Technology and Innovation Strategy

The English word strategy has its etymological roots in Ancient Greek. The term’s roots come from the compound of stratós (ing. army) and ágō (ing. lead), referring to leading the army, or generalship.

For Mintzberg (1994), strategy can be viewed as a plan, an action, a market mechanism, and a broader perspective. As a plan, strategy shows the means for reaching the ends; as a pattern of action, it harmonizes organizational activities coherently; as a market mechanism, it helps organizations to differentiate themselves from their competitors. As a perspective, it sets the vision of the organization.

There are seven features that distinguish strategy from the other related managerial concepts:

1. Strategy is a process. 

2. Strategy requires research activities. 

3. Historical dynamics can lead to preferred areas and alternatives, but strategy is always about searching for new possibilities.

4. Strategy formulation is never done in perfectly rational conditions; thus, strategy formulation must be based on highly aggregated, incomplete, and uncertain information about the strategic choices.

5. The distinguishing characteristic is uncertainty. 

6. Strategy is more about the journey rather than the destination itself.

7. Strategy is made up of a hierarchically coherent set of objectives.

The most common form of thinking is about the events, then about the behaviors, and finally about the systems. When one thinks about the events, it is usually reactive, people at this level tend to think about events one by one, and at this level, the aim of thinking is reactive. In the upper level, we have patterns of behavior which are responsive. Here, several events are taken into consideration to make sense of their integrative functioning. Decision-makers look at long-term trends and assess their implications. This thinking provides a break from the short-term perspectives of the previous one. Nevertheless, the most sophisticated thinking level focuses on systemic structures. According to Senge (1990: 39), this level of thinking generates “structural” explanations. This is the least common and most powerful way of thinking. The main question at this level is to search for the reasons behind the patterns of behavior. This level of thinking aims to design the future rather than find out ways for adaptation.

An introductory definition of management can be expressed as working with and through people for fulfilling organizational objectives by conducting managerial functions such as planning, organizing, leading, and controlling. The definition of management seems to be enough for conducting ongoing organizational tasks in a relatively predictable environment. However, today both the number of variables and the pace of change in the external environment have increased tremendously

• There is increasing customer demand for the quality and the variety of the products offered by the businesses.

• With the development of new technologies, serving and accessing customers is becoming more comfortable than before.

• New technologies and the rise in the average level of education intensified competition.

• Asian-based businesses took the lead on the cost-leadership creating threat for the western economies.

• Increasing awareness of sustainability led the organizations to find out environmentally friendly inputs.

• Attitudes toward consumerism and consumer rights were developed both locally and globally.

• The Internet and other technological developments made communication more comfortable, faster, and relatively cheaper.

• The trend toward globalization resulted in more integrated economies.

• The volume and intensity of international business activities increased, putting multinational corporations at the center of the global marketplace.

By reinterpreting the universal definition of management from the strategic perspective, strategic management can be described as a process encompassing strategy formulation, application, and evaluation of the results. Strategic management consists of the analyses, decisions, and actions that an organization undertakes to create and sustain competitive advantages

Strategic management

• makes organization alert to recognize and benefit from new business opportunities,

• provides an objective perspective for ongoing organizational problems,

• enhances coordination and makes it easier for managers to conduct necessary controls,

• decreases resistance to change by giving logical explanations on decisions,

• bridges decision-making processes with the organizational objectives,

• increases overall efficiency and effectiveness of the organization,

• decreases the total time spent on conflict resolution,

• opens up effective channels for internal communication,

• helps to integrate individual effort around organizational objectives,

• clarifies individual responsibilities for conducting the job done within the organization,

• motivates employees for future-oriented thinking,

• creates a collaborative atmosphere for solving organizational problems,

• motivates change and promotes positive behavior toward organizational change initiatives, and

• disciplines management by clarifying the overall direction of the organization.

To fulfill the purpose of gaining sustained competitive advantage, two approaches, namely the positioning approach and the resource-based approach, were offered in the strategic management literature.

Positioning Approach

According to the positioning approach, the creation of competitive advantage relies on the organization’s position in its industry. Michael E. Porter is credited for five forces analysis, which the positioning approach stems from. According to Michael Porter, businesses should find an attractive industry or make their industries more attractive for their operations. According to Porter, operational effectiveness and efficiency do not automatically guarantee competitive advantage. Operational effectiveness can be developed using managerial techniques such as total quality management, just-in-time production, benchmarking, reengineering and outsourcing, etc.

Resource-Based Approach

Unlike the positioning approach, the resource-based approach focuses on the internal environment of the organization. Organizations are a bundle of resources, and each organization uniquely configures and uses them to fulfill organizational objectives (Penrose, 1959: 25). According to the resource-based view; organization’s competitive advantage stems from its endowment of strategic resources that are valuable, rare, costly to imitate, and costly to substitute (Barney, 1991).

The strategic management process consists of four essential elements: (1) Environmental scanning, (2) strategy formulation, (3) strategy implementation, and (4) evaluation and control.

An organization’s innovations strategy is “a vector of organization choices spanning the domains of technology development and commercialization”. The decisions related to various factors have to be made. To develop or to imitate, the intensity of research activities, budget priorities for innovation, locus of research activities within the organization, geographical scope, nature and breadth of technologies, knowledge management strategy, value creation alternatives, mode of commercialization are among these crucial trade-offs. According to Akman and Yılmaz, an innovation initiative’s successful accomplishment requires a strategic orientation. Developing an innovation strategy represents a managerial task that requires integrating all business functions and dealing with intra-organizational cultural challenges

Differentiation, low-cost, and niche strategies are strategic alternatives that an organization can pursue to create better value propositions. Regardless of the selected strategy, organizations trying to diversify their offerings can emphasize product innovativeness, technical abilities, or alternative distribution channels.

Risk and future orientations of organizations are critical in the second group of innovation strategies. This group is best illustrated by Miles and Snow’s (1978) classification of defenders, prospectors, analyzers, and reactors. Scenarios for the future and the strategic intent are the primary building blocks of this typology (Ahmed and Sheperd, 2010: 89). This typology helps explain why organizations facing similar situations behave differently and why they continue to do so over long periods.

• Higher costs due to the hidden costs of accelerating development, such as the risk of trivial innovation driving out more profitable breakthrough innovations.

• Higher costs as a result of the required investments in technology.

• High costs due to more thorough concept and prototype testing.

• Consumer-based disadvantages are related to the inability to exploit opportunities arising from shifts in consumers’ preferences and purchase criteria as the market develops.

• Disadvantages related to being locked in on first-generation technology prevent organizations from taking advantage of the latest technology.

• Disadvantages related to possible positioning and pricing mistakes inherent with accelerated development.

The main follower types are listed below:

• An early follower (or fast follower)

• In step with the majority of competitors (simply a follower)

• A late follower (also known as late entrant)

Advantages of fast-follower strategy are (1) allowing market uncertainty to disappear, (2) learning from the mistakes of pioneers, (3) introducing superior manufacturing techniques, (4) introducing products with superior technology or design features, and (5) fine-tuning the marketing mix

Regardless of the purpose of a technology strategy, decision-makers have to answer the two main questions given below while formulating their technology strategies.

• Which technology competencies does the organization want to develop?

• Which option among “buy-make-collaborate” does the organization plan to select?

Technologies grow in a pattern that generally follows an S-curve. This pattern is usually called the technology life cycle. The cycle includes four sequential processes, including (1) generic research, (2) applied R&D, (3) production scale-up, and (4) technological maturity.

Every technological stage in the technology life cycle provides a gateway for the organization to enter the competition. These gateways are called technology entry strategies. Development entry strategy is the entry strategy when technology shifts from generic research to applied R&D. The outcome of this strategy is not certain at the moment of the investment. Organizations do not know whether these efforts yield commercial outcomes or not.