Chapter 3 & 4

Chapter 3: Technology Speciation and the path of Emerging Technologies

Chapter 3 of Wharton on Emerging technologies starts with the example of internet which is result of change in domain of application of technology rather than the result of technology revolution. Authors named the shift in domain of applications and evolution of emerging technologies as ‘Technology Speciation’. By taking the insights from the evolutionary biology, authors say that the emerging technologies may emerge from:
1. Lineage Development: It is implementing a small technology developed in one domain into a new or different domain. And speciation process requires adapting to the needs of the new areas it is exploiting and also making use of the rich sources available in the new environment.
2. Gradual Evolution and Creative Destruction: Initial growth of emerging technologies may be slow but it ultimately replaces the existing technologies. This process was discussed by giving the example of wireless telephones and wired communication.
3. Melding of Technologies Lineages: New technologies may emerge from the convergence (where one technology is brought into the domain of another technology) or fusion (two technologies of different domain are applied to a new domain) of the existing technologies. (CAT scanner a combination of X-ray technology and the computing technology is an example of process of convergence and fiber-optic communication is an example given for fusion of technologies).
Authors suggest that managers can use technology speciation to their advantage- by focusing on the potential of a new technologies and their application in the market, creating a market for the new technology rather developing a new technology for the existing market, understanding the needs and requirement of the different consumers , sources of feedback, looking for opportunities for convergence or fusion technologies, studying emerging technologies in the smaller market before leaping into the bigger market. A new technology undergoes many changes and involves technological development and domain changes, managers need to understand this process and make better use of it.


Chapter 4: Identification and assessment of emerging technologies

Evaluation and assessment of technology is required for any firm to survive in the long run. Chapters 4 of Wharton on Emerging technologies discuss how technologies can be identified and assessed. In order to have long-term competitive advantage, early detection of emerging technologies is very important for the firms. Because changes in the emerging technologies are so rapid firms need to be dynamic in their approach when assessing emerging technologies. Authors suggest that managers should follow four interrelated steps -scoping, searching, evaluating and committing in their assessment of emerging technologies.
Scope: Scope for technology assessment is broad, so firms should limit their scope to new markets and new technologies, which includes customer definition, the cost of R & D, technical expertise etc. As the emerging technologies are ambiguous and ever changing, firms should be flexible in their evaluation process. Sometimes new technologies require firms to expand their scope, for example pharmaceutical industries need to change their scope as when there are changes in their related field such as biotechnology.
Searching: Once the scope is defined firms should look for the sources to tap the new technology. Sources can be found within the firms (many of the new technologies discovered by companies such as IBM, DuPont etc came from within their own organizations), public licensors such as universities, government and research institutes and from technical and trade literatures. Manager’s focus toward emerging technologies should be broad, they should be aware of the strong signals and weak signals that surround the emerging technologies. Examples for strong signals are patents and literary citations and competitors actions that are where, when and how competitive firms are investing in the market.
Evaluating: After scope is defined and the potential emerging technologies is recognized, it is important to evaluate technologies based on the financial and organizational criteria. As the emerging technologies are surrounded by ambiguity, risk and uncertainties, an effective evaluation plan is required to reduce at least some of the uncertainties and risks involved. Authors suggest that assessing a technology should be with respect to the firm’s environment such as technical capabilities of the firm, firm’s existing market etc. Risk evaluation is one of the important aspects in emerging technologies. Firms’ should consider assessing risk based on market, technology and organization.
Committing: After evaluation, firms should commit to the emerging technologies. There are four general commitment strategies suggest in the chapter.
Wait and watch: Though this kind of approach to emerging technologies is suggested as a one of the pitfalls of emerging technologies in chapter 2, authors suggest that sometimes it is an advisable strategy when it comes to a fast follower firm.
Position and learn: Smithkline Beecham uses its venture capital fund, as a positioning and learning approach. This kind of approach not only helps companies to identify new technologies but also excludes any kind of competitive threats.
Sense and follow: Once the firm identifies and assesses the technology, it follows the technology with active commercialization strategy.
Believe and lead: Though there are many risks involved with the emerging technologies, authors suggest that if a company believes in a technology, then it should fully commit all the resources towards the new technology and lead the technology.

A bit of research on ARCO from chapter 3.It was mentioned in the book that ARCO’s failure in solar energy power was due to their unpreparedness to the market. They entered the solar power market during the energy crisis of the late 1970’s and manufacturing their own photovoltaic arrays. ARCO was the first to build a 1 megawatt pilot operation, the Lugo plant in Hesperia, CA, which is now closed. The Carrizo Solar Corporation, NM bought the facility from ARCO in 1990. In 2000, ARCO was acquired by BP a UK based oil company and is officially known as BP West Coast Products LLC

Reference: http://www.eugeneleafty.com/SolarPower.asp
http://en.wikipedia.org/wiki/ARCO

Chapter 2 Pitfalls in emerging technologies

Chapter 2 of Wharton on emerging technologies deals with the major mistakes committed by established organizations when adopting emerging technologies. Authors discuss the traps an established company might fall into while dealing with emerging technologies.

Day and Schoemaker categorize these pitfalls into four:

Delayed participation: Delayed participation is nothing but the wait and watch approach of the incumbent companies in order to avoid risks and losses from emerging technologies. Authors state some of the reasons for the delayed participation of the incumbent companies in emerging technologies as:
Managers’ of the established companies fail to recognize the future potential of emerging technologies because of their preconceived notions.
Established companies delay their participation with opinion that the emerging technologies are for smaller organization.
Approach new technologies, with the same principles applied to the current technologies

Authors suggest certain guidelines to follow in order to avoid delayed participation traps. Incumbent companies -

Should have vision and imagination about the emerging technologies’ future,-should know about the customers’ need of emerging technologies.

Should keep in mind that the emerging technologies are not for the current customer needs. I think this is the most important one – any technology should serve the end-client well. In today’s technology frenzy – that’s something that is easily forgotten.

Should estimate the risks involved and the future risks.

Should look for the similar past experiences or look for the companies who adopted similar emerging technologies. In short – learn from other’s mistakes. This one would be tough since emerging technologies are typically very new. By the time we have some case studies to follow it is most likely a somewhat established technology rather than an emerging technology. So more likely scenario would be that you (meaning the company adopting the emerging technology) would be an example of success (or failure) for other companies to follow.

Sticking with familiarity: The second trap for incumbent companies is sticking with familiarity. Authors say that the incumbent companies prefer to stick to familiar areas rather than enter new horizons; this is because of the fear of risks and ambiguity involved in emerging technologies. Organizations fall into this kind of trap when they over or under estimate the capabilities of emerging technologies.
In order to avoid this trap authors suggest that the incumbent companies should have:
Strong knowledge about industry standards.
Managers should come out of their narrow minded approach
Finding and learning from the companies who already faced such situations.

Reluctance to fully commit: This is the third trap dicussed by the authors. Incumbent companies will fall into this trap because of- Managers’ reluctance due to the fear of loss of the profits of the existing products. The authors presented the example of IBM and DEC companies’ reluctance to enter into distributed networks thinking that it would lead to loss of mainframes market and risk-taking attitude of the managers. Certainty effect is one of the reasons for the incumbent companies to fall into reluctance to fully commit trap i.e., incumbent companies think that investing in the incremental innovations is more profitable rather than in the uncertain emerging technologies. The other reasons to fall prey to this trap are established companies’ focus on current needs of the customer rather foreseeing the future needs, inertia, due to path dependency i.e., leaning towards past or traditional approach. I must also add here that there is always some level of complacency on the part of established companies since they are doing well at that moment so they tend to think that nothing needs to change.

Lack of Persistence: The last trap discussed about the companies lack of persistence. Companies lose patience when expected results are not seen. Authors say that low persistence could be due to sunk cost fallacy- decision to abandon the emerging technologies at the budding stage because of the losses incurred initially. Knight Rider, Inc, withdrawal from many emerging technologies over the years due to the negative financial results is good example of low persistence. Day & Schoemaker also gives an example of USA Today newspaper which through their sheer perseverance became a winner even though it had to incur losses for 10 continuous years.

Authors also provide four solutions that help established firms to avoid pitfalls in emerging technologies:

Widening peripheral vision: Incumbent companies should look for the signals when an emerging technology is entering the market. Though finding the indicators is difficult, authors provide few techniques to look for signals, such as which emerging technologies are important, studying or working with the lead – users of the new technologies, emerging technologies’ advantages to customers, market adoption and future of the technology.

Creating a learning culture: Authors suggest that collective learning is important when looking at emerging technologies. Organizational learning such as open to different viewpoints, willingness to take up new challenges, continuous experimentation and communication, rather than individual learning is the key solution to avoid traps.

Staying flexible in strategic ways: Organizational flexibility is one of the keys to avoid traps. The success of Microsoft in the uncertain emerging technologies is due to its flexibility to adapt to the changing trends. In spite of stiff competition from companies like Apple, IBM etc, Microsoft emerged as a leader due to its flexible approach towards emerging technologies.

Providing organizational autonomy: Fourth solution provided by the authors, is that incumbent companies should treat emerging technologies as a separate entity. This will enable the established companies to look at emerging technologies with a new mind-set. Not only is this approach useful to the parent company but also for the smaller company, where the new team can have the freedom to approach emerging technologies in different way. The book also discusses the degree of separation between parent and child companies and also how much independence is optimal, does the parent company need to cannibalize itself and synergy between the two companies.

This chapter concludes by saying that success of any incumbent company in embracing disruptive technologies depends on the continuous support from the senior management, creating a separate unit of the new technology, willingness to take risks and have organizational and strategic flexibility.

On the whole I thought this was a very interesting chapter. There are few points in there which are a bit predictable and many that are thought provoking. The authors’ attempt to categorize the various pitfalls made interesting reading and was easy to understand

Throughout the chapter I see that there is a stereotype that all managers and stakeholders are not risk takers. There is a lot of persuasion from the authors to take the necessary risks but there is little in terms of warning against taking too much risk. I think we can add a little text to the chapter about the pitfalls of rushing to adopt an emerging technology without giving enough thought and pitfalls created by over eager and higher risk taking managers.

Wharton On Emerging Technologies - Chap 1

In the first chapter of Wharton on Emerging Technologies, authors discuss the management challenges on emerging technologies.The chapter also discusses the various challenges faced by the established companies while embracing emerging technologies and ways to overcome these challeges. According to the textbook, emerging technologies are science-based innovations that have the potential to create a new industry or transform an existing one. Emerging technologies are also defined as any knowledge based innovative application that has entered or created a new market.

The authors say that for the established companies emerging technologies is totally a different game and has to compete with the rapidly changing technologies.Though large companies have all the infrastructure and technology, main challenges they face are technological ambiguity,uncertain markets ,rapidly changing trends. To encounter these challenges, the managers of the established companies should have a different approach and mind set in their decision making, planning, resource allocation,market analysis and the R & D.

By providing the examples of two companies, the authors suggest that to be sucessful in emerging technologies, companies must have dynamic approach with the changing trends,understand the customers use of technology, have disciplined imagination ie., learning from experiment and understand the pattern of emerging technologies. Even though there are frameworks, approaches and perspectives to help manage challenges on emerging technologies, the authors say that there would always be certain inconsistencies that the businesses has to deal with.

The word that caught my attention in this book is 'Creative Destruction'- occurs when something new kills the old ones.This word was coined by Joseph Schumpter ,an Austrian Economist in 1946, in his work titled "Capitalism,Socialism and Democracy". Creative destruction as I undertsand it is the phenomenon of radical innovations making the existing technologies obsolete or out-dated. It follows a vicious cycle where one technology is invented and it rises rapdily only to be replaced by another radical innovation.I found this article interesting where the writer says that the Google will be the next victim of Creative Destruction.

It was mentioned in the book that the top 15 spenders in R&D were large corporation in 1998, but, I have few question as in this economic downturn are the companies willing to invest in R&D? What would be the fate of small companies which are into emerging technologies?


http://www.businessinsider.com/2009/2/google-next-victim-of-creative-destruction-goog