Strategic Process in MTI

Strategy
 Strategy Defined
 A coordinated set of actions that fulfill the firm’s objectives,
purposes, and goals.
 It is not a single act in a firm.

 Without a strategy, managers have:

 No well-defined business path to follow.
 No roadmap to manage by.
 No cohesive, reasoned action plan to produce successful
performance.
Establishing the Strategy
 Strategic Planning
 The process that lays the groundwork and direction of the firm
over the next several years as outlined in a formal written
strategic plan.
 Strategic Management
 An ongoing process in which the organization defines:
 the nature of the businesses in which it will be active
 the kind of economic and human organization it intends to be
 The nature of the contribution it intends to make to its various
constituents
Levels of Strategy
Mission Statement
 A simple statement of the basic purpose or reason for a firm
to exist.
 It should:

 Identify what is unique about the firm

 Identify the scope of activities it wants to pursue

 Help the firm stay focused by defining who and what it is

Corporate Strategy
 The pattern of decisions in a company that:
 Determines and reveals the firm’s objectives, purposes, or goals
 Produces the principal policies and plans for achieving those
objectives, purposes, or goals
 Defines:
 The range of businesses the firm is to pursue
 The kind of economic and human organization it is or intends to be
 The nature of contribution it intends to make to its constituencies
Business Level Strategy
 Business Level Strategy
 How to operate the businesses that the firm decides to enter
into.
 Porter’s model of low cost and differentiation is the most
popular business level strategy model.
 Functional Strategy
 How each functional area in a given business will operate to aid
the firm’s business level strategy.
 Examples: marketing strategy, and financial strategy
External and Internal Strategic Interactions
Types of Capabilities
 Technical Capabilities
 How the firm approaches technology
 Destroy—eliminating and replacing technology
 Preserve—maintaining technology; continuous improvement
 Develop—leaping others with new technological capabilities

 Market Capabilities
 the ability to place the product or technology appropriately.
Competitive Advantage
 Competitive Advantage
 Something that the firm does better than any of its competitors.
 Goal: To have a sustainable competitive advantage
 Requires that the advantage:
 Must be valued by customers
 Cannot be easily duplicated by competitors
Centrality of MTI in Strategic Management
 MTI affects inputs, throughputs, and outputs for the
strategic process of the firm.

 By examining the strategic process in a systematic manner, it

should be easier to see how MTI affects and is affected by
the strategic activities in a firm.
Centrality of MTI in Strategic Management
 Integrating MTI and Strategy— Capabilities are skills that
a firm develops.

 They are the building blocks for the firm’s strategy.

 It is at this level that the firm’s integration of technology with

strategic concerns should begin.

 Competitive advantages are developed from capabilities.

Types of Capabilities
 Technical capabilities concern how the firm approaches technology it
already has or wishes to have in the future.
 The approach used relative to technical capabilities can be classified as:
 Destroy—usually to replace with better technology. Out with
the old, in with the new.
 Preserve—the technology may be old but the firm believes it
still has utility
 Develop—can give the firm a competitive leap over others in
the industry.
 Types of Capabilities

 Market capabilities indirectly impact the technology of the firm.

 Engineers may develop new technical capabilities but if there is no
way to distribute or sell the product, then competitive advantage is not
likely to appear.
Classification of Technology
 Continuous technology—Changes in technology that while not constant reflect a
progression of changes that happen over a relatively short period of time.
 Example: the personal computer becoming lighter and more mobile.

 Radical technology—Causes a dramatic change in the way things are done.

 Example: when the computer was introduced, it changed the way information was processed
and stored in organizations.
Classification of Technology
 Next-generation technology—Is between radical and continuous.
 Example: The personal computer is a next-generation technology from the mainframe
computer. It was made possible by the radical technology of the silicon chip.

 Disruptive technology—is closely related to radical technology, but is related to

how it affects the market or segments of the marketplace.
Classification of Technology
 Offensive technology— technology is used in a way that is not being used
by competitors so that it gains a competitive advantage.
 The advantage can come from lower costs or from providing value more effectively
or efficiently to customers.
 Defensive technology— this involves obtaining technology that others
already employ in order to maintain competitiveness or to block competitors from
gaining the technology.
The S-Curve of Technological Progress
 Key Activities in the Strategic Management Process

SOURCE: Adapted from UC Santa Cruz Leadership Convocation, Kristine Hafner, Director Business Initiatives, UCOP, February 4, 1999.
Planning

The systematic gathering of information that leads

to the generation of feasible alternatives for the
firm, selection of the most appropriate action, and
ultimately to setting of direction for the firm.
The Planning Process

1. Data gathering about the external environment and

the firm’s internal capabilities.
2. Mission generation—from the information, the
mission is formed. The mission is a simple statement of
the basic purpose or reason for existing.
3. Objective setting—the firm builds on the mission to
establish measurable objectives and performance targets
that will help it fulfill its mission.
4. Strategy establishment—the strategy helps to ensure
that the actions the firm takes will accomplish the
objectives and targets. There are three levels of
strategy—corporate, business, and functional .
Financial Analysis

 Income statement and retained earnings

 Balance sheet and reallocating resources
 Interpreting Financials
o Profit ratios
o Liquidity ratios
o Efficiency ratios
o Other ratios
External Environment
 Porter’s Five-Forces Model Plus

SOURCES: “Co-opetition: Competitive and Cooperative Business Strategies for the Digital Economy,” Nalebuff B., Brandenburger A., Strategy and Leadership (1997,Vol. 2, No. 6) © Emerald
Group Publishing Limited. http://www.emeraldinsight.com/sl.htm. Republished with permission, Emerald Group Publishing Limited; adapted with the permission of The Free Pre
Buyers
 Factors increasing the bargaining power of a buyer:
 The larger the percentage of the industry’s output that the
buyer purchases.
 The lower the cost of switching to competing brands.
 The greater the number of sellers available to the buyer.
Suppliers

 Factors increasing the bargaining power of a supplier:

 There is high demand for supplier’s goods.
 The quality and performance of supplier’s product are unique.
 Customers are unable to vertically integrate backward into the
supplier’s industry.
New Entrants
 The threat of new entrants in a competitive rivalry is reduced
when:
 Customers have strong brand loyalties.
 Economies of scale must be achieved.
 Large capital requirements are required.
 New entrants cannot gain easily gain access to distribution
channels.
 Industry products have proprietary protection (e.g., patents).
Substitutes
 The power of substitutes increases when:
 Customers have the opportunity to compare
quality/performance.
 Customers’ costs for switching to competitors’ products are
low.
Complementors
 The power of complementors to influence the competitive
environment of an industry increases when:
 They have the ability to integrate forward/backward into the
complement’s industry
 There are few or no substitute complements
 Buyer or supplier switching costs are high
 There is relative concentration in the complement’s industry
Implementation

 Key actions in implementation:

 What to do—execute the plan
 When to do it—when priorities dictate
 How to do it—make or buy
 Who will do it—us, them or combination
Strategic Implementation Process
 Common implementation concerns

•Structure
•Personnel issues such as hiring, job assignments,
training, development
•Decision making
•Communication to whom, how, when, etc.
•Culture of the firm—norms and values
•Employee incentives—rewards, awards, etc.

Tool to conceptualize elements of the implementation process—

value chain analysis which breaks down the firm’s activities into
primary and support activities
 Technologies in the Value Chain

SOURCE: Adapted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from
COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance, by Michael E. Porter. Copyright © 1985,
1988 by Michael E. Porter. All rights reserved.
 Evaluation and Control
• Concerned with how well the firm’s strategies are working and
making adjustments to meet changing conditions.
•Evaluation—comparison of actual outcomes with expected outcomes
•Control—adjustments, as needed to either the plan or the
implementation
•Balanced Scorecard is a tool for evaluation and to define issues
to be considered for adjustment.
•Net PresentValue
Balanced Scorecard Issues
 Major Strategic Questions in MTI
 Should we create our own new technology and
innovations internal to the firm?
OR
 Should we acquire technology from others through
acquisition or strategic alliances?
Managerial Guidelines
 For a firm to navigate successfully the strategic processes
involved in the management of technology and innovation, it
must keep certain actions in mind.These include:
1. Forget traditional organizational functions—judge ideas, not
positions.
2. Know where the firm is in the life cycle of the technology and
where its competitors are.
3. Be willing to assume risk if the potential long-term reward is
great.
4. Utilize all resources in the environment. Do not get caught by
the “not invented here” syndrome.
Managerial Guidelines
5. Break down communication barriers. Many firms lose
opportunities because of a “not shared here” approach to
lessons learned.
6. Keep expectations realistic. Too often, firms abandon
technologies too soon because unrealistic expectations cannot
be met.
7. Establish processes for new initiative approaches to
management.
 Characteristics of a Technology-Driven Corporate Cycle

SOURCE: Girifalco, L. Dynamics of Technological Change.© 1991,Van Nostrand Reinhold, p. III. Reprinted
with permission of Springer Science and Business Media.