, make quick necessary decision and adapt to a quickly ever-changing world. The example given is how Microsoft was able to divert its operations from developing for Windows and OS/2 in order to fight the browser battle with Netscape.

4) Providing Organizational Autonomy
Taking the development of the emerging technology out of the organization, will allow freedom and flexibility for the technology to grow and develop without being compromised by the organizations rigid structures and mental models.




Analysis

While it is mentioned I feel that there is not enough emphasis put on the role of the executive team and specifically the CEO (company visionary leader) in developing and providing a clear vision for emerging technologies. Through-out the chapter the authors give examples of how IBM seemed to miss every large emerging technology opportunity that they had a chance to be a part of prior to the early 90s, from the Xerox copier in the late 50s to the PC throughout the 80s. IIBM missed these opportunities and because they did they were a dying company. That was until Lou Gerstner stepped in as CEO from 1993 to 2002. As many articles and experts put it, he changed the culture at IBM. Before Lou arrived at IBM everyone seemed to be going in different directions with different objectives and goals. Mr. Gerstner provided direction for the different divisions at IBM, cut divisions that didn’t make sense and pursued emerging markets, technologies and business models that would return IBM to profitability. When Lou Gersnter started at IBM, IBM’s stock was at about $10, by April of 1999, it hit its peak during his tenure at $129.

If the fate of the emerging technology does in fact rest on the shoulders of the executive teams at established firms, what can we truly do to manage the emerging technology? How can we influence the fate of an emerging technology as managers in an established firm? If we take a step back and look at this another way how can we have influence of emerging ideas or business processes that we either manage or develop ourselves?




Resources

http://finance.yahoo.com/echarts?s=IBM#symbol=IBM;range=my

http://tip.psychology.org/models.html

http://postcards.blogs.fortune.cnn.com/2008/07/17/power-point-five-tips-from-ibms-turnaround-champ/

http://news.cnet.com/2100-1001-828095.html

Managing Emerging Technologies

I liken the management theories presented by the Wharton school to building a fire. When you first set fire to the paper under your logs you should blow gently to supply the fire the oxygen needed to build. If you blow too hard you risk blowing the fire out before it even gets started, don't blow hard enough and nothing will happen. This balancing act continues as you feed your fire, if you don't put enough wood on the fire the fire will have nothing to burn and therefore will not grow, if you put too much fire on, again, you risk the fire getting to big for you to handle.



In the Wharton book, Day and Schoemaker start off by explaining the complexities of managing emerging technologies. Smaller firms can actually have an advantage over larger more established firms when it comes to managing and taking to market emerging technologies. A small firm is nimble and agile when it comes to making decisions about the new technology, where as often large firms decision making process are so cumbersome and slow, by the time a decision is made the window of opportunity may be closed already. Another issue that large firms often run into is that they often have well defined cultures and business structures. These cultures and structures can prevent them from letting ideas fully bloom into emerging technologies. Where as a smaller company would let the technology flourish and create its culture. Of course there are disadvantages with being a smaller firms creating new technologies such as, monetary resources must be found from outside sources, the smaller firms may not have the personnel resources to control the business if the technology takes off, to name a couple. In these instances larger firms have a definite advantage, but they have to utilize these advantages to get the benefits.


In order for the larger firms to make use of the natural advantages they possess, Day and Schoemaker, suggest a business plan similar to what Hewlett-Packard put in place when developing, what was then (1992), the world's smallest hard disk drive, code names the Kittyhawk. When deciding to develop this product HP gave the project leader, Rick Seymour, a budget and free-reign for the deveopment and the go-to market strategy for the Kittyhawk. HP made this a separate division that could make decisions about their product quickly and move with the market as needed. They were still able to draw from the vast resources of the HP corporation for procedural knowledge and know-how, but weren't confined by it.

Large corporation such as HP and IBM have over time learned, the hard way, to recognize the need to silo off new and developing areas of their business to allow them the room to grow and mature. At the same time they allow these departments to take advantage of the resources of the "parent", to learn from past successes, mistakes, experience and knowledge.

Apple learned this lesson the hard way 16 years ago when they tried to develop and lead the industry with the Newton. They went to market with a product that was underdeveloped for what the market wanted and they paid the price. Fast-forward 10 years to the introduction of the iPod and then a few years later the iPhone and it looks as though Apple learned from its mistakes with the Newton. The iPod and iPhones were well outside the scope of the traditional computer manufacturing lines of business at Apple. However, by contracting an outside engineer that had complete control over development, the iPod was able to change quickly and drastically over the development cycle, as Steve Jobs requested. The iPod had go or no-go checkpoints along the way, where corporate (read Steve Jobs) checked how user friendly the hardware and software were. The product that was developed, ties beautifully in with not on Macs but PCs as well.

Wharton focuses on emerging technologies with the this new management frame work, but I wonder if it only applies to emerging technologies? Can we look at this frame work in the context of other businesses that you see around town? Could Barnes & Noble create a successful food business while working under the construct of B&N? Jack-in-the-Box tried to set up a higher end sit-down restaurant (JBX), however they did not get far enough awyay from their traditional set-up and business model to make it successful. Banana Republic, the Gap and Old Navy are all owned by the same company, but they operate autonomously and are all extremely successful. Do these not represent the same basic management ideas that Day and Shoemaker are trying to convey? Or is there something fundamentally different with technology and specifically new emerging technologies?


Resources:

Corcoran, Elizabeth. "Why Apple Won." Forbes.com. 23 October 2006. . 11 February 2009.
http://www.forbes.com/2006/10/20/ipod-itunes-jobs-tech-media-cz_ec_1023valleyletter.html

Day, George S. and Paul J.H. Shoemaker. Wharton on Managing Emerging Technologies. New Jersey: John Wiley & Sons, 2000.

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2086

Christense, Clayton M. "Hewlett-Packard: The Flight of the Kittyhawk (A)." Harvard Business Review 23 Oct. 2006