Emerging Technologies Avoiding Emerging Technology Traps Based on
Emerging Technologies Avoiding Emerging Technology Traps Based on Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 1
Emerging Technologies Objective l Discuss Data vs. Information vs. Knowledge l Understand the common traps that put incumbents at a disadvantage for ET l Reveal solution to aid incumbent with new technology JMiddaugh PSU (Harrisburg) 2
Emerging Technologies Data vs. Information l Data § Raw facts § Streams of raw facts representing events such as business transactions l Information § A collection of facts organized in such a way that they have additional value beyond the value of facts themselves § Clusters of facts meaningful and useful to human beings in processes such as making decision l Process § A set of logically related tasks performed to achieve a defined outcome JMiddaugh PSU (Harrisburg) 3
Emerging Technologies Data vs. Information l Information is created by defining and organizing relationships among data. l Defining different relationships results in different information. l Establishing relationships between data creates information. Stairs and Reynolds, Principles of Info Sys, Course Technology, 1998 JMiddaugh PSU (Harrisburg) Information = Data + Relationships 4
Emerging Technologies The Value of Information [Figure 1. 2] Stairs and Reynolds, Principles of Info Sys, Course Technology, 1998 JMiddaugh PSU (Harrisburg) 5
Emerging Technologies Information Concepts Data, Information and Knowledge Information Data JMiddaugh PSU (Harrisburg) The body of guidelines and procedures used to select, organize, and manipulate data to make it suitable for a specific task. A collection of facts organized in such a way that they have additional value beyond the value of facts themselves. Raw facts 6
Emerging Technologies Where do Managers get Data / Information about ET l Attend Industry Conferences l Read the Trade Press l Buy Consulting Studies l Talk with Customers / Vendors l Monitor Developments in the field JMiddaugh PSU (Harrisburg) 7
Emerging Technologies Traps of Incumbents Delayed Participation II. Sticking with the Familiar III. Reluctance to Fully Commit IV. Lack of Persistence I. JMiddaugh PSU (Harrisburg) Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 8
Emerging Technologies I. Delayed Participation High uncertainty l Watch and wait / wait and see l Need a credible champion l – With vision Often seen as narrow application not yet required by an existing customer l Often misses the market opportunity l – IBM (1958) wanted to sell typewriter instead of Xerox copier – (1980’s) never signed an exclusive license for operating system – Never exercised it purchase option for 10% of Intel Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 9
Emerging Technologies Delayed Participation l Early attempts at ET make them easy to ignore – High costs and imperfection of technology (vs the established technology) l Visionary companies embrace ET – “have a face only a mother could love” Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 10
Emerging Technologies Internet & User Frustration l l l l Slow response Junk message SPAM Limited interactivity Privacy concerns Security Inefficient Search Engines Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 11
Emerging Technologies Questions Managers need to ask l What could this look like in the future? l How quickly could it develop? l Are my customers ready for new ET? l What are the risks? l Who are the competitors? l What did we learn from past projects? Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 12
Emerging Technologies II. Sticking with the Familiar People fear Change (risk and ambiguity) l Incumbent stay in “old” market familiar too long l Multiple (Opposing) technologies advance simultaneously via for dominate design l War of Standards l – Lock-in effects – Increasing return – Switching costs - Network externalities - Positive feedback loops - Installed base Winners -> set the standards l Losers -> are trapped l Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 13
Emerging Technologies Why companies pick a familiar but wrong Technology l Past success reinforces established ways of problem-solving and decision-making l Firm lacks in-house capability to appraise ET l A proprietary mind-set is established Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 14
Emerging Technologies Sticking with the Familiar Human Psychology l People fear change – Change = loss not gains l People do not like to take risks – Visibility / Vulnerability / Accountability – Burden of proof is on those wanting the change l Commission (instead of omission) – Greater risk of l Regret / reproach / censoring by an oversight committee l Change entails transaction costs and efforts Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 15
Emerging Technologies Questions Managers need to ask l How strong is status quo in our business? l How can we get new ideas into our business? l Is it time to do something else? l What is on the technology horizon? l How have managers been treated when they opted for the unfamiliar? Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 16
Emerging Technologies III. Reluctance to Fully Commit A half-hearted commitment l Incumbents tend to be too cautious l Optimal options strategy covers fear of aggressive commitment l Need vigilant & honesty about true risk l Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 17
Emerging Technologies Firms are unable/unwilling to commit Damage existing products l Takes advantage of profitable products Resistance of partners – – Risk Paradox l Bold forecasting – l l Overconfidence in general predictions Inability to see opposing arguments Timid choices – l l Risk-risk aversion Looks at isolated choices instead of the entire package ROI l – – – Prospect profits are unclear Less attractive than current products Projected returns of ET are worse then established technology l – JMiddaugh PSU (Harrisburg) Encyclopedia Britannica $1, 300 / set vs. $80 / cd Slimmer profit margin Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 18
Emerging Technologies Firms are unable/unwilling to commit l Current / Existing Customer – Meeting needs current customers instead of looking for new customer / markets l l Copiers – Xerox and Kodak missed small copier market Sears underestimated Sam Walton discount stores – Existing Customers receive disproportionate attention l l 5. 25 disk -> 3. 5 led to emergence of the laptop Complicated Structure – Not naturally “ambidextrous” – Close alignment l Strategy, capability, structure and culture which feed well established processes and routines Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 19
Emerging Technologies The ET Paradox l Incumbents – Shy away from ET (very risky) – Can afford the risk because of diverse portfolio l Entrepreneurs – embrace new risky ET – Despite limited financial resources JMiddaugh PSU (Harrisburg) 20
Emerging Technologies Risk Utility Function and Risk Preference JMiddaugh PSU (Harrisburg) Figure 10. . 1 Schwable, Kathy – Course Technology, 2002 21
Emerging Technologies Questions Managers need to ask l How long should/can we be profitable in our current markets? l Are these truly creating and managing strategic options? l Is the company too committed to it core business? l What is your risk ratio? Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 22
Emerging Technologies IV. Lack of Persistence l Enter and leave the market – Market may not materialize as soon as expected – Too many competitors crowding the market – Technology takes an unexpected direction – “Is this ever going to be profitable” Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 23
Emerging Technologies Lack of Persistence l Sunken-cost fallacy – Overcommitted to their core business – Pull the plug on ET investments – (if a company’s core business begins to fail, look to cut costs or reduce assets) l l New ET is an easy target Project Champion – Is vital to the health of an ET project l USA Today – 10 years of loss – Gannett’s CEO Al Neuhart stuck with the project Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 24
Emerging Technologies ROLE OF CHAMPION l Ensures accountability for the organization l Promotes more effective collaboration with business partners which improves potential for increased revenue l Provides a long-term investment in competitive advantage JMiddaugh PSU (Harrisburg) Awad –Electronic Commerce 1/e © 2002 Prentice Hall 25
Emerging Technologies Questions Managers need to ask l How can a company protect ET projects from core business pressures? l What is the commitment level of the executives? l How will the company determine if the venture is a success or failure? l Am I focusing on the short-term? Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 26
Emerging Technologies Solutions l Widening Peripheral Vision – Attend to signals from the periphery l Creating a Learning Culture – Invest in a learning capability – Have a learning corporate culture l Staying Flexible in Strategic Ways – Maintain flexibility by adopting an options perspective l Providing Organizational Autonomy – Maintain organizational separation Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 27
Emerging Technologies Widening Peripheral Vision Shifts from Existing markets and customers l Rate of Market Adoption and size l – Surveys, concepts test, conjoint analysis l New markets / products – Concept are ill-formed – Technology barely ready – More questions than Answer about ET l Cost – Availability – performance – Research should l l l JMiddaugh PSU (Harrisburg) Concentrate on lead users Improvements made to the functionality Customers do not know about the technology – they know their business Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 28
Emerging Technologies Widening Peripheral Vision Key Principles l The Big Picture – Visionary questions – Not precise questions l i. e. What is the market potential, timing, growth, etc. . l Use Multiple Methods l Focus on needs not the ET – Fax machine Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 29
Emerging Technologies Widening Peripheral Vision ET signal arrival long before it is established l Winners l – hear the weak signal and react quickly – imagine future possibility faster than competition l Shift in thinking – From existing customers / products / services – To customer’s benefits or problems – Focus attention of ET that will provide or improve benefits Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 30
Emerging Technologies Creating a Learning Culture l Keep Learning – Organization – not just individuals – Knowledge is power – “Field of Dreams” vs. Intraspect l Organizational Learning – Encouraging Openness to Diverse Viewpoints – Challenging the Prevailing Mind-Set – Experiment Continually – Deep Dialogs Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley JMiddaugh PSU (Harrisburg) 31
Emerging Technologies Learning Curve Theory What is it? l Helps estimate costs on project l Problem? l JMiddaugh PSU (Harrisburg) 32
Emerging Technologies Encouraging Openness to Diverse Viewpoints l Avoid Group-think l Diverse opinion – Technology / Market opportunity / Strategy l Managers need to be involved in the environment l Collect info trying to avoid uncertainty – Higher uncertainty leads to “wait and see” JMiddaugh PSU (Harrisburg) Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 33
Emerging Technologies Challenge the Prevailing Mind-Set l l l Challenge Status-Quo Separate current from “what could be” Work from the future backwards – Walt Disney l Foresight requires – – Deep Boundless Curiosity Willingness to speculate w/o conclusive evidence Liberal uses of analogies from similar situations Deep insights into customer needs, requirements, and behaviors Ackoff, Hamel and Prahalad, “Computing for the Future”, Boston: Harvard Business School Press, 1994 JMiddaugh PSU (Harrisburg) Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 34
Emerging Technologies Experiment Continually l Best way to learn is to continue to explore and experiment l Learn from mistakes / failures / setbacks l Develop demonstrate prototypes – to eliminate uncertainty l Experimenting often leads to failure but through experimenting comes knowledge – A child does not walk correctly the first time JMiddaugh PSU (Harrisburg) Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 35
Emerging Technologies Experiment Continually l Organizations need to develop a culture of learning l Current culture – Orgs -> reward safe player – Orgs -> blame risk-takers “well-intention” failure – No patience for failure – Few incentives to study the failure l Lessons JMiddaugh PSU (Harrisburg) Learned Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 36
Emerging Technologies Deep Dialog l l Master the art of strategic conversation Communication problems ranges – From lack of trust – To unresolved past problems – To cultural misunderstandings l Deep Communication – – l Meeting of the minds and hearts Foster bonding among people Bridges differences Blends ideas Perlmutter “On Deep Dialog”, Working Paper, Emerging Global Civilization Project, (The Wharton School, University of Pennsylvania, 1990) Individual knowledge is not enough we need collective wisdom JMiddaugh PSU (Harrisburg) Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 37
Emerging Technologies Stay Flexible in Strategic Ways l Stay Flexible in Strategic Ways – Automobile manufacturing flexibility on the assembly line – Microsoft lesson l l Keep options open, study your rival, change directions quickly and boldly Manage Real Options – Keep a number of options open by l l l Only committing investment in stages Follow multiple technology paths Delay some project – Create partnership / alliances / subsidiaries JMiddaugh PSU (Harrisburg) Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 38
Emerging Technologies Provide Organizational Autonomy l Move ET to a separate small entity l Acts more like a entrepreneurial l New groups “have permission” to work differently than the existing corporate culture l Parent has available resources and absorbs some of the risk JMiddaugh PSU (Harrisburg) Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 39
Emerging Technologies Provide Organizational Autonomy l Optimal Independence? – – l Physical and structure separation Separate funding and accounting Different policies Cannibalize the parent Synergy – – – Any Cooperation between two structures Internal competition Redundancy Leverage the parent’s strength On-line vs. Traditional l JMiddaugh PSU (Harrisburg) L. L. Bean / Wal-Mart or Barnes and Nobles Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley 40
Emerging Technologies References v Wharton on Managing Emerging Technologies, Day and Schoemaker, Wiley, 2000. JMiddaugh PSU (Harrisburg) 41
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