Technology Management - Chapter 3
B222A – Technology and Innovation Management
Chapter 3 – EXPLOITATION
- INTRODUCTION
The process of exploitation concerns generating profit or achieving other benefits from technology. It is the utilization of new technology or scientific developments to improve the performance of products, services and manufacturing process. The exploitation activity includes three sub-processes:
-commercialization/marketing: the launch of product/service into the market,
-technology transfer:the process of transferring technologies internally from an R&D unit or from an external partner to the manufacturing department
-utilization: fully put new technologies into use
- COMMERCIALIZATION/MARKETING
Commercialization is the process of introducing a new product or service into the market. It is the successful transfer of an invention or an idea to a sellable product in the marketplace. Many companies are good at producing inventions but not all their inventions are put into use. So the acquisition of new technology is an important step but not enough to turn inventions into profits.
The route taken by technology exploitation can be:
-In-house commercialization: production and distribution of technology carried out within the company
-Joint commercialization: production and distribution carried out through joint ventures, alliances or other collaborations
-Selling technology: idea, prototype, license…
A company chooses its exploitation method based on its strategy and core ompetencies. Core technologies are produced and used in-house, other technologies are sold to partners.Other criteria taken into consideration to precise the level of exploitation: geographical distribution of the company, need for support technology, category of the technology (basic or not), urgency of exploitation, technology life-cycle position, direct application, complementary assets (after-sales support…)…
Commercialization is directly related to earning revenues from sales. Marketing is an important process at this stage since introducing a product to the market needs advertising, distribution and selling of the product.
Marketing is concerned with anticipating customer’s future needs and wants, through market research or creative imagination. Marketing is also concerned with the attraction of new customers and retention of existing customers. For a marketing to be successful, the mix of four Ps (product, price, promotion and place) should be appropriately adapted to the target market.
Marketers depend a lot on market research to determine their markets, competitors, business environment, customers’ wants and needs… They can gather this information through direct or indirect relationships with customers (customers meeting, surveys, focus group…). Marketing focuses as well on the psychological and sociological aspects of consumers.
The marketing of technological product or services is highly critical since the time-lag (delay) from invention to turn into a sellable product is usually very high. The reasons behind this delay are: non-existence of complementary technologies, existence of low-cost alternatives, the characteristics of individuals that retain them from adapting new technologies…
- MARKETING PROCESSES
Four major processes: market preparation, targeting, positioning, execution.
3.1.Market preparation
Preparing the market is about educating the market on a product or service and preparing customers and other companies for the change. It’s also about building awareness of the new technology as well as forming relationships with customers and suppliers. As technology products are complex and expensive, educating customers may improve the perception of the product.
At this stage alliances with other firms or even competitors might help the adoption of technological standards, since partners may help provide complementary technologies and assets needed for the success of the innovation.
3.2.Targeting
Targeting is aboutfinding the right customers and learning their characteristics in order to decide which segments of the market to decide on for marketing the product. For this it is very important to understand the adopters types (Innovation curve, figure 3.1 p. 64).
Some customers are more open to new products than others. The adopters types are the following:
-Innovators: lead the change and are important for communicating the benefits of a new innovation to other adopters.
-Early adapters: are willing to try out new ideas.
-Early majority adopters: are willing to accept change more quickly than the average.
-Late majority adopters:will only use new ideas after the majority has tried them.
-Laggards: they are critical of new ideas and don’t adopt them unless they become common in use.
Based on this, it is more logical to convince innovators and early adopters of a new technology rather than other segments of the adopters market. Trying to convince the mass market will be a waste of time and money.
3.3.Positioning:
The typical strategies for positioning are generally: low cost, niche and product differentiation. But for technology marketing, the blue-ocean strategy is an important option. It concerns creating uncontestant market space and make competition irrelevant, instead of investing in markets where competition is constantly increasing.
In case of technology, customers need to feel secure, and that moving to a new technology is low risk. Technology marketing build its positioning according to adopter type: innovators are interested in technological superiority, early majority are interested by a well-functioning , low-cost version of the new technology. The challenge remains in crossing the boundary and going from early adopters to early majority.
3.4.Execution:
The way to cross the barrier and execute the marketing positioning is to focus on one or two specific niche markets where it can dominate rapidly and force out competitors. After this, the firm can use this dominance of the first niche to attack the surrounding niches. And reach the early majority group. The progressive approach will build a winning image and develop the trust of customers in the company.
To reduce the risk of adoption, technology companies may offer trial version, and train customers to using new technology.
- TECHNOLOGY TRANSFER
Technology transfer is the process by which the technology developed by a creator is applied and utilized by an applier. Creators might be an individual, an R&D department within a company, another commercial developer company, a partner company…The applier might be a manufacturing department of the company where technology is developed, it might be a commercial company, a competitor or the government. If either the creator or the applier is from a different country, technology transfer takes place at the international level.
The process of technology transfer is complicated since it involves not only equipment but also know-how and skills. Moreover, technology transfer becomes complicated due to cultural differences and when feelings and attitudes, values and priorities are involved.
A certain number of factors affect the transfer of technology:
-High level of technical understanding where transfer is done
-External pressure from competitors enforcing quick adoption
-Joint-programs between technology developer and technology buyer
-The existence of other development activities complementary to the transferred technology….
Technology transfer has become one of the most important policy issues for developing countries that import their technologies. The technology transfer activity has become an important dimension of industrial and technological policies in many countries. Governments have set up proper frameworks to initiate and support technology transfer between research organizations and companies.
4.1. Technology transfer processes:
Four tasks are considered for the transfer of technology:
-Determining the transfer method, actors and timing
-Pre-transfer activities
-Transfer activities
-Evaluations and improvements
4.1.1. Determining the transfer method, actors and timing:
Once the decision is made to transfer a technology, there are a number of possible methods to be used, informal and formal. This includes: technical information exchange through published material, meetings, symposia, individual exchanges…
Deciding which staff members should be involved in the transfer process is an element of the technology transfer process. Forming multifunctional teams and establishing communication among them improves the overall process and facilitates learning. Staffing decision concerns both the developer of the technology and the receiver.
After this, timing issues need to be decided: when is technology ready to move from R&D to production and finally to market. Timing depends on the degree to which the technology satisfies the customer’s needs and ensures efficient production.
4.1.2. Pre-transfer activities:
Formal technology transfer relies on legal documentation, a contract including binding conditions on what will be transferred, between whom, when, how and for what price. The contract preparation is even more complicated when the technology transfer is international, since the contract should be structured according to international regulations.
Before the technology transfer starts, there might be a number of adjustments to physical facilities and workforce, depending on the location of the transferred technology, new installations or changes needed (electricity, infrastructure…)…
The members of the receiving organization might lack some necessary skills for working on the new technology. At this stage training is a must, and also possible recruitment of new staff with the right skills is a possibility.
4.1.3. Transfer activities:
After physical installation, tests are carried out at different levels and, depending on the results, new sets of arrangements may be undertaken. Other actions are also needed during start-up of the new technology, especially through migration from the old process to the new. Sometimes it may be a hectic shutdown of the old process and last-minute installation and start-up of the new one.
Another important issue is the communication between the R&D, production and marketing departments of a company: manufacturing are conservative regarding the incorporation of new technologies.
4.1.4. Evaluations and improvements:
When full production starts, feedback starts to flow either from internal production departments or from markets and customers which creates and activity of evaluation and improvement. The cause of certain problems can be could be technical or due to inadequate training.
It is difficult to measure the success of technology. It actually involves many factors: licenses, request for help, competitive advantage gains, cost saving, site visit, new customers, ROI, …
- TECHNOLOGY UTILIZATION
Utilization process consists of three major steps:
-Measure technology/utilization performance
-Identify priorities and develop a business case to improve utilization
-Implement changes
5.1. Measure technology/utilization performance
Technology investments have little impact on the short run. In the long run, the firm may have a better product, broader international applications and a new generation of products. The main issue here is to find the criteria for performance and the way to measure it. Although there are no simple, direct quantifiable measures of the performance of technology, the evaluation of the input-process-output framework is possible:
-Input measures are the time and resources required
-Process measures are the indicators of efficiency of the process (average breakeven time, average time to market, hours worked by project…)
-Output measures are indicators related to the commercialization of the innovation (revenues generated by a new service or product, number of new products compared to competitors…)
Besides general measures, some micro-measures might be taken into consideration at the operations level, in order to track a weakness in the progress. For example: the number of unplanned changes that have affected the initial design in order to measure how consistent is this design.
The final activity in performance management is benchmarking. Benchmarking is the comparison of the organization’s performance to other companies’ performance in order to improve processes and standards.
5.2. Identify priorities and develop a business case to improve utilization
It is important to identify which measure or criteria are the most appropriate and helpful to improve in order to improve the whole performance of the technology utilization. Many dimensions should be taken into consideration:
One important factor to consider: the demand change. To anticipate demand changes customers should be involved at the early stages of the technology development.
Another mechanism that can help reducing the underutilization of the technology is by diversifying the use of this technology. Companies have to focus on core technologies that make it possible to diversify the product or the market range.
Moreover, underutilization of a certain technology may be caused by the lack of reliability. Any loss or failure of a product will induce a large amount of repair costs to the customer and will be damaging to the manufacturer’s reputation. To meet this long-term challenge, a manager needs to develop three important features of a product:
-Reliability: based on the frequency of breakdowns
-Maintainability: based on the time of breakdown
-Availability: the proportion of time during which a product is effectively available for operational use.
Another dimension for evaluating the performance: the technical limitations or capacity limits of the technology itself. Due to technical limitations, utilization might not exceed a certain level called “capacity limits”; even if the technology is still new. This opens the door for substitute technologies.
5.3. Implement changes:
Improvement projects are similar to new product or process projects need to be implemented following R&D acquisition practices developed in Ch. 2.
Helpful documentary to watch:
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