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TMitTI 1
T-109.5410 Technology Management in the
Telecommunications Industry (3 cr)
© Sakari Luukkainen
TMitTI 2
Background of the course
• R&D investments in Finland are 5 billion € of
which is privately financed 72 %, major R&D
performed by telecommunications industry
• Telecom company´s cost structure is dominated
by the R&D cost, which is biggest fixed cost
• Majority of those fixed costs are sunk costs which
can not be easily recovered if technology
commercialization fails
© Sakari Luukkainen
TMitTI 3
Growth by industrial sector
8 000 000
7 000 000
Production
6 000 000
5 000 000
Electronics
4 000 000
Paper
3 000 000
2 000 000
1 000 000
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
© Sakari Luukkainen
Source: Stat Finland
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Background of the course
• Current slowdown - the development moves two steps
forward and one step backward
• Media catalysts overestimated expectations in growth
phase, and panic in decline phase
• Asymmetric information in the technology financing
market
• High 3G license costs delay development
• Most of the success is related to GSM technologies,
hyper price competition in mobile voice and SMS
• No history data of business – difficult to forecast,
unreliable market research
© Sakari Luukkainen
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Background of the course
• VC financing has so far resulted in a very few new success
stories
• Only 20 % of R&D performed by companies can be
exploited commercially
• The role of liquidity constraints is negligible in determining
R&D investment – steady R&D spending
• Market uncertainty is however high - many technical
possibilities open up with unclear market need - many
failures and unexpected success
• Incumbent companies often lose their competitive position
in discontinuous technological change
© Sakari Luukkainen
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Goal of the course
• To describe technology management as a part
of the business process of a telecommunications
company
• The course handles the structure of the
telecommunications industry and its innovation
characteristics, technology choices, R & D
financing, standardization and product strategy
© Sakari Luukkainen
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Graduating the course
• The course is especially designed to students taking
Telecommunications Management / Networking
Business for their major or minor, but is suitable for
all students that are interested in techno-economic
issues related to telecommunications
• The preferred but not compulsory prerequisite for
this course is TU-91.2005 Strategic Management of
Technology and Innovation, it can be graduated e.g.
parallel during this course
• Replaces courses T-109.410, T-111.050 and TU91.126
© Sakari Luukkainen
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Graduating the course
• 9 lectures, 2 industry speakers, on Tuesdays hall T3, at 10.15-12
• Exam requirements consist of the lectures and the following books:
Carl Shapiro, Hal R. Varian, Information Rules, A Strategic Guide to the Network
Economy, 1999
Michael E. McGrath: Product Strategy for High Technology Companies, 2001
• Following books will also be touched in the lectures:
Mäenpää, K., Luukkainen, S.: From Telecommunications Technology to Multimedia
Communications: The Competitiveness of the Telecommunications Cluster, 1994
Luukkainen, S: The Effect of the Developmental Dynamics of the Line of Business
on the International Competitiveness of the Telecommunications Industry, 1996
Gawer, A., Cusumano, M.: Platform Leadership: How Intel, Microsoft, and Cisco
Drive Industry Innovation, 2002
Christensen, C.: Seeing What's Next: Using the Theories of Innovation to Predict
Industry Change, 2004
Afuah, A.: Innovation Management: Strategies, Implementation and Profits, 2003
Palmberg, C., Martikainen, O.: Overcoming a Technological Discontinuity - The
Case of the Finnish Telecom Industry and the GSM, 2003
© Sakari Luukkainen
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Graduating the course
• First examination is 17.12.2006 at 9 - 12 in lecture hall T1
and the enrollment to the exam will be done via Topi, 4
exams / year
• Exam consists of three essay questions of which two is
compulsory, six concept definitions and one applied question
concerning some real life business case
© Sakari Luukkainen
Telecom Management / Networking
Business
Telecommunications
(Application area,
research target)
Industrial
Management
(Theory)
Internet &
Multimedia
(Application area,
research target)
© Sakari Luukkainen
TMitTI 10
TMitTI 11
Related courses
TU-91.2005 Strategic Management of Technology and Innovation 5
S-38.3001 Telecommunications Forum 1-5
S-38.3041 Operaattoriliiketoiminta 3-5
T-109.7510 Research Seminar on Telecommunications Business 5
T-124.5100 Verkottuneet liiketoimintaprosessit ja –mallit 4
© Sakari Luukkainen
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Master’s Thesis Scope
 Emerging technology / Product strategy analysis
 New telecom service design
 Integration of ICT & business processes
© Sakari Luukkainen
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Product Management Organization
Vice President, Sales and Marketing
Marketing
Services
Advertising
Marketing
Research
Product
Management
Product
Manager
© Sakari Luukkainen
Product
Manager
Sales
Account
Manager
Account
Manager
Product management is business
process management
Top
Management
Sales
R&D
Finance
Purchasing
Product
Manager
Marketing
Production
Customers
© Sakari Luukkainen
Legal
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Business Assessment: Hierarchy of
Strategies
Focus on
developing and
leveraging core
competencies
Vision
Corporate Strategy
Divisional Strategy
Product/Market Strategy
Marketing Tactics
Customer Satisfaction
TMitTI 15
Focus on
customerspecific needs
Source: Gorchels
© Sakari Luukkainen
PM´s balance of management
activities
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strategic
strategic
short-term
short-term
day-to-day
day-to-day
the reality
the goal
Source: Gorchels
© Sakari Luukkainen
TMitTI 17
Characteristics of Innovation
• New or improved product, service or process from market
point of view, which contains new technological solutions and
has been commercially successfully introduced to the market
• Radical, disruptive, sustained, incremental, architectural,
service and process innovations
• Innovator gets competitive advantage through timing
advance and IPR protection by patents – short monopoly
• Monopoly will loosen through trade of patents and licenses or
knowledge spillovers when competitors copy the technology and
proprietary technology gets common to all players in the
industry
© Sakari Luukkainen
TMitTI 18
Innovation process
Process innovation
Service innovation
Product innovation
Proprietary
technologies
Market appeal
GSM, Internet, fax,
I-mode, Ethernet,
IN, ADSL, CATV
data
R&D
investment
X.400, ISDN, WAP,
ERMES, ATM,
UMTS?
Generic
technologies
Technology push
Science base
© Sakari Luukkainen
TMitTI 19
Magnitude of Change
Discontinuous technology
Discontinuous change
Incremental change
Time
© Sakari Luukkainen
Source Tushman, 1997
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Technology cycle
Technological
Substitution
Technological
Discontinuity
Retention
Variation
Era of
Incremental
Change
Technological
Discontinuity
Era of
Ferment
Selection
Retention
Variation
Era of
Incremental
Change
Dominant
Design
Era of
Ferment
Selection
Dominant
Design
© Sakari Luukkainen
Source Tushman, 1997
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Performance
Disruptive technology
Disruptive
technology
Time
© Sakari Luukkainen
Source Christensen, 1997
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Technology Management
• Technology is a resource that is as pervasively important in
the organization as are financial and human resources
• The deployment of technology in the firm´s product-market
strategy strategy to position itself in terms of differentiation
and cost, and gain technology-based competitive
advantage
• The firm´s resource commitment to various areas of
technology
• The firm´s use of organization design and management
techniques to manage the technology function
• Vieving technology as a functional capability implies the
need to develop a technology strategy
© Sakari Luukkainen
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Technology Strategy
Interrelated decisions related to
• Technology choice
• Technology sourcing
• Level of technology competence
• Level of funding for R&D
• Organization for R&D
• Timing
• Technology introduction in new products/services
• Marketing of products/services
© Sakari Luukkainen
TMitTI 24
Innovation process
Technological change
Technology
Assessment
and
Forecasting
R&D
Standardization
Productization
Market
Assessment
and
Forecasting
Market change
© Sakari Luukkainen
Marketing
TMitTI 25
Technology strategy process in firms
Autonomous
strategic
action
Emerging
context
Concept of
corporate
strategy
Induced
strategic
action
Existing
context
© Sakari Luukkainen
TMitTI 26
Technology strategy enactment in firms
Induced
- applied research on new technologies opportunities and
threats to support existing businesses
- standardization, alliances
- product development
- joint ventures
- acquisitions
Autonomous
- science-based research
- internal corporate venturing
- external corporate venturing: VC, venturing alliances
and if they fail the last change is followership by copying /
contracting / licensing without timing and cost advantage
© Sakari Luukkainen
TMitTI 27
Timetable
25.9. Introduction, Sakari Luukkainen
2.10. R&D Management, Sakari Luukkainen
9.10. Standardization Strategy, Sakari Luukkainen
16.10. Product Strategy, Sakari Luukkainen
30.10. Market Dynamics of Telecom Industry, Sakari Luukkainen
6.11. Cases ERMES and GSM, Sakari Luukkainen
13.11. Cases DOCSIS and ADSL, Sakari Luukkainen
20.11. Technology Management in Nokia Siemens Networks,
Ossi Pöllänen
27.11 Technology Management in Ericsson, Visa Friström
17.12. Examination
© Sakari Luukkainen