Transcript Information Society

TMitTI 1
T-109.410 Technology Management in the
Telecommunications Industry (2 cr)
Sakari Luukkainen
Helsinki University of Technology
Telecommunications Software and Multimedia Laboratory
© Sakari Luukkainen
TMitTI 2
Background of the course
• 2001 R&D investments in Finland were 5 billion €
of which was privately financed 72 %, major R&D
performed by telecom sector, which quadrupled
its size in the 90´, currently largest manufacturing
sector (Statistics Finland, 2001)
• 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
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
• No history data of business – difficult to forecast,
unreliable market research
© Sakari Luukkainen
TMitTI 4
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 (3i, 2002)
• The role of liquidity constraints is negligible in determining
R&D investment – steady R&D spending (Niininen, 1999)
• The effect of public financing has had a significant but
limited effect, it works in firms that already have high R&D
intensity – successful R&D requires process knowledge
(Niininen 1999)
• Financing by own cashflow puts more pressures to allocate
R&D according to market need
© Sakari Luukkainen
TMitTI 5
Background for the course
• 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 change
• Incremental change easier to management, focus now on
management of discontinuous change by incumbent firms
• The role of technology and innovation management is
increasing
© Sakari Luukkainen
TMitTI 6
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
TMitTI 7
Graduating the course
• The course is especially designed to students
taking Telecommunications Management 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-91.123 Strategic
Management of Technology and Innovation, it
can be graduated e.g. parallel during this course
• Replaces courses T-111.050 and TU-91.126
© Sakari Luukkainen
TMitTI 8
Graduating the course
• 11 lectures, on Thursdays hall T2, at 9.15-11
• Exam requirements consist of the lectures and the following
books:
Carl Shapiro, Hal R. Varian, Information Rules, A Strategic Guide to the
Network Economy, chapters 5-10
Charles Edquist, The Internet and Mobile Telecommunications System of
Innovation, 2003
• Following books will also be touched in the lectures:
M. McGrath: Product Strategy for High Technology Companies
A. Gawer and M. Cusumano: Platform Leadership: How Intel, Microsoft,
and Cisco Drive Industry Innovation
M. Gaynor: Network Services Investment Guide - Maximizing ROI in
Uncertain Times
C. Christensen: Seeing What's Next: Using the Theories of Innovation to
Predict Industry Change
© Sakari Luukkainen
TMitTI 9
Graduating the course
• First examination is 9.12.2004 at 13.00 - 16.00 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
• The exam results will be published within a month in the
course www-page and T-109 notice board
© Sakari Luukkainen
TMitTI 10
Telecommunications Management
Telecommunications
Internet &
Multimedia
© Sakari Luukkainen
Strategic
Management
TMitTI 11
Telecommunications Management
Telecommunications
(Application area,
research target)
Strategic
Management
(Theory)
Internet &
Multimedia
(Application area,
research target)
© Sakari Luukkainen
TMitTI 12
Telecommunications Management
Prerequisites
TU-22.101 Introduction to Industrial Management and Engineering 3-4
Compulsory courses
T-110.350 Computer Networks 3
TU-91.129 Principles of Strategic Management 2
TU-91.123 Strategic Management of Technology and Innovation 3
T-109.410 Technology Management in the Telecom Industry 2
T-109.501 Research Seminar on Telecommunications Business I 2
T-109.551 Research Seminar on Telecommunications Business II 3
Optional courses
T-124.100 Development of Business Processes 2
S-38.001 Telecommunications Forum 1-3
S-38.041 Networking Business 2
TU-22.120 Introduction to Project Management 2
TU-53.309 Cross-Cultural Management 2
TU-91.108 Marketing Management 2,5
T-110.456 Next Generation Cellular Networks 3
© Sakari Luukkainen
TMitTI 13
Master’s Thesis Scope
 Technology / Product Strategy Analysis
 Telecom Service Design
 Integration of ICT & Business Processes
 Business Analyses Specific to Telecom Sectors
© Sakari Luukkainen
TMitTI 14
Recent master´s theses
 Utilisation of WAP technology in extranet business
 Monetary transactions in mobile environment
 Mobile location product strategy
 Mobile information systems in maintenance industry
 Discriminatory pricing of telecommunications services
 UWB technology strategy analysis
 Consolidation in the Finnish consumer ISP industry
 Disruptive technologies and the music industry
© Sakari Luukkainen
TMitTI 15
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
TMitTI 16
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 17
Focus on
customerspecific needs
Source: Gorchels
© Sakari Luukkainen
PM´s balance of management
activities
TMitTI 18
strategic
strategic
short-term
short-term
day-to-day
day-to-day
the reality
the goal
Source: Gorchels
© Sakari Luukkainen
TMitTI 19
Technology Management
• Technology is an ensemble of theoretical and practical
knowledge, knowhow, skills and artifacts that are used by
the firm to develop, produce and deliver its products and
services
• Technology is a resource that is as pervasively important in
the organization as are financial and human resources
• Its mangement is a basic business function and adds
dynamic character to the business definition
• Key issues in technology management: designing a
technology strategy, designing and innovative organization,
and implementing a development strategy
• Vieving technology as a functional capability implies the
need to develop a technology strategy
© Sakari Luukkainen
TMitTI 20
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 21
Technology Strategy
• 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 use of technology, more broadly, in the various activities
comprised by the firm´s value chain
• 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
© Sakari Luukkainen
Source: Burgelman & Rosenbloom
TMitTI 22
Determinants of technology strategy
Technical
Capabilities
G
E
N
E
R
A
T
I
V
E
M
E
C
H
A
N
I
S
M
S
Internal Environment
Strategic
Behaviour
Organizational
Context
Technology
Strategy
Technology
Evolution
Industry
Context
External Environment
© Sakari Luukkainen
I
N
T
E
G
R
A
T
I
V
E
Experience
M
E
C
H
A
N
I
S
M
S
Source: Burgelman & Rosenbloom
TMitTI 23
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 24
Innovation process
Process innovation
Service innovation
Product innovation
Proprietary
technologies
R&D
investment
Generic
technologies
Market appeal
GSM, Internet, fax,
I-mode, LAN,
ADSL, indoor
WLAN
Videotext, HDTV,
X.400, X.500,
videophone, ISDN,
WAP, ERMES, IN,
ATM, public WLAN,
DVB, UMTS?
Technology push
Science base
© Sakari Luukkainen
TMitTI 25
Growth by industrial sector
35 000
30 000
25 000
Paper
20 000
Electronics
Textile
15 000
Teleservices
10 000
5 000
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
0
© Sakari Luukkainen
TMitTI 26
Historical milestones
•
•
•
•
•
•
•
•
•
•
•
•
•
1876 Bell invented telephone
1882 Founding of first private teleoperator
1920 State owned teleoperator
1950 Nokia supplies telecables
1969 Nokia supplies transmission systems
1971 ARP
1978 First digital switching centre DX-200
1982 NMT 450
1986 Nokia´s mobile switching centre
1987 NMT 900
1991 GSM
1994 Liberalization of teleservices starts
2000 Nokia is the dominant mobile phone
manufacturer in the world
© Sakari Luukkainen
TMitTI 27
Explanation for 90´s competitiveness
Firm strategy,
structure and
rivalry
Demand
conditions
Factor
conditions
Gov.
action
IBA
Related and
supporting
industries
© Sakari Luukkainen
Source: Porter
Telecommunications value chain telecluster
Regulation,
tech. policy
Computer
industry
Mechanics
producers
Semiconductor
producers
TMitTI 28
Content
providers
Network
operator
Service
operator
Consumers
Telecom
industry
Business
services
Banking,
health care,
traffic…
Circuit board
installation
Circuit board
producers
© Sakari Luukkainen
Software
companies
TMitTI 29
”Possibilities for new ways of competing usually
grow out of some discontinuity or change in industry
structure often created by new technologies or by new
demands that bring existing technologies to market in new
combinations and forms.
Often innovators are outsiders to the existing industry. A
firms ability to sustain its success is most likely a result of
constant innovations to adapt to changing circumstances.”
Porter, 1990
© Sakari Luukkainen
TMitTI 30
Magnitude of Change
Discontinuous technology
Discontinuous change
- radical innovation
Incremental change
Time
© Sakari Luukkainen
Source Tushman, 1997
TMitTI 31
Performance
Disruptive technology
Disruptive
technology
Time
© Sakari Luukkainen
Source Christensen, 1997
TMitTI 32
Technology sourcing
• Internal / external
• Induced / autonomous
© Sakari Luukkainen
TMitTI 33
Classification of R&D
Type of R&D
Incremental Discontinuous Fundamental
Probability of technical
success
40-80%
20-40%
Small, difficult
to assess
Time to completion
0,1-2 years
2-4 years
5-10 years
Competitive potential
Modest, but
necessary
Large
Large, difficult
to assess
Durability of
competitive advantage
Short,
imitable by
competitors
Long,
protectable by
patents
Long but risky
© Sakari Luukkainen
Source: adapted from Pitkänen 2000, ADL 1991
TMitTI 34
Technology strategy process in firms
Autonomous
strategic
action
Strategic
context
Concept of
corporate
strategy
Induced
strategic
action
Structural
context
© Sakari Luukkainen
Source: Burgelman & Rosenbloom
TMitTI 35
Technology strategy enactment in firms
Induced
- applied research on new technologies opportunities and
threats to support existing and emerging businesses
- standardization, alliances
- product development
- joint ventures
- acquisitions
Autonomous
- science-based research
- internal corporate venturing
- external corporate venturing
and if they fail the last change is followership by copying /
contracting / licensing without timing and cost advantage
© Sakari Luukkainen
TMitTI 36
Timetable
16.9. Introduction, Sakari Luukkainen
23.9. Technology Marketing, Jari Haggren
30.9. Market Dynamics of Telecom Industry, Sakari Luukkainen
7.10. Standardization, Sakari Luukkainen
14.10. Case GSM, Sakari Luukkainen
21.10. Product Strategy, Eino Kivisaari
28.10. Product Strategy, Eino Kivisaari
4.11. R & D Management, Sakari Luukkainen
11.11. R & D Management, Case TeliaSonera, Jyrki Härkki
18.11. Corporate Venturing, Case Nokia, Taina Tukiainen
25.11 Technology Foresight, Sakari Luukkainen
9.12. Examination
© Sakari Luukkainen