Technology and Innovation Management

TEACHER: Hello, Student. Our discussion begins with the description of two important concepts: know-how and can-do.

Technology means knowing how to do something: the know-how. Every commercial enterprise needs to possess the know-how of some process, no matter how simple it might be.

But to actively participate in the market, know-how must be complemented with the ability to apply the technology, the can-do.

Can-do is a must. A firm may have the technical knowledge of a given productive process, but it can not apply it profitably without the means to perform it effectively. Can-do includes availability of trained personnel, capital goods (machinery and installations), and also the means to market the goods.

STUDENT: How can a firm acquire know-how?
TEACHER: The basic ways to acquire technology are:

· Hire personnel with expertise in the field.
· Purchase know-how from other firms through license and/or technical assistance agreements.
· Receive it from the manufacturer of specialized equipment installed.
· Perform in-house research and development (R&D).

It is important to mention the need of a Technology Strategy.

In all firms, from a shoe manufacturer to a chipmaker, some type of Technology Strategy must be in place to stay competitive and spot opportunities

STUDENT: Can we discuss and example of such strategy?
TEACHER: Sure.

Elements of a Technology Strategy

I. Awareness

· A firm must be constantly aware of the existing and upcoming technologies in its field, be it from external sources of from within the company. The ways to do this are many, from scanning trade magazines to attending trade shows to efficiently managing of the in-house pool of know-how.

II. Assessment

· Decide which technologies may impact the business.
· Quantify potential of these technologies to affect the business positively or negatively.
· Analyze the firm's capacity to incorporate these technologies effectively.

III. Implementation

· Maintain a priority schedule based on potential cost-benefit and viability.
· Organize to permit incorporation of new technologies.

STUDENT: Many times, in relation to a company's capabilities, one hears about invention, creativity and innovation. Can you please elaborate?

TEACHER: Gladly. We must try to define and distinguish between these three activities, which are the motors of technological change. Of course the meanings overlap a lot, but still there are basic differences. A firm must be clearly aware of the differences.

I. Invention means discovering something radically new.

· To invent something in today's environment is difficult and very expensive. An intensive and costly R&D activity must be present.
· Many inventions take place "before their time" and can not be implemented profitably in existing market conditions. Normally inventions carry patent protection, but for a limited time only; a long delay in practical application can make this protection useless.
· In spite of the previous caveat, sometimes an invention can be a hit and be tremendously profitable. We hear of this with certain frequency in the drug industry, carrying familiar names such as Upjohn's Minoxidil, Eli Lilly's Prozac or Pfizer's Viagra. But it must be realized that the investment in R&D behind any of these hits is enormous.

II. Creativity is devising a novel combination of existing technologies or practices.

· A new product composed of existing elements (as the first Apple computer).
· An original way to exploit an existing technology (as using the Internet for a new service -i.e., a site publishing and selling "electronic books").
· Creativity can be expensive and involving a lot of high-tech R&D in sub-technologies (as in developing a faster, smaller computer chip) but sometimes it may be cheap and very profitable This happens many times in manufacturing when an employee thinks of an improvement in the production process.

III. Innovation can be defined as the practical and profitable implementation of the ideas originated by invention or creativity; "converting ideas into value". In commercial firms, the objective of innovation is:

· To bring new profitable products or services to market.
· To improve competitiveness through lower production cost.

STUDENT: As in every aspect of business, there must be a need for managing this innovation process.
TEACHER: Innovative ideas flow continuously to management from external and internal sources. Some may be good, others not as good. The key is, simply put, to identify the ones the company should invest in and eventually implement.

This flow of ideas should be encouraged, never discouraged. The source of all ideas are people.

STUDENT: A truism, of course. Obviously, machines do not have ideas!
TEACHER: Yes, but a truism frequently forgotten by management.

A large proportion of new ideas comes from internal sources. An employee may have an original idea, or may bring up an observation he made at a trade show.

STUDENT: What can management do to encourage people to contribute their ideas?
TEACHER: Let's see. A company must:

I. Motivate employees to communicate their ideas. People should be recognized for this, regardless of whether the idea is judged a bright one or a dumb one. No one should ever be criticized for their ideas; no matter what management thinks of a suggestion made by an employee, they should be commended by the simple fact of communicating it.
II. Good ideas can come from any part of the company. Flow of ideas should not be limited to coming from specialized sources. An idea about a new product or an extension of the product line will probably come from a marketing specialist, But a clerk may also have a useful idea about marketing; after all, he is also a consumer.
III. Ideally, employees should receive financial rewards for good ideas that are implemented, especially in case of suggestions coming from people not specifically employed for that purpose such as R&D personnel. Leading companies such as IBM have had this type of programs in place for decades and while many employees received substantial rewards, the company profited by using the ideas.
IV. Criticism about a new idea should be postponed. No idea should be discarded at first sight. There should be a systematic approach to evaluate suggestions by a formally organized group or committee.

STUDENT: OK, now a company has selected an innovation project with good potential. What comes next?
TEACHER: Now the company faces a very important task: implementing the innovation.

Deciding to invest in an innovation is tricky. It is one of the areas where management insight is very critical. Still, some objective factors must be considered:

* Ideas are always fuzzy at the beginning. Promising ideas should be "nurtured", thought about, discussed, re-considered.
* Innovation should be judged according to its relevancy to the short or long term competitive advantage of the business. The current ideology is that a company should concentrate in its core competency, its "core businesses". So, a good idea may not fit into this policy. Again... the idea may be the kernel of a new core business!
* The risks and potential benefits should be quantified. Launching a completely new product is more risky and carries more potential rewards than an extension of an existing product line or a redesigned package.
* Most innovations are relevant to the whole company. This fact is often disregarded and therefore top management coordination is vital. The marketing people may be sure that the new packaging for mayonnaise is great, but it may be a lot more expensive to manufacture. Decision-making should involve all relevant sectors of the company. Senior management must make sure that good teamwork is practiced.
* The resources to be allocated to the innovation project should be realistically calculated.
* Once approved, the project should have a formally stated method and plan. Timing is crucial in bringing innovations to market; a realistic "critical path" of the project should be drawn and followed-up.
* The project should be clearly communicated and understood. Clearly established objectives over time and continuous re-evaluation are vital. Not all projects started are viable, since conditions may have changed. Deciding to terminate a project is as important as deciding to start it.