New Markets for New Technologies

1
New Markets for New Technologies

• Henry C. Co
• Technology and Operations Management,
• California Polytechnic and State University

2
Recapitulation

• Technology -- A process, technique, or
  methodology -- embodied in a product design or in
  manufacturing/service -- which transforms inputs
  of labor, capital, information, material, and
  energy into outputs of greater value.
• Technology Change -- A change in one or more of
  the inputs, processes, techniques, or
  methodologies that improves the measured levels
  of performance of a product or process.
• Many growth phenomena in nature show an S
  shaped pattern -- Any single technical approach
  is limited in its ultimate performance by
  chemical and physical laws that establish the
  maximum performance that can be obtained using a
  given principle of operation.

3
Recapitulation (continued)

• Slope of technological trajectory steeper than
  slope of trajectories of customer need.
• Intel microprocessor speed increases about 20
  per year.
• Eli Lily Purity of insulin improved from 50,000
  ppm in 1925 to 10 ppm in 1980 (by about 14 per
  year).
• Manufacturers of hydraulic excavators increased
  by 15 per year the amount of earth their machine
  could heft in a single scoop from 0.25 cubic
  yard in 1948 to 10 cubic yards by 1974.

4
Technology and Strategy

• Technological Strategies
• Overall Cost Leadership
• Overall Differentiation
• Focus.

5
Overall Cost Leadership

• The firm seeks industry wide cost leadership in
  serving a broad range of industry segments.
• Technological Leadership -- Fist mover on lowest
  cost product or process technology.
• Technological Followership -- Lower cost of
  product or process through learning from leaders
  experience.

6
Overall Differentiation

• The firm seeks industry wide differentiation in
  serving a broad range of industry segment.
• Technological Leadership -- First mover on unique
  product or process that enhances product
  performance.
• Technological Followership -- Adapt product or
  delivery system more closely to market needs by
  learning from leaders.

7
Focus

• The firm directs its entire strategy at a narrow
  target business segment, foregoing sales to other
  segments.
• Lowest Segment Cost
• First mover on lowest cost segment technology
  (Technological Leadership).
• Alter leaders product or process to serve
  particular segment more efficiently
  (Technological Leadership).
• Segment Differentiation
• First mover on unique product or process tuned to
  segment performance needs (Technological
  Leadership).
• Adapt leaders product needs for particular
  segment or create segment switching costs
  (Technological Leadership).

8
Keeping Products Competitive

• Technology maturation
• Are exploiting technology maturation? i.e.,
  ensuring that conventional technologies currently
  incorporated in our products, processes,
  distribution, and service are being used and
  extended appropriately and effectively?
• Studies indicated that technologies go through a
  process of maturation that follows the S curve
  (technical advancement versus effort curve)
  from early emphasis on product attributes to
  later emphasis on cost and process technologies.
• Technology substitution
• Are we aware of, are we appraising
  dispassionately, and are we developing when
  appropriate emerging technologies that could
  supplant those now being used?
• Additional source of values

9
The Basis of Competition

• Individual product life cycle -- birth, growth,
  maturity, and demise.
• Recent studies on hydraulic excavators, disk
  drives, executive education, and diabetic care
  showed that product categories and brands follow
  a different cycle.
• Performance oversupply in one basis of
  competition triggers the next basis of
  competition
• From functionality (e.g., capacity is disk
  drives) to reliability, from reliability to
  convenience or flexibility, and finally to price.

10
The Basis of Competition in the Disk Drive
Industry
11
Trajectories of Hydraulic Excavators Bucket
Capacity Demand and Supply