TECHNOLOGY STRATEGY

Whether or not an organisation would generate or develop its own technology and with what intensity it would pursue the efforts in this respect would depend upon technology strategy it has formulated or adopted. Let us, therefore, first see what a technology strategy is, what could be the different types of technology strategies, why is it important to have a technology strategy, and how could we link it with the overall business of an organisation.

Though the term ‘strategy’ is commonly used as an antonym of ‘tactics’, it actually implies long-term, purposeful and interconnected efforts, while tactics imply action to deal with immediate specific problems. “Technology Strategy” may accordingly be defined as a strategy to deal with the technology and related issues at macro and micro levels, with respect to set objectives.

MACRO LEVEL STRATEGY : At macro level, each country outlines and adopts a technology strategy to achieve its political, economic and social objectives and translates the same into action through appropriate policies and mechanisms. These strategies may be different for different countries. For example, US may adopt to excel in “defence” or “warfare technologies” or in generation of first stage new technologies for knowledge-based industries, while Japan may decide to excel in technologies for consumer products of newer designs at lower costs. Korea may decide to adopt and upgrade imported technologies using mass production techniques for consumer products without really caring much for aesthetics or high quality levels, and without bothering for defence or other strategic applications. On the other hand, India may decide to develop its own capabilities in strategic areas such as defence, atomic energy and space where technologies are usually closely guarded or for maximum utilisation of its own resources. It may thus train S&T manpower, generate employment, promote rural development, check population, and so on. India’s thrust has been on a strong scientific base while countries like Korea, Taiwan, Singapore, Thailand have given attention to developing technological capabilities, at least on short-term basis. Some countries may adopt technology strategies for building up export oriented economies as in the case of Japan and Korea, while some others may prefer to have technology strategies for import substitution as is case of India, Pakistan, Bangladesh. Thus, technology strategies may vary with the national perspectives, and accordingly policies and mechanisms are evolved and implemented. Financial resources play an important role in evolving the technology strategies..

Depending on the resources available and the will of the government, the policies are evolved, mechanisms are set up and measures are taken to ensure the achievement of the set objectives. 

MICRO LEVEL STRATEGY : The extraordinary range and potential uses of contemporary technology have important consequences for industrial and commercial firms. The industrial and organisational turbulence endangered by technological change and increasing international competitive pressures provide threats and opportunities for firms. An effective strategic approach to technology allows firms to cope better with these changes, and reduces the threats and insecurities facing them and their employees.

The basic role of technology strategy in business planning is to help ask the questions like : what business the corporation plans to be in and how it be positioned? Effective planning identifies the present decisions required to create desirable and competitive corporate futures. In particular, technology strategy must anticipate the transient impact of technological innovation on the future competencies of the corporation. An appropriate level of formal planning provides systematic and documented strategy. The inputs to the process occur through participation of staff and line management and of special planning groups. Technology scenarios should help management focus on the interaction of changes between technology and change in markets, resources, regulation and competition’.

Some of the arguments, based on experiences and case studies in several countries, relating to technology strategy include :

  • The existence of a corporate strategy is increasingly necessary for industrial firms and is necessarily long-term. It is appropriate for all companies except the very smallest. Technology strategy should complement other elements of corporate strategy.: manufacturing, marketing, investment etc., and should in many cases be international in focus.
  • Strategies extend beyond the boundaries of the term to encompass the behaviour of other companies – suppliers, customers, partners and competitors – and other sources of technology. Public policies can directly affect the technological activities of firms and must be taken into account.
  • Strategy formulation, implementation and review are processes which are susceptible to radical change through the intervention of managers. There are benefits to be obtained by basing strategy upon those accumulated competencies which provide comparative competitive advantage, and through complementing those competencies with external expertise. A crucial factor underlying successful strategy is the ability of managers to adapt and learn from experience.

IMPORTANCE OF TECHNOLOGY STRATEGY : Mark Dodgson has identified the following five issues which bear on the importance of corporate strategy for technology

i) The need to cope with technological uncertainty;

ii) Complexity and discontinuous nature of technological development;

iii) The need for technology to be viewed in a global context;

iv) The need to attain complementarities, and

v) The relationship between corporate strategy technology and public technology policies. 

LINKING BUSINESS AND TECHNOLOGY STRATEGY : According to Fredrick Betz the basic role of technology strategy in any business planning is to pose three fundamental questions

i) In what business should the firm engage in future?

ii) How should the firm be positioned in these businesses?

iii) What research, production and marketing will be necessary to attain those positions?

An example of a major change in business plans arising from technological considerations occurred in Monsanto (USA) in the early 1980s. From the late 19th century,, the chemical ‘industry was a continuously innovative and growing hi-tech industry. The phase of technological change in the chemical industry followed the classic S-curve, exponentially exploding in the early 20th century and growing linearly into the later 20th century. Then in the late 1970s, there arose a possibility that the basic chemicals industry would become mature technology industry. At the same time world-wide industrial capacity to produce commodity chemicals outgrew demand. Technology transfer of chemical knowledge to less developed countries has shifted the competitive edge from knowledge advantages to resource advantages.

Petrochemicals were going through a technology life cycle and several countries like South Korea, Mexico, India and other developing countries are building petrochemical plants to meet their own needs; more important, some importers, particularly Middle Eastern countries, are about to become big exporters themselves. Therefore, the traditional exporters in the USA, Western Europe and Japan are now looking for ways to safeguard their home markets. The large American chemical firms had to plan new strategies. In the early 1980s, Monsanto re-oriented its technology strategies to reduce costs in its traditional business areas while positioning itself in new technologies and new businesses. As a result, the traditional business of Monsanto (basic chemicals) would become only 1/3rd of Monsanto’s future businesses. Monsanto sold a number of losing businesses in the United States and abroad and at the same time bought a number of small companies, to fit into new electronics operation and invested heavily in biotechnology. This is one result of the strategy based on integrating technology into business planning – parts of the company continue, parts are discontinued and new parts acquired or begun. Monsanto had turned its long range strategy towards the hottest new, major technology then unfolding biotechnology.

FORMULATING A TECHNOLOGY STRATEGY : In planning technology strategy for competitive advantage the following steps have been suggested

  1. Identify all the distinct technologies and sub-technologies in the value chain.
  2. Identify potentially relevant technologies in other industries or those under scientific development.
  3. Determine the likely path of change of key technologies.
  4. Determine which technologies and potential technological changes are most significant for competitive advantage and industry structure.
  5. Assess a firm’s relative capabilities in important technologies and the cost of making improvements.
  6. Select a technology strategy, encompassing all important technologies, that reinforces the firm’s overall competitive strategy.
  7. Reinforce business unit technology strategy at the corporate level.

SMALL AND MEDIUM ENTERPRISES : The small and medium enterprises play an important role in the overall industrial and economic development in developed as well as developing countries including India, although the size and definitions may vary from country to country. In India, small scale sector contributes to about 50% of the total industrial production, about 30% of total exports, and provides employment to over 12 million people. Many of the small businesses are promoted and managed by technologically innovative entrepreneurs and managers. These units often enjoy preferential treatment in financing and marketing but lack resources in terms of investments, manpower, equipment, etc. The scales of operations are low. Therefore, the business strategies and requirements of small companies are different than those of large and corporate companies. Accordingly, the technology requirements and technology strategies also are different since their capacity to invest in technology is limited. However, there are many companies who have technological awareness and capabilities and are innovative in nature. It is reported that many of the European small and medium enterprises have virtually limitless potential to develop and utilise new technologies. The major factor underlining their success and growth is the quality of their management. Technological entrepreneurs are “born entrepreneurs” and cannot be reproduced, while professional managers can be trained. They are aware of all the limitations and possibilities of small firms, and are capable of identifying, encouraging and nurturing entrepreneurship. The world-wide experience shows that companies having successful management of technology and effective strategies for technology are more successful overall than others. Also, technology innovative companies have a better chance of independent operations and sustained growth than others. In India, the awareness about the importance of technology strategies and investments in technology generation and development is growing, in the small scale sector in particular, in the context of new policies announced in the later part of the year 1991.

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